Lecture 1

INTRODUCTION TO ACCOUNTING
 AGENDA

1. Accounting Function

2. Accounting Information

3. Financial Accounting vs. Management Accounting

4. Ethics in Accounting

5. Accounting Assumptions and Principles

6. Career Opportunities in Accounting

7. Skills and competences of Accountant

 1. Accounting Function
Identifying Recording
Business Business
Activities Activities
Communicating
Business Activities

Select transactions Input, measure

& events & classify
Prepare, analyse & interpret
Source: American Accounting Association (1966)
 2. Accounting Information
Owners Customers Competitors

Managers Employees

Main users of Business

Accounting
Lenders Government
Information

Investment Community
Suppliers
analysts representatives
 2. Accounting Information
Main users of Accounting Information

External Users Internal Users

•Lenders •Consumer Groups •Managers •Sales Staff

•Shareholders •External Auditors •Officers •Budget Officers
•Governments •Customers •Internal Auditors •Controllers
 2. Accounting Information
Qualities of Accounting Information
Qualities

Fundamental Enhancing

Relevance Faithful representation

Predictive value Confirmatory value Completeness Neutrality Freedom from error

Materiality
threshold

Comparability Timeliness Verifiability Understandability

Source: International Accounting Standards Board (2018)

 2. Accounting Information

Accounting Information System

Information Information Information Information

identification recording analysis reporting
 3. Financial Accounting vs.
Management Accounting
Features Management Accounting Financial Accounting
Nature of the reports
Specific purpose General purpose
produced
Level of detail Often very detailed Usually broad view
Usually subject to accounting
Regulations Unregulated
regulation
Usually annually, semi-annually
Reporting interval As short as required by managers
or quarterly
Often based on projected future
Time Orientation Almost always historical
information and past information
Financial and non-financial Financial information, great
Range and quality of
information, often uses non- emphasis on objective, verifiable
information
verifiable information evidence

Sources: Association of Certified Public Accountants (2018) & Chartered Institute of Management Accountants (2018)
 4. Ethics in Accounting
Five fundamental principles
of ethics in accounting:
• Integrity
Ethics • Objectivity
• Professional competence

Beliefs that Accepted and due care

distinguish standards of • Confidentiality
right from good and bad
wrong behavior • Professional behaviour
Sources: AICPA (2018), CIMA (2018) & IIA (2018)
 4. Ethics in Accounting

Identify ethical concerns Analyse options Make ethical decision

Use personal ethics to Consider all good and Choose best option
recognize ethical bad consequences after weighing all
concern consequences
 5. Accounting Assumptions &
Principles
Conceptual Framework Approach: Members shall identify,
evaluate and address threats to compliance with the rules and
fundamental ethical principles.
• Generally Accepted Accounting Principles (GAAP) from Financial Accounting
Standard Board (FASB)

• International Financial Reporting Standards (IFRS) from International

Accounting Standard Board (IASB)

• Vietnamese Accounting Standards (VAS) from Ministry of Finance

Sources: FASB (2018), IASB (2018) & VAS (2018)
 5. Accounting Assumptions &
Principles
Conceptual Framework Approach
Objectives of Financial Reporting

Qualitative
Elements of
Characteristics of
Financial Statements
Accounting Information

Operating Guidelines

Assumptions Principles Constraints

Sources: FASB (2018), IASB (2018) & VAS (2018)

 5. Accounting Assumptions &
Principles

Now Future
Going-Concern Assumption Monetary Unit Assumption
Reflects assumption that the business will Express transactions and events in
continue operating instead of being closed monetary, or money, units.
or sold.

Business Entity Assumption Time Period Assumption

A business is accounted for separately Presumes that the life of a company
from other business entities, including its can be divided into time periods, such
owner. as months and years.

Sources: FASB (2018), IASB (2018) & VAS (2018)

 5. Accounting Assumptions &
Principles

Revenue Recognition Principle

1. Recognize revenue when it is earned. Cost Principle
2. Proceeds need not be in cash. Accounting information is based on
3. Measure revenue by cash received actual cost. Actual cost is
plus cash value of items received. considered objective.

Full Disclosure Principle

Matching Principle
A company is required to report the
A company must record its expenses
details behind financial statements that
incurred to generate the revenue reported.
would impact users’ decisions.

Sources: FASB (2018), IASB (2018) & VAS (2018)

 5. Accounting Assumptions &
Principles
Two constraints

• Materiality relates to an item’s impact

on a firm’s overall financial condition and
operations.

• Conservatism dictates that when in

doubt, choose the method that will be
the least likely to overstate assets and
income.
 6. Career Opportunities in
Accounting

Managerial Financial Taxation Accounting-related

•General accounting •Preparation •Preparation •Lenders •FBI investigators
•Cost accounting •Analysis •Planning •Consultants •Market researchers
•Budgeting •Auditing •Regulatory •Analysts •Systems designers
•Internal auditing •Regulatory •Investigations •Traders •Merger services
•Consulting •Consulting •Consulting •Directors •Business valuation
•Controller •Planning •Enforcement •Underwriters •Human services
•Treasurer •Criminal investigation •Legal services •Planners •Litigation support
•Strategy •Estate plans •Appraisers •Entrepreneurs

Sources: AICPA (2021) & ACCA (2021)

 6. Skills and Competences of
Accountant

Sources: AICPA (2021), ACCA (2021) & CGMA (2021)

The changing business environment

Increasing sophistication of customers

Development of global economy

Rapid changes in technology

Deregulation of domestic markets

Increasing pressure from owners

Increasing volatility of financial markets

 Discussion

What are objectives that a business pursue?

Let’s think about the needs of internal and

external stakeholders.