REVISION Pa

LÊ HÀ UYÊN VY – FINANCIAL ACOUNTING 1
CHAPTER 1 : ACCOUNTING IN ACTION

I) Accounting Activities and Users
1) Accounting consits of three activities:
• Identifies: a company identifies the economics events (transitions)
relevant to its business.
• Records: provide a history of its financial activities -> classifies ->
summarize transitions.
• Communicates: prepare accounting report -> analyze and interpret for
users.
Bookepping : involes ONLY the reccording of economic events.
2) Who Users Accounting Data
- Internal Users: managers who plan , organize and run the business
which include:
+ Marketing
+ Human Resources
+ Finance
+ Company officer
Managerial accounting : provide internal reports to help users make
decisision about their companies.
- External users: individuals and organisations outside a company who want

to know about financial information of the company.
+ Investors ( owners)
+Creditors ( supppliers and bankers)
- Financial accounting : provides economics and finacial for investors and
creditors and external users.
II) The building Blocks of Accounting .
1. Ethics in Financial Reporting
- Right or wrong
- Honest or dishonet
- Fair or not fair
2. Measurement Principles
2.1 Historical Cost Principle ( or cost principle)* nguyên tắc giá gốc
- Record assets at their cost
2.2 Fair Value Principle ( nguyên tắc giá trị hợp lí)
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- Assets ans liabilities should be reported at fair value ( the price received to
sell an asset or settle a liability) . It is useful more than historical cost for
certain types of assets and liabilities.
3. Assumption
3.1 Monetary Unit Assumption
- Monetary Unit Assumption required that companies include in the
accounting records ONLY transaction data that can be expressed in money
terms.
3.2. Economic entity assumption
- it required that the activities of the entity be kept separate and distinct from
the activities of its owner and all other economic entities.
- A business owned by ONE person is a prioprietorship.
- A business owned by two or more persons associated as partners is a
partnership.
III) The Equation Accounting.
Asset = Liabilities + Owner’s Equity
1. Asset
- Resources a business owns.
- Provide future services or benefits.
2. Liabilities
- Claims against assets ( debts and obligations)
- Creditors ( party to whom money is owned)
3. Owner’s equity
- Ownership claim on total assets.
- Referred to as residual equity. ( vốn chủ sỡ hữu)
Equation Asset = Liabilities + Owner’s Equity

Equation Asset = Liabilities + Owner’s capital - Owner’s Drawing + Revenues - Expenses
expaneded
*ACCOUNTING EQUATION
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OWNER’S
ASSET = LIABILITIES EQUITY
ACCOUNT PAYABLE ( OWNER’S CAPITAL

CASH
nợ phải trả bằng giá gôc)
ACCOUNT OWNER’S DRAWING
NOTE PAYABLE
RECEIVABLE ( nợ
phải thu ) SALARIES & WAGES REVENUE: servvice
SUPLLIES PAYABLE revenue
INTEREST PAYABLE
EQUIPMENT EXPENSE
UNEARNED SERVICES
PREPAID REVENUE
INSURANCE
Lưu ý :
AR : nợ phải thu
AP: nợ phải trả ( giá gốc )
Unearned services revenue : doanh thu chưa thực hiện -> nằm bên liabilities
Revenue: service revenue
Expense : + supplies expense
+ Insurance expense
+ salaries & wages expenses
+ Rent expense
+ Interest expense
+ Utilities expense
+ Advertising expense
3.1 Increased in Owner’s Equity

• Invesment by Owner: ( Owner’s capital ) : Assets the power puts into the
business.
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• Revenues: Increases in assets or decrease in liabilities. That is resulting

from sale of good or performance of services in normal course of
business.
3.2. Decreasing in Owner’s Equity.
• Drawing : An owner may withdraw cash or other assets for personal
use
• Expenses: The cost of assets consumed or services used in the process
of earning revenue.
III) Analyzing Business Transactions
1. Transaction : business’s economic events recorded by accountants.
- May be external or internal
- Not all activities represent transactions
- Have a dual effect on accounting equation
2. Transaction Analysis
Transaction (1) : Investment of cash by Owner
- R Ray Neal starts a smartphone app development company which he names
Softbyte. On September 1, 2017, he invests $15,000 cash in the business. This
transaction results in an equal increase in assets and owner’s equity.
Transaction (2) : Purchase of Equipment for Cash

- Softbyte purchases computer equipment for $7,000 cash. This transaction
results in an equal increase and decrease in total assets, though the
composition of assets changes.
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Transaction (3) : Purchase of Supplies On Credit

- Softbyte purchases for $1,600 from Mobile Solutions headsets and other
computer accessories expected to last several months. Mobile Solutions
agrees to allow Softbyte to pay this bill in October. This transaction is a
purchase on account (a credit purchase). Assets increase because of the
expected future benefi ts of using the headsets and computer accessories,
and liabilities increase by the amount due to Mobile Solutions.
Transaction (4) : Services Performed For Cash

- Softbyte receives $1,200 cash from customers for app development services
it has performed. This transaction represents Softbyte’s principal revenue-
producing activity. Recall that revenue increases owner’s equity.
Transaction ( 5) : Purchase Of Advertising On Credit
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- Softbyte receives a bill for $250 from the Daily News for advertising on its
online website but postpones payment until a later date. This transaction
results in an increase in liabilities and a decrease in owner’s equity.
Transaction (6) : Services Performed For Cash and Credit

- Softbyte performs $3,500 of app development services for customers. The
company receives cash of $1,500 from customers, and it bills the balance of
$2,000 on account. This transaction results in an equal increase in assets and
owner’s equity.
Transaction (7) : Payment of Expenses

- Softbyte pays the following expenses in cash for September: offi ce rent $600,
salaries and wages of employees $900, and utilities $200. These payments
result in an equal decrease in assets and owner’s equity.
Transaction (8) : Payment Of Accounts Payable
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- Softbyte pays its $250 Daily News bill in cash but postpones payment until a
later date The company previously [in Transaction (5)] recorded the bill as
an increase in Accounts Payable and a decrease in owner’s equity.
Transaction (9) Receipt of Cash on Account

Softbyte receives $600 in cash from customers who had been billed for
services [in Transaction (6)]. Transaction (9) does not change total assets,
but it changes the composition of those assets.
Transaction (10): Withdrawl of Cash By Owner.

Ray Neal withdraws $1,300 in cash from the business for his personal use.
This transaction results in an equal decrease in assets and owner’s equity.
3. Summary of Transactions
3.1 The two sides of the equation must always be EQUAL.
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3.2 Each transaction is analyzed in terms of its effect on:

+ The three components of the basic accounting equation.
+ Specific items within each component.
EXERCISE:
Transactions made by Virmari & Co., a public accounting firm, for the
month of August are shown below. Prepare a tabular analysis which
shows the effects of these transactions on the expanded accounting
equation.
1.the owner invested $25,000 cash in the business.

2. The company purchased $7,000 of office equipment on credit.
3. The company received $8,000 cash in exchange for services
performed.
4. The company paid $850 for this month’s rent.
5. The owner withdrew $1,000 cash for personal use.
SOLUTION
IV) The Four financial staments and how they are prepared .
1. Income statement ( báo cáo kết quả kinh doanh / báo cáo thu nhập)
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- Revenues and expenses and resulting net income or net loss for a specific
period of time.
NET INCOME/ LOSS = FEE EARNED – TOTAL EXPENSE
2. Owner’s equity statement ( báo cáo chuyển động chủ sở hữu)

- Summarizes the changes in owner’s equity for specific period of time.
3. Statement of Financial Position ( Balance Sheet)

- Report the asset, liabilities, and owner’s equity at specific date.
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- Total asset must be equal total owner’s equity and liabilities.
4. Statement of cash flows.

- Summarizes information about the cash inflows ( receipt) and ouflows (
payments) for a specific period of time.
EXERCISE :
Presented below is selected information related to Flanagan Company at
December 31, 2017. Flanagan reports financial information monthly.
Equipment 10,000 Utilities Expense 4,000

Cash 8,000 Accounts Receivable 9,000
Service 36,000 Salaries and Wages 7,000
REVENUE Expense
Rent Expense 11,000 Notes Payables 16,500
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Account 2,000 Owner’s Drawing 5,000

Payable
a. Determine the total assets of Flanagan Company at December 31, 2020.

b. Determine the net income that Flanagan Company reported for
December 2020.
c. Determine the owner’s equity of Flanagan Company at December 31,
2020.
SOLUTION
a. The total assets are 27,000 ( cash 8,000+ AR 9,000+ Equipment 10,000)
b. Net income is 14,000
Revenues
Services Revenues 36,000
Expenses
Rent expenses 11,000
Salaries and wages Expenses 7,000
Utilities expenses 4,000
Total expense 22,000
Net income 14,000

c. The ending owner’s equity of Flanagan Company is $8,500. By rewriting
the accounting equation, we can compute owner’s equity as assets minus
liabilities, as follows.
Total asstes ( as computed in (a)) 27,000

Less: Liabilities
Notes Payable 16,500
Account payable 2,000
18,500
Owner’s equity 8,500
MULTIPLE CHOICE QUESTIONS
1. . Which of the following is not a step in the accounting process?

a. Identification
b. Economic entity *
c. Recording
d. Communication
2. Which of the following statements about users of accounting
information is incorrect?
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a. Management is an external user.

b. Taxing authorities are external users.
c. Present creditors are external users.
d. Regulatory authorities are internal users. *
3. During 2017, Bruske Company’s assets decreased $50,000 and its
liabilities decreased $50,000. Its owner’s equity therefore:
a. increased $50,000
b. decreased $50,000.
c. decreased $100,000
d. did not change. *
4. Performing services on account will have the following effects on the

components of the basic accounting equation:
a. increase assets and decrease owner’s equity
b. increase assets and increase owner’s equity. *
c. increase assets and increase liabilities.
d. increase liabilities and increase owner’s equity.
5. Net income will result during a time period when

a. assets exceed liabilities.
b. assets exceed revenues.
c. expenses exceed revenues
d. revenues exceed expenses. *
6. Which of the following is not one of the four basis financial

statements?
a. The balance sheet
b. The audit report *
c. The income statement
d. The statement of cash flows.
7. Which of the following is not an asset?
a. Cash
b. Land
c. Equiment
d. Contributed capital. *
8. Which of the following is not an external user of an accounting

information?
a. Regulatory agencies.
b. Finance directors
c. Company officers
d. All of these are external users. *
9. The ACE company has five plants nationwide that cost $100 million.
The current market value of the plants is $500 million. The plant will
be recorded and reported as assets at
a. $100 million *
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b.$600 million
c. $500million
d.$400million
10. On the last day of the period, Alan Cesska Company buys a $900
machine on credit. This transaction will affect the:
a. Income statment only
b. Balance sheet only *
c. Income statement and owner’s equity statement only
d. Income statement, owner’s equity statement, and balance sheet.
CHAPTER 2: THE RECORDING

PROCESS
I) ACCOUNTS, DEBITS AND CREDITS.

1. The Account
- Is an individual accounting recording of increases and decreases in specific
asset, liabilities, or owner’s equity item.
• Debit = left
• Credit= right
2. Debits and credits
- Dr and Cr do not mean increase or decrease, as is commonly thought.
- We use the ternms Dr and CR repeatly in the recording process to describe
where the entries are made in accounts.
- When comparing the totals of the two sides, an account shows a debit
balance if the total of the debit amounts exceeds the credits. An account
shows a credit balance if the credit amounts exceed the debits.
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2.1 Debit and Credit procedure

- Under the double-entry system ,each transaction must affect two or more
accounts to keep basic accounting equation in balance.
- The equality of debits and credits provides the basis for the double-entry
system of recording transactions.
- DEBITS MUST EQUAL CREDITS
2.2 Summary of Dr/Cr rules:
II) THE JOURNAL

1. The recording process
- Analyze transaction
- Enter transaction in journal
- transfer journal information to ledger accounts.
2. The journal
• Journalizing
Ex1: On July 1, Butler Company purchases a delivery truck costing $14,000. It pays
$8,000 cash now and agrees to pay the remaining $6,000 on account (to be paid later).
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Ex2: Kate Browne engaged in the following activities in establishing her salon, Hair It Is:
1. Opened a bank account in the name of Hair It Is and deposited $20,000 of her own
money in this account as her initial investment.
2. Purchased equipment on account (to be paid in 30 days) for a total cost of $4,800.
3. Interviewed three people for the position of hair stylist.
Prepare the entries to record the transactions.
III) THE LEDGER AND POSTING

1. The ledger
- The entire group of accounts maintained by a company is the ledger.
- The ledger provides the balance in each of the accounts as well as keeps track
of changes in these balances.
- A general ledger contains all the asset, liability, and owner’s equity accounts.
- Standard form of account (three-column form of account: debit, credit, and
balance):
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2. Posting
- The procedure of transferring journal entries to the ledger accounts is called
posting
- Posting should be performed in chronological order. That is, the company
should post all the debits and credits of one journal entry before proceeding
to the next journal entry
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Summary of Journalizing and Posting
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IV) THE TRIAL BALANCE

- A trial balance is a list of accounts and their balances at a given time.
- Debit balances appear in the left column and credit balances in the right
column. The totals of the two columns must equal.
- The steps for preparing a trial balance are:
+ List the account titles and their balances in the appropriate debit or
credit column.
+ Total the debit and credit columns
+ Verify the equality of the two column
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- DEBIT MUST BE EQUAL CREDIT.
EX: Oct.
1 Lia Berge begins business as a real estate agent with a cash investment of
$30,000
2 Paid rent, $700, on office space.
3 Purchases office equipment for $2,800, on account.
6 Sells a house and lot for Hal Smith; bills Hal Smith $4,400 for realty services
performed.
27 Pays $1,100 on the balance related to the transaction of October 3.
30 Receives bill for October utilities, $130 (not paid at this time).
Journalizing the transactions.
SOLUTION
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MULTIPLE CHOICE QUESTIONS
1. Of the following account types, which would be increased by a debit?

a. Liabilities and expenses
b. Assets and equity
c. Assets and expenses *
d. Equity and revenues
2. Failure to record the receipt of a utility bill for services already received will
result in:
a. An overstatement of assets
b. An overstatement of liabilities
c. An overstatment of equity *
d. An overstatment of assets
3. The proper journal entry to record Ranson Company’s billing of clients for $500
of services rendered is:
a. Dr cash 500 and Cr account receivable 500
b. Dr Acount receivable 500 and Cr Capital Stock
c. Dr AR 500 and Cr Service revenue 500 *
d. Dr Cash 500 and Cr Service Revenue 500
4. Lynn Lipincott invested land valued at $5,000 in her business. This transaction
would be recorded by:
a. Dr cash 5000 and Cr Capital Stock 5000
b. Dr Land 5000 and Cr Service revenue 5000
c. Dr Land 5000 and Cr capital Stock 5000 *
d. Dr Capital Stock 5000 and Cr Land 5000
5. The trial balance
a. Is a formal financial statement.
b. Is used to prove that there are no errors in the journal or ledger.
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c. Provides a listing of every account in the chart of accounts.

d. Provides a listing of the balance of each account in active use. *
6. A ledger:
a. contains only asset and liability accounts.
b. should show accounts in alphabetical order.
c. is a collection of the entire group of accounts maintained by a company. *
d. is a book of original entry.
7. Posting:
a. normally occurs before journalizing.
b. transfers ledger transaction data to the journal.
c. is an optional step in the recording process.
d. transfers journal entries to ledger accounts. *
8. The purchase of supplies on account should result in:
a. a debit to Supplies Expense and a credit to Cash.
b. a debit to Supplies Expense and a credit to Accounts Payable.
c. a debit to Supplies and a credit to Accounts Payable. *
d. a debit to Supplies and a credit to Accounts Receivable.
9. Before posting a payment of $5,000, the Accounts Payable of Senator Company
had a normal balance of $16,000. The balance after posting this transaction was:
a. $21,000.
b. $5,000.
c. $11,000. *
d. Cannot be determined.
10. The trial balance of Jeong Company had accounts with the following normal
balances: Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable
$4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Owner’s
Capital $42,000, Owner’s Drawings $15,000, and Equipment $61,000. In
preparing a trial balance, the total in the debit column is:
a. $131,000. *
b. $216,000.
c. $91,000.
d. $116,000
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CHAPTER 3: ADJUSTING THE ACCOUNT

I) The Accrual basic of accounting
1. Fiscal and calender year.
- An accounting time period that is one year in length is a fiscal year.
- Many businesses use the calendar year (January 1 to December 31) as their
accounting period.
- Accounting time periods are generally a month, a quarter, or a year.Monthly
and quarterly time periods are called interim periods.
2. Accrual-verus Cash-Basis Accounting.
- Accrual Basis accounting : record transaction in the periods in which the
events occur ( ghi nhận tại thời điểm sự kiện xảy ra )
Ex : Recored revenue when perform services
- Cash-basis accounting : record transaction when they received cash or pay out
the cash. ( ghi nhận tại thời điểm tiền được nhận hoặc chi )
Ex: Record expenses when cash is paid.
3. Recognizing revenues and Expenses.
3.1 Revenue Recognition principle.
- The revenue recognition principle requires that companies recognize revenue
in the accounting period in which the performance obligation is satisfied.
3.2 Expense recognition Principle
- The expense recognition principle requires that companies recognize
expenses in the period in which they make efforts (consume assets or incur
liabilities) to generate revenue.
4. The need for adjusting entries.
- Adjusting entries : + prepare finacial statement.
+ include income statement and 1 balance sheet.
5. Types of adjusting entries.
DEFERRALS ( PHÂN BỔ ) ACCRUALS ( DỒN TÍCH )
-Prepaid expense ( asset): trả cash -Accrued Revenues: đã cũng cấp dịch
trước khi ghi nhận expenses vụ nhưng chưa nhận được cash.
Ex: Insurance expense x Ex: Accounts receivable x
Prepaid insurance x Service revenue x
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-Unearned revenues( liability): -Accrued expense: chi phí cho những

nhận cash trước nhưng chưa cung cấp dịch vụ đã sử dung nhưng chưa trả
dịch vụ. tiền.
Ex: Unearned service revenue x Ex: Salaries & wages expense x
Service revenue x Salaries & wages payable x
5.1 Prepaid Expenses

a. Supplies
Pioneer Advertising purchased supplies costing $2,500 on October 5. Pioneer
recorded the purchase by increasing (debiting) the asset Supplies. 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). This
use of supplies decreases an asset, Supplies. It also decreases owner’s equity
by increasing an expense account, Supplies Expense
b. Insurance
On October 4, Pioneer Advertising paid $600 for a one-year fire insurance
policy. Coverage began on October 1. Pioneer recorded the payment by
increasing (debiting) Prepaid Insurance. This account shows a balance of
$600 in the October 31 trial balance. Insurance of $50 ($600 ÷ 12) expires
each month. The expiration of prepaid insurance decreases an asset, Prepaid
Insurance. It also decreases owner’s equity by increasing an expense account,
Insurance Expense
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c. Depreciation (sự khấu hao / hư tổn của 1 tài sản nhất định )
- Depreciation for adjustment
For Pioneer Advertising, assume that depreciation on the equipment is $480 a
year, or $40 per month. Rather than decrease (credit) the asset account
directly, Pioneer instead credits Accumulated Depreciation—Equipment.
Accumulated Depreciation is called a contra asset account. Such an account is
off set against an asset account on the balance sheet
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Ex: vd mua 1 chiếc máy tính 15tr thì sau 2 năm giá trị của máy tính đó không
còn là 15tr nữa mà là 12tr hoặc bé hơn. Vậy thì 3tr ( 15tr-12tr) sẽ là sự khấu
hao ( depreciation) của chiếc máy tính.
Depreciation 3tr
Accumulated Depreciation – Equipment 3tr
Accumulated depreciation : is a contra asset account.

- Statement Presentation
Equipment 15tr
Less: Accumulated depreciation- equipment 3tr
12tr
5.2 Unearned Revenues
-Pioneer Advertising received $1,200 on October 2 from R. Knox for
advertising services expected to be completed by December 31. Pioneer
credited the payment to Unearned Service Revenue. This liability account
shows a balance of $1,200 in the October 31 trial balance. From an evaluation
of the services Pioneer performed for Knox during October, the company
determines that it should recognize $400 of revenue in October. The liability
(Unearned Service Revenue) is therefore decreased, and owner’s equity
(Service Revenue) is increased
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Ex : The ledger of Hammond Company, on March 31, 2017, includes these selected
accounts before adjusting entries are prepared.
Debit Credit
Prepaid Insurance $ 3,600
Supplies 2,800
Equipment 25,000
Accumulated Depreciation-Equipment $ 5,000
Unearned Service Revenue 9,200
An analysis of the account shows the following
1. Insurance expires at the rate of $100 per month

2. Supllies on hand total $ 800
3. The equipment depreciates $200 a month.
4. During March, services were performed for one-half of the unearned service
revenue. Prepare the adjusting entries for the month of March.
SOLUTION
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5.3 Adjusted entries for accruals

a. Accrued Revenue
- Đầu tháng cung cấp dịch vụ cho khách hàng nhưng khách hàng xin nợ, tới cuối
tháng khi tổng kết sổ sách sẽ có 1 khoản lợi nhuận của mình mà mình chưa lấy
được.
- In October, Pioneer Advertising performed services worth $200 that were not
billed to clients on or before October 31. Because these services were not
billed, they were not recorded. The accrual of unrecorded service revenue
increases an asset account, Accounts Receivable. It also increases owner’s
equity by increasing a revenue account, Service Revenue
b. Accrued Expense
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- Nhân viên làm cho mình từ đầu tháng tới cuối tháng, tới cuối tháng phải note
chi phí lương đó mặc dù thực tế mình vẫn chưa chi số tiền đó -> liabilities
- Expenses incurred but not yet paid or recorded at the statement date are
called accrued expenses (interest, taxes, and salaries)
- Companies pay for some types of expenses, such as employee salaries and
wages, after the services have been performed. Pioneer Advertising paid
salaries and wages on October 26 for its employees’ first two weeks of work.
The next payment of salaries will not occur until November 9
- At October 31, the salaries and wages for these three days represent an
accrued expense and a related liability to Pioneer. The employees receive total
salaries and wages of $2,000 for a fi ve-day work week, or $400 per day. Thus,
accrued salaries and wages at October 31 are $1,200 ($400 × 3). This accrual
increases a liability, Salaries and Wages Payable. It also decreases owner’s
equity by increasing an expense account, Salaries and Wages Expense
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c. Accrued Interest
- Pioneer Advertising signed a three-month note payable in the amount of
$5,000 on October 1. The note requires Pioneer to pay interest at an annual
rate of 12%.
Face Value Of Note x Annual Interest Rate x Time in Terms Of One year = Interest
$ 5000 x 12% x 1/12 = $ 50
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Ex2: Micro Computer Services began operations on August 1, 2020. At the end of August
2020, management prepares monthly financial statements. The following information
relates to August
1. At August 31, the company owed its employees $800 in salaries and wages that will be
paid on September 1.
2. On August 1, the company borrowed $30,000 from a local bank on a 15-year mortgage.
The annual interest rate is 10%.
3. Revenue for services performed but unrecorded for August totaled $1,100. Prepare
the adjusting entries needed at August 31, 2020.
SOLUTION
1. Salaries and wages expense 800

Salaries and wages payable 800
( to record accured salaries )
2. Interest expense 250
Interest payable 250
( $ 30,000x10%x1/12 = 250)
3. Account receivable 1,100
Service Revenue 1,100
( to record revenue for services performed )
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DEFERRALS ( PHÂN BỔ ) ACCRUALS ( DỒN TÍCH )
-Prepaid expense ( asset): trả cash

trước khi ghi nhận expenses
Ex:* Insurance expense x -Accrued Revenues: đã cũng cấp dịch
Prepaid insurance x vụ nhưng chưa nhận được cash.
* Supplies expense x Ex: Accounts receivable x
Supplies x Service revenue x
* Depreciation expense x
Accumulated Depreciation x
-Accrued expense: chi phí cho những
dịch vụ đã sử dung nhưng chưa trả
-Unearned revenues( liability): nhận tiền.
cash trước nhưng chưa cung cấp dịch vụ
Ex: *Salaries & wages expense x
Ex: Unearned service revenue dr
Salaries & wages payable x
Service revenue cr
* Interest Expense x
Interest Payable x
6. Summary of Basic relationships
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V) Adjustied trial balance and financial statements

1. Preparing the adjusted trial balance
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2. Preparing the financial statements
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EX: Evan Watts, D.D.S., opened a dental practice on January 1, 2017. During the first
month of operations, the following transactions occurred
1. Watts performed services for patients totaling $2,400. These services have not yet
been recorded.
2. Utility expenses incurred but not paid prior to January 31 totaled $400.
3. Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash
and signing a $60,000, 3-year note payable. The equipment depreciates $500 per
month. Interest is $600 per month.
4. Purchased a one-year malpractice insurance policy on January 1 for $12,000.
5. Purchased $2,600 of dental supplies. On January 31, determined that $900 of
supplies were on hand.
Prepare the adjusting entries on January 31. Account titles are Accumulated
Depreciation— Equipment, Depreciation Expense, Service Revenue, Accounts
Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance,
Supplies, Supplies Expense, Utilities Expense, and Utilities Payable.
SOLUTION
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MULTIPLE-CHOICE QUESTIONS
1. The revenue recognition principle states that:

a. revenue should be recognized in the accounting period in which a performance
obligation is satisfied.
b. expenses should be matched with revenues.
c. the economic life of a business can be divided into artificial time periods.
d. the fiscal year should correspond with the calendar year.
2. The time period assumption states that:
a. companies must wait until the calendar year is completed to prepare financial
statements.
b. companies use the fiscal year to report financial information.
c. the economic life of a business can be divided into artificial time periods.
d. companies record information in the time period in which the events occur.
3. Accumulated Depreciation is:
a. a contra asset account. *
b. an expense account.
c. an owner’s equity account.
d. a liability account.
4. Adjusting entries are made to ensure that:
a. expenses are recognized in the period in which they are incurred.
b. revenues are recorded in the period in which services are performed.
c. balance sheet and income statement accounts have correct balances at the end
of an accounting period.
d. All the responses above are correct.
5. Each of the following is a major type (or category) of adjusting entries except:
a. prepaid expenses.
b. accrued revenues.
c. accrued expenses.
d. recognized revenues *
41
6. The trial balance shows Supplies $1,350 and Supplies Expense $0. If $600 of
supplies are on hand at the end of the period, the adjusting entry is:
a. Supplies 600
Supplies expense 600
b. Supplies 750
Supplies expense 750
c. Supplies expense 750 *
Supplies 750
d. Supplies expense 600
Supplies 600
7. Rivera Company computes depreciation on delivery equipment at $1,000 for the
month of June. The adjusting entry to record this depreciation is as follows.
a. Depreciation expense 1,000
Accumulated Depreciation – rivera company 1,000
b. Depreciation expense 1,000
Equipement 1,000
c. Depreciation expense *** 1,000
Accumulated Depreciation-Equipment 1,000
d. Equipment expense 1,000
Accumulated Depreciation- Equipment 1,000
8. Anika Wilson earned a salary of $400 for the last week of September. She will be
paid on October 1. The adjusting entry for Anika’s employer at September 30 is:
a. No entry is required.
b. Salaries and Wages Expense 400 **
Salaries and Wages Payable 400
c. Salaries and Wages Expense 400
Cash 400
d. Salaries and Wages Payable 400
Cash 400
9. Which of the following statements is incorrect concerning the adjusted trial
balance? a. An adjusted trial balance proves the equality of the total debit balances
and the total credit balances in the ledger after all adjustments are made.
b. The adjusted trial balance provides the primary basis for the preparation of fi
nancial statements.
c. The adjusted trial balance lists the account balances segregated by assets and
liabilities. ****
d. The adjusted trial balance is prepared after the adjusting entries have been
journalized and posted.
10. . The trial balance shows Supplies $0 and Supplies Expense $1,500. If $800 of
supplies are on hand at the end of the period, the adjusting entry is:
a. debit Supplies $800 and credit Supplies Expense $800. ***
b. debit Supplies Expense $800 and credit Supplies $800
c. debit Supplies $700 and credit Supplies Expense $700.
d. debit Supplies Expense $700 and credit Supplies $700
42
CHAPTER 4: COMPLETING THE ACCOUNTING

CYCLE
I) Preparing closing entries and post-closing trial balance
1. Closing the books
- Temporary accounts : these account will be closed at the end of period
- Permanent account : these account will not be closed from period to period.
2. Preparing closing entries

- Closing entries also produce a zero balance in each temporary account.
- Closing entries formally recognize in the ledger the transfer of net income (or
net loss) and owner’s drawings to owner’s capital.
43
- Debit revenues and credit income summary

- Debit income summary and credit expense
- Debit income summary and credit Owner’s capital the amount of net income.
- Debit Owner’s capital for the balance in the Owner’s Drawing account, and
credit Owner’s Drawing for the same amount.
44
45
3. Post – closing trial balance
After Pioneer Advertising has journalized and posted all closing entries, it prepares
another trial balance, called a post-closing trial balance, from the ledger. The post-closing
trial balance lists permanent accounts and their balances after the journali zing and
posting of closing entries. The purpose of the post-closing trial balance is to prove the
equality of the permanent account balances carried forward into the next
accounting period. Since all temporary accounts will have zero balances, the post-
closing trial balance will contain only permanent—balance sheet—accounts
46
SUMMARY OF CLOSING ENTRIES
Ex: Hancock Company has the following balances in selected accounts of its adjusted trial
balance.
Account payable 27,000 Owner’s Drawing 15,000
Service Revenue 98,000 Owner’s Capital 42,000
Rent exepense 22,000 Account Receivable 38,000
47
Salaries and wages exepense 51,000 Supplies expense 7,000
Prepare the closing entries
SOLUTION
Service revenue 98,000
Icome summary 98,000
( to close revenue to income summary )
Income summary 80,000
Rent expense 22,000
Salaries and wages exepense 51,000
Supplies expense 7,000
( to close expense to income summary)
Income summary ( 98,000-80,000) 18,000
Owner’s capital 18,000
( to close net income to owne’s capital )
Owner’s capital 15,000
Owner’s drawing 15,000
( to close owner’s drawing to owner’s capital )
MULTIPLE-CHOICE QUESTIONS
1. When a net loss has occurred, Income Summary is:

a. debited and Owner’s Capital is credited.
b. credited and Owner’s Capital is debited. ***
c. debited and Owner’s Drawings is credited.
d. credited and Owner’s Drawings is debited
2. The closing process involves separate entries to close (1) expenses, (2) drawings,
(3) revenues, and (4) income summary. The correct sequencing of the entries is:
a. (4), (3), (2), (1).
b. (3), (1), (4), (2).
c. (1), (2), (3), (4). **
48
d. (3), (2), (1), (4)
CHAPTER 5: ACCOUNTING FOR

MERCHANDISING OPERATIONS
I) Merchandising operations and inventory systems.
- Merchandising companies that purchase and sell directly to consumers are
called retailers.
- Merchandising companies that sell to retailers are known as wholesalers.
- Cost of goods sold is the total cost of merchandise sold during the period.
This expense is directly related to the revenue recognized from the sale of
goods.
NET SALES – COST OF GOOD SOLD = GROSS PROFIT
GROSS PROFIT – OPERATING EXPENSE = NET INCOME ( NET LOSS)
• FLOW OF COST
BEGINNING INVENTORY + COST OF GOOD PURCHASED = COST OF GOOD

AVAIBLE FOR SALE
COST OF GOOD AVAIBLE FOR SALE – COST OF GOODS SOLD= ENDING

INVENTORY
1. Perpetual system
- Companies keep detailed records of the cost of each inventory purchase and
sale.
- A company determines the cost of goods sold each time a sale occurs
2. Periodic system
- Companies do not keep detailed inventory records of the goods on hand
throughout the period.
49
- They determine the cost of goods sold only at the end of the accounting period.
II) Recording purchases and sales under perpetual system
PURCHASE SALE
On account Inventory Dr Account receivable / cash Dr

Account payable Cr Sales revenue Cr
Cost of good sold Dr
Inventory Cr
Freight- FOB shipping point : người mua( FOB destination: người bán( seller) chịu
cost buyer) chịu phí vận chuyển-> phí vận phí giao hàng-> được ghi nhận thành 1
chuyển sẽ được tính vào tiền hàng. khoản chi phí giao hàng riêng.
Inventory Dr Freight-out/ delivery expense Dr
Cash Cr Cash Cr
Sales return and allowances Dr
Return and Account payable Dr
Account receivable Cr
allowances Inventory Cr
( khi trả lại-> dựa vào giá bán ) trên sổ
( trả hàng) sách
Inventory Dr
Cost of good sold Cr
Trên thực tế ở trong kho ( khi trả lại->
dựa vào giá vốn
Account payable Dr Cash Dr
Discount ( số tiền trả ban đầu ) ( tiền nhận sau khi giảm)
( giảm giá) Cash Cr Sales discount Dr

( tiền sau khi được giảm ) ( giảm bao nhiêu )
Inventory Cr Account receivable Cr

( giảm được bao nhiêu) ( giá gốc ban đầu /chưa giảm giá )
Net Sale = Sale Revenue - Sale Return And Allownce - Sale Discount
III) THE ACCOUTNING CYCLE TO A MERCHANDISING COMPANY

1. ADJUSTING ENTRIES
- Adjust inventory to physical account
Cost of good sold xx

Inventory xx
Ex: that PW Audio Supply has an unadjusted balance of $40,500 in
Inventory. Through a physical count, PW Audio Supply determines that its
50
actual merchandise inventory at December 31 is $40,000. The company

would make an adjusting entry as follows
Dec 31 Cost of good sold 500
Inventory 500
2. Closing entries
- Close income statement accounts with credit balances
Sales revenue xx
Income summary xx
- Close income statement account with debit balances:
Income summary xx
Sales Returns and allowance xx
Sales discount xx
Cost of good sold xx
Freight-Out xx
Rent expense xx
Salaries and wages expense xx
- Close net income to capital:
Income summary xx
Owner’s capital xx
- Close drawings to capital:
Owner’s Capital xx
Owner’s Drawings xx
IV) MULTIPLE-STEP WITH A SINGLE -STEP INCOME STAMENT .

1. Multiple-step income statement
- Two of these step relate to the company’s principal operating activities
- A multiple -step statement also distinguish between operation activities and
non operation activities.
• Operating expens
51
• Nonoperating activites: không thường xuyên xảy ra và cũng ko liên

tục.
+ Gain on disposal of plant aset : thanh lí tài sản cố định

+ Casualty los from vandalism : khoản bị tổn thất.
52
V) SINGLE-STEP INCOME STATMENT.

- Không có operating expense hay non-operating
- Chỉ có revenue và expense ( total revenue – total expense= net income / net
loss)
MULTIPLE-CHOICE QUESTION
1. The sales accounts that normally have a debit balance are:
a. Sales discount
b. Sales returns and allowances
c. Both a and b **
d. Neither a nor b
2. A credit sale of $750 is made on June 13, terms 2/10, net/30. A return of $50 is
granted on June 16. The amount received as payment in full on June 23 is:
a. 700
b. 686 ***( 750-50=700 , 700x(1-2%)=686)
c. 685
d. 650
3. Which of the following accounts will normally appear in the ledger of a
merchandising company that uses a perpetual inventory system?
a. Purchases.
b. Freight-In.
c. Cost of Goods Sold. ***
d. Purchase Discounts
4. If sales revenues are $400,000, cost of goods sold is $310,000, and operating
expenses are $60,000, the gross profi t is:
53
a. 30,000
b. 90,000
c. 340,000
d. 400,000
5. If beginning inventory is $60,000, cost of goods purchased is $380,000, and
ending inventory is $50,000, cost of goods sold is
a. 390,000 **
b. 370,000
c. 330,000
d. 420,000
54

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LÊ HÀ UYÊN VY – FINANCIAL ACOUNTING 1

CHAPTER 1 : ACCOUNTING IN ACTION

- External users: individuals and organisations outside a company who want

Asset = Liabilities + Owner’s Equity

Equation Asset = Liabilities + Owner’s Equity

ACCOUNT PAYABLE ( OWNER’S CAPITAL

3.1 Increased in Owner’s Equity

• Revenues: Increases in assets or decrease in liabilities. That is resulting

Transaction (2) : Purchase of Equipment for Cash

Transaction (3) : Purchase of Supplies On Credit

Transaction (4) : Services Performed For Cash

Transaction ( 5) : Purchase Of Advertising On Credit

Transaction (6) : Services Performed For Cash and Credit

Transaction (7) : Payment of Expenses

Transaction (8) : Payment Of Accounts Payable

Transaction (9) Receipt of Cash on Account

Transaction (10): Withdrawl of Cash By Owner.

3.2 Each transaction is analyzed in terms of its effect on:

1.the owner invested $25,000 cash in the business.

NET INCOME/ LOSS = FEE EARNED – TOTAL EXPENSE

2. Owner’s equity statement ( báo cáo chuyển động chủ sở hữu)

3. Statement of Financial Position ( Balance Sheet)

- Total asset must be equal total owner’s equity and liabilities.

4. Statement of cash flows.

Equipment 10,000 Utilities Expense 4,000

Account 2,000 Owner’s Drawing 5,000

a. Determine the total assets of Flanagan Company at December 31, 2020.

Total expense 22,000

Net income 14,000

Total asstes ( as computed in (a)) 27,000

MULTIPLE CHOICE QUESTIONS

1. . Which of the following is not a step in the accounting process?

a. Management is an external user.

4. Performing services on account will have the following effects on the

5. Net income will result during a time period when

6. Which of the following is not one of the four basis financial

8. Which of the following is not an external user of an accounting

CHAPTER 2: THE RECORDING

I) ACCOUNTS, DEBITS AND CREDITS.

2.1 Debit and Credit procedure

II) THE JOURNAL

III) THE LEDGER AND POSTING

Summary of Journalizing and Posting

IV) THE TRIAL BALANCE

- DEBIT MUST BE EQUAL CREDIT.

MULTIPLE CHOICE QUESTIONS

1. Of the following account types, which would be increased by a debit?

c. Provides a listing of every account in the chart of accounts.

CHAPTER 3: ADJUSTING THE ACCOUNT

DEFERRALS ( PHÂN BỔ ) ACCRUALS ( DỒN TÍCH )

-Unearned revenues( liability): -Accrued expense: chi phí cho những

5.1 Prepaid Expenses

Accumulated depreciation : is a contra asset account.

Prepaid Insurance $ 3,600

Accumulated Depreciation-Equipment $ 5,000

Unearned Service Revenue 9,200

An analysis of the account shows the following

1. Insurance expires at the rate of $100 per month

5.3 Adjusted entries for accruals

$ 5000 x 12% x 1/12 = $ 50

1. Salaries and wages expense 800

DEFERRALS ( PHÂN BỔ ) ACCRUALS ( DỒN TÍCH )