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    Nguyen Dinh Khanh

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    Dinhkhanh Nguyen
    The document defines key accounting concepts: 1) A general ledger contains all accounts tracking assets, liabilities, equity, revenues and expenses. A trial balance lists account names and balances to prove total debits equal credits. 2) The ongoing concern principle assumes a company will continue, allowing deferring expenses. Materiality focuses on important disclosures. Conservatism recognizes expenses early and revenues only when assured. 3) Revenue is recognized when earned, regardless of receipts. Financial statements present revenues, expenses, assets, liabilities and equities in a standard format, with revenues and expenses in the income statement and assets, liabilities and equities in the balance sheet.

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    Nguyen Dinh Khanh

    Uploaded by

    Dinhkhanh Nguyen
    69 views2 pages
    The document defines key accounting concepts: 1) A general ledger contains all accounts tracking assets, liabilities, equity, revenues and expenses. A trial balance lists account names and balances to prove total debits equal credits. 2) The ongoing concern principle assumes a company will continue, allowing deferring expenses. Materiality focuses on important disclosures. Conservatism recognizes expenses early and revenues only when assured. 3) Revenue is recognized when earned, regardless of receipts. Financial statements present revenues, expenses, assets, liabilities and equities in a standard format, with revenues and expenses in the income statement and assets, liabilities and equities in the balance sheet.

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    The document defines key accounting concepts: 1) A general ledger contains all accounts tracking assets, liabilities, equity, revenues and expenses. A trial balance lists account names and balances to prove total debits equal credits. 2) The ongoing concern principle assumes a company will continue, allowing deferring expenses. Materiality focuses on important disclosures. Conservatism recognizes expenses early and revenues only when assured. 3) Revenue is recognized when earned, regardless of receipts. Financial statements present revenues, expenses, assets, liabilities and equities in a standard format, with revenues and expenses in the income statement and assets, liabilities and equities in the balance sheet.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    69 views2 pages

    Nguyen Dinh Khanh

    Uploaded by

    Dinhkhanh Nguyen
    The document defines key accounting concepts: 1) A general ledger contains all accounts tracking assets, liabilities, equity, revenues and expenses. A trial balance lists account names and balances to prove total debits equal credits. 2) The ongoing concern principle assumes a company will continue, allowing deferring expenses. Materiality focuses on important disclosures. Conservatism recognizes expenses early and revenues only when assured. 3) Revenue is recognized when earned, regardless of receipts. Financial statements present revenues, expenses, assets, liabilities and equities in a standard format, with revenues and expenses in the income statement and assets, liabilities and equities in the balance sheet.

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    NGUYEN DINH KHANH

    Could you explain with your own words what are:

    1. A general ledger, a trial balance, a profit and loss account or income


    statement, a balance sheet?

    A general ledger is often defined as a book of accounts. Today a ledger is


    most likely an electronic record or file containing a group of accounts. For
    example, a company's general ledger is the record containing all of its
    asset, liability, owner equity, revenue, expense, gain, and loss accounts.
    Each of these accounts will contain the amounts that are pertinent to the
    account.

    A trial balance is a listing of the name and the balance of each of the
    accounts in the general ledger. The trial balance is not a financial
    statement. Rather, it is an internal report that documents which accounts
    have debit balances and which accounts have credit balances and proves
    that the total of the debit balances is equal to the total of the credit
    balances.

    2. The on-going concern, the materiality and conservatism principles?

    The on-going concern principle is the assumption that an entity will


    remain in business for the foreseeable future. Conversely, this means the
    entity will not be forced to halt operations and liquidate its assets in the
    near term at what may be very low fire-sale prices. By making this
    assumption, the accountant is justified in deferring the recognition of
    certain expenses until a later period, when the entity will presumably still
    be in business and using its assets in the most effective manner possible.

    The materiality concept is the principle in accounting that trivial matters


    are to be disregarded, and all important matters are to be disclosed. Items
    that are important enough to matter are material items.

    Conservatism principle is the general concept of recognizing expenses


    and liabilities as soon as possible when there is uncertainty about the
    outcome, but to only recognize revenues and assets when they are assured
    of being received. Thus, when given a choice between several outcomes
    where the probabilities of occurrence are equally likely, you should
    recognize that transaction resulting in the lower amount of profit, or at least
    the deferral of a profit. Similarly, if a choice of outcomes with similar
    probabilities of occurrence will impact the value of an asset, recognize the
    transaction resulting in a lower recorded asset valuation.
    3. Revenue vs. Receipts, FS categories vs. FSLI’s

    Revenue are recognized as soon as a product has been sold or a service has
    been performed, regardless of when the money is actually received.
    Receipts occur when cash is received

    Financial statements are used to report the profitability and financial


    stability of a company. To create a company’s financial statements,
    information on revenues, expenses, assets, liabilities and equities are
    presented in a predetermined format. Revenues and expenses appear on the
    income statement, and assets, liabilities and equities are presented on the
    balance sheet. As an equity item, retained earnings is placed on the right
    side of the balance sheet, under “Shareholders’ Equity.”

    In financial statement line items, items basically represent different


    incomes and expenses accumulated under one head. For example,
    Administration expenses is one line item, Selling expenses is separate
    category and must be presented in the next line or different line. Same goes
    for finance cost which is yet another line item. So, it simply means piece of
    information pertaining to a particular category reported in separate line.

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