English of accounting pps

1 TỔNG LIÊN ĐOÀN LAO ĐỘNG VIỆT NAM TRƯỜNG ĐẠI HỌC TÔN ĐỨC THẮNG PHÒNG THCN & DN READING Compiled by: ThS. ĐỖ THỊ HOA QUYÊN Internal publishing - HCMC, June 2010- 2 TỔNG LIÊN ĐOÀN LAO ĐỘNG VIỆT NAM TRƯỜNG ĐẠI HỌC TÔN ĐỨC THẮNG PHÒNG THCN & DN READING FOR ACCOUNTING Compiled by: ThS. ĐỖ THỊ HOA QUYÊN Internal publishing - HCMC, June 2010- 3 PROCESSING ACCOUNTING DATA BOOKKEEPING Bookkeeping is an essential accounting tool. A small business or company may employ only one bookkeeper, who records all of the financial data by hand; large organizations may employ many bookkeepers, who use electronic and mechanical equipment for a large part of their work. Each organization has its own bookkeeping requirements, but all systems operate on the same basic principles. The two basic systems of bookkeeping are double entry and single entry. The basic principle of double-entry bookkeeping is that every transaction has a twofold effect. In other words, a value is received and a value is yielded. By recording both effects of each transaction, this system offers protection against error. An account is a record of the financial transactions that concern one item or a group of similar items. The account includes categories of financial data for each area of interest during a specific period: the value at the beginning of a period, changes in value during the same period and the value at the end of a period. Assets are those things of value that your company owns. The cash in your bank account is your asset. So is the company car you drive. Assets are the objects, rights and claims owned by and having value for the firm. Since your company has a right to the future collection of money, accounts receivable are assets The machinery on your production floor is also an asset. If your firm owns real estate or other tangible property, those are considered assets as well. If you were a bank, the loans you make would be considered assets since they represent a right of future collection. There may also be intangible assets owned by your company. Patents, the exclusive right to use a trademark, and goodwill from the acquisition of another company are such intangible assets. Their value can be somewhat hazy. Think of liabilities as the opposite of assets. These are the obligations of one company to another. If money is owed to an organization or person for things or services purchased on credit, this liability is called an account payable. So is the loan you took from your bank. If you were a bank, your customer's deposits would be a liability, since they represent future claims against the bank. Other liabilities include wages or salaries that are owed to employees, or taxes that have not yet been paid. We segregate liabilities into short-term and long-term categories on the balance sheet. This division is nothing more than separating those liabilities scheduled for payment 4 within the next accounting period (usually the next twelve months) from those not to be paid until later. We often separate debt like this. It gives readers a clearer picture of how much the company owes and when. The value of the business to the owner or owners is known as capital. Other terms used to designate capital are proprietorship, owners’ equity (usually abbreviated OE), ownership, or net worth. The two Income and Expense Accounts are used to increase or decrease the value of your accounts. Thus, while the balance sheet accounts simply track the value of the things you own or owe, income and expense accounts allow you to change the value of these accounts. Income is the payment you receive for your time, services you provide, or the use of your money. When you receive a paycheck, for example, that check is a payment for labor you provided to an employer. Other examples of income include commissions, tips, dividend income from stocks, and interest income from bank accounts. Income will always increase the value of your Assets and thus this becomes your Equity. Expenses refer to money you spend to purchase goods or services provided by someone else. Examples of expenses are a meal at a restaurant, rent, groceries, gas for your car, or tickets to see a play. Expenses will always decrease your Equity. If you pay for the expense immediately, you will decrease your Assets, whereas if you pay for the expense on credit you increase your Liabilities. All transactions affect at least two accounts. Each transaction must be analyzed to determine which accounts are affected, and whether they should be increased or decreased. An entry made on the left-hand side or column of an account is called a debit, while an entry made on the right-hand side or column is a credit. Debit, usually abbreviated DR, at one time meant value received, or literally he owes. Credit, usually abbreviated CR, meant value parted with, or literally he trusts. Many students have trouble with accounting because they forget that the only meaning for “debit” is the left side of an account and the only meaning for “credit” is the right side of an account. Perhaps someone once told you that you were a “credit” to your school or your family. As a result, you may think that there is a “goodness” attached to credits and perhaps a “badness” attached to debits. Such is not the case. ASSETS = LIABILITIES + OWNERS’ EQUITY Asset A/C’s = Liability A/C’s + Proprietorship A/C’s DR CR DR CR DR CR + - - + - + For examples: When Morgan’s Appliance Store, sells a refrigerator for $260, the bookkeeper debits the cash account (asset) and credits the sales account (income) by $260. On the day that Mr. 5 Morgan pays his monthly rent of $500, the bookkeeper debits the rent account (expense) and credits the cash account (asset) by $500. The second basic system of bookkeeping, as mentioned previous, is called the single-entry method. This method refers to any system that does not include the complete results of every transaction. The most common type of single-entry bookkeeping involves records of cash, accounts receivable, and accounts payable. Task 1: Comprehension 1. How do bookkeeping procedures in a large organization differ from those in a small one? 2. What are the two basic methods of bookkeeping? 3. What is double-entry bookkeeping? How does it differ from single-entry bookkeeping? 4. What is a liability? Assets? What are some examples of liabilities? Of assets? What is the difference between asset and liability? 5. What does capital mean? What other terms are often used instead of capital? 6. What is an account? Give an example of an account. What abbreviation is commonly used for account? 7. What is a debit? What kinds of accounts do debiting increase? What abbreviation is commonly used for a debit? 8. What is a credit? What kind of accounts does crediting increase? How is it commonly abbreviated? 9. Describe the entries to be made by a bookkeeper for a furniture store when (a) a couch is sold for $300, and (b) when the janitor is paid his weekly salary of $175 Task 2: - Match the phrase on the left with the statement on the right 1. Liabilities a. all the money received by a company during a given period 2. Credit b. the amount of business done by a company over a year 3. Assets c. The left-hand column of an account 4. Creditors (GB) account payable (US) d. The right-hand column of accounts 5. Proprietorship e. That which is owed by an organization 6. Debit f. a company ‘s owners 7. Debtors ( GB) or accounts receivable g. (the value of) raw materials, work in progress, and finished products stored ready for sale 8. overheads(GB) or overhead(US) h. sums of money owed to suppliers for purchases made on credit 9. shareholders ( GB) stockholders(US) i. sums of money owed by customers for goods or services purchased on credit 10. stock ( GB) or inventory (US) j. Owners’ equity 11. turnover k. something of value to an organization 6 12. revenue or earnings or income l. The various expenses of operating a business that cannot be charged to any one product, process or department Task 3: What type of account-asset, liability, capital, income, or expense- do you think each of the following items should be listed under? 1. Office supplies in stock _________________________________ 2. Accrued taxes ___________________________________ 3. Typewriter rental ___________________________________ 4. Installment payments received ___________________________________ 5. Cash in bank ___________________________________ 6. Managerial fees __________________________________ 7. Payroll accrued _________________________________ 8. Cash received from client _________________________________ 9. Withdrawals _________________________________ 10. Telephone bill ________________________________ Task 4-Check the appropriate box-debit or credit- to show what the bookkeeper should do if he or she wants to . . . . 1. Increase the payroll account 2. Increase the notes payable account. 3. Increase the proprietorship account. 4. Increase the inventory (asset) account. 5. Increase the sales account. 6. Decrease the owners’ equity account 7. Decrease the furniture and fixtures account. 8. Decrease the telephone account. 9. Decrease the sales account. 10. Decrease the mortgage account After recording transactions, a trial balance is prepared to test the equality of the sum of the debit balances and credit balances. Preparing a trial balance requires five steps: 1. Determine the balance of each account in the ledger. 2. List the accounts with balances other than zero, with the debit balances in one column and the credit balances in another. 3. Add the debit balances. 4. Add the credit balances. 5. Compare the sum of the debit balances with the sum of the credit balances. If the accounts are not balanced, some error has been made which the bookkeeper must find and correct.However a trial balance is not absolute proof of accuracy. You may DR. CR 7 record a correct debit amount to the wrong account. This error will not cause a trial balance to be out of balance. PRACTICE A – Comprehension 1. What is a transaction? 2. What is a journal? general journal? Give some examples? In double-entry bookkeeping, what is entered in the journal? 3. What is a ledger? Subsidiary ledger? Give example? What is the relationship of a journal to a ledger? What does posting mean? 4. What does to foot mean? 5. What is a trial balance? B- Vocabulary practice: Match each of the items in the left-hand column with the appropriate item in the right-hand column A B 1. Purchase of office furniture a) A book of original entries 2. Fixed asset b) The test balance of the account 3. Post c) Totaling or adding column 4. Asset equal d) Acquisition of a fixed asset 5. Journal e) The books that lists all of the accounts 6. Trial balance f) To transfer entries from the journal to the ledger 7. Footing g) Liabilities plus owners’ 8. Ledger h) Buildings and machinery Special Terms Asset: anything of value or use to an organization. This includes cash, receivables, securities, property, and intangible, such as goodwill. Goodwill is the extra value (such as a company’s reputation and other intangibles) of a business not reflected in its financial statements. The word asset is frequently used in the plural. JERRY DOW, ATTORNEY Trial balance December 31,1998 Cash …………………… $ 650 Prepaid insurance………… 2,400 Office supplies…………… 120 Law library………………. 2,880 Office equipment………… 6,880 Accounts payable……… $ 760 Unearned legal fee………. 3,000 Jerry Dow, capital……… 9,000 Ferry Dow, withdrawals… 1,100 Legal fees earned………… 3,900 Rent expense…………… 1,000 Salaries expense…………. 1,400 Utilities expense………… 230 Totals …………………… $ 16,660 $ 16,660 8 Note receivable: a written promissory note to pay a sum of money at fixed date Account receivable: credit sales or sales on account (promises of future payment) Office supplies: stamps, stationery, paper, pencils and similar items Store supplies: wrapping paper, cartons, bags, string and similar items Equipment: physical assets such as desk, chair, office machine, etc. Liability: An obligation that is owed by an organization: debts to other organizations for merchandise or services; wages owed to employees; accrued (owed but not yet paid) taxes; and payments due on loans for mortgages. Note payable: liability in written promise Accounts payable: the amount owed on the basic of oral or implied promise to pay (purchase on credit) Capital: The investment in an organization or business by its owner or, owners. Other terms often used instead of capital are owners’ equity, often-abbreviated OE, and proprietorship. Account: A record of the changes and balances in the value of an individual item listed in the ledger of an organization. An example of an asset account is the company’s furniture and fixtures, usually listed as one item since it would be impractical to list every desk and chair. Each account, usually abbreviated a/c, frequently has its own page in the organization’s ledger. Income: the increase in assets through a result of the operation of the business Revenue: the formal language of income Expense: the increase in liabilities through an incurrence of the operation of the business Double entry: A method of bookkeeping in which the twofold effect of every entry is recorded, thus requires two entries to record each transaction. Single entry: Any bookkeeping system that does not include the complete results of each transaction. It is usually used by small companies or to keep track of specific accounts: for example, a checkbook, which only keeps a record of the cash balance. Debit: An amount entered on the left-hand side of an account. Asset and expense accounts are increased by debiting, that is, by entering amounts in the left-hand column. Debit is usually abbreviated DR. Credit: An amount entered on the right-hand side of an account. Liability, capital, and income accounts are increased by crediting, that is, by entering amounts in the right-hand column. Credit is usually abbreviated CR. Withdrawals account: the account used to record the transfers of assets from a business to its owner; also known as personal account or drawing account 9 FINANCIAL STATEMENTS Warm up: Do you know how many kinds of financial statements are there in a business? What are they? Who are interested in the financial statements? Give some examples What are the purpose of the financial statements? Reading: Financial statements are used to communicate accounting information and convey a concise picture of the results of operations and the financial position of a business. In other words, financial statements show you where a company’s money came from, where it went, and where it is now. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization’s financial position. Reported income and expenses are directly related to an organization’s financial performance. The financial statements of a business that are presented to its owners and other outside parties include four primary statements: the operations statement, the statement of changes in owners’ equity, statement of cash flows, and the balance sheet. Operations statement The operations statement is also referred to as a profit and loss statement or an income and expense statement. It shows how much profit and loss was generated by the operations of the company during the accounting period. In this case, operations may be considered as sales of goods or services. The profit from sales after the direct costs for producing the goods or services have been deducted is called gross income and gross profit. While income is produced, however, the business has certain other expenses-indirect costs related to the production of that income, such as general or selling expenses. The balance is left when these further expenses are deducted is called net income or net profit. In other word, three major captions involve in the income statement including: revenues (gross income), expenses, and net income. Revenues are earned from the sale of goods or services rendered by the entity to others for which the entity will receive (or has received) cash or something else of value. Expenses represent the dollar amount of resources used up by the entity during a period of time to earn revenues. The expense may be on credit so that cash or other resource is paid after the expense is incurred, such as paying the employees at the end of the month for services provided during the month. The expense may represent the cost of using equipment or buildings that were purchased in one accounting period for use in several accounting periods. This kind of expense is called depreciation expense. If the total expenses exceed the total revenues, a net loss is reported. 10 When revenues and expenses are equal for the period, the business has operated at break even. An operations Statement for a service business The statement of changes in owners’ equity The statement shows an increase or decrease in working capital for the year and how this change arose. In some cases, this statement will show the change in the cash position rather than the carriage in working capital. In other word, the statement shows what changes have occurred in regard to equity since the previous balance sheet was compiled. It shows, for example, the money the owners have put in (investment) or taken out (disinvestment) of the business, as well as profits and losses from its operation Balance sheet The balance sheet shows the firm’s condition on the last day of the accounting period. It shows what the business owns and what it owes to its creditors or its owners. This is expressed in the following accounting formula: Assets = liabilities + owners’ equity The purpose of the balance sheets is to report the financial position of a business at a particular point in time. Therefore, the balance sheet is frequently called the statement of financial position. . Marjorie Breck, CPA Income Statement Year Ended December 31, 20X Fee income $30,000 Expenses: Salaries $3,000 Rent 2,000 Telephone 300 Supplies 1,000 Car Rental 1,200 Interest expense 100 7,600 Pretax income: 22,400 Income tax expense: ( $22,400 x 10%) 2,240 Net income $20,160 JERRY DOW, ATTORNEY Statement of Changes in Owner’s Equity For month ended December, 31 1990 Jerry Dow, capital, November 30,1990 ………………………… $ - 0 - Plus: Investment by owner………………………………………… $9,000 Net income………………………………………………… 2,200 Total………………………………………………………………… 11,200 Less withdrawals by owner………… …………… 1,100 Jerry Dow, capital December 31,1990 ……………. $10,100 [...]... and the ability of the management The information contained in the balance sheet is restricted to that contained in the accounts Therefore, rather to say that it is a statement of the financial condition of a 11 business, it is more correct to say that it is a statement of the financial position of the accounting for that business The balance sheet is sometimes referred to as a statement of assets and... arithmetic-logical unit (ALU) These two units are made up of electronic circuits which millions of switches that can be in one of two states, either on or off The function of the control unit within the central processor is to transmit coordination control signal and commands The control unit is that portion of the computer that directs the sequence or step-by-step operations of the system, selects instructions and... normal use of your computer Here’s an example of a simple virus, the Lehigh virus The infector portion of Lehigh replicates by attaching a copy of itself to COMMAND.COM (an important part of DOS), enlarging it by about 1,000 bytes So let’s say you put a floppy containing COMMAND.COM into an infected PC at our office – that is , a PC that is running the Lehigh program The infector portion of Lehigh looks... dictionary contains a list of words with the preferred places to split it If one of these cases fits part of the word at the end of the lien, the word processor splits the word, adds a hyphen at the end and places the rest on the next line This happens extremely fast and gives text a more polished and professional look Mail merge applications are largely responsible for the explosion of ‘personalize’ mail... cable has been installed on a large scale, enabling vast amounts of data to be transmitted at a very high speed using light signals The impact of fiber optics will be considerably to reduce the price of network access Global communication and computer networks will become more and more a part of professional and personalizes as the prices of microcomputers and network access drops At the same time, distributed... reading HARDWARE and SOFTWARE Computer systems may be catalogued into two parts: The first part is hardware – the physical, electronic and electromechanical devices that are thought of and recognized as “computers” The second part is software – the program that controls and coordinates the activities of the computer hardware and that direct the processing of data The basic components of computer hardware... language of accounting in English – Sandra Costinett – Prentice Hall Regents, 1977 3- Vietnamese accounting system, Finance Publishing House – Hanoi 1996 14 TỔNG LIÊN ĐOÀN LAO ĐỘNG VIỆT NAM TRƯỜNG ĐẠI HỌC TÔN ĐỨC THẮNG PHÒNG THCN & DN READING FOR InformatIon technology Compiled by: ThS ĐỖ THỊ HOA QUYÊN Internal publishing - HCMC, June 2010- 15 Unit 1 Configuration Task 1: Warm up Label the elements of the... of the hardware in which calculations are performed and the internal memory in which other data and instructions are stored during the actual execution of programs The various peripherals, which include input and /or output devices, various secondary memory devices, and so on, are attached to the CPU Computer software can be divided into two very broad categories system software and applications software... parts of the processor 4- The ‘computer’ is the hardware 5- Software is the program on cards, tapes and disks 6- The processor is usually referred to as the computer 7- The word ‘computer’ means the processor and the internal memory 8- Systems software is usually referred to as programs 9- Complete hardware/software products are called turnkey systems 10- Computers process specially prepared items of. .. chip is an electronic device composed of silicon elements containing a set of integrated circuits 5- RAM, ROM, and secondary storage are the components of the main memory 6- Information cannot be processed by the microprocessor if it is not loaded into the main memory 7- ‘Permanent’ storage of information is provided by RAM (random access memory) 8- The speed of the microprocessor is measured in megahertz . of the operation of the business Revenue: the formal language of income Expense: the increase in liabilities through an incurrence of the operation of the business Double entry: A method of. equity, often-abbreviated OE, and proprietorship. Account: A record of the changes and balances in the value of an individual item listed in the ledger of an organization. An example of an asset. 1. Purchase of office furniture a) A book of original entries 2. Fixed asset b) The test balance of the account 3. Post c) Totaling or adding column 4. Asset equal d) Acquisition of a fixed