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INTRODUCTION

1. Objectives:

Provide the learner know how to understand the

accounting process (collecting, processing and providing
FINANCIAL ACCOUNTING I accounting information to users).
Applying accounting knowledge in business practices.

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INTRODUCTION 3. Contents:
2. Learning materials: Part 1: FINANCIAL ACCOUNTING I

1. Overview of Financial Accounting in businesses

 “Financial Accounting” (in Vietnamese), by Ngo The Chi,
Truong Thi Thuy, published by Finance Publisher 2. Accounting for Cash, Raw materials, Tools and Supplies
 “Financial Accounting” (in English), Mai Ngoc Anh,
Nguyen Thi My Trinh, Finance Publisher 3. Accounting for Fixed Assets
 Vietnamese Law on Accounting (2015)
4. Accounting for Payrolls and payroll related compensations
 Vietnamese Accounting Standards-VAS
 Vietnamse Accounting Regulation (according to Circular 5. Accounting for production Costs
200/2014 by Ministry of Finance and others relating
regulations) 6. Accounting for Revenues, Expenses and Business Result
 Other legal documents in Taxes, business, security
7. Financial Statements
market,… Copyright: Faculty of Accounting- Academy Copyright: Faculty of Accounting- Academy
of Finance 3 of Finance 4

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INTRODUCTION
CHAPTER I: OVERVIEW OF FINANCIAL ACCOUNTING IN
BUSINESS
3. Contents CONTENTS:
Part 2: FINANCIAL ACCOUNTING II 1.1 Overview about accounting.
1.2 Basic accounting concepts and principles.
1. Accounting for foreign currency transactions
1.3 Contents of financial accounting in business
2. Accounting for Liabilities and Equity 1.4 Contents of Accounting works.
3. Further issues in preparing Financial statements

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of Finance 5 Finance 6

1.1.1. Definitions of Accounting

1.1 Overview about accounting
1.1.1. Definitions of Accounting Definition of accounting from IFAC
1.1.2. Classifications of Accounting
Definition of accounting from IACP
1.1.3. Roles and requirements of accounting information
Definition of accounting from AAA
1.1.4. Role of Accounting
Definition of accounting from Vietnamese Accounting Law

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1.1.1. Definitions of Accounting

Common views:
1.1.2. Classifications of Accounting
-Accounting means the work of collecting, processing,
checking, analyzing and providing economic and financial Single- Entry
information. Accounting
Based on
- Accounting information is in forms of value; record method
-Accounting information provided for user’s decisions. Double-Entry
Accounting

(***)

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1.1.2. Classifications of Accounting 1.1.2. Classifications of Accounting

General Financial
Based of level of accounting Based on Accounting
accounting purposes of
information accounting
Detail information Management
accounting Accounting

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Financial accounting vs
Managerial accounting
The Differences Between
Financial accounting means the work of
collecting, processing, checking, analyzing and Management and Financial
providing economic and financial information in
the form of financial reports for entities which Accounting
have the requirement to use the information of the
accounting entity.

Managerial accounting means the work of

collecting, processing, analyzing and providing
economic and financial information as required by
management and for economic and financial
decisions made internally by an accounting entity.
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Financial Accounting Financial Management Management

Statements Reports
Accounting

External Users and Users: Management

Users:
Management
Characteristics: Objective and subjective
Characteristics: Objective
Prepared according to
Prepared according management needs
to acct regulations
Prepared periodically
Prepared periodically or as needed

Business entity Business entity or segment

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1.1.3. Roles and requirements of accounting

information 1.1.3. Requirements of accounting
The purpose of financial accounting information is that provides to
current and potential users, who use that information to make information
decisions.

Stockholders
Different Requirements of accounting
information
group of users
Other (Accounting Law, VAS 01)
stakeholders Objectivity Timelines Comparabilit
Completeness Understandabi
Integrity (Neutrality) s lity y

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Integrity
Completeness
Accounting information should be recorded
and disclosed as supported by sufficient valid Transactions arising in an accounting period
evidence and represents the substance of should be completely recorded and reported.
economic transactions in terms of nature and
value.
Timeliness
Objectivity
Accounting information to be recorded and Accounting information should be reported
disclosed should be factual, truthful and on a timely basis, i.e. on or before the due
unbiased. date.
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Comparability
Understandability
Accounting information should be produced and
presented in a consistent manner to enable users to
Information presented in financial statements
interpret the enterprise’s financial performance for a
should be straightforward and understandable.
period in relation with other enterprises.
Users are assumed to have a reasonable
Otherwise, explanatory notes should be used to
knowledge of business, economics, finance and disclose the inconsistency to facilitate comparison by
accounting. Information about complex matters users of the enterprise’s accounting information with
is presented in the notes to the financial other enterprises, of the current period with the prior
statements periods and of the financial performance with the
budget plan

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1.1.4 Role of Accounting

1.2 Basic accounting concepts and principles.
Article 4 (Accounting Law)
1. Collecting, processing accounting information and data 1.2.1 Basic accounting concepts
according to subjects and contents of accounting works,
accounting standards and accounting regime.
1.2.2. Financial statements’ elements
2. Inspecting, supervising revenues, expenditures, debts; 1.2.3. Basic accounting principles
inspecting the management, use of assets and sources of assets;
discovering and preventing violations against regulations on
finance and accounting.
3. Analyzing accounting information and data; advising,
proposing solutions for resolving administrative requirements
and making of economic, financial decisions of the accounting
unit.
4. Providing accounting information and data as prescribed by
law.
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1.2.1 Basic accounting concepts 1.2.1 Basic accounting concepts

 Accounting entity  Accounting currency
Accounting currency is the currency used in keeping records and in
presenting the financial statements.
Clearly defined economic unit which
(1) engages in identifiable economic activities,
(2) controls economic resources (for which accounting records are
maintained and periodic financial statements are prepared)
and (3) is distinct from the personal dealings of its owners or
employees.

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1.2.1 Basic accounting concepts 1.2.2 Financial statements’ elements

 Accounting period
-Accounting period means a period of time fixed from the time an Assets
accounting entity commences to post entries in accounting books
until the time it ends the posting of entries in accounting books and
closes them in order to prepare financial reports An asset is a resource which is controlled by
-Accounting period: Usually one year, may be quarterly, can be the the enterprise and from which future
same as calendar year economic benefits are expected to flow to the
enterprise.(VAS 01 – Framework)

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Exercise 1
1.2.2 Financial statements’ elements
State which of the following items could appear as an asset on
Assets - Recognition criteria the balance sheet of business A. Explain your reasoning in each
case
a. $1,000 owing to business A by a customer who will never be
The entity has an exclusive right to control the benefit able to pay
b. The purchase of a license from business B giving business A the
It is probable that future economic benefits associated with the right to produce a product designed by B. Production of this new
asset will flow to the enterprise product is expected to increase profits over the period in which
business A holds the license
c. The hiring by business A of a new marketing director who is
The cost of the asset to the enterprise can be measured reliably
confidently expected to increase profits by at least 30% over the
next three years
The benefit must arise from some past transaction or event d. The purchase by business A of a machine which will save
$10,000 per annum. It is currently being used by business A but
it has been acquired on credit and is not yet fully paid for
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1.2.2 Financial statements’ elements 1.2.2 Financial statements’ elements

Liabilities - Recognition criteria
Liabilities The liability must be capable of reliable measurement
in monetary terms

A liability represents a present obligation of It is more likely that an outflow of resources will
occur
the enterprise arising from past transactions
The obligation arises from some past transaction or
or events, the settlement of which is expected event
to result in an outflow of resources from the
enterprise (VAS 01 – Framework) Present obligation

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Exercise 2
 State which of the following items could appear as a liability 1.2.2 Financial statements’ elements
on the balance sheet of a business. Explain your reasoning in
each case
a. $2,000 owing to business B for the satisfactory supply of goods
Equity
during the past month
b. Magazine subscription worth $27,400 have been received in Equity refers to the enterprise’s net assets,
advance by a publisher
that is, the residual interest in the assets after
c. The business has guaranteed a manager’s personal loan from a
bank of $100,000. The manager has maintained the account in all its liabilities (VAS 01 – Framework)
good order and $79,000 us currently owing
d. There is a legal claim against the business for negligence over
faulty workmanship. It is probable the business will settle out of
court for $50,000

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1.2.2 Financial statements’ elements 1.2.2 Financial statements’ elements

Equity Equity = Total Assets- Total Liabilities
The Accounting Equation
The contributed
capital Assets = Liabilities + Owners’ Equity
Equity

Retained
Earnings
The resources The rights of the
Others: Reserves, controlled by a The rights of the owners
Funds,... business creditors, which
represent debts
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1.2 Basic accounting concepts and principles

1.2.2 Financial statements’ elements 1.2.2 Financial statements’ elements
Income
Revenues and other incomes increases in economic benefits…..

Revenues and other incomes are increases in As a result of ordinary activities and other events
economic benefits as a result of ordinary of the enterprise during the accounting period in
the form of inflows or enhancements of assets or
activities and other events of the enterprise decreases of liabilities that result in increases in
Recognition equity.
during the accounting period in the form of criteria
inflows or enhancements of assets or decreases
Reliable measurement
of liabilities that result in increases in equity,
other than those relating to contributions from
equity participants (VAS 01 – Framework) 37
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1.2.2 Financial statements’ elements 1.2.2 Financial statements’ elements

Expenses
Expenses Decreases in economic benefits…

Expenses are decreases in economic benefits

during the accounting period in the form of The form of outflows or depletions of assets or
incurrences of liabilities that result in decreases in
outflows or depletions of assets or equity
Recognition
incurrences of liabilities that result in criteria Reliable measurement
decreases in equity, other than those relating
to distributions to equity participants (VAS 01 Recognised expenses have to be matched with
revenues recorded
– Framework) 40

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1.2.2 Financial statements’ elements 1.2.3. Basic accounting principles

Owners’
Assets = Liabilities + Equity 1. Going concern
7.Consistency

2. Accrual basis
Basic
Capital Retained accounting 6. Materiality
Stock Earnings principles
The
3. (Historical) Cost 5. Prudence
Accounting Revenue - Expenses
Equation 4. Matching
Net
A = L + OE = Income
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April 22 Finance 42

1.2.3. Basic accounting principles

1.2.3. Basic accounting principles
Accrual basis
Accrual basis
Transactions which have effects on assets, liabilities, Revenue reported when earned
equities, revenues and expenses of an enterprise are Expense reported when incurred
recognized when they occur, not at the time cash or
cash equivalents are received or paid. The financial Properly matches revenues and
statements prepared on the accrual basis reflect the expenses in determining net income
past, present and future business performance of the Requires adjusting entries at end of
enterprise. period

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Cash vs Accrual accounting Why use Accrual Accounting?

Cash basis Accrual basis Necessitated by the time period assumption
 over life of business:
Revenue When received When earned cash profit = accrual profit
recorded  need regular and timely reporting to users
Expense When paid When incurred  transactions may span more than one accounting period
recorded  cash flows often do not coincide with revenue and expense
Profit is Cash inflows from Revenues less recognition
revenues less cash expenses
outflows on expenses

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1.2.3. Basic accounting principles 1.2.3. Basic accounting principles

Going concern
Financial statements are normally prepared on (Historical) Cost
the assumption that an enterprise is a going
concern and will continue business for a
foreseeable future, that is, the enterprise is Assets are recognized at historical cost.
assumed to have neither the intention nor the The historical cost of an asset is the amount of
need to liquidate or curtail materially the scale cash or cash equivalents paid, or payable, or
of its operations. If such an intention or need fair value of the asset at the time the asset is
exists, the financial statements may have to be recognized. Cost is not changed unless
prepared on a different basis and accordingly otherwise required under specific standards.
that fact is disclosed
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1.2.3. Basic accounting principles 1.2.3. Basic accounting principles

The matching concept supports reporting revenues
Matching and related expenses in the same period.
Revenues should match with expenses. The Paid $10,000 for Sold the
recognition of revenue should be combined with an advertising advertised
Paid $10,000
campaign for for
a
the recognition of expenses incurred to earn the product in
an advertising
product that will
revenue. Expenses matching with revenue campaign for ain
be introduced 2010
include those incurred in the period the revenue product that will
2009.
is generated and those incurred in prior periods be introduced in
or accruals which are associated with the 2004 2005
$10,000
$10,000
revenue of the current period. expensed in
recorded as an
2010 to match
asset
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1.2.3. Basic accounting principles 1.2.3. Basic accounting principles

Consistency Prudence
The accounting policies and practices selected The prudence concept requires that:
a) Provisions should be made, however, excessive
by an enterprise should be applied
provision is not allowed;
consistently for at least one accounting period. b) Assets and incomes should not be overstated;
The causes and effects of any change in the c) Liabilities and expenses should not be understated;
current accounting policies and practices d) Revenues and incomes are recognized if, and only if, it
should be disclosed in a note to the financial is probable that economic benefits will flow to the
statements. enterprise while expenses should be recognized when there
is evidence that economic outflows are probable.
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1.3 Contents of financial accounting

1.2.3. Basic accounting principles
Accounting subjects with respect to business operations shall comprise:

Accounting for Cash

Materiality Accounting for Materials, Tools and Supplies
Accounting for Fixed Assets, Investment properties, leased Assets
Information is material if its omission or misstatement Accounting for Payrolls and Compensation
could influence the economic decisions of users taken on Accounting for Manufacturing costs
the basis of the financial statements. Accounting for Financial Investments
Materiality depends on the size of the item or error Accounting for Revenue, Cost of goods sold, income, expenses
judged in the particular circumstances of its omission or and the business result
misstatement. Materiality of information is considered in Accounting for Liabilities and Equity
both qualitative and quantitative terms. Financial Statements

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1.4.2 Contents of Accounting works

1.4 Contents of Accounting works
1.4.1. Requirements for Accounting works in business The approach of Accounting process

1. Collecting, processing accounting information and data

1- Compliance with regulation of Law on accounting according to subjects and contents of accounting works,
accounting standards and accounting regime.
2- Compliance with Accounting standards, regulation 2. Analyzing accounting information and data; advising, proposing
on Finance and Accounting. solutions for resolving administrative requirements and making
of economic, financial decisions of the accounting unit.
3- Compliance with business’ regulations and 3. Providing accounting information and data as prescribed by law
characteristics 4. Organize and manage scientific research into accounting and
application of information technology to accounting works;
4- Consideration of costs and benefits
5. Carry out inspection, settle complaints and denunciations, and
take actions against violations against regulations of law on
accounting

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1.4.2 Contents of Accounting works 1.4.2 Contents of Accounting works

The approach of Accounting works
The approach of Accounting works
1.Accounting regime
1. Accounting records
2.Accounting records
What are Accounting records?
3.Accounts
4.Accounting books Further reading: Section 1, Chapter II, Law on
5.Accounting inspection accounting No 88/2015/QH 13

6.Financial Statements
The cicular No. 200/2014/TT-BTC
7.Application of information technology to
accounting works

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1.4.2 Contents of Accounting works 1.4.2 Contents of Accounting works

The approach of Accounting works The approach of Accounting works
2. Accounts
2. Accounts Assets = Liabilities + Equity

Further reading: Section 2, Chapter II, Law on

accounting No 88/2015/QH 13 Acounts Acounts Acounts
type No 1, 2 type No 3 type No 4
The cicular No. 200/2014/TT-BTC, Article 9

Chart of accounts prescribed in Appendix 1, the cicular

No. 200/2014/TT-BTC: Included 76 Accounts and 150
Sub-accounts.

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1.4.2 Contents of Accounting works Assets (1,2) Liabilities,Equity(3,4)

The approach of Accounting works + - (4) - +

Basic
+ (1) (3)
Result = Income Expenses transactions
Liabilities,Equity(3,4)
Assets (1,2)
- +
+ -
Acounts Acounts Acounts
type No 9 type No 5, 7 type No 6,8 (2)

Assets (1,2) Expenses(6,8) Result(9) Income(5,7) Assets (1,2)

+ - + - (5) + -
-
(7) Trasfer E Transfer I
Liabilities,Equity(3,4 Liabilities,Equity(3,4)
+ (8) (6)
- - +
Gain Loss

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1.4.2 Contents of Accounting works General Journal

The approach of Accounting works H&F Corporation

3. Accounting books Transaction Titles of Affected

Posting date
Date Accounts
Vouchers Amount
Further reading: Section 2, Chapter II, Law on
accounting No 88/2015/QH 13 Date
Description Accounts

D N Debit Credit

The cicular No. 200/2014/TT-BTC, Article 9

1/1/2013 1/1/2013 0012 Buying goods on credit Inventory 800

Payables 800

Accounting books prescribed in Appendix 4, the cicular

No. 200/2014/TT-BTC: Included Ledgers or Journals ….

(All are optional)

Transaction
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General Ledger
1.4.2 Contents of Accounting works
Account Inventory –AC 156 The approach of Accounting works
H&F Corporation
4. Financial statements
Vouchers Ref. Amount
Date
Accounts
Description
reference Further reading: Section 3, Chapter II, Law on
D N Debit Credit
accounting No 88/2015/QH 13
Beginning balance -

The cicular No. 200/2014/TT-BTC, Article 9

Buying goods .. Payables 800

Selling goods C.0.G.S 400 Financial statements prescribed in Appendix 2, the

cicular No. 200/2014/TT-BTC: Included 4 statements
Closing balance

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1.4.2 Contents of Accounting works

Financial statements prescribed in Appendix 2, the

cicular No. 200/2014/TT-BTC, included 4 statements as GOOD LUCK!
belows: (Annual and Interim FSs)

- Balance sheet Form NoB 01 - DN

- Income statement Form NoB 02-DN
- Cash flow statement Form No 03 - DN

- Notes to the Financial Statements Form No 09 - DN

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