VIETNAM NATIONAL UNIVERSITY OF AGRICULTURE Authors: PHI THI DIEM HONG | TRAN THI THUONG ACCOUNTING PRINCIPLES WORKBOOK (Advanced Program) VIETNAM NATIONAL UNIVERSITY OF AGRICULTURAL PRESS - 2022 ii PREFACE As cross-border among different countries, the globalization that influence on all business activities, is taking place at an ever more rapid anywhere. The famous business failures that have been reported in the press in the pass are good realizable evidences to demonstrate the importance of business activity analysis and proper recording of transactions. If the financial information, as the financial reports, of a business entity are to properly represent the results of operations and the financial condition of the company, the transactions must be analyzed and recorded in the accounts following generally accepted accounting principles. Therefore, the accounting technics are important not only to accounting majors but also to anyone entering or engaged in a business career to become managers because the ultimate effects of these book entries are reflected in the financial statements.
If the assets, liabilities and their related expenses are excluded from the financial reports, or reported revenues are recognized prematurely or do not really exist, the financial statements are misleading. The information in financial statements are only useful and meaningful in case they are fair and clearly represent the business events of the company. Accounting and its information are always useful for all enterprises or one who would like manage or use economic resources or engage in other economic activity to make business decision. Accounting Principle is a course of study that provides the principles and techniques that accounts employ in measuring, processing, evaluating and communicating information about the financial performance and position of a business.
This courses supplies learners the “language of business” or the learners understand business terms and concepts used in making decisions. If the learners understand how accounting information is issued, the learners will be in an even stable position when faced with a management decision based on accounting information. In order to help the learners as students to develop an understanding of a range of theoretical and practical techniques used in to participate more effectively, this book has been issued not only as students‟ workbook but also the training material. Throughout the book is the questions and exercise examples taken from everyday life to relate an accounting concept being introduced or discussed to students' experiences.
From this, the aim of book is introducing the fundamental principles and practices of accounting and developing skills and attitudes useful for learners in much of dynamic business situations. This edition contains a total of 10 chapters with most of the contents were expressed under United States Generally Accepted Accounting principles (US-GAAP) as purpose of advanced program that does enrich knowledge of learners at least in comparing with other GAAP (including Vietnam accounting standards). Each chapter of iii first edition has three sections: (i) the brief summary of core terminology and definitions that allow students to review all major concepts covered to that point; (ii) form of questions and exercises sample that is one of the most important section of book to explain how to solve or find the answers of the chapter questions, exercises available; and (iii) question and exercise practice that is the largest sections of end-of-chapter questions, exercises, and problems available. All end-of-chapter exercises and questions have been traced back to the chapter explanation to ensure that nothing is asked of a student that does not appear in the book with key answers.
Each exercise or question becomes more prominent in the business literature and in practice for learners studying on accounting law and regulation, assumed, greater responsibility for preventing and detecting fraud. In especially, this book differs from others in a design of comprehensive single reference source for understanding current accounting principles and reporting issues. It is directed to accounting learners, trainers or other preparers and users of accounting information. Its presentation and format assists strongly the quick comprehension of complex accounting-related subjects updated for today‟s rapidly changing business environment.
All of those sources of accounting guidance are prepared and discussed directly by authority groups, Dr. Phi Thi Diem Hong and Dr. Tran Thi Thuong, who are working in Financial Accounting Department, Faculty of Accounting and Business Management. In which, the both of authors have tried their efforts of their fields in accounting teaching or researching and working, not only normal but also advanced program in university and enterprises, however, it is difficult to be perfected as willing as.
Therefore, we are so happy to receive the supporting comments from the readers who are any of our students, colleagues, accounting professors or researchers in the world in order to do best in next editions. Acknowledgements: The whole book would not have seen the light of the day without the help of so many wonderful colleagues in Faculty of Accounting and Business Management who have helped us to comprise all ideas and content together. We also wish to place our sincere appreciation of the untiring efforts of commentators for her/his thorough technical review of the entire manuscript. He/She inviable comments have all been take into account in writing this book.
Authors Phi Thi Diem Hong Tran Thi Thuong iv CONTENTS Chapter 1. INTRODUCING ACCOUNTING IN BUSINESS. ACCOUNTING IN BUSINESS REVIEWS. Accounting and Accounting activities.
Accepted accounting terminology. MULTI-CHOICE QUESTIONS AND EXERCISES SAMPLE. Multiple-choice questions sample. PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS.
Practical Multiple-choice questions. ANALYZING AND RECORDING TRANSACTIONS. ANALYZING AND RECORDING TRANSACTIONS REVIEWS. Analyzing and recording process.
Double entry accounts. Trial balance sheets. EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE. Multiple-choice questions sample.
PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS. Practical Multiple-choice questions. ADJUSTING ACCOUNTS AND PREPARING FINANCIAL STATEMENTS. ADJUSTING ACCOUNTS AND PREPARING FINANCIAL STATEMENT REVIEWS.
Accrual Basis of Accounting. Preparing Financial statements. EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE. Multiple-choice questions sample.
PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS. Practical Multiple-choice questions. ACCOUNTING FOR MERCHANDISING OPERATIONS. MERCHANDISING OPERATION REVIEWS.
Accounting for Merchandise. EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE. Multiple-choice questions sample. PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS.
Practical Multiple-choice questions. INVENTORY AND COST OF GOODS SALES. INVENTORY AND COST OF GOODS SALES REVIEWS. Cost of Goods sold.
Accounting for Inventory. EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE. Multiple-choice questions sample. PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS.
Practical Multiple-choice questions. ACCOUNTING FOR RECEIVABLE. ACCOUNTING FOR RECEIVABLE REVIEWS. Accounting for Receivable.
Uncollectible Accounts and Bad Debt. EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE. Multiple-choice questions sample. PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS.
Practical Multiple-choice questions. LONG-TERM ASSETS. LONG-TERM ASSETS REVIEWS. Cost of Long-term Assets.
Computing and Recognition Depreciation. Accounting for Disposal of Long-term Assets. Accounting for Selling Long-term Assets. EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE.
Multiple-choice questions sample. PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS. Practical Multiple-choice questions. CURRENT LIABILITIES REVIEWS.
Concepts underlying Current Liabilities. Accounting for Current Liabilities. EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE. Multiple-choice questions sample.
PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS. Practical Multiple-choice questions. LONG-TERM LIABILITIES. LONG-TERM LIABILITIES REVIEWS.
Concepts underlying long-term liabilities. Accounting for long-term liabilities. EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE. Multiple-choice questions sample.
PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS. Practical Multiple-choice questions. SHAREHOLDER‟S EQUITY REVIEWS. Accounting for the shareholder‟s Equity.
EXERCISES AND MULTI-CHOICE QUESTIONS SAMPLE. Multiple-choice questions sample. PRACTICAL EXERCISES AND MULTIPLE-CHOICE QUESTIONS. Practical Multiple-choice questions.
250 viii Chapter 1 INTRODUCING ACCOUNTING IN BUSINESS 1. ACCOUNTING IN BUSINESS REVIEWS 1. Accounting and Accounting activities Anyone probably will find that of all the business knowledge that have acquired or will learn, the accounting study will be the most useful. The financial and economic decisions as not only a student or consumer but also anyone involve accounting information.
For individual situation, relating income tax profile, accounting information helps determine his/her taxes payable. Understanding the accounting discipline also can influence many of his/her future occupational decisions. Nobody cannot stand out of the accounting information effects on his/her personal and occupational life. Every profit-seeking business organization such as money, inventory, machinery, and other assets, uses accounting information.
For this reason, accounting is called the language of business. Accounting also serves as the language providing financial information about not-for-profit organizations such as hospitals, charities, churches, etc. but this book concentrates on accounting in business. Accounting in Business is a system that identifies, records and communicates an financial information of an business entity to a wide range of potential users in making decisions.
In other words, accounting is a link between business activities and decision makers. Accounting activities like a cycle following the business cycle as bellowed: (i) Accounting identifies the business activities by recording and then processed to become useful information, after that communicated through accounting reports to decision makers. (ii) Data about business activities or transactions are the input to the accounting system, and useful accounting information for decision makers is the output. Normally, there are following four major decision types that managers can use accounting information to make sound decisions: (i) Financial decisions mention to what amounts of capital (funds) are needed to run the business and whether to keep safety these funds from owners (stockholders) or creditors.
In this sense, the company capital means money used to purchase resources such as machinery, merchandises, and buildings and to pay expenses of operating the business. (ii) Resource allocation decisions relate how the total company capital is to be invested, for example the amount to be invested in building. 1 (iii) Production decisions focus on what kinds of product are to be produced, by when and what means. (iv) Marketing decisions are setting prices of selling and budgets of advertising or the location of a company's markets and how to reach them.
Accounting Principles Accounting information has been required relevant, reliability and comparable in order to satisfy being useful for all users. Unfortunately, the accounting information quality is strongly depended on the accountants‟ ethical. The ethical behavior mentions more than merely making sure you are not violating a code of ethics. Most people sense what is right and wrong, but yet get-rich-quick opportunities can tempt many of us.
In fact, the greed won out over their sense of right and wrong. Therefore, it is necessary setting a principles or general accepted accounting principles (GAAP) for accounting activities. On the other word, the accounting principles are the important contents to keep the accounting practical body. Depending on different condition of nation, each country has different GAAP body that has been accepted and promulgated in whole domestic area.
Some of developed countries, as United Sated, United Kingdom, Australia, set a principle system that has been accepted voluntary in other countries. In this book, focusing on the learners of advanced program, there are three main concepts of GAAP including International Financial Report Standards (IFRSs); United Sated-General Accepted Accounting Principles (US-GAAP); and Vietnamese Accounting Standards (VASs) in table 1.1 as bellows: Table 1. Accounting Principles following IFRSs, US-GAAP and VASs No. IFRSs (IAS 01) US-GAAP VASs (VAS01) 1 Fair value Cost principle Historical cost 2 Comparable Revenue recognition Prudence 3 Going-concern Going-concern Continuous operation 4 Consistency Business entity Consistency 5 Off-setting Matching Matching 6 Accrual basis Monetary unit Accrual basic 7 Materiality Full disclosure Materiality The table 1.
shows that there are different entitles of principles in different countries, but there are many similar points among relevant regulations of three systems respectively. List of Accounting principles following the US-GAAP and VASs US-GAAP VASs Cost principle means that accounting information is Historical cost means that accounting information is based on actual cost. recognized according to their historical cost Matching principle prescribes that a company must Matching prescribes that a revenues is recognized, record its expenses incurred to generate the and the costs creating such revenue also need to be revenue.