1. ACCOUNTING BASICS
UNIT OBJECTIVES - MỤC TIÊU
DURATION (9 periods) - THỜI LƯỢNG HỌC (9 TIẾT)
• Provide students with an overview of accounting main issues, basic terms and concepts related
to accounting.
Cung cấp cho sinh viên cái nhìn tổng quan về các vấn đề cơ bản trong kế toán, các thuật ngữ
và khái niệm cơ bản trong kế toán.
• Provide for students the way of organizing an academic essay.
Cung cấp học sinh phương pháp tổ chức viết một bài luận.
• At the end of this unit, students will be able to talk and write about accounting main issues.
Sau khi kết thúc bài học này, sinh viên có thể nói và viết về các vấn đề cơ bản trong kế toán.
In this unit, students will be provided knowledge to
write and talk about an overview of accounting main
issues, basic terms and concepts related to accounting.
Trong bài này, sinh viên sẽ được cung cấp các kiến thức
ngôn ngữ để nói và viết về các vấn đề tổng quan trong
kế toán, các thuật ngữ và khái niệm cơ bản về kế toán.
1
Unit 1: Accounting Basics
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2. Unit 1: Accounting Basics
2
Match the words or expressions in the column A with their definition in column B.
The suggested time to do this exercise is 10 minutes.
Column A Column B
1. Ledger A The amount of money written on the left side of the ledger
2. Debit B The amount of money written on the right side of the ledger
3. Credit C
The recording of revenues and expenses may take place before
related cash is received.
4. Cash method D
A book in which the monetary transactions of a business are posted in
the form of debits and credits. A ledger includes the record of
accounts transferred as final entry from original postings.
5. Accrual method E
The recoding of revenue and expenses takes place when the related
cash is received
6. Balance sheet F
A statement reporting the organization’s economic performance over
a specific period of time.
7. Income
statement
G
The basis of the standard accounting system in which each transaction
is recorded in at least two accounts: debit and credit.
8. Cashflow
statement
H
The summary of the organization’s uses of funds (assets) and sources
of funds (liablilities and equity) at a specific point of time
9. Double-entry
accounting
I
The basic formula of the double-entry book keeping system. It shows
how assets were financed either by borrowing money from someone
else (liability) or by paying your own money (shareholder’s/ owner’s
equity)
Assets = Liabilities + Shareholder’s/ owner’s equity
10. Accounting
equation
J
A statement explaining how an organization obtains cash and how it
spend cash and other factors that may affect cash positions.
11. Revenue K A daily record of events or business
12. Book keeping L
An evaluation of a person, organization, system, process, project or
product in order to certain the validity and reliability of information,
and also provide an assessment of a system’s internal control.
13. Creditor M
The recording of all financial transactions undertaken by an individual
or organization.
14. Audit N
the amount of money that a company receives from its activities in a
given period, mostly from sales of products and/or services to cus-
tomers
15. Journals O
A party (e.g. person, organization, company, or government) that has
a claim to the services of a second party. The first party, in general,
has provided some property or service to the second party under the as-
sumption (usually enforced by contract) that the second party will re-
turn an equivalent property or service.
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3. Unit 1: Accounting Basics
3
ACCOUNTING BASICS
Definition ofAccounting
Accounting is the process of financially measuring,
recording, summarizing and communicating the
economic activity of an organization. It is often referred to
as “the language of business” and, like any other language,
it has its own unique vocabulary and rules. Some people
think of accounting as a highly technical field understood
only by professional accountants. However, technical
accounting terms such as assets, liabilities, equity, revenue,
expense, income and cash flow are widely used
throughout the micro-finance field. Thus it is important
that anyone involved in making business decisions understands the basic accounting concepts
which form the basis of financial management.
Accounting is the process
Accounting is a service activity. It provides financial information about an organization’s
economic activities which is intended to be used as a basis for decision making. It provides
the required to answer questions such as: What are the resources of the organization? What
debts does it owe?Are its operating expenses too high relative to revenue?Are the organization’s
current lending activities generating enough income for it to be sustainable? Not everyone
needs to understand the intricate details of an organization’s accounting system; however, it
is helpful for employees to understand the framework within which accounting operates.
Managers, in particular, need to know how to interpret the information accounting provides.
Based on this information, managers can analyze the financial status of their organization and
manage the organization’s finances to ensure future financial stability.
Role of Accounting
Accounting falls into two general categories: financial
accounting and management accounting. Financial
accounting presents a summary view of the financial results
of past operations. Financial accounting reports are aimed at
external audiences although they are widely used internally
as well. Management accounting information is tracked and
presented at a much more detailed level, such as by programme or branch. Projected
financial information is also a part of management accounting and is aimed primarily at
internal audience. Management reports are prepared frequently and report on an on going
basis the differences between planned and actual results.
Financial Statements
The preparation of financial statements is virtually the last stepin the accounting process
but it is an appropriate point to begin studying accounting in order to understand what will
be produced. Financial statements are the primary means through which an organization
communicates information about its economic activities. The purpose of these statements is to
provide useful financial information to parties such as banks, investors, suppliers, governments,
etc., who may make decisions affecting the organizations’operations or otherwise influence the
Text A: Read text A: Accounting Basics and do exercises 2.1, 2.2 below. The
suggested time for reading the text and completing the exercises is 30 minutes.
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4. direction of its activities. Financial
statements are means of conveying a
concise picture of the financial position of
the organization. An individual who has
a clear understanding of these statements
will understand better the purpose of
earlier steps in the process.
The three most widely used financial
statements are the Balance Sheet, the
Income Statement and the Statement of
Changes in Financial Position.TheBalance
Sheet is a summary of the economic
resources of an organization and the
claims against those resources at a specific point in time. The Income Statement reports the
organization’s economic performance over a specified period of time.
The Statement of Changes in Financial Position reports the organization’s sources and uses
of funds (also referred to as the Statement of Changes in Sources and Uses of Funds or the
Cash Flow Statement). It explains how an organization obtains cash (sources of funds) and
how it spends cash (use of funds) including the borrowing and repayment of debt, capital
transactions, and other factors that may affect the cash position.
(Source: http://www.ruralfinance.org/servlet/BinaryDownloaderServlet?fileame=1125440545561_Lesson1_
definition_accounts.pdf, retrieved on 15 December, 2009)
Answer the following questions based on the information in text A.
1. What is Accounting?
2. Why is it important for business people to understand the basic accounting concepts?
3. What kinds of information does accounting activity provide?
4. What does the accounting information help managers in the business management?
5. Who are financial accounting aimed at? How about management accounting?
6. What kinds of information about the company do financial statements provide?
7. What are the most popular financial statements?
According to text A which of the following sentences are (T) or false (F).
Correct the false information.
Note:
The Statement of Changes in Financial Position
is not described until after the recording and
summarizing of economic transactions is
explained.
The first two statements are explained earlier.
Together, these statements summarize all of
the information contained in the organization’s
accounts.
Questions T/F
1. Accounting rules and terms are very technical and only professional accountants
can understand.
2. Accounting activity brings the information about the income and the spending
of the company.
3. As a manager, understanding accounting system entails being able to interpret
the information accounting provides.
4. People like investors and bondholders use management accounting reports
to make their investment decisions.
5. One who can’t read the financial statements can’t understand the accounting
process.
6. Statement of changes in sources and uses of funds is part of the statement of
changes in financial position.
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Unit 1: Accounting Basics
2.1
2.2
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5. 5
Unit 1: Accounting Basics
ACCOUNTING POLICIES AND STANDARDS
Text B: Read text B and do exercises 2.3, 2.4, 2.5 below. The suggested time for
reading the text and completing the exercises is 40 minutes.
Valuation and measurement
Investors in companies want to
know how much the companies
areworth,socompaniesregularly
have to publish the value of their
assets and liabilities. Companies
also have to calculate their profits
or losses: their managers need
this information, and so do
shareholders, bondholders and
the tax authorities. Companies
can choose their accounting
policies – their way of doing their
accounts. There are a range of
methods of valuation – deciding
how much something is worth
– and measurement – determining
how big something is – that are
accepted by law or by official
accounting standards. In the USA,
there are Generally Accepted
Accounting Principles (GAAP).
In most of the rest of the world
there are International Financial
Reporting Standards (IFRS), set
by the International Accounting
Standards Board. These are
technical rules or conventions
– accepted ways of doing things
that are not written down in a law.
Although businesses can choose
among different accounting
policies, they have to be
consistent, which means using
the same methods every year,
unless there is a good reason to
change a policy: this is known
as the consistency principle. The
policies also have to be disclosed
or revealed to the shareholders:
the Annual Report will contain
a ‘Statement of Accounting
Policies’ that mentions any
changes that have been made.
This enables shareholders to
compare profits and values
with those of previous years.
Areas in which the choice of
policies can make a big difference
to the final profit figure include
depreciation – reducing the value
of assets in the company’s
accounts, the valuation of stock
or inventory, and the making of
provisions – amounts of money
deducted from profits – for
future pension payments.
As there is always more than
one way of presenting accounts,
the accounts of British companies
have to give a true and fair
view of their financial situation
– meaning there are various
possibilities – rather than the
true and fair view – meaning
only one is possible.
Historical cost and accounting
Theaimofaccountingstandards
is to provide shareholders
with the information that will
allow them to make financial
decisions. This is one reason
whyinmanycountriesaccounting
follows the historical cost
principle: companies record
the original purchase price of
assets, and not their (estimated)
current selling price or replace-
ment cost. This is more
objective, and the current value
is not important if the business
is a going concern – a successful
company that will continue to
do business – as its assets are
not going to be sold, or do not
currently need to be replaced.
However, some countries with
regular high inflation, e.g. in
South America, use inflation
accounting systems that take
account of changing prices. One
system used is replacement cost
accounting, which values all
assetsattheircurrentreplacement
cost – the amount that would
have to be paid to replace them
now.
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6. Unit 1: Accounting Basics
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Match the two parts of the sentences
Are the following statements true or false?
1. Companies are told which accounting policies to use.
2. Companies can change their accounting policies whenever they like, as long as they
disclose this in their Annual Report.
3. Companies could produce several profit figures, depending on how they depreciated their
assets, valued their inventory, etc.
4. There is only one correct interpretation of a company’s financial position, and company
accounts must show this.
5. In many countries, companies do not record the current value of their assets.
6. In countries with high inflation, companies value their assets at their current replacement
cost.
Complete the table with words from the text and related forms
Put a stress mark in front of the stressed syllable in each word. The first one has
been done for you.
Verb Noun(s) Adjective
calcu’lation -
- consistent
- conventional
measure -
present -
valuable
2.3
2.4
2.5
1. Company’s managers, investors, creditors
and the tax authorities all
a. and not their current value, is recorded in
accounts.
2. There are different ways of doing accounting
but companies have to be consistent,
b. need to know the current market value of
its assets.
3. Companies have to disclose or make
known
c. need to know about the size of profits or
losses.
4. The historical cost principle is that the price
paid to buy assets,
d. which accounting methods they are using.
5. A going concern usually doesn’t e. which means regularly using the same
methods.
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7. Unit 1: Accounting Basics
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You are now listerning to a lecture on accounting overview. Listen carefully
and do the exercices 3.1, 3.2, 3.3 below.
Listen to the lecture the FIRST time and answer the questions
1. Why is accounting called the ‘language of business’?
....................................................................................
2. How is a standardized accounting system achieved?
....................................................................................
3. What are revenues and expenditures?
...................................................................................
4. In what ways are the balance sheet and the income statement different?
...................................................................................
5. How are accountants classified in the United States?
...................................................................................
6. What kind of services do public accountants provide?
...................................................................................
7. For whom do private and governmental accountants work?
...................................................................................
Now listen to the lecture the SECOND time and circle the answer that best
completes each of the sentences below
1. Accounting information is used by .................. to help them make financial decisions.
a. managers b. potential investors
c. creditors d. all of the above
2. Regardless of the type of business or the amount of money involved:
a. all companies use identical accounting systems
b. balance sheets are more important than income statements
c. common procedures are used in handling financial information
d. no standardized accounting system is employed
3. Business monetary transactions are summarized in:
a. bank books b. financial statements
c. computers d. cash registers
4. Public accountants may earn the title of CPA by:
a. becoming governmental accountants
b. paying a fee
c. fulfilling rigorous requirements
d. obtaining a Bachelor of Arts degree in accounting.
5. Private and governmental accountants are paid on a ............. basis.
a. salary b. monthly
c. fee d. weekly
3.1
3.2
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8. An accounting overview
Hi everyone, accounting is frequently called the ‘language of business’
because of its ability to communicate financial information about
an organization. Why is called so? Various (1)………... .parties,
such as managers, potential investors, (2)…..…, and the government,
depend on a company’s accounting system to help them make
informed financial decisions. An effective accounting system,
therefore, must include accurate (3)………., recording, classifying,
(4)…….., (5)………….and reporting of information on the financial
status of an organization.
In order to achieve a standardized system, the accounting process
follows accounting principles and rules. Regardless of the type of business or the amount
of money (6)…….., common procedures for (7)…….. and presenting financial information
are used. Incoming money (revenues) and outgoing money (expenditures) are carefully
monitored, and (8)………… are summarized in financial statements, which (9)……. the
major financial activities of an organization.
Ok. As you may know, two common financial statements are the balance sheet and the
income statement. The balance sheet shows the financial position of a company at one
point in time, while the income statement shows the financial performance of a company
over a period of time. Financial statements allow interested parties to (10)……. one
organization to another and/or to compare accounting (11) ……. within one organization.
For example, an (12)…….. may compare the most recent income statements of two
corporations in order to find out which one would be a better investment.
Unit 1: Accounting Basics
8
Listen to the first part of the lecture again and fill ONE word in each blank below
Choose the best alternative to complete the sentence. The suggeted time for
completing the exercises is 10 minutes
1. It’s up to the accountant to ................. the various financial statements.
a. interpret b. intercept
c. invent d. translate
2. The bookkeeper keeps a record of every financial ................. .
a. action b. transaction
c. entry d. transcription
3. It’s essential to ................. the invoice number in any correspondence.
a. estimate b. quote
c. say d. tell
4. We’re in ................. with our supplier over this invoice so don’t pay it until you hear
from me.
a. argument b. dispute
c. agreement d. distress
3.3
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9. Unit 1: Accounting Basics
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5. We send a ................. to customers who haven’t settled their accounts.
a. reminder b. remainder
c. remembrance d. memory
6. If these figures could be ................. into parts and labor it would make them easier to
understand.
a. set up b. broken down
c. rounded up d. laid down
7. This company has a weekly ................. of about $100,000.
a. pay b. payroll
c. salary d. wage
8. By examining the balance ................. and other documents we were able to find out that
the company was not doing as well as they claimed.
a. slip b. ledger
c. account d. sheet
9. The rent for the office is already 3 months .................!
a. overtime b. in the red
c. in demand d. overdue
10. Due to the economic climate we have had to ................. more bad debts this year than ever
before.
a. tell off b. write off
c. find out d. note down
11. Do they have enough working ................. to keep trading?
a. capital b. expenses
c. accounts d. currency
12. Such items as buildings and machinery are known as ................. assets.
a. current b. hidden
c. fixed d. liquid
Complete the text using the words in the box. The suggeted time for completing the
exercises is 10 mitutes
Bookkeeping
Bookkeepers record every purchase and sale that a business makes, in the order that they
take place, in (1) .............................. . At a later date, these temporary records are entered in
or (2 ).............................. to the relevant account book or (3 )............................. . Of course
4.2
credits
journals
transactions
debits
ledger
transferred
double-entry
posted
trial balance
invoice
receipt
vouchers
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10. Unit 1: Accounting Basics
10
the ‘books’ these days are likely to be computer files. At the end of an accounting period, all
the relevant totals are (4 ).............................. to the profit and loss account. (5)
.............................. bookkeeping records the dual effect of every transaction – a value both
received and parted with. Payments made or (6) .............................. are
entered on the left-hand (debtor) side of an account, and payments
received or (7) .............................. on the right-hand side. Bookkeepers
will periodically do a (8) .............................. to test whether both sides
of an account book match. In most business (9).....................................,
the seller of goods or services sends the buyer a bill or (10)
.............................. , and later a 11 ............................ acknowledging
payment. Businesses are obliged to retain the documents – known as
(12) .............................. – that support or prove an item in an account,
and make them available to the internal and external auditors who
check the accounts. Bookkeepers are not to be confused with librarians,
who also keep books, or with bookmakers, who ‘make books’ in the sense that they accept
bets (on horse races, etc.) and traditionally wrote them down in a book like a bookkeeper’s
journal. Accountants, unlike bookkeepers, analyze financial records, and decide how to
present them.
Match the remarks on the left with the responses on the right, check your
answers with a partner, then practice the dialogue together
1. You’re an accountant? Does
that mean you spend your
time writing down credits
and debits, and adding up
columns of figures all day?
Can’t be exciting.
2. So what do accountants do?
3. You mean the shareholders?
4. So do you prepare reports
for managers?
5. And the cost of the accounts
department!
6. You mean what they do in
the front of shops?
7. Ah, now that’s interesting...
8. Not at all. As a matter of
fact, I’m a tax inspector...
A. Ha! Now you’re going to ask me to tell you how you
can pay less tax.
B. No, managerial accountants do, but I work in cost
accounting. We have to work out the real cost of each
item the company makes, which means finding a way
to allocate all the overheads to different products.
C. No, not only. Managers always need the help of
accountants. They need financial statements, and
budgets, and cash-flow projections, and so on, to
measure the success of what they’ve done, and to
make decisions for future projects.
D. Of course. But as I said, we’re necessary, and
useful. Haven’t you heard of ‘window dressing’?
E. Sure, but it’s also another name for what some
people call ‘creative accounting’– making a company’s
financial situation look as good as possible in the
balance sheet, and so on. It’s not very legal, but it
happens. The accountants in my firm also have lots
of wonderful ways of reducing our tax bill.
F. That’s bookkeeping. Not quite the same thing.
G. Well, accountants do record cash flows, and the value
of assets and liabilities, and they calculate profits
and losses, and so on. But it’s not just writing down
numbers. We’re really in the business of supplying
people with information.
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11. Unit 1: Accounting Basics
11
Based on the information in this unit, answer the following questions with your
own words
1. Give a brief definition of accounting. What is accounting
involved in?
2. How many kinds of accounting are there? What are
their differences?
3. Give a brief summary of the three main financial
statements.
4. Do all companies follow a common way of accounting or
do they choose their own way of accounting? Explain
consistency principle and historical cost principle.
5. Tell briefly about bookkeeping process.
How to write an essay
1. Organization of an essay
An essay has three main parts: an introduction, a body and a conclusion.
The introductory paragraph attracts the reader’s
attention and informs the reader what your
main topic of discussion will be. An introductory
paragraph has two parts:
• General statement: Several general sentences that
give background information on your subject and
gradually lead your reader into your specific topic.
• A thesis statement that states the subdivisions
(topic of each paragraph). It may also indicate
your method of development.
The body of an essay discusses your subdivided topics, one by one. It contains as many
paragraphs as necessary, often 2 or more explain the controlling ideas in the thesis
statement.
The concluding paragraph reminds your reader of what you have said. Remember to use
a “conclusion” transition signal. Your concluding paragraph has a summary of the main
ideas or a restatement of the thesis in different words and your final comment on the topic.
2. Outlining an Essay
Always make an outline of an essay before you begin to write. See the organization of an
essay model below:
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6.1
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12. Unit 1: Accounting Basics
12
I. INTRODUCTION
II. BODY
III. CONCLUSION
3. Writing and revising the Essay
Writing is a process which requires revision again and again in order to produce a good final
product. Follow 3 steps below for your writing improvement.
- Firstly, write the first rough draft of your essay from the outline. Skip lines in order to have
enough space to make changes.
- Secondly, revise the first draft for content and organization, and write a second draft.
- Thirdly, proofread the second draft for grammar, sentence structure, and mechanics. Write
as many drafts as necessary before the final copy.
Writing practice
Write an essay about the main issues in accounting by the using information from
this unit as well as the additional sources from books or internet websites.
The suggested time for completing the exercise is 45 minutes.
General Statements
Thesis statements
- Paragraph 1:
A. Topics sentence
1. Support
2. Support
3. Support
(Concluding sentence)
- Paragraph 2:
B. Topics sentence
1. Support
2. Support
3. Support
(Concluding sentence)
- Paragraph 2:
C. Topics sentence
1. Support
2. Support
3. Support
(Concluding sentence)
Restatement or summary
of the mains points; final
comments
6.2
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13. Unit 1: Accounting Basics
13
English terms Vietnamese equivalents
A
- Accounting principles - Các nguyên tắc kế toán
- Annual Report - Báo cáo thường niên, báo cáo hàng năm
- Accounting system - Hệ thống kế toán
B
- Balance sheet - Bảng tổng kết tài sản, bảng kết toán
- Bought ledger - Sổ cái mua vào
- Bookkeeper - Nhân viên kế toán (lập hồ sơ thu chi, quản lý các
sổ sách kế toán)
C
- Credit - Khoản có, bên có; ghi có
- Consistency principle - Nguyên tắc nhất quán
- CPA (Certified Public Accountant) - Kế toán viên được xác nhận
(kế toán viên đã qua các kỳ kiểm tra nghề nghiệp
và là thành viên của Hiệp hội các kế toán viên
được xác nhận)
D
- Debit - Khoản nợ, bên nợ; ghi nợ
- Debtors - Con nợ, tài khoản phải thu từ khách hàng
- Depreciation - Khấu hao
- Double-entry bookkeeping - Kế toán kép
E
- Expenditure - Chi tiêu, chi phí
F
- Financial statements - Các báo cáo tài chính
- Financial status - Khả năng tài chính
- Financial position - Tình trạng tài chính
G
- Going concern concept - Khái niệm doanh nghiệp phát triển bền vững
- Generally Accepted Accounting Principles - Những nguyên tắc kế toán được mọi người chấp
nhận, phổ cập
I
- Income statement - Báo cáo thu nhập
- Inflation - Lạm phát
- Inventory (stock) - Hàng hoá, nguyên vật liệu lưu kho
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14. Unit 1: Accounting Basics
14
H
- Historical cost - Giá gốc
J
- Journals - Sổ nhật ký, sổ nhật biên
N
- Nominal ledgers - Sổ cái danh nghĩa
P
- Provisions - Dự phòng
R
- Revenue - Doanh thu
- Replacement cost accounting - Kế toán chi phí thay thế
T
- Tax computation - Việc tính toán thuế
- Take account of - Xét đến, tính đến
- To buy on credit - Mua chịu
- To sell on credit - Bán chịu
- Trial balance - Cân đối kiểm tra
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