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Introduction to Accounting Principles

Chapter 1 introduces accounting as a process involving identification, recording, and communication of financial transactions for both internal and external users. It outlines the building blocks of accounting, including ethics, measurement principles, and assumptions, as well as the roles of IASB and FASB in setting standards. Additionally, it describes key financial statements such as the income statement, retained earnings statement, statement of financial position, and statement of cash flows.

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4 views4 pages

Introduction to Accounting Principles

Chapter 1 introduces accounting as a process involving identification, recording, and communication of financial transactions for both internal and external users. It outlines the building blocks of accounting, including ethics, measurement principles, and assumptions, as well as the roles of IASB and FASB in setting standards. Additionally, it describes key financial statements such as the income statement, retained earnings statement, statement of financial position, and statement of cash flows.

Uploaded by

huynhminhthu1292005
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

CHAPTER 1: ACCOUNTING IN ACTION

I) What is accounting?

Three - Identification (select transactions)


activities
- Recording

- Communication: Prepare accounting report + Interpret for users

Internal - Finance
Users
- Marketing

- HR, management

* Managerial accounting activities focus on reports for internal users.

External - Investor + Creditor (most common type)


Users
- Taxing authorities (cơ quan thuế)

- Regulatory agencies (cơ quan quản lý)

- Labor unions (công đoàn lao động)

1. True

2. Bookkeeping (kế toán): involves recording

3. Accountants still have to communicate

4. False

5. True

II) The building blocks of accounting


Ethics in
Financial
Reporting

Accounting - International Accounting Standards Board (IASB) → Determines International


Standards Financial Reporting Standards (IFRS); Used in 130 countries.

- Financial Accounting Standards Board (FASB) → Determines generally


accepted accounting principles (GAAP); used in the U.S.

Measureme - Historical cost principle (nguyên tắc giá gốc): tài sản được ghi nhận theo giá
nt Principles gốc và không được thay đổi trừ khi có quy định khác trong chuẩn mực kế toán
cụ thể, IFRS công nhận.

- Fair value principle: tùy theo thẩm định mà ghi theo giá trị hợp lý (dựa trên giá
thị trường hiện tại).

→ Selecting Measurements principle: Relevance (make a difference in a


decision) + Faithful representation (the numbers and descriptions match what
really existed or happened)

Assumption - Monetary unit assumption: transaction data can be expressed in money terms.
s
- Economic Entity Assumption (Giả định về thực thể kinh doanh): doanh nghiệp
cần tách bạch giữa các hoạt động, giao dịch của công ty, tổ chức với các giao
dịch liên quan đến cá nhân người chủ sở hữu của doanh nghiệp đó.
3. False: The historical cost principle dictates that companies record assets at
their cost. Under the historical cost principle, the company must also use cost in
later periods.

4. False → faithful representation

III) Financial Statement

Income statement: revenues + expenses → net income or net loss

Retained earnings statement: the changes in retained earnings for a


specific period of time.

Statement of financial reports the assets, liabilities, and equity of a


position company at a specific date. (Sometimes
referred to as a balance sheet.)

Statement of cash flows cash inflows (receipts) and outflows


(payments)

the cash effects of a company’s operations →


investing → financing → net increase or
decrease → the cash amount at the end of the
period

Comprehensive income comprehensive income items that are not


statement included in the determination of net income in
1.

the income statement + comprehensive


income statement → combined: statement of
comprehensive income.

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