ESP 3 Note
ESP 3 Note
ESP 3 Note
Write an essay of 300 words explaining the role of accounting in the business world
Accounting serves as the lifeblood of any successful business. It transcends mere number
crunching and delves into the very core of financial health, strategic decision-making, and
ultimately, a company's future. Its importance can be understood through its diverse roles, each
contributing significantly to a thriving organization.
Firstly, accounting provides transparency and accountability. By meticulously recording and
analyzing financial transactions, it paints a clear picture of the company's financial standing. This
transparency empowers key stakeholders, including investors, creditors, and management, to
make informed decisions based on accurate data. Financial reports, meticulously prepared by
accountants, serve as a crucial communication tool that fosters trust and confidence in the
organization.
Secondly, accounting functions as a powerful tool for financial forecasting and planning. By
analyzing past trends and current data, accountants can predict future performance, identify
potential risks and opportunities, and assist in developing realistic budgets. This foresight
enables businesses to allocate resources efficiently, adjust strategies proactively, and make
informed investments that propel them towards their goals.
Thirdly, accounting ensures compliance with various legal and regulatory requirements.
Every business operates within a framework of established rules and regulations. Accountants
play a vital role in ensuring adherence to these regulations, whether it be tax laws, accounting
standards, or industry-specific regulations. This compliance safeguards the business from legal
repercussions and potential financial penalties, fostering a stable and secure operating
environment.
Furthermore, accounting plays a pivotal role in evaluating business performance and
identifying areas for improvement. By analyzing financial data alongside operational metrics,
accountants can pinpoint areas of inefficiency, assess the effectiveness of marketing campaigns,
and evaluate the profitability of different product lines. This data-driven analysis empowers
businesses to make strategic adjustments, optimize operations, and maximize profitability.
Finally, accounting contributes to effective resource allocation and risk management. By
understanding the financial implications of various decisions, accountants can guide
management towards optimal resource utilization. Additionally, they can identify potential
financial risks, assess their impact, and develop proactive mitigation strategies. This risk
management ensures the long-term financial sustainability and stability of the business.
In conclusion, accounting is not merely a record-keeping function; it is the cornerstone of sound
business practices. Its multifaceted role in providing transparency, enabling strategic decision-
making, ensuring compliance, and driving performance optimization makes it an indispensable
tool for any organization seeking success in the competitive business world.
Write a composition expressing your own opinion on the topic:Why do people want to become
an accountant? Use the following plan:
Introduction
Paragraph 1: state topic and your opinion clearly
Main body
- Paragraph 2: viewpoint 1 and reason
- Paragraph 3: viewpoint 2 and reason
- Paragraph 4: give the opposing viewpoint and reasons
Conclusion
Final paragraph: restate your opinion, using different words
Useful words and phrases:
- To list viewpoints: To begin with, In the first place, Firstly, Secondly, Finally, etc.
- To add viewpoints: What is more, In addition, Furthermore, Besides, not only … but also,
etc.
- To present the other side of the argument: Some people argue that…, As opposed to the
above ideas, Contrary to what most people believe, etc.
- To express opinion: I believe, In my opinion, I think, In my view, I strongly believe, I feel
that, To my mind, It seems to me that, etc.
Essay:
Accounting often conjures images of meticulous spreadsheets and endless calculations, leading
to the assumption that only those with a natural affinity for numbers pursue this career. However,
the reasons why individuals choose to become accountants are far more nuanced and extend far
beyond a love for math.
Firstly, the intellectual challenge inherent in accounting draws many to the field.
Deciphering complex financial statements, identifying patterns in seemingly random data, and
unraveling intricate accounting principles provides a sense of intellectual fulfillment and
satisfaction for those who enjoy problem-solving and logical reasoning. The constant evolution
of accounting standards and the emergence of new technologies ensure that there is always
something new to learn and master, keeping the profession intellectually stimulating.
Secondly, the promise of career stability and security is a highly attractive factor for
aspiring accountants. Unlike many other fields, accounting boasts a robust job market with a
consistent demand for qualified professionals. This stability, coupled with the potential for
lucrative salaries and benefits, provides individuals with a sense of financial security and peace
of mind. This is especially appealing to those seeking a predictable and secure career path.
However, it is important to acknowledge that not everyone is drawn to the rigid structure
and meticulous nature of accounting. Some individuals may find the field too restrictive and
lacking in creativity, preferring careers that offer more flexibility and freedom. Additionally, the
perception of accountants as being introverted and conservative may deter those who thrive in
fast-paced, extroverted environments.
Despite these counterpoints, I believe that the unique combination of intellectual stimulation,
career stability, and societal impact is what truly sets the accounting profession apart. It offers a
fulfilling career path for those who enjoy problem-solving, value stability, and desire to make a
positive contribution to the world. Whether it's helping individuals manage their finances,
ensuring the financial health of businesses, or contributing to economic development,
accountants play a vital role in society.
Unit 4: BOOKKEEPING
1. Have you ever done any bookkeeping?
2. Why do you think bookkeepers are not as respected as chartered/certified accountants?
Bookkeeping is the recording of any financial transactions.
A lot of people look down on bookkeepers (accounts payable), and the act of bookkeeping is
often seen as one of the less challenging aspects of accountancy. However, without good
bookkeepers, accounts would find that they were faced with a huge amount of extra work.
Accountants create reports from the financial transactions, which were recorded, and file the
appropriate forms with the government. Bookkeepers provide the accountant with the source
information on which these reports are based.
Bookkeepers usually also deal with petty cash and authorised its use, VAT returns and personal
tax returns.
For accountants, effective writing skills can be as important as the ability to crunch the numbers.
Your professional development and competitive edge depend as much on your ability to
communicate what you’ve found as the findings and recommendations themselves.
Write an essay of 300 words about the key writing challenges accountants face when trying to
do this?
In a world obsessed with balance sheets and bottom lines, accountants are often seen as the silent
translators of financial realities. Yet, their value transcends mere number crunching. Effective
communication, particularly through writing, is the bridge that connects the intricate world of
figures to the decisions that shape businesses. But for accountants, this bridge can be fraught
with challenges.
The first hurdle lies in the jargon chasm. Accounting is a language unto itself, rife with
acronyms and technical terms that leave non-financial audiences adrift in a sea of confusion.
Imagine explaining depreciation schedules to a marketing team using only industry jargon. The
result? Glazed eyes and lost opportunities. Accountants must master the art of translating
complex concepts into plain language, using clear explanations and relatable examples to make
their findings accessible.
Then comes the delicate dance of balancing accuracy with readability. Accountants walk a
tightrope between precision and engagement. While adhering to professional standards and
avoiding ambiguity is essential, dense, technical prose can alienate readers. The key lies in
finding the sweet spot, ensuring the message is both technically sound and engaging, perhaps by
employing visuals, storytelling elements, or even humor to keep the audience hooked.
Another challenge arises from the diverse audience spectrum. Accountants write for a
multitude, from executives needing concise summaries to clients seeking detailed analyses. Each
audience has unique needs and varying levels of financial literacy. The ability to tailor writing
style, tone, and level of detail becomes paramount. Imagine explaining the same financial
statement to a CEO and a small-business owner – the approach would be worlds apart.
Furthermore, the very nature of financial information demands meticulous attention to
accuracy and completeness. Even a minor error can have significant consequences.
Accountants must be meticulous fact-checkers, double-checking calculations, and verifying
sources. This meticulousness extends to adhering to formatting and style guidelines, ensuring
clarity and professionalism in presentation.
Finally, the accounting landscape is constantly evolving, with new regulations, technologies, and
communication tools emerging regularly. Accountants must stay abreast of these changes and
adapt their writing styles and approaches accordingly. Failure to do so can leave them
communicating in a bygone era, their message lost in the winds of change.
In conclusion, the writing challenges faced by accountants are as diverse as the numbers they
wrangle. Yet, by mastering the art of clear communication, accountants can transform from silent
translators to trusted advisors, adding immense value to their organizations and navigating the
ever-changing world with confidence. The next time you see an accountant, remember – they're
not just number-crunchers; they're storytellers, educators, and influencers, shaping the future one
articulate word at a time.
Loss of flexibility: Different countries have different needs and priorities. Standardized
accounting principles might not be appropriate for all countries.
Increased complexity: Developing and implementing a single set of accounting
standards would be a complex and time-consuming process.
Cost of implementation: Small businesses and developing countries might not be able to
afford to comply with standardized accounting principles.
Cultural differences: Accounting practices can be influenced by cultural factors.
Standardized accounting principles might not be sensitive to these differences.
3. How could GAAP be made simpler
4. Is it necessary to have two systems for accounting for tax? Why/why not?
Difference between tax accounting and GAAP
Location
Depreciation Modified Accelerated Cost Recovery Straight line & reducing balance
System, or MACRS, which uses depreciation
declining percentages defined by the
IRS. In addition, the IRS allows
taxpayers to expense a fixed asset in
the year of the purchase.
Many small and medium-sized enterprises (SMEs) use the tax accounting system over GAAP.
- Tax accounting is significantly simpler than GAAP, as instead of having to record every
single transaction, only those which impact the tax situation are taken into consideration.
- GAAP is expensive. Many firms use professional accountants to prepare tax returns and
financial statements. When the basis of the taxed differs from the financial statements,
more time is spent on the process, resulting in higher fees.
- Tax accounting (regulations) use everyday language and easily understandable examples
as they are not just meant for experienced accountants but also business owners.
In the present years, there has been raised the debate on the conversion of GAAP (Generally
Accepted Accounting Principles) to IFRS (International Financial Reporting Standards).
Companies are using a system of inconsistent accounting standards for their financial reporting.
Compare and contrast GAAP and IFRS
- This statement summarizes the company's revenues and expenses over a specific period,
usually a quarter or a year.
- It shows how much money the company has earned from its operations, how much it has
spent on expenses, and its net income (profit or loss).
- Key components of the income statement include:
o Revenue: Income earned from selling goods or services.
o Cost of Goods Sold (COGS): Direct costs associated with producing the goods or
services.
o Operating Expenses: Indirect expenses incurred to run the business, such as rent,
salaries, and marketing.
o Net Income: Profit or loss remaining after all expenses have been deducted from
revenue.
Cash Flow Statement:
- This statement summarizes the company's cash inflows and outflows over a specific
period.
- It shows how much cash the company has generated from its operating, investing, and
financing activities.
- The cash flow statement helps stakeholders understand the company's ability to generate
cash and meet its financial obligations.
In your experience, what do people think of the work done by accountants? What do they
generally think about financial statements? How can accountants make the numbers they
produce easier to understand?
Perceptions of accountants:
Positive:
Reliable and trustworthy: Accountants are often seen as individuals who handle
finances with accuracy and integrity, making them valuable assets to businesses and
individuals.
Good at handling finances: Their expertise in financial matters inspires confidence in
their ability to manage budgets, track expenses, and ensure financial compliance.
Essential for businesses: From startups to large corporations, businesses rely on
accountants for bookkeeping, tax preparation, and financial analysis, making them crucial
for smooth operations.
Negative:
Seen as boring or nerdy: The stereotype of accountants being obsessed with numbers
and paperwork can portray them as lacking excitement or creativity.
Jargon-heavy and difficult to understand: Financial terminology can be complex and
opaque to those without accounting knowledge, creating a communication barrier.
Not always seen as creative or innovative: Accounting is often perceived as a rule-
based field, potentially downplaying the problem-solving and analytical skills involved.
Perceptions of financial statements:
Positive:
Use plain language and avoid jargon: Translating complex financial terms into simpler
language can make information more accessible to a wider audience.
Provide clear explanations and context: Supplementing numbers with explanations and
context can help users understand the underlying meaning and significance of the data.
Use visuals and charts: Representing data through charts, graphs, and infographics can
make complex information more visually appealing and easier to grasp.
Engage in storytelling: Framing financial information through stories or relatable
scenarios can make it more engaging and memorable for non-financial audiences.
Offer educational resources and workshops: Providing resources like explainer videos,
blog posts, or even financial literacy workshops can empower individuals to better
understand financial statements and make informed decisions.
By making conscious efforts to communicate effectively and simplify complex financial
information, accountants can bridge the gap between the world of numbers and the general
public, fostering trust and understanding.
(tra mạng)
- Balance check: It ensures everything balances, like a double-entry bookkeeping system
where every debit has a matching credit. This verifies the accuracy of transactions and
prevents errors.
- Financial snapshot: It gives a quick picture of the company's financial health. Assets
show what it owns, liabilities what it owes, and equity what's left for owners.
- Decision-making tool: By understanding the relationships between assets, liabilities, and
equity, stakeholders can make informed decisions about investments, loans, and business
strategies.
- Transparency and trust: It promotes transparency in financial reporting, building trust
with investors, creditors, and other stakeholders.
5. What are the typical assets and liabilities connected to a SME?
Assets:
Current assets:
- Cash and equivalents: Petty cash, bank accounts, short-term investments.
- Accounts receivable: Money owed by customers for goods or services sold on credit.
- Inventory: Raw materials, work-in-progress, finished goods held for sale.
- Prepaid expenses: Insurance premiums, rent, or utilities paid in advance.
Non-current assets:
- Property, plant, and equipment (PP&E): Buildings, machinery, vehicles, furniture,
computers, etc.
- Intangible assets: Intellectual property (patents, trademarks, copyrights), goodwill, brand
reputation, customer relationships.
Liabilities:
Current liabilities:
- Accounts payable: Money owed to suppliers for goods or services purchased on credit.
- Short-term loans: Bank overdrafts, lines of credit, payable within a year.
- Accrued expenses: Expenses incurred but not yet paid, such as salaries or utilities.
Non-current liabilities:
- Long-term loans: Mortgages, bank loans, equipment loans, payable over multiple years.
- Deferred tax liabilities: Taxes payable in future years based on current accounting
practices.
Study the balance sheet sample of any Vietnamese company and translate the main items of it.
Annual Report of Vinamilk 2022
Assets:
Total Assets: VND 49,652,828 million (approximately USD 2.13 billion)
Liabilities:
Total Liabilities: VND 16,262,813 million (33% of total liabilities and equity)
Equity:
Total Equity: VND 33,390,015 million (67% of total liabilities and equity)
The Units of Production Depreciation method is most suitable for assets whose wear and tear or
obsolescence is directly related to their level of production or usage. This method ties the
depreciation expense to the actual output or usage of the asset, making it an appropriate choice
for assets where the correlation between usage and depreciation is significant. Here are types of
assets that are best depreciated using the Units of Production method:
Manufacturing Equipment:
Machinery used in manufacturing processes, such as production lines, presses, and industrial
equipment, may experience wear and tear directly proportional to the number of units produced.
Units of Production Depreciation allows for a more accurate matching of depreciation with the
level of production.
Fleet Vehicles:
Vehicles used for delivery services, transportation, or any other operations where mileage or
hours of operation correlate with wear and tear are suitable for Units of Production Depreciation.
This is especially relevant for businesses with a fleet of vehicles where some may be used more
intensively than others.
4. (Bonus) Problem with depreciation and amortization:
The total cost the asset is paid full in the first year but is accounted for over the useful life of the
asset. Therefore the company’s actual current cash flow situation can be misrepresented in the
accounts during this time.
5. (Bonus) How can intangible assets be amortized?
- Assets with infinite life cannot be amortized
- Assets with finite life: using straight line method until net book value reaches zero at the
end of its useful life.
Describe the depreciation method companies can use on their assets and the reasons for
choosing that method.
Companies have several depreciation methods to choose from when allocating the cost of assets
over their useful lives. The selection of a particular depreciation method depends on factors such
as the nature of the asset, its usage pattern, and financial reporting requirements. Here are some
common depreciation methods used by companies:
Straight-Line Depreciation:
Method: Under the straight-line method, an equal amount of depreciation is charged each year
over the asset's useful life.
Reasons for Choosing:
- Simplicity: Straight-line depreciation is straightforward and easy to calculate.
- Uniform Expense: It provides a consistent and predictable expense, making it suitable for
assets that offer a relatively constant benefit over time.
Units of Production Depreciation:
Method: Depreciation is based on the actual usage or production of the asset. The cost per unit of
production is multiplied by the actual units produced or hours used.
Reasons for Choosing:
- Variable Usage: Ideal for assets whose usage varies significantly over time.
- Accurate Matching: Aligns depreciation with the actual level of asset utilization.
Sum-of-the-Years-Digits Method:
Method: The sum-of-the-years-digits method involves a formula that considers the sum of the
digits of the asset's useful life. The depreciation expense is then calculated based on the
remaining digits each year.
Reasons for Choosing:
- Accelerated Depreciation: It accelerates depreciation relative to the straight-line method.
- Balances Acceleration: Provides a balance between straight-line and double-declining
balance methods.
Financial Due Diligence: Conduct a detailed financial due diligence to assess the
potential impact of the aircraft purchase on liquidity, leverage, and profitability.
Risk Mitigation Strategy: Develop a robust risk management strategy that includes fuel
price hedging, compliance with aviation regulations, and scenario planning for economic
uncertainties.
Financial Modeling: Create detailed financial models to project the return on
investment, factoring in operational costs, revenue projections, and financing terms for
the new aircraft.
Stakeholder Communication: Clearly communicate the expansion plan to stakeholders,
including investors and lenders, highlighting the anticipated benefits and risk mitigation
measures.
In conclusion, while expansion offers growth opportunities, a meticulous financial analysis and
risk management strategy are crucial for informed decision-making. We recommend proceeding
with a thorough evaluation of the proposed aircraft purchase, ensuring alignment with your
strategic objectives and financial capacity.
The new head of your financial department wants to know about the taxation system in your
country. He also heard that the taxation system is closely connected with the financial
reporting requirements. Write a report to him explaining the major points and referring to the
relevant laws. Write 150-200 words.
To: New Head of Financial Department
From: [Your Name]
Date: December 20, 2023
Subject: Overview of Vietnamese Taxation System and Financial Reporting
As requested, I have prepared this report outlining the key aspects of the Vietnamese taxation
system and its connection to financial reporting requirements.
Major Taxes and Rates:
Corporate Income Tax (CIT): 20% standard rate, with preferential rates for specific
sectors (e.g., 10% for socialized projects). (Law on Corporate Income Tax 2014)
Personal Income Tax (PIT): Progressive rates from 5% to 35%, depending on income
level. Non-residents face a flat 20% rate on employment income. (Law on Personal
Income Tax 2019)
Value-Added Tax (VAT): Generally 10%, with reduced rates of 5% and 0% for specific
goods and services. (Law on Value-Added Tax 2017)
Financial Reporting Requirements:
Taxable income must be calculated in accordance with accounting standards issued by the
Ministry of Finance, which closely align with International Financial Reporting
Standards (IFRS). (Law on Accounting 2015)
Companies must submit financial statements audited by independent auditors within nine
months of the fiscal year end. (Law on Auditing 2017)
Tax authorities utilize financial reports to verify tax returns and may request additional
information or documents for accurate tax assessment.
Unit 13: TAXES (part Two)
1. What is the difference between retail and wholesale
- Retail: Sells goods directly to individual consumers in smaller quantities at higher per-
unit prices, often with a focus on presentation and customer experience.
- Wholesale: Sells goods in larger quantities to businesses, retailers, or distributors at lower
per-unit prices, with a focus on bulk transactions and efficiency.
2. The vocabulary term “per annum” is borrowed from another language and not really an
English term. What is the story behind this?
3. Can you think of any tax breaks that the government in your country has introduced
recently?
Corporate Income Tax (CIT) Incentives:
- Preferential tax rates: Reduced tax rates of 10%, 15%, or 17% apply to specific industries
and projects, lasting for 10-15 years or even the project's entire lifetime.
- Tax holidays: Complete exemption from CIT for 4-6 years, followed by 50% reduction
for several subsequent years, is available for qualified projects.
- Special investment incentives: Decision 29/2021 outlines special incentives for R&D and
large-scale projects. The most attractive package includes a 5% CIT rate for 37 years, 6
years of tax exemption, and a 50% CIT reduction for 13 years.
Value-Added Tax (VAT) Incentives:
- Zero VAT rate: Applies to certain exports, basic necessities like food and medicine, and
educational services.
- Reduced VAT rate: 5% rate applies to specific goods and services like agricultural
products, fertilizers, and tourism services.
- VAT refunds: Exporters and businesses investing in priority sectors can claim VAT
refunds for imported goods and services.
4. Where can a potential investor go for advice
5. What tax advice would you give to an individual who comes to live and work in your
country?
- Determine your tax residency status: After 183 days in Vietnam or 12 consecutive
months, you'll be considered a tax resident and subject to tax on your worldwide income.
Plan your finances accordingly.
- Research tax treaties: Check if your home country has a tax treaty with Vietnam to avoid
double taxation.
- Consult a tax advisor: Seek professional advice on your specific situation and potential
tax liabilities, especially if you have complex income sources.
- Register for a tax code: Upon arrival, obtain a tax code from the local tax office. You'll
need this for official transactions and tax filing.
Write a short report (10-12 sentences). Find information about taxation in Vietnam. Compare
taxation of your country with taxation in the USA and the UK. Do these systems have much in
common? Is there any differences?
Taxation systems play a pivotal role in shaping the economic landscapes of countries worldwide.
This report provides a concise comparison of the taxation systems in Vietnam, the USA, and the
UK, highlighting both commonalities and differences.
Taxation in Vietnam:
Vietnam operates under a progressive income tax system, with individual tax rates ranging from
5% to 35%. Corporate income tax is generally set at a flat rate of 20%, although certain sectors
may enjoy preferential rates. Value-added tax (VAT) is a key component, set at 10%, with
reduced rates for essential goods. Vietnam also imposes special consumption tax on items such
as alcohol and tobacco.
Taxation in the USA:
The United States employs a progressive income tax system with rates ranging from 10% to
37%. Corporate income tax rates vary from 15% to 21%. Additionally, the U.S. has a complex
system of state and local taxes. Sales tax rates differ by state, and some states levy personal
income tax.
Taxation in the UK:
The United Kingdom utilizes a progressive income tax system with rates ranging from 20% to
45%. Corporate tax is set at a standard rate of 19%, but certain small businesses may benefit
from reduced rates. VAT is a significant component, set at 20%, with reduced rates for specific
goods and services.
Commonalities and Differences:
- Commonalities: All three countries rely on income tax, corporate tax, and value-added
tax as primary revenue sources. They also incorporate progressive tax structures, meaning
higher earners pay a higher percentage of their income in taxes.
- Differences: Tax rates, especially in terms of income tax and corporate tax, vary
significantly among the three countries. Additionally, the specific regulations, deductions,
and exemptions differ, influencing the effective tax burden on individuals and businesses.
While Vietnam, the USA, and the UK share common elements in their taxation systems,
including reliance on income and corporate taxes, there are notable differences in tax rates and
structures. Understanding these distinctions is crucial for businesses and individuals navigating
the complexities of taxation in each respective country.
What reponsibilities do auditors have in their relationship with their clients? How is this
regulated in your country or in a country you know? Is the regulation strong enough?
Auditors have a range of responsibilities in their relationship with clients, and these
responsibilities are crucial for maintaining the integrity and reliability of financial reporting. The
responsibilities of auditors can be broadly categorized into several key areas:
Independence and Objectivity:
- Responsibility: Auditors must maintain independence from the client to ensure an
unbiased and impartial assessment of the financial statements. This includes avoiding
conflicts of interest and not being unduly influenced by client management.
- Actions: Auditors are expected to assess and disclose any financial or personal
relationships that could compromise their independence. They should remain objective
and impartial throughout the audit process.
Professional Competence and Due Care:
- Responsibility: Auditors are required to possess the necessary knowledge, skills, and
expertise to perform the audit effectively. Due care involves conducting the audit with
diligence, thoroughness, and professional skepticism.
- Actions: Auditors continually update their knowledge, maintain relevant professional
certifications, and apply professional judgment to ensure the quality and accuracy of their
work.
Confidentiality:
- Responsibility: Auditors must maintain the confidentiality of client information obtained
during the audit. This includes financial data, internal processes, and any sensitive
information related to the client's operations.
- Actions: Auditors are bound by professional standards and legal obligations to keep client
information confidential. They should not disclose any information without the client's
consent, unless required by law.
Communication with Management and Governance:
- Responsibility: Auditors have a responsibility to communicate effectively with the client's
management and, where applicable, with governance bodies. Clear communication
ensures a mutual understanding of audit expectations and findings.
- Actions: Auditors discuss audit planning, scope, and results with management. They also
communicate any significant issues or findings to the audit committee or board of
directors.
Compliance with Ethical Standards: