Tiếng Anh chuyên ngành kế toán tài chính, Lecture notes of Finance

Download Tiếng Anh chuyên ngành kế toán tài chính and more Lecture notes Finance in PDF only on Docsity! 1-1 ENGLISH FOR ACCOUNTING Financial Accounting Department 1-2 Content  English for Financial accounting  English for Management accounting  English for Auditing 1-5 Accounting is a system that IndentifiesRecordsCommunicates relevant, reliable, and comparable information about an organization’s business activities . 1.1.1. DEFINITION 1-6 Three Activities The accounting process includes the bookkeeping function. 1.1 DEFINITION AND ROLE OF ACCOUNTING 1.1.1What is Accounting? 1-7 The purpose of accounting is to provide financial information to the stakeholders of the business 1.1.2 The role of accounting 1-10 LO 2 External Users Illustration 1-2 Questions that external users ask 1.1.2 The role of accounting 1-11 1.2 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 1.2.1 Objective of Financial Accounting 1.2.2 Elements of Financial Statements 1.2.3 Qualitative characteristics of accounting information 1.2.4 Recognition, measurement and disclosure concepts 1-12 ILLUSTRATION 2-7 Conceptual Framework for Financial Reporting LO 1 1-15 Liabilities Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events LO 2 Conceptual Framework. 1.2 CONCEPTUAL FRAMEWORK 1.2.2. Elements of Financial Statements 1-16 Equity Residual interest in the assets of an entity that remains after deducting its liabilities. LO 2 Conceptual Framework. 1.2 CONCEPTUAL FRAMEWORK 1.2.2. Elements of Financial Statements 1-17 Investments by owners LO 2 Conceptual Framework. Owner investment, also called owner's investment or contributed capital, is the amount of assets that the owner puts into the company. 1.2 CONCEPTUAL FRAMEWORK 1.2.2. Elements of Financial Statements 1-20 Revenues Revenue is the income generated from normal business operations and includes discounts and deductions for returned merchandise LO 2 Conceptual Framework. 1.2 CONCEPTUAL FRAMEWORK 1.2.2. Elements of Financial Statements 1-21 Expenses Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods. An expense is the cost of operations that a company incurs to generate revenue. LO 2 Conceptual Framework. 1.2 CONCEPTUAL FRAMEWORK 1.2.2. Elements of Financial Statements 1-22 The qualitative characteristics of accounting information is identified by distinguishing better (more useful) information from inferior (less useful) information for decision-making purposes 1.2 CONCEPTUAL FRAMEWORK 1.2.3. Qualitative characteristics of accounting information 1-25 1.2.3. Qualitative characteristics of accounting information Fundamental Quality—Relevance Financial information has predictive value if it has value as an input to predictive processes used by investors to form their own expectations about the future. Relevant information also helps users confirm or correct prior expectations. Information is material if omitting it or misstating it could influence decisions that users make on the basis of the reported financial information. 1-26 1.2.3. Qualitative characteristics of accounting information Fundamental Quality—Faithful Representation Faithful representation means that the numbers and descriptions match what really existed or happened. 1-27 1.2.3. Qualitative characteristics of accounting information Fundamental Quality—Faithful Representation Completeness means that all the information that is necessary for faithful representation is provided. Neutrality means that a company cannot select information to favor one set of interested parties over another. An information item that is free from error will be a more accurate (faithful) representation of a financial item. 1-30 Assumptions in Financial Reporting Going Concern The business will remain in operation for the foreseeable future. Periodicity States that the life of a business can be divided into artificial time periods. 1.2 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 1.2.4 Recognition, measurement and disclosure concepts 1-31 Illustration: Identify which basic assumption of accounting is best described in each item below. (a) The economic activities of KC Corporation are divided into 12-month periods for the purpose of issuing annual reports. (b) Solectron Corporation, Inc. does not adjust amounts in its financial statements for the effects of inflation. (c) Walgreen Co. reports current and noncurrent classifications in its balance sheet. (d) The economic activities of General Electric and its subsidiaries are merged for accounting and reporting purposes. Periodicity Going Concern Monetary Unit Economic Entity 1.2 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 1.2.4 Recognition, measurement and disclosure concepts LO 5 1-32 Principles in Financial Reporting Measurement Principles Historical Cost Fair Value Or cost principle, dictates that companies record assets at their cost. Indicates that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability). 1.2 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 1.2.4 Recognition, measurement and disclosure concepts 1-35 Principles in Financial Reporting Expense Recognition Principle Expense Recognition “Let the expense follow the revenues.” 1.2 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 1.2.4 Recognition, measurement and disclosure concepts 1-36 Principles in Financial Reporting Full disclosure Principle Full disclosure Requires that companies disclose all circumstances and events that would make a difference to financial statement users. 1.2 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 1.2.4 Recognition, measurement and disclosure concepts 1-37 Illustration: Identify which basic principle of accounting is best described in each item below. (a) KC Corporation reports revenue in its income statement when it is earned instead of when the cash is collected. (b) Yahoo, Inc. recognizes depreciation expense for a machine over the 2-year period during which that machine helps the company earn revenue. (c) Oracle Corporation reports information about pending lawsuits in the notes to its financial statements. (d) Eastman Kodak Company reports land on its balance sheet at the amount paid to acquire it, even though the estimated fair market value is greater. Revenue Recognition Expense Recognition Full Disclosure Measurement 1.2 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 1.2.4 Recognition, measurement and disclosure concepts 1-40 Provides the underlying framework for recording and summarizing economic events. Assets are claimed by either creditors or owners. Claims of creditors must be paid before ownership claims. Assets Liabilities Owner’s Equity= + 1.3 Accounting Equation, the account and recording process 1.3.1 Accounting equation 1-41 Assets Liabilities Owner’s Equity= +  Resources a business owns.  Provide future services or benefits.  Cash, Supplies, Equipment, etc. Assets 1.3 Accounting Equation, the account and recording process 1.3.1 Accounting equation 1-42 Assets Liabilities Owner’s Equity= +  Claims against assets (debts and obligations).  Creditors - party to whom money is owed.  Accounts payable, Notes payable, etc. Liabilities 1.3 Accounting Equation, the account and recording process 1.3.1 Accounting equation 1-45 Expenses are the cost of assets consumed or services used in the process of earning revenue. Common expenses are: salaries expense, rent expense, utilities expense, tax expense, etc. 1.3 Accounting Equation, the account and recording process 1.3.1 Accounting equation 1-46 Account Name Debit / Dr. Credit / Cr.  Record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.  Debit = “Left”  Credit = “Right” Account An Account can be illustrated in a T-Account form. 1.3 Accounting Equation, the account and recording process 1.3.2 The account 1-47 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 another. ► DEBITS must equal CREDITS. Debit and Credit Procedures 1.3 Accounting Equation, the account and recording process 1.3.2 The account 1-50  Assets - Debits should exceed credits.  Liabilities – Credits should exceed debits.  Normal balance is on the increase side. Chapter 3-23 Assets Debit / Dr. Credit / Cr. Normal Balance Chapter 3-24 Liabilities Debit / Dr. Credit / Cr. Normal Balance 1.3 Accounting Equation, the account and recording process 1.3.2 The account 1-51  Owner’s investments and revenues increase owner’s equity (credit).  Owner’s drawings and expenses decrease owner’s equity (debit). Chapter 3-25 Debit / Dr. Credit / Cr. Normal Balance Owner’s Capital Chapter 3-23 Owner’s Drawing Debit / Dr. Credit / Cr. Normal Balance Chapter 3-25 Debit / Dr. Credit / Cr. Normal Balance Owner’s Equity 1.3 Accounting Equation, the account and recording process 1.3.2 The account 1-52  Purpose of earning revenues is to benefit the owner(s).  Effect of debits and credits on revenue accounts is the same as their effect on Owner’s Capital.  Expenses have the opposite effect: expenses decrease owner’s equity. Chapter 3-27 Debit / Dr. Credit / Cr. Normal Balance Expense Chapter 3-26 Debit / Dr. Credit / Cr. Normal Balance Revenue 1.3 Accounting Equation, the account and recording process 1.3.2 The account 1-55 Account Title Ref. Debit Credit Oct. 1 Date General Journal LO 5 Explain what a journal is and how it helps in the recording process. Cash Common stock 10,000 10,000 Sierra issued common stock in exchange for $10,000 cash. Oct. 1 1.3 Accounting equation, the account and the recording process 1.3.3 The recording process 1-56 Account Title Ref. Debit Credit Oct. 1 Date General Journal LO 5 Explain what a journal is and how it helps in the recording process. Sierra borrowed $5,000 by signing a note.Oct. 1 Cash Notes payable 5,000 5,000 1.3 Accounting equation, the account and the recording process 1.3.3 The recording process 1-57 Account Title Ref. Debit Credit Oct. 2 Date General Journal LO 5 Explain what a journal is and how it helps in the recording process. Sierra purchased equipment for $5,000.Oct. 2 Equipment Cash 5,000 5,000 1.3 Accounting equation, the account and the recording process 1.3.3 The recording process 1-60 1. Analyze business transactions 2. Journalize the transactions 6. Prepare an adjusted trial balance 7. Prepare financial statements 8. Journalize and post closing entries 9. Prepare a post-closing trial balance 4. Prepare a trial balance 3. Post to ledger accounts 5. Journalize and post adjusting entries: Deferrals/Accruals LO 8 Describe the required steps in the accounting cycle. Illustration 4-33 Required steps in the accounting cycle 1.4 Accounting Cycle 1-61 Trial Balance – Each account is analyzed to determine whether it is complete and up-to-date. 1.4 Accounting Cycle 1.4.1 Trial Balance 1-62 Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 15,200 Supplies 2,500 Prepaid Insurance 600 Equipment 5,000 Notes Payable 5,000 Accounts Payable 2,500 Unearned Service Revenue 1,200 Common Stock 10,000 Dividends 500 Service Revenue 10,000 Salaries & Wages Exp. 4,000 Rent Expense 900 Totals 28,700 28,700 Balance Sheet Adjusted Income Trial Balance Adjustments Trial Balance Statement LO 10 Describe the purpose and the basic form of a worksheet. 1. Prepare a Trial Balance on the Worksheet 1.4 Accounting Cycle 1.4.1 Trial Balance 1-65 Supplies  Sierra purchased supplies costing $2,500. This account shows a balance of $2,500 in the October 31 trial balance.  An inventory count at the close of business on October 31 reveals that $1,000 of supplies are still on hand. Thus, the cost of supplies used is $1,500 ($2,500 − $1,000). Adjustment  Dr Supplies Expense: 1,500  Cr Supplies: 1,500 Adjusting entries 1-66 Dr Depreciation Expense: 40 Cr Accumulated Depreciation: 40 Prepaid Insurance Depreciation Unearned Service Revenue Dr Insurance Expense: 50 Cr Prepaid Insurance: 50 Dr Unearned Service Revenue: 400 Cr Service Revenue: 400 Adjusting entries 1-67 67 Ajusting entries Revenue Dr Account Receivable: 200 Cr Service Revenue: 200 Interest Dr Interest Expense: 50 Cr Interest payable: 50 Salaries Dr Salaries&wages Expense: 1,200 Cr Salaries&wages payable: 1,200 1-70 Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 15,200 15,200 15,200 Supplies 2,500 1,500 1,000 1,000 Prepaid Insurance 600 50 550 550 Equipment 5,000 5,000 5,000 Notes Payable 5,000 5,000 5,000 Accounts Payable 2,500 2,500 2,500 Unearned Service Revenue 1,200 400 800 800 Common Stock 10,000 10,000 10,000 Dividends 500 500 500 Service Revenue 10,000 400 10,600 10,600 200 Salaries & Wages Exp. 4,000 1,200 5,200 5,200 Rent Expense 900 900 900 Totals 28,700 28,700 Supplies Expense 1,500 1,500 1,500 Insurance Expense 50 50 50 Accumulated Depreciation 40 40 40 Depreciation Expense 40 40 40 Accounts Receivable 200 200 200 Interest Expense 50 50 50 Interest Payable 50 50 50 Salaries and Wages Payable 1,200 1,200 1,200 Totals 3,440 3,440 30,190 30,190 7,740 10,600 22,450 19,590 Net Income 2,860 2,860 Totals 10,600 10,600 22,450 22,450 Balance Sheet Adjusted Income Trial Balance Adjustments Trial Balance Statement (a) (b) (a) (g) (c) (d) (d) (e) (b) (e) (f) (f) (g) (c) Compute Net Income or Net Loss. 3. Total Columns, Compute Net Income (Loss) 1.4 Accounting Cycle 1.4.3 Closing the books 1-71 1.5 FINANCIAL STATEMENTS 1.5.1 Income Statement 1.5.2 Statement of Owner’s equity 1.5.3 Balance sheet 1.5.4 Statement of Cashflow 1.5.5 Note to Financial Statement TYPES OF FINANCIAL INFORMATION —_—<—_——[_ financial Reporting ————— Area Directly Affected by Existing FASB Rules <——— Basic Financial Statements ————+} All Information Useful for Investment, Credit, and Similar Decisions Notes to the Other Means of measures (fair values of items carried at historical cost) Financial . . Supplementary 7 . Other Financial Financial ; Statements Information fi Information Statements Reporting Balance sheet Examples: Examples: Examples: Examples: © Statement of © Accounting ° Changing prices ¢ Management’s ¢ Discussion of comprehensive policies disclosures discussion and competition and income © Contingencies * Oil and gas analysis Se Rene Hf © Statement of Inventol Terese * Letters to lia cash flows method, information stockholders ¢ Analysts' reports Sustainability ¢ Economic © Statement of ¢ Number of ) non atone tr naman tetanic reports Bead stockholders’ outstanding ° News articles equity * Alternative about company 24-72 1-75 Income Statement Presentation of Sales 1.5 FINANCIAL STATEMENTS 1.5.1 Income statement 1-76 1.5 FINANCIAL STATEMENTS 1.5.1 Income statement Key Items:  Net sales  Gross profit  Operating expenses Operating Expenses 1-77 Key Items:  Net sales  Gross profit  Operating expenses  Non- operating activities  Net income 1.5 FINANCIAL STATEMENTS 1.5.1 Income statement 1-80  Reports revenues and expenses for a specific period of time.  Net income – revenues exceed expenses.  Net loss – expenses exceed revenues.  Past net income provides information for predicting future net income. LO 4 Income Statement Illustration 1-4 Helpful Hint The financial statement heading identifies the company, the type of statement, and the time period covered. Sometimes, another line indicates the unit of measure, e.g., “in thousands” or “in millions.” 1.5 FINANCIAL STATEMENTS 1.5.1 Income statement 1-81 Net income is needed to determine the ending balance in owner’s equity. 1.5 FINANCIAL STATEMENTS 1.5.2 Statement of Owner’s equity 1-82 Retained Earnings Statement Net income is needed to determine the ending balance in retained earnings. Illustration 1-5 Income Statement Illustration 1-4 1.5 FINANCIAL STATEMENTS 1.5.2 Retained Earnings Statement 1-85 Balance Sheet  Reports assets and claims to assets at a specific point in time.  Assets = Liabilities + Stockholders’ Equity.  Lists assets first, followed by liabilities and stockholders’ equity. Illustration 1-7 Helpful Hint The heading of a balance sheet must identify the company, the statement, and the date. 1.5 FINANCIAL STATEMENTS 1.5.3 Balance Sheet 1-86 Balance Sheet Illustration 1-8 Statement of Cash Flows Illustration 1-7 1.5 FINANCIAL STATEMENTS 1.5.4 Statement of Cashflow 1-87 Answers:  Where did cash come from during the period?  How was cash used during the period?  What was the change in the cash balance during the period? Statement of Cash Flows Illustration 1-8 Helpful Hint The heading identifies the company, the type of statement, and the time period covered by the statement. Negative numbers are shown in parentheses. 1.5 FINANCIAL STATEMENTS 1.5.4 Statement of Cashflow