Overview of Financial Accounting and the

Vietnamese Accounting System

CHAPTER 1
➢ Explain the role of financial accounting
information in decision-making.
➢ Understand the fundamental principles
of financial statement presentation.
➢ Describe the basic components of
financial statements.
➢ Utilize the accounting system to
record transactions related to core Learning Objectives
business operations.

2
 Content
Introduction to financial
accounting.

The Vietnamese accounting system

and its application in basic
production and business activities.

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 Section 1

Introduction to Financial Accounting

4
 Accounting and Decision-Making

Business’s Making Users

activities decisions

Data Accounting Information

system

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Three Activities
Illustration 1-1
The activities of the accounting process

The accounting process includes

the bookkeeping function.
Who Uses Accounting Data

INTERNAL
USERS

Illustration 1-2
Questions that internal
users ask
Who Uses Accounting Data

EXTERNAL
USERS

Illustration 1-3
Questions that external
users ask
Financial Statement

•
Statement of Financial Position
• Income Statement
• Cash Flow Statement
• Notes of FS
 Statement of Financial Position
• 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).
Income •

Statement •

•
 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?
 Vietnamese Accounting System

1 2 3

The Accounting Vietnamese Specific accounting

Law and related Accounting systems for
regulations. Standards. enterprises, public
entities, and banks.
 Fundamental Accounting Principles
Accrual Basis: Record transactions when they occur, not when cash is exchanged.

Going Concern: Assume the enterprise will operate continuously.

Historical Cost: Record assets based on their original cost.

Matching Principle: Match revenues with corresponding expenses.

Consistency: Maintain consistent accounting policies.

Prudence: Exercise caution in estimates and judgments.

Materiality: Include information that significantly impacts decisions.

Basic Requirements of Accounting

Honesty Objectivity Completeness

Timeliness Clarity Comparability.

 Accounting equation

Assets = Liabilities + Owner’s Equity

Assets
Resources with economic
value controlled by the
business.

Provide a future benefit

Assets

CASH PROPERTY, INVENTORY ACCOUNT PREPAID FINANCIAL

PLANT AND RECEIVABLE EXPENSES INVESTMENT
EQUIPMENT S
Liabilities
Debts owed to outsiders (creditors)
 Liabilities

• Loans
• Advance payment from customer
• Bank overdraft
• Payable to supplier
• Tax payable
 Owner’s Equity

Owner’s Capital
right to
the
asset of Retained earnings (Revenue – Expense)
the
business Reserves
• Revenues: a result of providing
services or selling products to
customers.
• Expenses: the using up of assets
and the consuming of services in
the process of earning revenues.
Expended Accounting equation

Assets Liabilities Owner’s equity

Retained
Assets Liabilities Capital Funds
Earnings

Assets Liabilities Capital Funds Revenue Expense

 Section 2

The Vietnamese accounting system and its application in

basic production and business activities.

31
What is an Account and its
usefulness?
Debits ◆ Record of increases and decreases in a specific asset,
liability, Owner’s equity, revenue, or expense item.
and
◆ Debit = “Left”
Credits
◆ Credit = “Right”

An account can Account Name

be illustrated in a Debit / Dr. Credit / Cr.
T-account form.
 Debits and Credits

DEBIT AND CREDIT PROCEDURES

Double-entry system
◆ Each transaction must affect two or more accounts to keep the basic accounting
equation in balance.

◆ Recording done by debiting at least one account and crediting at least one other
account.

◆ DEBITS must equal CREDITS.

 Asset Accounts

Note:
❖Contra Asset Account: 214, 229
▪ Opening balance and Closing balance: Credit side
▪ Increase side: Credit side
▪ Decrease side: Debit side

Accounts 131, 136, and 138 sometimes have balances on both sides.
 Practice 1

Journalize the transactions

1. Buy raw materials and pay in cash 300 million VND (price excluding VAT, VAT rate
10%), goods have been instocked to the warehouse.
2. Pay cash in advance for an employee 20 million.
3. Buy goods and pay by cash at the bank of 440 million VND (price with 10% VAT).
Goods have been instocked to the warehouse.
4. Company A pays 220 million in cash.
5. Buy a truck worth 500 million, the price is not including VAT (the tax rate is 10%), and
pay immediately by cash at the bank.
 Liabilities and Equity Accounts

Note:
❖Contra Equity Account: 419
▪ Opening balance and Closing balance: Debit side
▪ Increase side: Debit side
▪ Decrease side: Credit side
Accounts 331, 333, 334, 336, and 338 sometimes have balances on both
sides.
Accounts 412, 413, and 421 sometimes have balances on both sides.
 Practice 2

1. Short-term loans in cash of 200 million VND.

2. Long-term loan of 500 million to pay a payable amount to the seller.
3. Pay salary payable by cash at the bank of 60 million.
4. The owner contributes capital in cash of 400 million, and fixed assets of 300
million.
5. Using undistributed profits after tax to set up a investment and development
fund of 300 million.
 Revenue and income Accounts

Note:
❖Contra Sales Account: 521
▪ Increase side: Debit side
▪ Decrease side: Credit side
Account types 5, and 7 are transferred to Account 911 at the end of the
period
 Practice 3

1. Selling goods in cash at an exclusive of VAT price of 400 million, VAT 10%.
2. Selling goods at an exclusive of VAT price of 400 million on credit, VAT 10%.
3. The company receives the interest on bank deposits in the period is 2 million
VND.
 Expense Accounts

Note:
Accounts 621, 622, and 627 are transferred to Account 154 at the end of the
period.
Accounts 632, 641, 642, 635, 811, and 821 are transferred to Account 911 at the
end of the period.
 Practice 4
1. The cost of goods sold is 500 million.
2. Pay in cash for the sales department 20 million and the administration
department 10 million.
3. The salary payable is 30 million for the sales department and 30 million for
the administration department.
4. The depreciation is 10 million for the sales department and 5 million for the
administration department.
5. The interest payable is 10 million.
6. The contract breach penalty is 10 million, paid in cash.
THE END