Unit 19: Accounting and financial statements

Accounting

It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a given period, and the value and nature of a firm assets, liabilities and owner’s equity.

Assets = Liabilities + Owner’s Equity

Types of accounting

1. Government Accounting

2. Financial Accounting

3. Public Accounting

4. Fiduciary Accounting

5. Tax Accounting

6. Management Accounting

7. Creative Accounting

Government accounting

Government accounting refers to the field of accounting that specifically finds application in the public sector or government.

Financial accounting

Financial accounting is the process of recording, summarizing and reporting the myriad (a lot of) of transactions resulting from business operations over a period of time.

These transactions are summarized in the preparation of financial statements, including:

1. Balance sheet

2. Income statement

3. Cash flow statement

Management accounting

Management accounting is the process of identifying, analyzing, recording and presenting financial information that is used for internally by the management for planning, decision making and control.

Differentiate management and financial accounting

Management Accounting	Financial Accounting
Provides information for managers inside an organization who direct and control its operations	Provides information to stockholders, creditors and others who are outside the organization

Public accounting

Public accounting is a process of auditing (kiểm tra sổ sách) financial statements, designing financial accounting systems, assisting in the managerial accounting function, providing managerial advisory services, and tax preparation.

Fiduciary accounting (ủy thác)

Fiduciary accounting is a brand of accounting including the entire process wherein a fiduciary - normally a personal representative, trustee (người được ủy thác) e or guardian (người giám hộ) - communicates information on a ongoing basis (runs indefinitely) regarding the financial administration of a fund to the parties in interest, and perhaps, to a court.

Tax accounting

Tax accounting is the accounting process that focuses on tax issues including filing tax returns and planning for future tax responsibilities.

Creative accounting

Creative accounting consists of accounting practices that follow required laws and regulations, but deviate from what those stands intend to accomplish.

Creative accounting capitalizes on loopholes (kẻ hở) in the accounting standards to falsely portray a better image of the company.

Creative accounting methods

1. Misstating revenue

2. Massaging expenses (Manipulate)

3. Concealing bad news

4. Misstating assets

5. Inadequate disclosure

Reasons for creative accounting

1. Income shooting

2. Survive from bankruptcy

3. Profit more

4. Pay less tax

5. Boost the share price

6. To increase (fake) transaction

7. To attract investor

Financial Statements

Financials statements are a collection of reports about an organization’s financial results, financial condition, and cash flow

Income statement → Statement of cash flows → Balance sheet

Balance sheet

A balance sheet is one of the financial statements.

A balance sheet is a statement of assets and liabilities of an enterprise at a given date.

it is also called Statement of Financial Position.

Income statement

The income statement reports revenues, expenses, and the resulting net income.

(Khi khách hàng nợ tiền công ty thì số tiền nợ đó vẫn được tính vào assets của công ty và được thêm vào income statement)

The retained earnings statement

It shoes the retained earnings at the beginning and end of the accounting period.

Cash flow statement

The cash flow statement explains the reasons for changes in the cash balance, showing sources and uses of cash in the operating, financing and investing activities of the firm.

(Quan trọng hơn income statements)