Chapter 01

ACCOUNTING IN BUSINESS

Chapter 1

© 2009 The McGraw-Hill Companies, Inc.,All Rights Reserved

CHAPTER OBJECTIVES

• Recognize that accounting is an important information system

• General characteristics of accounting information

• Understand the assumptions and principles in accounting

• Understand accounting equation

• Be able to analyze transactions and events

• Identify components of the Financial Statements

• Nắm được định nghĩa và tầm quan trọng của môn kế toán

• Nắm được các yêu cầu cơ bản đối với thông tin kế toán

• Hiểu rõ các giả thiết và nguyên tắc thực hành kế toán

• Nắm chắc phương trình cân bằng kế toán

• Có thể phân tích các nghiệp vụ và sự kiện

• Nhận dạng các báo cáo tài chính

DEFINITION OF ACCOUNTING

Accounting

Identifying Phân loại

Select transactions and events

Recording Ghi chép

Input, measure and classify

Communicating Truyền đạt

Prepare, analyze and interpret

McGraw Hill/Irwin‐ Slide 2

USERS OF ACCOUNTINGINFORMATION

External Users

•Lenders • Consumer Groups•Shareholders • External Auditors

•Governments • Customers

Internal Users

•Managers • Sales Staff•Officers/Directors • Budget Officers

•Internal Auditors • Controllers


USERS OF ACCOUNTINGINFORMATION

External Users

Financial accounting (Kế toán tài chính) provides external users with financial statements.

Internal Users

Managerial accounting (kế toán quản trị) provides information needs for internal decision makers.


ETHICS - A KEY CONCEPTĐạo đức

Beliefs that Accepted standardsdistinguish right from wrong of good and bad

from wrong behaviour


SETTING ACCOUNTING PRINCIPLES

IASC

• IASs 1973 - 2001

IASB

• IFRS FROM 2001

VIỆT NAM

Bộ tài

chính

•Luật kế toán•VAS – Chuẩn mực kế toán Việt Nam

Các văn bản hướng dẫn thi hành luật và VAS

INTERNATIONAL ACCOUNTING

Qualitative Characteristics of Financial Statements

YÊU CẦU ĐỐI VỚI THÔNG TIN KẾ TOÁN

•Affects the decision of its users

•Nature & Materiality

RELEVANCEThích hợp, phù hợp

•Is trusted by users

•Faithful presentation; substance over form; Neutrality, Prudence, Completeness

RELIABILITYĐáng tin cậy

•Is helpful in contrasting information of organizations

COMPARABILITYCó thể so sánh

PRINCIPLES AND ASSUMPTIONSOF ACCOUNTING

Revenue Recognition Principle Nguyên tắc ghi nhận doanh thu1. Recognize revenue when it is earned.

2. Proceeds need not be in cash.3. Measure revenue by cash received

plus cash value of items received.

Matching Principle Nguyên tắc phù hợp

A company must record its expensesincurred to generate the revenuereported.

Cost Principle – Historical cost Giá vốn lịch sử

Accounting information is based onactual cost. Actual cost is

considered objective.

Full Disclosure PrincipleNguyên tắc công khai

A company is required to report thedetails behind financial statementsthat would impact users’ decisions.


PRINCIPLES AND ASSUMPTIONSOF ACCOUNTING

Now FutureMonetary Unit Assumption

Thước đo tiền tệGoing-Concern Assumption

Hoạt động liên tục

Reflects assumption that the businesswill continue operating instead of

being closed or sold.

Business Entity Assumption Nguyên tắc thực thể kinh doanh

A business is accounted forseparately from other business

entities, including its owner.

Express transactions and events inmonetary, or money, units.

Time Period Assumption Nguyên tắc kỳ kế toán

Presumes that the life of a company canbe divided into time periods, such asmonths and years.


ACCRUAL BASIS VS.CASH BASIS

Accrual BasisCơ sở dồn tích

Revenues arerecognized whenearned and expensesare recognized whenincurred.

Accounting

Cash BasisCơ sở tiền mặt

Revenues arerecognized whencash is received andexpenses recordedwhen cash is paid.

Not GAAP


THE ACCOUNTING EQUATIONPhương trình cân bằng kế toán

Accounting Equation

Assets Tài sản

= Liabilities Vốn nợ

+ Equity Vốn chủ sử hữu


ASSETSResources owned or

controlled by the entity

NON-CURRENT ASSETS

Long-term prepaid expenses

Tangible fixed assetsVehicles, equipments,

buildings

CURRENT ASSETS

Cash, inventories, accounts receivable

Long term investments: Investment in stock and bonds

Intangible fixed assets: copyrights, patents

Cash 8,200$ Accounts receivable 11,200 Merchandise inventory 21,000 Office supplies 550 Store supplies 250 Prepaid insurance 300 Total current assets 41,500$

Assets

Z-MARTPartial Balance Sheet

December 31, 2009

Classified Balance Sheet

HighlyLiquid

LessLiquid

Snowboarding ComponentsBalance Sheet (Partial)

January 31, 2009

Current assetsASSETS

Cash $ 6,500Short-term investments 2,100Accounts receivable 4,400Merchandise inventory 27,500Prepaid expenses 2,400

Total current assets $ 42,900

Current assets are expected to be sold,collected, or used within one year or the

company’s operating cycle.Equipment $ 33,200Buildings 170,000 203,200Less accumulated depreciation 53,000 150,200Land 73,200

Intangible assets 10,000Total assets $ 343,800



January 31, 2009



Total current assets $ 42,900Long-term investmentsNotes receivable 1,500Investments in stocks and bonds 18,000Land held for future expansion 48,000Total investments 67,500

Long-term investments are expected to be heldfor more than one year or the operating cycle.

Land 73,200Intangible assets 10,000Total assets $ 343,800



January 31, 2009



Total current assets $ 42,900Long-term investments

Tangible fixed assets are assets usedto produce or sell products and services.

Plant assetsEquipment $ 33,200Buildings 170,000 203,200Less accumulated depreciation 53,000 150,200Land 73,200

Intangible assets 10,000Total assets $ 343,800



January 31, 2009



Total current assets $ 42,900Long-term investmentsNotes receivable 1,500Investments in stocks and bonds 18,000Land held for future expansion 48,000Total investments 67,500

Intangible fixed assets are long-term resourcesused to produce or sell products and services

and that lack physical form.Intangible assets 10,000Total assets $ 343,800


Current Liabilities

Accounts payable

Wages payable

Non-current liabilities

Loans

Leases

LiabilitiesCreditors’ claims on assets

Snowboarding Components

Current liabilitiesAccounts payableWages payableNotes payable

Balance Sheet (Partial)January 31, 2009

LIABILITIES

$ 15,3003,2003,000

Current portion of long-term liabilities 7,500Total current liabilities $ 29,000

Current liabilities are obligations due within thelonger of one year or the company’s operating

cycle.Total liabilities and equity $ 343,800





LIABILITIES

$ 15,3003,2003,000


Long-term liabilities:Notes payable (net of current portion) 150,000

Long-term liabilities are obligations not duewithin the longer of one year or the company’s

operating cycle.


EQUITY (Vốn chủ sở hữu)

Owner’sClaims onAssets


Equity = owner capital – owner withdrawal

Owner capital = contributed capital + retained earnings




LIABILITIES

$ 15,3003,2003,000


Long-term liabilities:Notes payable (net of current portion) 150,000

Total liabilities $ 179,000EQUITY

T. Hawk, Capital 164,800Total liabilities and equity $ 343,800

Equity is the owner’s claim on the assets.


Distribution of profitsPhân phối lợi nhuận

• Profit = revenue - expense• Dividends – cổ tức• Reserve (các quĩ): quỹ phúc lợi xã

hội, quỹ khen thưởng • Reinvestment: tái đầu tư• Retained earnings: lợi nhuận chưa

phân phối, để tăng vốn• Giả sử div, reserve, reinvestment = 0

thì profit sẽ chỉ làm tăng equity

TRANSACTION ANALYSISEQUATION

Phương trình cân bằng kế toán

The accounting equation MUST remain inbalance after each transaction.

Assets = Liabilities + Equity


TRANSACTION ANALYSIS

A company invests $30,000 cash tostart a consulting business .

The accounts involved are:(1) Cash (asset)

(2) Owner Capital (equity)



Purchased supplies paying $2,500 cash.


(2) Supplies (asset)



Purchased supplies paying $2,500 cash.


Accounts Notes C. TaylorCash Supplies Equipment Payable Payable Capital

(1) $ 30,000 $ 30,000

(2) (2,500)$ 2,500

$ 27,500$ 2,500 $ - $ - $ - $ 30,000

$ 30,000 = $ 30,000



Purchased equipment for $26,000 cash.


(2) Equipment (asset)



Purchased equipment for $26,000 cash.Assets = Liabilities + Equity

Accounts Notes C. TaylorCash Supplies Equipment Payable Payable Capital

(1) $ 30,000 $ 30,000

(2) (2,500)$ 2,500(3) (26,000) $ 26,000

$ 1,500$ 2,500 $ 26,000 $ - $ - $ 30,000

$30,000 = $30,000



Purchased Supplies of $7,100 and on account.

The accounts involved are:(1) Supplies (asset)

(2) Accounts Payable (liability)



Purchased Supplies of $7,100 and on account.


Accounts C. TaylorCash Supplies Equipment Payable Notes Payable Capital

(1) $ 30,000 $ 30,000

(2) (2,500) $ 2,500

(3) (26,000) $ 26,000

(4) 7,100 $ 7,100

$ 1,500 $ 9,600 $ 26,000 $ 7,100 $ - $ 30,000

$ 37,100 = $ 37,100



Provided consulting services receiving $4,200cash.


(2) Revenues (equity)



Provided consulting services receiving $4,200cash.


Equipmen Accounts Notes C. TaylorCash Supplies t Payable Payable Capital Revenue

(1) $ 30,000 $ 30,000

(2) (2,500)$ 2,500

(3) (26,000) $ 26,000

(4) 7,100 $ 7,100

(5) 4,200 $ 4,200

$ 5,700$ 9,600$ 26,000 $ 7,100$ - $ 30,000 $ 4,200

$ 41,300 = $ 41,300


FINANCIAL STATEMENTS (Báo cáo tài chính)

Let’s prepare the Financial Statements reflectingthe transactions we have recorded.

1.Income Statement2.Notes for financial statements

3.Balance Sheet4.Statement of Cash Flows


INCOME STATEMENT (Báo cáo kết quả hoạt động kinh doanh)

FastForwardIncome Statement

For Month Ended December 31, 2009

Revenues:Consulting revenueRental revenue

Total revenuesExpenses:Rent expense

Salaries expenseTotal expenses

Net income

$ 5,800300$ 6,100

1,000700

1,700$ 4,400

Net income is thedifference between

Revenues andExpenses.

The income statement describes a company’s revenuesand expenses along with the resulting net income orloss over a period of time due to earnings activities.


STATEMENT OF OWNER’S EQUITY (Báo cáo thay đổi trong vốn chủ sở hữu)

FastForwardIncome Statement


Revenues:

The net income of $4,400increases Owner's Equity

Consulting revenueRental revenue

Total revenuesExpenses:Rent expense

Salaries expenseTotal expenses

Net income

$ 5,800

300$ 6,100

1,000700

1,700$ 4,400

by $4,400.

FastForwardStatement of Owner's Equity

For Month Ended December 31, 2009C, Taylor, Capital December 1, 2009Plus: Investment by ower

Net income

Less: Withdrawals by ownerC. Taylor, Capital, December 31, 2009

$ -$ 30,000

4,40034,400

200$ 34,200


BALANCE SHEET (Bảng cân đối kế toán)

The Balance Sheet describes a company’s financialposition at a point in time.

FastForwardBalance Sheet

December 31, 2009

Assets Liabilities & EquityCash $ 4,800 Accounts payable $ 6,200Supplies 9,600 Total liabilities 6,200Equipment 26,000 Equity

C. Taylor, Capital 34,200

Total assets $ 40,400 Total liabilities and equity $ 40,400


1B - BUSINESS ACTIVITIES ANDTHE ACCOUNTING EQUATION

There are three major types of activities in any organization:1.Financing Activities - Provide the means organizationsuse to pay for resources such as land, buildings, andequipment to carry out plans.

2.Investing Activities - Are the acquiring and disposing ofresources (assets) that an organization uses to acquire andsell its products or services.3.Operating Activities - Involve using resources to research,develop, and purchase, produce, distribute, and marketproducts and services.


STATEMENT OF CASH FLOWS(Báo cáo lưu chuyển tiền tệ)

FastForwardStatement of Cash Flows


Cash flows from operating activities:Cash received from clientsCash paid for supplies

Cash paid for rentCash paid to employees

Net cash provided by operating activitiesCash flows from investing activities:Purchase of equipment

Net cash used in investing activitiesCash flows from financing activities:Investment by owner

Withdrawal by ownerNet cash provided by financing

activitiesNet increase in cashCash balance, December 1, 2009

Cash balance, December 31, 2009

$ 6,100(3,400)(1,000)

(700)$ 1,000

(26,000)(26,000)

30,000(200)

29,800$ 4,800

-$ 4,800


END OF CHAPTER 1

McGraw Hill/‐ Slide 40

Thank you for today!

See you next time!

Exercises1. At the beginning of the year, a company had $120,000 worth of liabilities.

During the year, assets increased by $160,000 and at year-end they equaled $360,000. Liabilities decreased $20,000 during the year. Calculate the beginning and ending values of equity.

2. The accounts of Garfield Company with the increases or decreases that occurred during the past year are as follows:

Except for net income, an investment of $3,000 by the owner, and a withdrawal of $11,000 by the owner, no other items affected the owner's capital account. Using the balance sheet equation, compute net income for the past year.

3. Analyzing following transactions a) On May 1, Mr. A formed a shoe consulting business, X company. In order to start

the business he invested $750,000 in cash.b) Company X spent $52,000 in cash for this period's advertising activities.c) Company X acquired $ 5000 tables and chairs on credit.

Account Increase Decrease

Cash 2500

Accounts receivable (5000)Accounts payable (11000)Note payables 16000

4. Provide descriptions for each transaction

Transactions Cash + Accounts receivable

+Supplies +Equipment = Accounts payable

+ B. Blue Capital

1) + 20000 +20000

2) -5000 + 5000

3) + 1500 +1500

Chapter 01

Documents

vi thng tin

companys operating

intangible

transaction

transaction

bonds land

capital total

financial