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Principles of Accounting - Coggle Diagram
Principles of Accounting
Chap 3: The adjusting process
3.3 The adjusted trial balance
3.4 The financial statements
3.2 Two categories of adjusting entries
4 Expenses
Depreciation expense (contra-asset account):
-> Quy tac Debit giam/ Credit tang
Dr. Depreciation expense
Cr. Accumulated depreciation, "asset"
-> Adjusting entries for depreciation expense of "asset"
Depreciation amount calculation
(Using straight-line method):
Annual depreciation: Cost of asset/ Years of useful life
Monthly depreciation amount: annual dep amount/12 month
Supplies expense
Dr. Supplies expense
Cr. Supplies
-> Adjusting entry for supplies exepense
Must know the supplies on hand (after using)
Accrued expense (Incur before paying)
Dr. .......... expense
Cr. ........... payable
->Adjusting entry for accrued ...... expense
(Dung cho salary/interest/insurance/electricity/gas/...)
Prepaid expense
Beg: Dr. Prepaid ...........
Cr. Cash
End: Dr. ........... expense
Cr. Prepaid .............
-> Adjusting entry for prepaid .....
(Dung cho rent/insurance)
2 Revenues
Accrued revenues: (Performed/earned revenue but NOT yet collected cash from client)
Dr. Accounts Receivable
Cr. Service/Sale revenue
Unearned (deferred) revenues: (Not earned/performed yet but already collect cash from client) ---> LIABILITY
Beg: Dr. Cash
Cr. Unearned revenue
End: Dr. Unearned revenue
Cr. Service/ Sale revenue
3.5 Ethical isssues in accrual accounting
3.1 Why we adjust the accounts
Accrual accounting requires adjusting entries AT THE END of the period ( Transaction AT THE END -> already adjusted)
Entries assign revenues to the corresponding period
Adjustments must properly measure
profit in the income statement
assets and liabilities in the balance sheet
Chap 2: Recording business transactions
2.1 The account, the ledger, the journal
Account: Detailed record all changes occurred
Journal: Chronological record of the transactions
Ledger: Holding all accounts
Trial Balance: List of all the ledger accounts with their balances
The process: Collect source of documents -> Record transactions in the journal -> Copy(post) to the ledger -> Prepare the trial balance
2.2 Debits, credits and double-entry accounting
Accounting is based on a double-entry system
CHEN HINH DEBIT/CREDIT
2.3 Recording transactions in the journal: CHEN HINH
2.4 Transaction analysis, journalizing and posting to accounts: CHEN HINH
2.5 The trial balance: CHEN HINH
Chap 1: The role of accounting in business
1.1 Defining accounting
Accounting encompasses the information system of
Process data into report
Make the decision
Measure business activity
Two types
Financial Accounting: provide information for external decision makers (investor, lenders)
Managerial Accounting: focus on internal decision makers (Business owner, manager, tax authorities, NPO,...)
1.4 Corporate social responsbility
ICAA - CPAA have a joint code of ethics for professional accountants (standards)
5 principles
Integrity ( Honesty, fair and sincere)
Objectivity (Avoid conflicts of self-interests and bias)
Professional competence and due care
Confidentiality
Professional behavior: (Compliance with the law)
1.5 Accounting measurements
Concepts
Entity concept: An entity stands apart from other organizations and individuals
Accounting period concept
Principles
Matching principle: The link/mix of inputs/outputs of goods and services
Profit recognition principle: Profit should be recognized the relevant activity that are
earned
and can be reliably
measured
Cost principle: Accounting measurement is based upon transaction costs
Conservatism (Prudence) principle:Constrains management natural optimists
Going concern assumption: Business will continue operating in a foreseeable future
1.3 Accounting regulation: (The interrelation of public sector, private sector and AASBs)
1.2 Decision makers: the users of accounting information:
(Business owners/Investors/Creditors/Government regulatory agencies/Tax authorities/NPO)
1.6 The accounting equation
(Assets = Liabilities + Equity)
Assets
Cash
Accounts Receivable
Inventories/Land/Buidling/Plant/Equipment
Prepaid expense
Liabilites
Accounts payable
Loan payable/borrowings
Accrued liabilities (salary/interest/tax payble)
Owner's Equity
Capital
Drawings (Dividend)
Income: all increase in equity other than owner's investment
Revenue: Part of income arising from ordinary activities
Expenses: decrease equity by using up assets/increase liabilities -> deliver goods/services to customer
1.8 Accounting for business transaction
Transaction: involves at least 2 parties
Each transaction affects at least 2 accounts
Accounts record the impact of events that are considered to affect the value of asset/liabilites
Transaction can affect 1 or both sides of equation
1.9 Prepare the financial statements:
The statement of financial position (Balance sheet): List all assets/liabilities/equity at a SPECIFIC DATE
The statement of cashflows: Cash in/out in PERIOD
The statement of changes in equity: Changes in owner's equity during a SPECIFIC PERIOD
Note financial statement
The statement of comprehensive income: summary of income /expenses and all changes in equity for a SPECIFIC PERIOD