Chapter 1

Introduction to
Accounting and Business
 Objectives

Describe the nature of a business

Describe the role of accounting in business

Describe the profession of accounting

Summarise the development of accounting principles and relate them to practice

State the accounting equation and define each element of the equation.

Describe the financial statements and explain how they interrelate.

 Nature of a business

What is accounting?

Profession of accounting

Content
GAAP

Accounting equation

Financial statement
 Nature of a
business

In general, a business is an organisation in

which basic resources (inputs) are
assembled and processed to provide goods
or services (outputs) to customers.
 Types of businesses:

Manufacturing Trading Service

bán hàng
mua rẻ bán mắc provide services
 Sole proprietorship is owned by one
tư nhân individual

Types of
Partnership is owned by two or more
Business hợp danh
individual
Organisation

10,000VND/share
Corporation: ownership is divided into
Capital:300mil/10,000share -> đền tối đa 300 -> đôn vốn lên nhiều cty VN ->
bằng tiền mặt
shares
công ty cổ phần

CT Nhà nước: fixed voiws nhà nước mở bằng bank account

Accounting consists of three basic
activities—it

◆ identifies, góp vốn (asset in cash) -> recepit payment

prepare accouting and identify documents

◆ records, and record transaction

◆ communicates câu hỏi ra kết quả, accounting reports

the economic events of an organization to

interested users.
 Three Activities
Illustration 1-1
The activities of the accounting process

The accounting process includes

the bookkeeping function.

1-8
 Accounting provides information for stakeholders
các bên có liên quan

Stakeholders are people or organization who have interest in business

Two groups of stakeholder:
- Internal users
- External users
 Who Uses Accounting Data

INTERNAL
USERS

1-10
 Who Uses Accounting Data

EXTERNAL
USERS

Đầu tư chứng khoắng-ư

1-11
 Profession of accounting

Accountant
in-house freelancer

Private accountant Public accountant

(who is employed by a (provide services for a fee to
cty dịch vụ kế toán, nhiều công ty

business) SMEs, k thuê private accountant, employeer

chịu 20-30%, employee chịu 10%
k bắt buộc xuất thân từ kế toán
clients) có được chứng chỉ kế toán CIA , có kinh nghiệm
thi 2-3 môn
chief accountant - năm thứ 2 - thi chứng chỉ kê toán trường

Accounting Fields

Financial Accounting Managerial Accounting

kề toán tài chính - mình học

financial statements
 Generally Accepted Accounting Principles

Financial Statements
Various users ◆ Balance Sheet
need financial ◆ Income Statement
◆ Statement of Stockholders’ Equity
information ◆ Statement of Cash Flows
◆ Note Disclosure

The accounting profession

has developed standards Generally Accepted
Accounting Principles
that are generally accepted (GAAP)
and universally practiced.
 Generally Accepted Accounting Principles

Generally Accepted Accounting Principles (GAAP) – Standards that are generally

accepted and universally practiced. These standards indicate how to report economic events.

Standard-setting bodies:

► Financial Accounting Standards Board (FASB)

► International Accounting Standards Board

(IASB)
 Business entity concept

Means that the owner and the business

are treated as separate entities. An entity
is an organisation or a system.

thieu 100tr - cá nhân - có tiền mượn tiền cty -

phải ghi vào sở sách - k được nhập chung

bank account của cty supplier - or owner of suppier

pháp nhân: cty - thể nhân: owner

 HISTORICAL COST PRINCIPLE
giá gốc mua đất: 1 tỷ 20 năm: 10 tỷ -> nhưng vẫn ghi nhận 1 tỷ -> financial statement: giá gốc

đầy đủ chứng cử chứng minh

nước ngoài: theo giá thị trường

dictates that companies record assets at their cost

 Accounting Period

Means that financial statements of the

business are prepared for a period of time,
either a month or a year.

monthly, quarterly, annually,

fiscal year, financial year: năm tài chính: 4 option (1/1 - 31/12, 1/4-31/3, 1/7-30/6, 1/10-30/9) (quý 1,2,3,4)

calendar year
 Going concern
hoạt đông liên tục

Means when we record the transactions of a

business, we assume that the business will
continue to operate for the foreseeable
future.
giả định hoạt động tiếp tục trong thời gian 1-2 năm nữa current assets: 110 mil (cash, inventory)
current liability: (>12 thời gian trả nợ) 200 mil

Current asset (tài sản ngắn hạn) 110/200= 0,55 trả nợ 1 đồng -> k thể going concern
non-current asset (tài sản dài hạn)
trừ Vietnam Airline - CTy nhà nước
compare asset vs liability
 Consistency
Means that accountant tries to prepare
the financial statement of the business
on the same basis every year.

accounting policies

chính sách khấu hao: depreciation

costing method

-> đổi chính sách -> đổi cách tính -> k thể so sánh số liệu được -> phải declare trong financial statement là thay đổi chinhs
sách
 ➢ The materiality concept, also called the
materiality constraint, states that financial
information is material to the financial
statements if it would change the opinion
or view of a reasonable person.
➢ The concept of materiality is relative in
size and importance.

đang bị lỗ liên tục 3 năm -> loại bỏ sàn chứng khoán -> 1 or 2 tỷ chỉnh về mấy trăm triệu -> k phải sai sót trọng yếu

cty kiểm toán kiểm tra financial statement: true or fair, sai sót không trọng yếu (có cách tính) 1,000 tỷ 100 or 200 triệu -> sai sót k
trọng yếu -> k ảnh huowgr đến cảm quan người đọc báo cáo tài chính -> tùy trường hợp

Materiality
Concept
 • Requires that companies include in the
accounting records only transaction
data that can be expressed in terms of
money.

trên fiancial statements: giá trị tiền

MONETARY
UNIT
ASSUMPTION
Accounting equation
phương trình kế toán

Assets = Liabilities + Owner’s Equity

Assets
nguồn lực với giá trị kinh tế

Resources with economic value

controlled by the business.
kiểm soát được

cty đứng tên

thỏa 2 điều kiện

lợi ích kinh tế trong tương lai

Provide a future benefit

truck-> asset (cty sở hữu) -> trở hàng +bán đi

 Assets
Account Receivable: nợ phải thu khách hàng

CASH PROPERTY, STOCK PATENT LAND USAGE MONEY IN

PLANT AND (INVENTORY) RIGHT RIGHT BANK
EQUIPMENT mua photocopy về bán quyền sử dụng đất - có thể bịt hu hồi
ACCOUNT
hàng tồn kho, hàng hóa
truck mua - chỉ có quyền sử dụng
goods: hàng hóa: xe ô tô để bán -> goods (mình chỉ học về goods) có nhiều bank account tên
PPE: tài sản cố định hữu hình finished goods: thành phẩm tự sản xuất ra rồi bán thuê tối đa 49 năm của doanh nghiệp
raw materials: nguyên liệu
giá trị từ 30 trở lên: mới tính là tài sản cố định
good in progress/process: chi phí sản xuất kinh doanh dở dang tiền trong tài khoản thanh toán - (ATM)

kì tế toán theo tháng 30/6, sản xuât quần áo,

mua xe về chạy: PPE
 Liabilities
nợ phải trả

Debts owed to outsiders (creditors)

 Liabilities

• Loans ngân hàng

khách hàng mới, đứng trước (tiền cọc), sau đó cung cấp hàng

nếu k trả hàng thì cọc phải trả lại

• Advance payment from customer (cty) mình ứng trước tiền cho supplier: asset của cty
mình mua dịch vu (customer) cho supplier: liability của supplier

• Bank overdraft khu chi: bank account còn li 4 mil có nhu cu thanh toán 10 mil -> khu chi
6 mil

• Payable to supplier account payable: nợ supplier

• Tax payable nợ thuế: VAT giá trị gia tăng, thuế thu nhập doanh nghiệp

interest payable: nợ tiền lãi

salary payable: lương tháng 6 tháng trả

 Owner’s Equity
vốn chủ sở hữu

Owner’s right to the asset of the business

➢ Capital

➢ Drawings owner mượn tiền cty - capital

➢ Retained earnings (Revenue – Expense)

lợi nhuận giữ lại: doanh thu - chi phí
 • Revenues: a result of providing
services or selling products to
có thể là thu or chưa thu tiền on credit/on account: chưa thu tiền
customers. receive in cash

• Expenses: the using up of assets

and the consuming of services in
the process of earning revenues.

Drawings: An owner may withdraw

cash or other assets for personal use.
We use a separate classification
called drawings to determine the total
withdrawals for each accounting
period RE= R- E -> giảm -> tăng

using up assets: selling goods (inventory: 20: asset: 20, sold 6 inventory:14) cost of good sold (giá bán trừ giá mua): giá vốn hàng bán, depreciation expense

cosuming services: salary expense, advertisement expense, rental expense, utilities expense ->
chi phí chỉ phát sinh or tăng ->

sử dụng dịch vụ: increase: expense 100 mil ex

ký hợp động qc: ct khuyển mãi: expense
at the end of month:
 Expended Accounting equation

Assets Liabilities Owner’s equity

Retained
Assets Liabilities Capital Drawings
Earnings

Assets Liabilities Capital Drawings Revenue Expense

về tính lại bài tập

Capital
 Accounting Transactions assest, liability, ownẻ euity -> increase or decrease
nghiệp vụ kinh tế phát sinh

Transactions (business transactions) are a business’s economic events

recorded by accountants. Transactions may be external or internal
External transactions involve economic events between the company and
some outside enterprise. mua nhà cung cấp, bán ra ngoài

For example, Campus Pizza’s purchase of cooking equipment from a

supplier, payment of monthly rent to the landlord, and sale of pizzas to
customers are external transactions.
Internal transactions are economic events that occur entirely within one
company. The use of cooking and cleaning supplies are internal transactions
ghi nhận lương sa thải k ảnh hưởng, bồi thường hợp động
for Campus Pizza
Companies carry on many activities that do not represent business transactions.
Examples are hiring employees, responding to e-mails, talking with customers,
and placing merchandise orders
Each transaction must have a dual effect on the accounting equation. For example, if an
asset is increased, there must be a corresponding:
• Decrease in another asset, or asset increase

1. asset decrease

• Increase in a specific liability, or EX1: purchase goods and paid in cash

Asset: good increase -> Asset: cash decrease

• Increase in owner’s equity

Ex2: purchase goods on credit

Asset: goods increase -> liability: account payable increase

Ex3: owners contributed capital in cash

Asset: cash increase -> Owner Equity: capital increase

Two or more items could be affected. For example, as one asset is increased $10,000,
another asset could decrease $6,000 and a liability could increase $4,000
 Transaction Analysis

TRANSACTION 1: INVESTMENT BY THE OWNER

Ray and Barbara Neal decide to start a smartphone app development company that they
incorporate as Softbyte Inc. On September 1, 2023, they invest $15,000 cash in the
business.

Assets = Liabilities + Owners’ Equity

TRANSACTION 2: PURCHASE OF EQUIPMENT FOR CASH
Softbyte Inc. purchases computer equipment for $7,000 cash.
TRANSACTION 3. PURCHASE OF SUPPLIES ON CREDIT
Softbyte Inc. purchases for $1,600 headsets and other accessories expected to last several
months. The supplier allows Softbyte to pay this bill in October
TRANSACTION 4. SERVICES PERFORMED FOR CASH
Softbyte Inc. receives $1,200 cash from customers for app development services it has
performed.
TRANSACTION 5. PURCHASE OF ADVERTISING ON CREDIT
Softbyte Inc. receives a bill for $250 from the Daily News for advertising on its online
website but postpones payment until a later date.
TRANSACTION 6. SERVICES PROVIDED FOR CASH AND CREDIT.
Softbyte provides $3,500 of services. The company receives cash of $1,500 from
customers, and it bills the balance of $2,000 on account.
TRANSACTION 7. PAYMENT OF EXPENSES
Softbyte Inc. pays the following expenses in cash for September: office rent $600,
salaries and wages of employees $900, and utilities $200.
TRANSACTION 8. PAYMENT OF ACCOUNTS PAYABLE
Softbyte Inc. pays its $250 Daily News bill in cash. The company previously (in
Transaction 5) recorded the bill as an increase in Accounts Payable.
TRANSACTION 9. RECEIPT OF CASH ON ACCOUNT
Softbyte Inc. receives $600 in cash from customers who had been billed for services
(in Transaction 6).
• Each transaction must be analyzed
in terms of its effect on:
• The three components
of the basic accounting
equation.
• Specific types (kinds) of
items within each
component.
• The two sides of the equation
must always be equal.
• The Common Stock and Retained
Earnings columns indicate the
causes of each change in the
stockholders’ claim on assets.
 Financial statement

• Profit and loss statement

• Statement of owner’s equity
• Balance sheet
• Statement of cash flows
• Notes of FS
 Profit and loss statement

Revenues

Expenses
Income Statement

◆ Reports the profitability of the company’s operations

over a specific period of time.

◆ Lists revenues first, followed by expenses.

◆ Shows net income (or net loss).

◆ Does not include
investment and dividend
transactions between the
stockholders and the
business
 Statement of owner’s equity

Summary
of the
changes in
the
owner’s
equity
 Balance sheet

A list of
assets,
liabilities
and
owner’s
equity
Balance Sheet

◆ Reports the assets, liabilities, and stockholders’ equity

at a specific date.

◆ Lists assets at the top, followed by liabilities and

stockholder’s equity.

◆ Total assets must equal total liabilities and stockholder’s

equity.

◆ Is a snapshot of the company’s financial condition at a

specific moment in time (usually the month-end or year-
end).
 Statement of cash flows

A summary
of the cash
receipts and
cash
payment
Statement of Cash Flows

◆ Information on the cash receipts and payments for a

specific period of time.

◆ Answers the following:

► Where did cash come from?

► What was cash used for?

► What was the change in the

cash balance?

LO 5
 Financial Statements

Question
Which of the following financial statements is prepared as of a
specific date?

a. Balance sheet.

b. Income statement.

c. Retained earnings statement.

d. Statement of cash flows.

LO 5