1.

Absorption costing: A system of assigning costs to products that includes all the costs it takes to
manufacture the product, both fixed and variable. Absorption costing is the required system for
financial reporting purposes. An alternative to absorption costing is variable costing, which is
often used for internal decisions.
2. Account: A structure for showing the effect of business events on a particular asset, liability, equity,
revenue, or expense. The effects are measured in terms of dollars. The account acts as a collection
point during the processing of all the transactions involving the balance sheet or income-statement
item, providing the value that appears on the financial statement. All the increases and decreases to a
company’s cash are collected in the cash account, which appears on the balance sheet.
3. Accounting entity: The object of the accounting process. The accounting entity is the organization
or part of the organization for which the process of representing business transactions in financial
reports is separated from the other parts. The accounting entity is necessary for meaningful
information. A sole proprietor must separate the business part of life from the personal part of life.
The business is the accounting entity, and to measure perform- ance, only the transactions
associated with the business are counted in revenues and expenses. Personal income, such as
inheritances or gifts, cannot be added to the revenues of the accounting entity.
4. Account receivable: A current asset on the balance sheet repre- senting the amount customers
owe and have promised to pay (without any formal written agreement). Usually these amounts,
which arise from credit sales, are paid quickly and do not involve interest. Accounts receivable are
one type of trade receivable.
5. Accrual accounting: A method of recognizing revenue and expenses based on criteria other than
the receipt or payment of cash. An entity includes revenue in income when the earnings process is
substantially complete, even if the customer has not paid yet. This usually means the product has
been shipped or the service has been performed. Then, after all the earned revenues are identified,
the company includes all the expenses it took to produce those revenues, even if the company has
not paid for those expenses.
6. Transaction: It means an event or a business activity which involves exchange of money or
money’s worth between parties. The event can be measured in terms of money and changes the
financial position of a person e.g. purchase of goods would involve receiving material and making
payment or creating an obligation to pay to the supplier at a future date. Transaction could be a
cash transaction or credit transaction. When the parties settle the transaction immediately by
making payment in cash or by cheque, it is called a cash transaction. In credit transactions, the
payment is settled at a future date as per agreement between the parties.
7. Goods/Services: These are tangible articles or commodities in which a business deals. These
articles or commodities are either bought and sold or produced and sold. At times, what may be
classified as ‘goods’ to one business firm may not be ‘goods’ to the other firm. e.g. for a machine
manufacturing company, the machines are ‘goods’ as they are frequently made and sold. But for
the buying firm, it is not ‘goods’ as the intention is to use it as a long term resource and not sell it.
Services are intangible in nature which are rendered with or without the object of earning profits.
8. Profit: The excess of Revenue Income over expense is called profit. It could be calculated for each
transaction or for business as a whole.
9. Loss: The excess of expense over income is called loss. It could be calculated for each transaction
or for business as a whole.
10. Asset: is a resource owned by the business with the purpose of using it for generating future profits.
Current Assets – An asset shall be classified as Current when it satisfies any of the following :
(a) It is expected to be realized in, or is intended for sale or consumption in the Company’s normal
operating Cycle, (b) It is held primarily for the purpose of being traded, (c) It is due to be realized
within 12 months after the Reporting Date, or (d) It is Cash or Cash Equivalent unless it is restricted
from being exchanged or used to settle a liability for at least 12 months after the Reporting Date.
Non-Current Assets – All other Assets shall be classified as Non-Current Assets. e.g. machinery
held for long term etc.
11. Liability: It is an obligation of financial nature to be settled at a future date. It represents the
amount of money that the business owes to the other parties. E.g. When goods are bought on
credit, the firm will create an obligation to pay to the supplier the price of goods on an agreed
future date or when a loan is taken from the bank, an obligation to pay interest and principal
amount is created.
Depending upon the period of holding, these obligations could be further classified into Long
Term on non-current liabilities and Short Term or current liabilities.
Current Liabilities – A liability shall be classified as Current when it satisfies any of the
following : (a) It is expected to be settled in the Company’s normal Operating Cycle, (b) It is held
primarily for the purpose of being traded, (c) It is due to be settled within 12 months after the
Reporting Date, or (d) The Company does not have an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date (Terms of a Liability that could, at the
option of the counterparty, result in its settlement by the issue of Equity Instruments do not affect
its classification)
Non-Current Liabilities – All other Liabilities shall be classified as Non-Current Liabilities. E.g.
Loan taken for 5 years, Debentures issued etc.
12. Internal Liability: These represent proprietor’s equity, i.e. all those amount which are entitled to
the proprietor, e.g., Capital, Reserves, Undistributed Profits, etc.
13. Contingent Liability: It represents a potential obligation that could be created depending on the
outcome of an event. E.g. if supplier of the business files a legal suit, it will not be treated as a
liability because no obligation is created immediately. If the verdict of the case is given in favor of
the supplier then only the obligation is created. Till that it is treated as a contingent liability. Please
note that contingent liability is not recorded in books of account, but disclosed by way of a note to
the financial statements.
14. Capital: It is amount invested in the business by its owners. It may be in the form of cash, goods,
or any other asset which the proprietor or partners of business invest in the business activity. From
business point of view, capital of owners is a liability which is to be settled only in the event of
closure or transfer of the business. Hence, it is not classified as a normal liability. For corporate
bodies, capital is normally represented as share capital.
15. Drawings: It represents an amount of cash, goods or any other assets which the owner withdraws
from business for his or her personal use. e.g. if the life insurance premium of proprietor or a
partner of business is paid from the business cash, it is called drawings. Drawings will result in
reduction in the owners’ capital. The concept of drawing is not applicable to the corporate bodies
like limited companies.
16. Net worth: It represents excess of total assets over total liabilities of the business. Technically,
this amount is available to be distributed to owners in the event of closure of the business after
payment of all liabilities. That is why it is also termed as Owner’s equity. A profit making business
will result in increase in the owner’s equity whereas losses will reduce it.
17. Non-current Investments : Non-current Investments are investments which are held beyond the
current period as to sale or disposal. e. g. Fixed Deposit for 5 years.
18. Current Investments : Current investments are investments that are by their nature readily
realizable and are intended to be held for not more than one year from the date on which such
investment is made. e. g. 11 months Commercial Paper.
19. Debtor : The sum total or aggregate of the amounts which the customer owe to the business for
purchasing goods on credit or services rendered or in respect of other contractual obligations, is
known as Sundry Debtors or Trade Debtors, or Trade Payable, or Book-Debts or Debtors. In other
words, Debtors are those persons from whom a business has to recover money on account of goods
sold or service rendered on credit. These debtors may again be classified as under:
Good debts : The debts which are sure to be realized are called good debts.
(ii) Doubtful Debts : The debts which may or may not be realized are called doubtful debts. (iii)
Bad debts : The debts which cannot be realized at all are called bad debts.
 It must be remembered that while ascertaining the debtors balance at the end of the period certain
adjustments may have to be made e.g. Bad Debts, Discount Allowed, Returns Inwards, etc.
20. Creditor : A creditor is a person to whom the business owes money or money’s worth. e.g. money
payable to supplier of goods or provider of service. Creditors are generally classified as Current
Liabilities.
21. Capital Expenditure : This represents expenditure incurred for the purpose of acquiring a fixed
asset which is intended to be used over long term for earning profits there from. e. g. amount paid
to buy a computer for office use is a capital expenditure. At times expenditure may be incurred for
enhancing the production capacity of the machine. This also will be a capital expenditure. Capital
expenditure forms part of the Balance Sheet.
22. Revenue expenditure : This represents expenditure incurred to earn revenue of the current period.
The benefits of revenue expenses get exhausted in the year of the incurrence. e.g. repairs,
insurance, salary & wages to employees, travel etc. The revenue expenditure results in reduction in
profit or surplus. It forms part of the Income statement.
23. Balance Sheet : It is the statement of financial position of the business entity on a particular date.
It lists all assets, liabilities and capital. It is important to note that this statement exhibits the state
of affairs of the business as on a particular date only. It describes what the business owns and what
the business owes to outsiders (this denotes liabilities) and to the owners (this denotes capital). It is
prepared after incorporating the resulting profit/losses of Income statement.
24. Journal: is often referred to as Book of Prime Entry or the book of original entry. In this book
transactions are recorded in their chronological order. The process of recording transaction in a
journal is called as ‘Journalisation’. The entry made in this book is called a ‘journal entry.
25. Cash Book: is a special journal which is used for recording all cash receipts and all cash
payments. Cash Book is a book of original entry since transactions are recorded for the first time
from the source documents. The Cash Book is larger in the sense that it is designed in the form of
a Cash Account and records cash receipts on the debit side and cash payments on the credit side.
Thus, the Cash Book is both a journal and a ledger.
26. LEDGER: a ledger is a group of accounts. Every ledger has two sides namely debit and credit.
Left hand side is debit and right hand side is credit. Each side of the ledger has columns on date,
particulars, journal folio and amount- In the particulars column of the debit side the name of the
account from which benefit is received is recorded and on the credit side, the name of the account
to which benefit is given is recorded.
27. A trial balance is a statement showing the balances, or total of debits and credits, of all the
accounts in the ledger with a view to verify the arithmetical accuracy of posting into the ledger
accounts. Trial balance is an important statement in the accounting process as it shows the final
position of all accounts and helps in preparing the final statements. The task of preparing the
statements is simplified because the accountant can take the balances of all accounts from the trial
balance instead of going through the whole ledger. It may be noted that the trial balance is usually
prepared with the balances of accounts. It is normally prepared at the end of an accounting year.
However, an organization may prepare a trial balance at the end of any chosen period, which may
be monthly, quarterly, half yearly or annually depending upon its requirements.
28. Bank Reconciliation Statement is a statement which records differences between the bank
statement and general ledger. The amount specified in the bank statement issued by the bank and
the amount recorded in the organization’s accounting book maintained by Chartered Accountant
might differ. A BRS checks entries on a monthly basis to avoid any future discrepancy. A BRS
means matching records for a cash account entries corresponding to the bank statement. BRS
checks the dissimilarity found between the two and makes appropriate changes. In this article, we
will discuss the bank reconciliation format and how to prepare it.
A bank reconciliation statement is a summary of business activity that reconciles financial details.
It ensures that payments have been processed and money has been deposited on the same date. An
accountant prepares the reconciliation statement once a month.
 UNIT 1: INTRODUCTION TO ACCOUNTING
1. Accounting: the process of identifying, measuring, recording and communicating economic
transactions
2. Accountant: one that keeps, audits, and inspects the financial records of individuals or
business concerns and prepares financial and tax reports
3. Private accountant: an accountant who works in private industry and is employed by a single
enterprise
4. Public accountant: an independent professional person who offers accounting services to
clients for a fee
5. Accounting system: the system designed to record the accounting transactions and events of a
business and account for them in a way that complies with its policies and procedures. The
basic elements of the accounting system are concerned with collecting, recording, evaluating,
and reporting transactions and events
6. Governmental accounting: used by government agencies, usually unprofitable organizations,
but which also need to record financial information
7. Bookkeeping: the recording of all financial transactions undertaken by an individual or
organization
8. Bookkeeper: a person employed to keep the books of account for a business. A bookkeeper is
responsible for ensuring that all transactions are recorded in the correct daybook, suppliers
ledger, customer ledger and general ledger. The bookkeeper brings the books to the trial
balance stage. An accountant may prepare the profit and loss statement and balance sheet
using the trial balance and ledgers prepared by the bookkeeper.
READING:
- Accounting has often been called the “language of business”. Since a language is a means of
social communication, it is logical that a language should reflect changes in our environment,
lifestyles and technology. Also, accounting is a means of social communication in which
changes and improvements are continually being made to communicate business information
more efficiently.
- The underlying purpose of accounting is to provide financial information about an economic
entity. The economic entity which we shall be concentrating upon is a business enterprise.
Managerial decision-makers need the financial information provided by an accounting system
to help them plan and control the activities of the economic entity. Financial information is
also needed by outsiders - owners, creditors, potential investors, the government, and the
public - who have supplied money to the business or who have some other interest in the
company that will be served by information about its financial position and operating results.

UNIT 2: CAREERS IN THE FIELD OF ACCOUNTANCY

1. Creative accounting: the use of holes in financial law to have an advantage or to show
figures in a deceptive way
2. Payroll clerk: the member of the accounting team who deals with employees
3. Purchase ledger clerk: the member of the accounting team who deals with suppliers, issues
payments for goods and services and keeps track of expenditure
4. Sales ledger clerk: the member of the accounting team who deals with sales, raises invoices
and collects payment
5. Tax advisor: a specialist who is able to give advice on matters of taxation
6. Value added tax (VAT): the tax which is due to the difference between the value of a product
or service and the cost of its production
7. Code of conduct: a set of rules which show the correct way to behave
8. Local accounting standards: the set of rules and laws for a country which govern how
accounts should be prepared
9. Balance sheet: a detailed summary of a person’s or a company financial condition at a
specific point in time, taking into account their assets, liabilities and equity
 10. Liquid assets: cash or something that is easily convertible into cash
11. Journal: an accounting record where all business transactions are initially entered
12. Net income: money remaining after all expenses and taxes have been paid
13. Equity: this word has 2 meanings “stock (shares)” and “net worth”
READING:
- Accounting
- Auditing means examining a company’s systems of control and the accuracy or exactness of
its records, looking for errors or possible fraud: where the company may have deliberately
given false information.
- An internal audit is carried out by a company’s own accountants or internal auditors
- An external audit is done by independent auditors: auditors who are not employees of the
company. The external audit examines the truth and fairness of financial statements. It tries to
prevent what is called ‘creative accounting’, which means recording transactions and values in
a way that produces a false result - usually an artificially high profit

UNIT 3: MAKING A CAREER IN ACCOUNTING

1. Trial balance: a statement of all debits and credits in the double-entry account book with any
discrepancies shown
2. Limited liability company (LLC): a business entity where the debts of the company are
separate from the debts of the shareholders
3. Sole trader/ proprietorship: a business which is owned and run by one person

UNIT 4: BOOKKEEPING
1. Daybooks: a journal of financial transactions entered on the day that they happened
2. Double entry bookkeeping: s system of keeping financial records where each transaction has
a debit and a credit posted
3. Single entry bookkeeping: a simple system of keeping financial records, where transactions
are entered only once
4. T-accounts: an informal word for a set of financial records using double entry bookkeeping,
with debits entered on the left and credits on the right
Questions:
- What is the most widely used bookkeeping method? What is the purpose?
The double-entry bookkeeping method is the most widely used bookkeeping method. It is a
standard accounting method that involves each transaction being recorded in at least two accounts,
resulting in a debit to one or more accounts and a credit to one or more accounts. Double entry
accounting provides a method for quickly checking accuracy because the sum of all accounts with
debit balances should equal the sum of all credit balance accounts
- How do you understand the double entry method?
In the double-entry accounting method, every journal entry transaction is recorded in the journal
once, but affects two different accounts. The first entry shows a change on the assets side - the
debit entry. The second entry shows a change on the equities side - the credit entry. The double-
entry method can be very confusing at first but when entries are properly recorded, the account
books will balance because the total of all credit entries will be equal to the total of debit entries
- Can you explain what the cash basis method is?
The cash basis method recognizes income and expenses according to real-time cash flow. Income
is recorded upon receipt of funds, rather than based upon when it is actually earned, and expenses
are recorded as they are paid, rather than as they are actually incurred.
- Can you explain what the accrual basis method is?
The accrual basis method recognizes income and expenses in the period to which they apply,
regardless of whether or not money has changed hands. Under this system, revenue is recorded
when it is earned, rather than when payment is received, and expenses are recorded when they are
incurred, rather than when payment is made. So it is an accounting method that measures the
performance and position of a company by recognizing economic events regardless of when cash
transactions occur. This method allows the current cash inflows/ outflows to be combined with
future expected cash inflows/ outflows to give a more accurate picture of a company’s current
financial position.

UNIT 5: THE PRINCIPLES AND STANDARDS OF ACCOUNTING

1. Accrual basis accounting: the method of accounting in which income and expenditure are
recorded at the date they are earned/ incurred
2. GAAP (Generally Accepted Accounting Principles): the common set of standards and
procedures used by companies when preparing financial statements
3. Net earnings: a company’s total revenue minus the operating expenses, depreciation, interest
paid and taxes
4. Public company: a firm which is permitted to sell shares in the firm to the general public
5. Reducing balance depreciation: a method of depreciation which imposes a set rate of
depreciation on the remaining balance of the asset
6. Tax accounting: methods of accounting which focus on tax instead of the appearance of
public financial statements
7. Economic entity assumption: the accountant keeps all of the business transactions of a sole
proprietorship separate from the business owner’s personal transactions. For legal purposes, a
sole proprietorship and its owner are considered to be one entity, but for accounting purposes,
they are considered to be two separate entities
8. Monetary unit assumption: economic activity is measured in US dollars, and only
transactions that can be expressed in US dollars are recorded
9. Going concern principle: this accounting principle assumes that a company will continue to
exist long enough to carry out its objectives and commitments and will not liquidate in the
foreseeable future
10. Time period assumption: this accounting principle assumes that it is possible to report
complex and ongoing activities of a business in relatively short, distinct time intervals
11. Matching principle: this accounting principle requires companies to use the accrual basis of
accounting. It requires that expenses be matched with revenues
12. Revenue recognition principle: under the accrual basis of accounting (as opposed to the cash
basis of accounting), revenues are recognized as soon as a product has been sold or a service
has been performed, regardless of when the money actually received

UNIT 6: FINANCIAL STATEMENT

1. Bank reconciliation (đối chiếu ngân hàng): the process of comparing the actual state of the
bank account with the bank nominal code in the accounts
2. Cash in hand: the amount of liquid equity held by an entity at a certain point in time
3. Invoice: the written record of a payment due, which is sent to the customer before payment
4. Receipt: the written record of a payment made, which is given to the customer after payment
5. Ledger control: a process in which totals from subsidiary nominal accounts are entered into a
control account to make it easier to interpret the data
6. Ledgers: accounting books in which accounts were prepared
7. Notes to the accounts: additional information added at the end of the accounts to give a full
understanding of the company’s situation
8. Consolidated affiliates (công ty hợp nhất): the holding company owns a minority interest
(less than 50%) but the accounts are nevertheless consolidated
9. Common stock (cổ phiếu phổ thông): the ordinary shares are held by the owners, who
therefore are the last to receive their money back in the event of liquidation
10. Accumulated gains: the amounts which affect common stockholders, but not from
movements in the stock of the company (eg: currency translation adjustments)
 11. Retained earnings: the profit which is not paid out to shareholders in the form of dividends,
but instead is kept by the company to reinvest or pay off debts
FASB definitions:
- Assets: are probable future economic benefits obtained or controlled by a particular entity as a
result of past transactions or events
- Comprehensive income: is the change in equity (net assets) of an entity during a period from
transactions and other events and circumstances from non-owner sources. It includes all
changes in equity during a period except those resulting from investments by owners and
distributions to owners
- Distribution to owners: are decreases in net assets of a particular enterprise resulting from
transferring assets, rendering services, or incurring liabilities to owners. Distribution to owners
decreases ownership interest or equity in an enterprise
- Equity: is the residual interest in the assets of an entity that remains after deducting its
liabilities. In a business entity, equity is the ownership interest
- Expenses: are outflows or other uses of assets or incurring of liabilities during a period from
delivering or producing goods or rendering services, or carrying out other activities that
constitute the entity’s ongoing major or central operation
- Gains: are increases in equity (net assets) from peripheral or incidental transactions of an
entity and from all other transactions and other events and circumstances affecting the entity
during a period except those that result from revenues or investments by the owner
- Investments by owners: are increases in net assets of a particular enterprise resulting from
transfers to it from other entities of something of value to obtain or increase ownership interest
(or equity) in it
- Liabilities: are 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
- Losses: are decreases in equity (net assets) from peripheral or incidental transactions of an
entity and from all other transactions and other events and circumstances affecting the entity
during a period except those that result from expenses or distributions to owners
- Revenues: are inflows or other enhancement of assets of an entity or settlement of its liabilities
(or a combination of both) during a period from delivering or producing goods, rendering
services, or other activities that constitute the entity’s ongoing major or central operations

UNIT 7: THE ACCOUNTING EQUATION

1. Accounting equation: the foundation of double entry accounting which shows that all assets
are either financed by borrowing money or paying with the money of the company’s
shareholders
2. Capital/ Shareholders’ equity: the total financial value of all assets less any liabilities. The
net worth of a company
3. Liabilities: amounts of money that a company owes
4. Contingent liability: a potential obligation that may be incurred depending on the outcome of
a future event
5. Current liabilities: money that will be paid in less than 12 months from the balance sheet date
6. Assets: things a company owns and uses in its business
7. Current assets: all assets that are expected to be converted into cash within one year of
normal business activity
8. Non-current asset/ Fixed
9. Intangible asset: an asset which is not physical in nature
10. Tangible asset: an asset with a physical existence
11. Intellectual property: creations of the mind
12. Retained earnings: profits that the company has not distributed to shareholders
13. Sole proprietorship: a type of business entity that is owned and run by one individual
 14. Patent: a legal right to produce and sell a newly invented product for a certain period of time
15. Trademark: a legally protected word, phrase, symbol or design used to identify a product
16. Share premium (thặng dư vốn cổ phần): the money that investors have paid to buy newly
issued shares, minus the shares’ face value
READING:
- The balance sheet is a document which has two halves. The totals of both halves are always
the same, so they balance. One half shows a business’s assets, which are things owned by the
company, such as factories and machines, that will bring future economic benefits. The other
half shows the company’s liabilities and its capital or shareholders’ equity.
- Liabilities are obligations to pay other organizations or people money that the company owes,
or will owe at a future date. These often include loans, taxes that will soon have to be paid,
future pension payments to employees, and bills from suppliers: companies which provide raw
materials or parts. Liabilities are generally divided into two types: current liabilities and non-
current liabilities. Long-term liabilities or non-current liabilities include bonds
Current liabilities are expected to be paid within a year of the date of the balance sheet. They
include creditors - largely suppliers of goods or services to the business who are not paid at
the time of purchase; planned dividends; deferred tax - money that will have to be paid as tax
in the future, although the payment does not have to be made now.
- Shareholders’ equity is recorded on the same part of the balance sheet as liabilities because it
is money belonging to the shareholders and not the company. Shareholders’ equity includes:
the original share capital (money from stocks or shares issued by the company; share
premium: money made if the company sells shared above their face value - the value written
on them; retained earnings: profits from previous years that have not been distributed to
shareholders; reserves: funds set aside from share capital and earnings, retained for
emergencies or other future needs.
- Accrued expenses are expenses that have accumulated or piled up during the accounting year
but will not be paid until the following year, after the date of the balance sheet. So accrued
expenses are charged against income - that is, deducted from profits - even though the bills
have not yet been received or the cash paid. Accrued expenses could include taxes and utility
bills, for example, electricity and water.
- If a company thinks a debt will not be paid, it has to anticipate the loss - take action in
preparation for the loss happening, according to the conservatism principle. It will write off, or
abandon, the sum as a bad debt, and make provisions by charging a corresponding amount
against profits: that is, deducting the amount of the debt from the year’s profits.

UNIT 8: DEPRECIATION AND AMORTIZATION

1. Amortization: the deduction of capital expenses incurred on an intangible asset over a
specific period of time
2. Depreciation: the method of allocating the cost of an asset over its useful life
3. Straight line depreciation (khấu hao theo đường thẳng): the method for reducing the value of
a tangible asset by equal amounts over its useful life
4. Salvage value: the amount of money that an asset will be worth at the end of its useful life
5. Net-book value: the current value of an asset shown in the accounting document
6. Sum-of-years-digits depreciation: the method for reducing the value of a tangible asset by a
variable percentage depending on how long the asset has been on the books
7. Accelerated depreciation (khấu hao nhanh): a term used to show that the reduction of an
asset’s value happens faster at the start of its useful life than at the end
8. Annuity depreciation (khấu hao niên kim): a method of depreciation centered around cost
recovery and a constant rate of return upon any asset that is being depreciated
9. Cash-flow: the movement of money into and out of a company, firm or legal entity
10. Finite life: a lifespan which is limited to a certain number of years, months, weeks or days
 UNIT 9: MANAGEMENT ACCOUNTING
1. Management accounting: the process of preparing management reports and accounts that
provide accurate financial and statistical information
2. Overheads (chi phí chung): the ongoing administrative expenses of a business which cannot
be matched to any specific business activity
3. Benchmark: a standard by which something can be measured or assessed
4. Takeover: the transfer of control of a firm from one group of shareholders to another group of
shareholders

UNIT 10: COST ACCOUNTING

1. Cost accounting:
- a method of evaluating the overall costs, both actual and notional, which are attributable to
conducting business
- the process in which all costs are examined
2. Bottom-line: the final line in the accounts, the net profit/ loss made by the company
3. Breakeven point (điểm hòa vốn): the figure at which neither profit nor loss is made
4. Opportunity costs: the imagined loss made on not following a certain course of action instead
5. Matching principle
- where a particular cost is assigned or matched to the income it will generate
- the idea that expenses should be allocated to a revenue stream where possible
6. Direct costs: those that can be directly related to the production of particular units of a
product - are quite easy to calculate. Examples include manufacturing materials and
manufacturing wages
7. Indirect costs/ Overheads: costs and expenses that cannot be identified with particular
manufacturing processes or units of production. Examples include rent or property taxes for
the company’s offices and factories, electricity for lighting and heating, the maintenance
department, the factory canteen or restaurant, managers’ salaries, and so on
8. Fixed costs: are those that do not change in the short term, even if the production level
changes, such as rent and interest payments.
9. Variable costs: are those that change in proportion to the volume of production, such as
components and raw materials, and overtime payments.
10. Cost center: a unit of activity in an organization for which costs are calculated separately
11. Absorption costing: as well as direct manufacturing costs - materials and labor - we allocate
part of our fixed and variable manufacturing overheads to the cost of every product
12. Activity-based costing: we identify all the different functions within the company and assign
costs to products and services according to how much these functions are involved in the
process of providing the products and services
13. Budget:
- a financial plan for the future
- a plan that shows how much money you will have and what it will be spent on
14. Goodwill (lợi thế thương mại): the favor or advantage that a business has acquired especially
through its brands and its good reputation
15. Draws/ Drawings: the withdrawal of business cash or other assets by the owner for the
personal use of the owner
16. Withdrawal: an amount of money which is taken out of an account

ACCOUNTING PRINCIPLES:
- The separate entity or business entity assumption is that a business is an accounting unit
separate from its owners, creditors and managers, and their assets. These people can all
change, but the business continues as before.
- The going concern principle: When preparing accounts, one must assume that the enterprise
will still be viable in the years to come. Practically all accounting items are affected by this
assumption, such as the carrying value of fixed assets and inventories, and the ability to repay
debts and other obligations
- The unit-of-measure assumption: all transactions and other items to be accounted for must
be in a single, supposedly stable monetary unit
- The time-period/ accounting period assumption: financial data must be reported for
particular (short) periods, which makes accrual and deferral necessary
- The historical cost principle (nguyên tắc giá gốc): the initial price paid for the acquisition of
assets is the one that recorded in accounts
- The revenue/ realization principle: revenue is realized at the moment when goods are sold
(or change hands) or when services are rendered
- The matching principle: This principle is concerned with the timing of the recognition of
transactions in the accounts. Items are recorded when the income or expense arises, and are
not dependent on the movement of cash.
- The objective principle: As accountants, we should view the business and its transactions in a
dispassionate way. The accounts should not be prepared with any personal bias. To avoid this
bias figures should, where possible, be backed by source documents
- The consistency principle: Accounts should be produced using the same principles from one
year to the next. Deviations from this principle must be noted, and the effects on the accounts
shown
- The full-disclosure principle: this means that insignificant trivial expenses need not be
accounted for separately, but are exempted by the principle of materiality
- The principle of conservatism/ prudence: What value should be given to the numbers in the
accounts? It is normal to act pessimistically so that profits and assets are not overstated, and
expenses and liabilities are realistically valued

UNIT 11: INTERNATIONAL ACCOUNTING

1. Allowance for uncollectable accounts = Provision for bad debts: a contra asset account
recording debts which may not be collected
2. Dividend (cổ tức): a sum of money paid to shareholders
3. Income statement: a financial report which shows the firm’s net profit or loss over a given
period
4. Financial statement: a report showing profit and loss for a business or institution
5. Inventory: a complete listing of all goods held by an entity, or the goods which are on the list
6. Certified public accountant: an accountant who has passed examinations required by the
state licensing officials
7. Fiscal year: the period used by companies and governments for accounting and tax purposes
8. Turnover: income that the company makes in its normal activities

UNIT 12: TAXES

1. Capital gains tax: is a tax on the sale of a non-inventory asset that has increased in value
since its purchase. The difference in value is then treated as a taxable source of income and
thus has tax levied against it. The rate of taxation varies depending on the income tax bracket
of the individual or corporation selling asset and whether it is a short or long-term gain.
2. Income tax: a tax on money received from salary, investments, rent
3. Corporation tax: a tax on the company’s profit
4. Excise duty: taxes imposed on specific products such as petrol, tobacco, alcohol
5. Value added tax: a consumption tax which is levied at each stage of production based on the
value added to the product at that stage
 6. Progressive tax: a tax that takes a larger percentage from the income of high-income earners
than it does from low-income individuals
7. Regressive tax: a tax that takes a larger percentage from low-income people than from high-
income people
8. Tax credit: an amount of money that a taxpayer is able to subtract from the amount of tax that
they owe to the government
9. Inheritance tax: a tax imposed on those who inherit assets from a deceased person
10. Social security spending: money paid by the government to sick and unemployed people
Income tax for individuals is usually progressive: people with higher incomes pay a higher rate of tax
(and therefore a higher percentage of their income) than people with lower incomes. Indirect taxes
such as sales tax and VAT are called proportional taxes, imposed at a fixed rate. But indirect taxes are
actually regressive: people with a low income pay a proportionally greater part of their income than
people with a high income.

UNIT 14: AUDITING

The main objective of auditing is to give the auditor’s professional opinion as to whether the
company’s financial reports correctly present its financial position. Auditors are known to check and
test all accounting records. In order to do that they must prove cash balances, confirm physical
inventories and verify the amounts owed by customers. Apart from that auditors must also decide
whether the company’s records are kept in accordance with accepted accounting practice.

Question: Do you agree accounting generates only costs?

Many people believe that accounting firms solely aim at generating profit. Although it is true
that profit is a motive of accounting, I would argue that… are far more crucial objectives of
accounting.
On the one hand, it is essential for any businesses to make profits in order to survive in
today’s competitive markets and accounting is no exception. Firstly, the primary objective of
any firm should be to deal with the company's day to day running costs, including staff
salaries, property rental fees, and other necessary expenses. Any social responsibility would
be meaningless, if a company is unable to cover its basic expenses to supply their products or
services to the public. Secondly, profits are also required to be reinvested back into the
company in order for improvements and innovations to be successful. In other words, an
enterprise must be in good financial health before it can make any positive contribution to
society.
I acknowledge that profit does have an important impact on how accounting firms operate.
Nevertheless,

Question: People should be able to keep all the money they earn, they should not pay tax for
the state. Do you agree or disagree?
The concept of keeping all the money one earns without contributing to the government
through taxation is appealing to some individuals. However, I am in disagreement with this
notion.
Opponents of paying taxes point out that they do not have trust in local authorities.
Undoubtedly, the funds collected from common citizens should be used for public services.
In a large number of countries today where corruption and bribery are rampant, however, the
federal budget is misappropriated for the personal gains of those in power. Another reason
why people are hesitant to part with their money is the high tax rates combined with an unfair
tax structure. For instance, the British public is now furious that while they are working hard
and paying their fair share, big corporations are cheating the system to avoid paying theirs.
These burdensome factors are likely to propel people toward tax avoidance and non-
compliance.
Nonetheless, I am convinced that citizens should make a fair contribution to the common
good in order to fund the public goods and services on which they all rely. There is no doubt
that taxes are crucial because governments collect this money and use it to finance social
projects such as health and education. Some of the money is also channeled to fund projects
such as pensions, unemployment benefits, and childcare. Without taxes, it would be
impossible for governments to raise money to fund these types of projects and meet the
demands of their societies. It is the taxpayers who reap the benefits of this money and this,
citizens should endeavor to make a financial contribution and understand that it is meant to
be more than just a “money grab” from the government.
In conclusion, while the idea of keeping all the money one earns may be tempting, I
completely disagree with this view as it is essential to recognize the crucial role of taxation.
Taxes are a necessary part of a functioning society, and their contribution to the government
helps to ensure a higher quality of life for all citizens.

Question: The government should raise taxes on petrol to reduce traffic congestion. To what
extent do you agree or disagree?
It is said that a higher tariff should be placed on petrol to alleviate the issue of traffic
congestion. I personally disagree with this opinion since a heavier tax causes commuters
more harm than good and therefore is not effective in cutting down traffic volume. Rather,
improving road infrastructure as well as reliability and comfort of public transport would be
more feasible approaches.
To begin with, higher excise on petrol results in higher living expenses while not achieving
the intended benefits of reduced car use. When a product or service is taxed heavily, it is
consumers that are being directly discouraged but this logic is flawed for essential goods.
This approach does not always lead to commuters cutting back on their traveling since going
to work or driving their children to school is a basic necessity in their daily lives. This is
evidenced by gasoline price fluctuations which occur relatively frequently in accordance with
changing economic situations. These increased petrol prices do not considerably mitigate
traffic jams in city centers.
To effectively deal with traffic gridlocks, better alternatives would be upgrading roads and
public transport systems. Firstly, more overpasses or underpasses could be constructed in
inner cities and national expressways could be built to better accommodate an ever increasing
volume of traffic. To illustrate, a newly opened Hanoi – Hai Phong highway in Vietnam has
alleviated the considerable strain on city roads. In addition, the punctuality and reliability of
buses and trains could be improved, and equipped with modern amenities such as air-
conditioners and well-designed interiors to facilitate a more pleasant experience for
passengers, in order to encourage people to give up the convenience and comfort of their own
vehicles.
In conclusion, imposing higher taxes on petrol does not really encourage drivers to cut down
on private vehicle usage and therefore wouldn't resolve traffic problems in an efficient way.
Rather, investing in road networks and public transport would be more viable solutions. By
tackling this issue we can reduce the effects of air pollution in cities, which significantly
impacts on human health.

Cost accounting provides managers with accurate information on the costs associated with
different products, services, and operations. This information enables them to identify areas
of the business that require improvement and make informed decisions on cost reduction and
efficiency measures. Additionally, cost accounting helps in setting prices for products and
services that ensure profitability while remaining competitive.
Furthermore, cost accounting is crucial for budgeting and forecasting as it provides accurate
data on past costs and trends, helping businesses plan for the future.

VAS & IFRS: The most basic difference between VAS and IFRS is in the content of the
Financial Statements. According to IAS, there are five components including: Statement of
Financial Position, Statement of Comprehensive Income, Statement of Cash Flow, Statement
of Changes in Equity, and Notes to Financial Statement. However, VAS has only four
components of Balance Sheet, Income Statement, Cash Flow Statement and Notes to
Financial Statements, the statement of changes in equity will be considered as a single
component of the notes to the financial statements. Besides, VAS stipulates the reporting
form rigidly, reducing the flexibility and diversity of the financial reporting system, while
IFRS does not give a specific form of the report or an account code. Financial statements are
prepared and presented depending on how the business is managed.

IFRS-VAS convergence in Vietnam will not only be mandatory from 2025 but it will also
enhance financial reporting capabilities of businesses operating in Vietnam having head
offices in other countries. For other businesses, this will provide more transparency and
comparability and will enhance their chances of M&A activities with international partners.
This convergence will benefit both domestic and foreign stakeholders, especially investors
and regulators. This would also facilitate the integration of the Vietnamese capital market
with the global market and at the same time, reduce the operating costs and complexities
faced by the accounting departments by eliminating the need to convert financial statements
on a periodic basis.
Apart from benefits from such convergence, businesses need to evaluate the challenges that
they may encounter during the process, such as readiness level, lack of resources (qualified
accountants) and availability of information to enable the convergence. Most of these could
be addressed through training, while others need professional support.
In order to reap the true benefits and address the challenges at each stage, it is important for
businesses to hire professionals who have expertise in both IFRS and VAS. Alternatively,
services from a professional firm could make this transition rewarding.

On the one hand, the biggest difficulty of implementing IFRS was market problems. The
reason is that IFRS requires recognition at fair value, while developing capital markets and
financial markets cannot provide reliable information about fair value of assets or liabilities.
Furthermore, certain transactions are not available in the markets because other markets are
not synchronized. For example, certain financial instruments such as convertible bonds,
derivatives, preferred stocks have not been widely traded in the market. Therefore, most
companies had not had experience in recording transactions in such contexts. Furthermore,
the implementation of IFRS is costly due to training costs, hiring experts to provide
guidelines for staff and human resource issues are also big problems.
On the other hand, I believe that those above-mentioned demerits of the adoption of IFRS in
Vietnamese accounting are overshadowed by the benefits to enterprises, investors and
authorities. Firstly, regarding the benefits for enterprises, IFRS requires the strengthening of
corporate accountability, thus increasing the transparency of financial statements and
comparability among companies. IFRS requires transactions to truthfully reflect their nature
rather than their name or legal form, which enables business performance to be reflected
objectively and reliably. Secondly, when adopting IFRS, the board of directors must disclose
detailed bases for the recognition and presentation of the financial statements, explain the
specific causes in cases where it is not possible to comply with the standard, and clearly
identify the risks that enterprises may face during the course of operations. Therefore, the
financial statements provide useful and reliable information to investors for decision making.
Thirdly, the application of IFRS provides useful information for the government in making
decisions on management, administration, risk control and decisions related to the inspection,
examination and supervision.
In summary, the adoption of IFRS is a challenge for Vietnam because the capital markets and
the stock market are developing, the qualifications and proficiency of auditors, accountants
and investors are low. However, I am of the opinion that converting from VAS to IFRS is
worth more consideration since it can bring about further economic value and benefits for
businesses, investors and governments in the long term. Given this situation, it is
recommended that the implementation of IFRS in Vietnam requires cooperation of the
government, enterprise, and individuals.

Potential actions can be done to promote the adoption of IFRS and its benefits in Vietnam: (i)
refine the requirements and policies for the adoption of IFRS in Vietnam. It is necessary to
establish regulations and guidelines to implement special techniques of IFRS such as
recognition of loss on assets, derivative instruments, and how to determine the fair value of
certain assets, financial assets, properties. The legal regulations on finance and accounting
should be amended to avoid conflicts and duplication; (ii) establish a roadmap including clear
visions and missions for the adoption of IFRS in Vietnam. This is the responsibility of the
authorities in regard to accounting; and (iii) raise awareness about the role financial
statements prepared according to IFRS. It is necessary to advertise the benefits and necessity
of IFRS so that managers, investors, and accountants understand the need of presenting
financial statements according to IFRS. (iv) strengthen training regarding IFRS for experts,
lecturers, auditors and accountants. Especially, universities should incorporate IFRS in
training programs. Furthermore, professional organizations and associations should enhance
the promotion and introduction of IFRS as well as provide guidance to companies regarding
the implementation of IFRS.

The separate entity assumption prescribes that a business may only report activities on
financial statements that are specifically related to company operations, not those activities
that affect the owner personally. This concept is called the separate entity concept because
the business is considered an entity separate and apart from its owner(s).
The going concern or continuity assumption assumes that the accounting entity will
continue to operate in the foreseeable future. It is assumed that the accounting entity has
neither the intention nor the necessity of liquidating or curtailing materially the scale of its
operations. This assumption provides the foundation for accrual accounting. When an
accounting entity ceases to be a going concern, the accounting approach changes from
accrual accounting to realization and liquidation.
The periodicity or time assumption implies that a company can present useful information
in shorter time periods, such as years, quarters, or months. The information is broken into
time frames to make comparisons and evaluations easier. The information will be timely and
current and will give a meaningful picture of how the company is operating.
The monetary or unit-of-measure assumption: In order to record a transaction, we need a
system of monetary measurement, or a monetary unit by which to value the transaction. In
the United States, this monetary unit is the US dollar. Without a dollar amount, it would be
impossible to record information in the financial records. It also would leave stakeholders
unable to make financial decisions, because there is no comparability measurement between
companies. This concept ignores any change in the purchasing power of the dollar due to
inflation.
The historical cost principle states that virtually everything the company owns or controls
(assets) must be recorded at its value at the date of acquisition. For most assets, this value is
easy to determine as it is the price agreed to when buying the asset from the vendor. There
are some exceptions to this rule, but always apply the cost principle unless FASB has
specifically stated that a different valuation method should be used in a given circumstance.
The revenue recognition principle directs a company to recognize revenue in the period in
which it is earned; revenue is not considered earned until a product or service has been
provided. This means the period of time in which you performed the service or gave the
customer the product is the period in which revenue is recognized. There also does not have
to be a correlation between when cash is collected and when revenue is recognized.
The expense recognition principle or matching principle states that expenses must be
matched with associated revenues in the period in which the revenues were earned. A
mismatch in expenses and revenues could be an understated net income in one period with an
overstated net income in another period. There would be no reliability in statements if
expenses were recorded separately from the revenues generated.
The objectivity principle: The term ‘objectivity’ refers to measurements that are unbiased
and subject to verification by independent entities. The principle requires that the value of
transactions, assets and liabilities be verifiable. It implies that valuation must be independent
of the person valuing the asset or liability. Accountants rely on various kinds of evidence to
support their financial measurements but seek always the most objective evidence available.
Despite the goal of objectivity, it is not possible to divorce completely accounting
information from assumptions, estimates and judgment.
The consistency principle implies that there should be consistent treatment of similar or the
same items from one accounting period to another. This adds to the usefulness of financial
reports since the reports from one period are comparable to those of another period. This also
facilitates the detection of trends. Entities sometimes need to change particular accounting
approaches in order to adapt to changes in the environment. Where a significant change has
been made, the fact that a change has been made and the shilling effects of the change should
be fully disclosed in the financial statements. Consistency facilitates both comparability and
understandability.
The full disclosure principle states that accounting reports must disclose all facts that may
influence the judgment of an informed reader. Adequate disclosure means that all material
and relevant facts concerning financial position and the results of operations are
communicated to users. This can be accomplished either in the financial statements or in the
notes accompanying the financial statements.
Materiality concept in accounting refers to the concept that all the material items should be
reported properly in the financial statements. Material items are considered as those items
whose inclusion or exclusion results in significant changes in the decision making for the
users of business information. Materiality concept also allows for the provision of ignoring
other accounting principles if doing so doesn’t have an impact on the financial statements of
the business concerned. Therefore, the information present in the financial statements must be
complete in terms of all material aspects, so that it is able to present an accurate picture of the
business.
Conservatism/ Prudence
This concept is important when valuing a transaction for which the dollar value cannot be as
clearly determined, as when using the cost principle. Conservatism states that if there is
uncertainty in a potential financial estimate, a company should err on the side of caution and
report the most conservative amount. This would mean that any uncertain or estimated
expenses/losses should be recorded, but uncertain or estimated revenues/gains should not.
This understated net income, therefore reducing profit. This gives stakeholders a more
reliable view of the company’s financial position and does not overstate income.

DIFFERENTIATE:
 - Users of accounting information may be divided into two major categories:
external users and internal users.
External users are groups of individuals who are not directly concerned with the entity’s day-
to-day operations but are indirectly related to it. These users include owners, lenders,
suppliers, potential investors and creditors, employees, tax authorities, etc. Internal users have
all levels of management personnel within an entity responsible for planning and controlling
operations
- Cost accounting & Financial accounting
Cost accounting is sometimes used to assist decision-making by management within a
business, whereas financial accounting is usually used by outside investors or creditors.
Financial accounting reveals the financial status and results of a corporation through
financial statements to external outlets, which provide information regarding its sales,
expenditures, assets, and liabilities. Cost accounting can be most useful in budgeting and
setting up cost reduction systems as a method for management, which will increase the
company's net profits in future.
- Financial accounting & Managerial accounting
Financial accounting systems are primarily designed to provide financial statements to
external users for their decision processes. However, internal users also have access to the
statements and use them in many of their decisions. Managerial accounting systems are
primarily concerned with supplementing the financial accounting information for internal
users, thus assisting them in reaching certain operating decisions.
- Accounting & Bookkeeping
Bookkeeping means the recording of transactions which is the record-making phase of
accounting. The recording of transactions tends to be mechanical and repetitive; it is only a
small part of the accounting field and probably the most straightforward part. Accounting
includes the design of accounting systems, preparation of financial statements, audits, cost
studies, development of forecasts, income tax work, computer applications to accounting
processes, and the analysis and interpretation of accounting information as an aid to making
business decisions. A person might become a reasonably proficient bookkeeper in a few
weeks or months; however, to become a professional accountant requires several years of
study and experience.
- Depreciation & Amortization
Depreciation and amortization are both accounting methods used to spread the cost of an
asset over its useful life, but they apply to different types of assets. Depreciation is used for
tangible assets, or physical assets, like buildings, machinery, equipment, vehicles, and
furniture. These assets wear down over time due to physical use and are depreciated to reflect
this decrease in value. Amortization, on the other hand, is used for intangible assets, which
are non-physical assets like patents, trademarks, copyrights, goodwill, and software. These
assets do not physically wear out, but they may become obsolete or lose their value over time,
or their use may be legally restricted to a certain period of time.
- Current assets & Non-current assets
Current assets are considered short-term assets because they generally are convertible to
cash within a firm's fiscal year, and are the resources that a company needs to run its day-to-
day operations and pay its current expenses. Current assets are generally reported on the
balance sheet at their current or market price. They include cash and cash equivalents,
accounts receivable, prepaid expenses, inventory and marketable securities.
Non-current assets are a company’s long-term investments that have a useful life of more
than one year. Noncurrent assets cannot be converted to cash easily. They are reported on the
balance sheet at the price a company paid for them, which is adjusted for depreciation and
amortization and is subject to being re-evaluated whenever the market price decreases
compared to the book price. They include land; property, plant and equipment; trademarks;
long-term investments and goodwill.
Non-current assets may be subdivided into tangible and intangible assets - such as fixed
and intangible assets.
- Tangible assets & Intangible assets
Tangible assets are assets with a physical existence - things you can touch - such as property,
plant and equipment. They are generally recorded at their historical cost less accumulated
depreciation costs - the amount of their cost that has already been deducted from profits. This
gives their net-book value. Intangible assets are non-current assets that are identifiable and
without physical substance. They include brand names - legally protected names for a
company’s products, patents - exclusive rights to produce a particular new product for a fixed
period, and trademarks - names or symbols that are put on products and cannot be used by
other companies. Because it is difficult to give an accurate value for any of these things,
companies normally only record tangible assets
- Current liabilities & Non-current (fixed) liabilities
Current liabilities are a company’s short-term financial obligations that are due within one
year or within a normal operating cycle. Examples include accounts payable, short-term debt,
dividends, and notes payable as well as income taxes owed. Non-current liabilities, also
known as long-term liabilities, are obligations listed on the balance sheet not due for more
than a year. Examples include long-term loans and lease obligations, bonds payable and
deferred revenue.
- Direct costs & Indirect costs
Direct costs are those that can be directly related to the production of particular units of a
product - are quite easy to calculate. Examples include manufacturing materials and
manufacturing wages. Indirect costs/ Overheads are costs and expenses that cannot be
identified with particular manufacturing processes or units of production. Examples include
rent or property taxes for the company’s offices and factories, electricity for lighting and
heating, the maintenance department, the factory canteen or restaurant, managers’ salaries,
and so on
- Income tax & Capital gains tax
Ordinary income tax applies to regular earnings like wages, salaries and interest and is taxed
at your marginal tax, which varies from 10% to 37% depending on your income. Capital
gains tax, charged when selling assets for a profit, varies depending on how long you owned
an asset. Short-term gains on assets held a year or less are taxed as ordinary income, while
long-term gains held for over a year have generally lower tax rates.