Principles of Accounting

Group Assignment

Class: ACC101-IB1909

Group: Group 1

Trimester: Summer 2024

Word count:

Student’ Name and ID:

1.Trần Hoa Kiều - SS196272

2.Trần Hà Mai Hương - SS194496
3.Hoàng Đặng Tiến Phát - SS193940
4.Nguyễn Đức Mạnh - SS193924
5.Lê Hoài Minh Tú - SS194942
6.Lâm Quang Tiến - SE170304
7.Trần Tấn Phát - SE170312
8.Đoàn Nguyễn Ngọc Tú - SE182330
 Ho Chi Minh City

Table of Contents
I. Report Contents.............................................................................................................................................
A. Business introduction and a summary of the accounting cycle................................................................
B. Description of business transactions for the first year of operation..........................................................
C. General Journal and Ledger.....................................................................................................................
D. Unadjusted Trial Balance, Adjustments, and Adjusted Trial Balance......................................................
E. Financial Statements................................................................................................................................
F. Closing process........................................................................................................................................
G. Analysis and Conclusion..........................................................................................................................
II. References List.............................................................................................................................................
III. Appendices...................................................................................................................................................
IV. Member’s Contribution form......................................................................................................................

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 I. Report Contents
A. Business introduction and a summary of the accounting
cycle.
1. Business Introduction:
a) KIEU HOA CO., LTD
KIEU HOA TRADING SERVICE COMPANY LIMITED, KIEU HOA CO., LTD, is a
company created by our group with the main purpose of accounting for the plastic composite
trading process. Our company was established according to the model of PHUONG
NGUYEN TRADING COMPANY LIMITED.

b) The process of formation and development of the Company

Currently on the market there are many plastic companies, so KIEU HOA TRADING
SERVICE COMPANY LIMITED, KIEU HOA CO., LTD chose Can Tho Plastic Joint Stock
Company as the place to import the main source of goods. During the year we worked, we
imported and sold quite a large source of goods.
2. Summary of the accounting cycle:
KIEU HOA CO., LTD's accounting cycle includes seven main steps:
i)Analysing and Recording Transactions:
Identify and record expenses, sales revenue, debt payments, customer cash,etc…
This includes proper categorisation and documentation and checks and balances to catch
errors.
ii) Posting Journal Entries to General Journal :
This step involves recording all financial activities. It involves recording each
transaction as a debit and a corresponding credit in two or more sub-ledger accounts.
iii) Post transactions to general ledger:
The recorded journal financials now transfer to the ledger. The general ledger
displays the company’s accounts and changes resulting from business transactions.
iv) Preparing an Unadjusted Trial Balance:
Once all transactions have been identified, a trial balance is calculated. The
unadjusted trial balance catches a lot of mistakes, ensuring that the total credit and debit
balances are equal.
v) Preparing an Adjusted Trial Balance:
This will help to make adjustments to the trial balance if any errors are found. The
goal is to ensure that the debits and credits are equal in the new trial balance and use a
worksheet to identify any discrepancies and make adjustments.
vi) Generating Financial Statements:
Financial statements can be created once all the account balances are adjusted and
corrected. These statements provide a snapshot of a company’s financial health and
performance.
vii) Closing the Books for the Period:
The books get closed at the end of the accounting cycle. This process ensures that
these accounts start fresh at zero balance for the new accounting period.

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B. Description of business transactions for the first year of
operation.

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C. General Journal and Ledger.
1. General Journal

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Main activities:

Purchased inventory: Tables, chairs, pallets, trays, plastic baskets and other plastic products
throughout the year from various suppliers (both cash and credit).
Sales: Sell all kinds of plastic products all year round (cash and credit).
Incurring costs: Salaries, insurance, equipment maintenance, fuel, office rent, transportation,
marketing, office utilities and depreciation.
Manage accounts payable and receivable: Purchase inventory on credit and sell inventory on
credit to customers with different payment terms.

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2. General Ledger

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Cash Flow
Initial balance 450,000.
Increases on cash sales and decreases on purchases and various expenses.
Closing balance 155,940.

Inventory
Initial balance is 60,000.
Fluctuations throughout the year with buying and selling activity.
The ending balance is 170,760.

Accounts Receivable
Increases on credit sales and decreases on customer payments.
Highest balance 60,000.

Accounts Payable
Increases when purchasing credit and decreases when paying suppliers.
Highest balance 72,000

Expenses
Includes salaries, rent, marketing, repairs, depreciation, fuel, transportation and office
utilities.
Incurred year-round for various business activities.

Sales
Recorded for both cash and credit sales.
The highest monthly revenue was 332,000.

COGS
Represents the cost of inventory sold to generate revenue.

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Increase with each sale.
Highest monthly COGS was 248,500.

D. Unadjusted Trial Balance, Adjustments, and Adjusted

Trial Balance.

1. Depreciation Expense: Adjustment Amount: $200 Reason for Adjustment: Depreciation

expense was recorded twice due to monthly payments. Impact: Decreases equipment value
on the balance sheet: $200 Increases accumulated depreciation value on the balance sheet:
$200 Decreases retained earnings on the balance sheet: $200 Increases depreciation
expense on the income statement: $200 Decreases net income on the income statement:
$200

2. Explanation: Depreciation expense is an expense recorded over time to reflect the wear
and tear of fixed assets throughout their useful lives. In Kieu Hoa's case, the equipment was
purchased in January and can be assumed to have a useful life of 5 years. Therefore, the
monthly depreciation expense for the equipment would be $200 ($2,400 / 12). However, due
to Kieu Hoa's monthly payments, the depreciation expense was recorded twice in the year,
resulting in an overstatement of $200. This adjustment aims to correct this error and ensure
that depreciation expense is recorded accurately in the financial statements.

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E. Financial Statements.

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Income Statement Analysis:
The company's net revenue reached $407,400, showing that its core business provides a
significant source of income.
Cost of sales accounted for $251,500, or about 61.7% of net sales, showing that production
and sales costs are an important factor affecting the company's profits.

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Gross profit reached $155,900, showing that the company is still capable of generating
profits from its core business.
However, total costs of $255,800, including selling and general and administrative expenses,
resulted in a net profit of only $155,900.
Businesses need to consider measures to control costs, especially management and
administrative costs, to improve operational efficiency and increase profits.

Analyze Statement of owner's equity

The equity of KIEU HOA CO., LTD at the beginning of the period was $450,000, invested by
the owner in the company.
During 2022, the company achieved a net loss of $99,900, contributing to a reduction in
equity.
However, the company did not record any capital withdrawals by owners during the year.
Therefore, KIEU HOA CO., LTD's Equity at the end of the period was $350,100, down
$75,900 compared to the beginning of the period.

Analyse Balance sheet

Asset:
The company has ample cash and cash equivalents ($155,940) to meet its short-term
liquidity needs.
Inventory ($167,760) shows the ability to meet customer needs and support production and
business activities.
The company has a quantity of equipment ($1,600) to serve production and business
activities.
The company has accounts receivable ($60,000) from customers, indicating the ability to
collect sales revenue.

Liabilities must pay:

The company has an account payable ($37,000) that needs to be paid in the short term. The
company has a relatively low amount of short-term liabilities compared to total assets,
indicating a low debt-to-capital ratio and low financial risk.

Equity:
Equity ($350,100) is the main source of funding for the company's business operations.

Cash flow analysis

Business activities:
KIEU HOA CO., LTD generated negative operating cash flow of $292,060 in 2022. This
shows that the company is using more money for business activities than it is generating.

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 F. Closing process.

G.Analysis and Conclusion.

Short-term payment index = 6.48. → The current ratio is too high, then we can see that the
company is having problems using short-term assets or debt ineffectively.

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Average inventory turnover = 0.34 → If the turnover is too low, long-term inventory will lead
to inventory management costs, the risk of goods deterioration, expiration, obsolescence... and
also causing waste of resources in terms of warehouses, capital, and labor; affects the cash
flow of the business.

ROE = 0.83 → Low ROE proves that the company's board of directors is not using
shareholders' capital effectively.

Gross profit margin = 0.38 → Gross profit margin is low so the efficiency of the business in
generating profits from main business activities is low.

II. References List

Gibson, E. (2023) 7 steps of the accounting cycle. Available at: https://docflite.com/7-
steps-of-the-accounting-cycle (Accessed: 29 August 2023).

III. Appendices
IV. Member’s Contribution form

Principles of Accounting
Group member’s Contribution form
Group 1
Member’s full name ID Percentage of
contribution
1. Trần Hoa Kiều SS196272 90

2. Trần Hà Mai Hương SS194496 90

3. Hoàng Đặng Tiến Phát SS193940 85

4. Nguyễn Đức Mạnh SS193924 95

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5. Lê Hoài Minh Tú SS194942 100

6. Trần Tấn Phát SE170312 90

7. Đoàn Nguyễn Ngọc Tú SE182330 100

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