DOCUMENT RESUME
ED 364 777 CE 065 427
TITLE Accounting Systems 40S. Interim Guide.INSTITUTION Manitoba Dept. of Education and Training,
Winnipeg.REPORT NO ISBN-0-7711-1143-6PUB DATE 93
NOTE 75p.; For a related guide, see CE 065 426.PUB TYPE Guides Classroom Use Teaching Guides (For
Teacher) (052)
EDRS PRICE MF01/PC03 Plus Postage.DESCRIPTORS *Accounting; Bookkeeping; *Business Education;
Classroom Techniques; *Computer Software; CourseContent; Educational Resources; Employment Potential;Foreign Countries; High Schools; Job Skills; LearningActivities; Lesson Plans; Student Evaluation;Teaching Methods; Units of Study
IDENTIFIERS Manitoba
ABSTRACTThis curriculum guide was developed for a
senior-level accounting course for students in high schools inManitoba. The course is designed for students who plan to engage inan entry-level accounting position or self-employment aftergraduation and for students who plan postsecondary study inaccounting and business. The course builds on and reinforces theconcepts, skills, and understandings mastered in introductoryaccounting (Accounting Principles 30G). Generally Accepted AccountingPrinciples (GAAP) are discUssed and analyzed as they are currentlyapplied to small and larger businesses. The guide includes thefollowing components: (1) an employability skills profile; (2)recommended program patterns for business education courses; (3)rationale for the program; (4) evaluation methods; (5) timeallotments; (6) goals and objectives; and (7) six units of study. Theunits cover these topics: review of accounting principles, synopticjournal, adjustments and closing entries, inventory systems,application packages, and options. Units consist of a goal,objectives, and teaching methods keyed to the objectives. Abibliography listing 18 texts, 11 computer programs, and a source formaterials completes the guide. (KC)
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Reproductions supplied by EDRS are the best that can be made *
from the original document.***********************************************************************
1993
Accounting Systems 40S
, .
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U.S DEPARTMENT OF EDUCATION(Nice of Educctione1Reseerch and Irnprovernenl
EDUCATIONAL RESOURCES INFORMATIONCENTER (ERICI
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TO THE EDUCATIONAL RESOURCESINFORMATION CENTER (ERIC)
Interim Guide
1993
Accounting Systems 40S
Interim Guide
atfl0
ManitobaEducationand Training ! )
ISBN 0-7711-1143-6
4
ACCOUNTING SYSTEMS 40S
This guide replaces, in part, the Accounting 202, 302 and Data Processing 202, 302guides of 1982, and becomes effective in September, 1993. The contents have beendeveloped as part of the review of the Business Education cluster of courses whichare affected by computer technology.
ACKNOWLEDGEMENTS
Members of the Business Education Steering Committee are
Gayle Halliwell (Chair)Lord Selkirk School Division No. 11
John ProudfootSt. James-Assiniboia School Division No. 2
Iris OverbyInterlake School Division No. 21
Lily BudzakWinnipeg School Division No. 1
Bill VandurmeSt. Vital School Division No. 6
Ben ZajacRiver East School Division No. 9
Roy Watt, ConsultantGoewan Personnel Services
Kathy Brough, Office Systems ManagerManitoba Telephone System
Edith LyonManitoba Business Education Teachers' Association
Ken HardyRed River Community College
ACCOUNTING SYSTEMS
Members of the Accounting Working Party are
Andre Favreau (Writer)Fort Garry School Division No. 5
Dawn HicksSt. James-Assiniboia School Division No. 2
Sharon WilsonSeven Oaks School Division No. 10
Ken HardyRed River Community College
Tony Boron, CGABoeing Canada
Consultants to committees are
Marcel Daeninck (until 1992)Business Education ConsultantManitoba Education and Training
Tom PrinsBusiness Education ConsultantManitoba Education and Training
H. Marshall DraperCoordinator, Technology and ScienceManitoba Education and Training
ACCOUNTING SYSTEMS 6 ii
CONTENTS
Employability Skills Profile 1
Recommended Program Patterns 2
Rationale 3
Evaluation 4
Time Allotments 5
Goals and Objectives 6
Accounting Systems 40S 13
Review of Accounting Principles 15Synoptic Journal 16Adjustments and Closing Entries 18Inventory Systems 25Application Packages 31Options 41
Bibliography 65
ACCOUNTING SYSTEMS iii
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9
RECOMMENDED PROGRAM PATTERNS
This flowchart is meant to provide schools with a recommended sequence of studiesfor the new Business Education courses. While the prerequisite to any course is at thediscretion of the school, the skill development as shown in the flowchart isrecommended. However, it is left to schools to schedule courses and to advisestudents based upon the educational readiness of individual students.
Exploration of General Business 20G125G*
Business OG/15G* Retailing 205
Business Principles 30G
Shorthand andTranscription 30SPromotions 30SRelations in Business 30S
Economics 40GLaw 40GShorthand andTranscription 40SManagement 40SMarketing Practicum 40S
Introductory AutomtedKeyboarding Word Office Seminar
15G Processing 40S in BusineFs
30G 40S
AdvancedKeyboarding25G Advanced
Word Processing4SS
ComputerApplications20G
* Under development
SoftwareApplications30S
10
AccountingPrinciples
AccountingSystems
40S
ACCOUNTING SYSTEMS 2
RATIONALE
Accounting Systems 40S is designed for those who plan to engage in an entry-levelaccounting or business-related position of self-employment after Senior 4 graduationand for the student who plans post secondary study in accounting and/or business.Students proceeding with their search for career roles and aptitudes, will also findAccounting Systems 40S appropriate and useful.
It is recommended that students meet all levels of objectives of Accounting Principles30G prior to enroiing in Accounting Systems 40S. It is also assumed that students willnave a basic knowledge of computer operations and software applications. Many willhave completed the course, Software Applications 30S.
Accounting Systems 40S builds on and reinforces the concepts, skills, andunderstandings mastered in Accounting Principles 30G. The introductory principlesand practices are reviewed, developed further, and applied. Generally AcceptedAccounting Principles (GAAP) are discussed and analyzed as they are currently appliedto small and larger businesses.
Initially, the synoptic or combination journal is the medium for recording transactions.The GAAP relating to adjusting and closing entries are practised and discussed forboth service and merchandising businesses.
Important advanced accounting topics included are: systems of accounting forinventory cost-flows and evaluation, inventory systems, inventory control, andinventory management.
Several optional accounting units which teacher and students may wish to study are:budgeting, manufacturing accounting, personal income tax, partnership accounting,corporation accounting, and statement analysis. The choice will depend upon theneeds and interests of the students enroled in the course. Electronic spreadsheetsand other software are encouraged for use in these optional units, where possible.
Because of the continuing increase in the use of computers in accounting, computeraccounting applications are important in Accounting Systems 40S. Students will usespreadsheets, general ledger accounting software, accounts receivable and accountspayable packages, a computerized inventory system, and record and maintain acomputerized payroll system. The software may be a single, integrated package ora series of different software systems.
1ACCOUNTING SYSTEMS 3
Students will benefit from both the extension of their skills and knowledge inaccounting, and from their experience with the computer applications. The course is
therefore practical for students looking toward immediate employment or postsecondary studies.
EVALUATION
Accounting Systems 40S stresses the application and further development of manyof the accounting principles and concepts learned in the introductory accountingcourse. Topics such as adjustments, accruals, and deferrals are developed further.Inventory accounting is introduced. The optional topics ai id the main unit, applicationpackages, have not been addressed in previous courses. Consequently, a combinationof various testing and evaluation devices are required for the different levels and typesof learning.
Evaluation of higher level learning in accounting often requires unique approaches.It is recommended that evaluation is based on a combination of classroom tests,accounting projects and simulations, case studies, and home assignments designatedas bases for summative evaluation.
Ability to analyze accounting transactions and apply accounting skills and knowledgein computer software packages may be judged by traditional testing methods, teacherobservations of student performance, checklists, and student completion of assignedprojects and problems.
Guidelines for Evaluation
Unit 1 Review of Accounting Principles 5%
Unit 2 Synoptic Journal35%
Unit 3 Adjustments and Closing Entries
Unit 4 Inventory Systems 55%
Unit 5 Application Packages 5%
Unit 6 Options
100%
ACCOUNTING SYSTEMS 4
TIME ALLOTMENTS
ACCOUNTING SYSTEMS 40S is a full credit course that has been developed andapproved by Manitoba Education and Training, for vocational use. It represent 110-120 hours of instruction.
The following guidelines for time allotments are recommended:
UNITS HOURS
1. Review of accounting principles 52. Synoptic journal }3. Adjustments and closing entries . } 40 454. Inventory systems }5. Application packages 60 656. Options 5
110 120
GOALS AND OBJECTIVES
Goals
1. To have students review basic accounting principles.2. To introduce students to the synoptic journal.3. To teach students the procedure for adjustments and closing entries.4. To teach students the principles of inventory systems.5. To provide students with computer skills to complete the accounting cycle of a
merchandising business.6. To provide students with advanced skills in accounting.
Objectives
UNIT 1: REVIEW OF ACCOUNTING PRINCIPLES
Basic Concepts of the Accounting Cycle
Students should be able to
demonstrate an understanding of the Accounting Principles objectivesreview or complete the objectives in Accounting Principles for Payroll Accounting
ACCOUNTING SYSTEMS 5
UNIT 2: SYNOPTIC JOURNAL
Combination Journal
Students should be able to
identify the need for the combination journalrecord entries in a combination journalforward totals from one page to anothertotal and rule the combination journalprove the combination journalpost those columns that affect general ledger accountsutilize error location techniques to locate errors in the combination/synoptic journalevaluate the combination journal system in terms of advantages anddisadvantages
UNIT 3: ADJUSTMENTS AND CLOSING ENTRIES
Adjusting Entries
Students should be able to
explain the need for and the purpose of adjusting entries for accrued expenseprepare adjustmentscalculate adjustments
Worksheet
Students should be able to
explain the need for and the purpose of the 10 column worksheet/spreadsheetsprepare a worksheet with adjustments
Financial Statements
Students should be able to
prepare the financial statementsrecord the adjusting and closing entriesprepare the post closing trial balance
ACCOUNTING SYSTEMS 1 4 6
4) Reversing Entries
Students should be able to
identify the need for reversing entries for accrued revenue and accrued expensesin the next accounting periodrecord the reversing entries for accrued revenue and accrued expensespost the reversing entries for the accrued revenue and accrued expenses to thegeneral ledger
UNIT 4: INVENTORY SYSTEMS
Inventory Control
Students should be able to
identify the need for and the purpose of inventory controlidentify the two basic types of inventory systemsdescribe the types of inventory systemsanalyze and record transactions for both inventory systemscompare the advantages and disadvantages of the types of inventory systems
Inventory Valuation
Students should be able to
identify the principles of inventory valuationidentify the methods of inventory valuationcalculate the value of inventory using the different methods of inventory valuationcompare the different principles of inventory valuationidentify how inventory costs are presented in finar.cia! statements
UNIT 5: APPLICATION PACKAGES
General Ledger
Students should be abie to
explain the need for and the advantages of a computerized general ledger systemexplain the components of the computerized general ledger systemload the general ledger option in the integrated accounting packageprint a chart of accounts to be used in the general ledger option for the accountingperiodedit or make additions or subtractions to the chart of accounts and reprint
ACCOUNTING SYSTEMS 7
record general ledger transactions on an input form if necessaryenter the general ledger transactions into the computeredit and correct the general ledger transactionspost the transactionsprint appropriate general ledger reports including general journal and general ledgerreportsprint a trial balanceprepare the adjusting entries that are appropriate and record them on the correctformsenter and post all adjusting entries to the appropriate general ledger accountsprint appropriate financial statementsenter the appropriate entries to perform the year-end closingprint the final general ledger reports
Accounts Receivable
Students should be able to
explain the need for and the advantages of using a computerized accountsreceivable systemexplain the components of the accounts receivable systemload the accounts receivable option in the integrated accounting packagecreate a customer's file to be used as your accounts receivable subsidiary ledgerfor the accounting periodlist the new customer file to check for accuracyedit and add new customers to the file when necessaryenter new sales invoices into the appropriate customer accounts using properinput formsenter customer payments into the appropriate customer accountsedit accounts receivable transactions entered erroneouslypost the transactions involving the accounts receivable option using the computerexplain what accounts are automatically updated with each accounts receivabletransactionexplain the relationship between the accounts receivable subsidiary ledger and thegeneral ledgerprint the accounts receivable reports involving customer accounts and accountsreceivable summary
ACCOUNTING SYSTEMS 8
10
4)
Accounts Payable
Students should be able to
explain the need for and the advantage of a computerized accounts payablesystemexplain the components of the computerized accounts payable ystemlist the vendor file to check for accuracyedit and add new vendors to the vendor file as is necessaryinput transactions that involve the vendors in the vendor file during the accountingperiodedit purchase entries made during the accounting periodrecord payments to vendors transacted during the accounting periodexplain what accounts are automatically updated with each of the transactionsmadeuse the accounts payable option to post the transactionsexplain the relationship that exists between the accounts payable SubsidiaryLedger and the general ledgerprint the reports that are required within the accounts payable option of theintegrated package
Inventory
Students should be able to
explain the need for and the advantages of a computerized inventory managementsystemexplain the components of the computerized inventory management systemload the inventory management option in the integrated accounting packagecreate an inventory file with items related to the specific business that will beused in the accounting periodrecord inventory transactions on any input forms used in the integrated accountingpackageenter the inventory transactions including additions and subtractions to theinventory items into the computeredit any inventory transactions entered in errorpost the transactions using the inventory management optionexplain the relationship between inventory and accounts receivable and accountspayableprint the various inventory reports available within the inventory managementoption
ACCOUNTING SYSTEMS 9
Payroll
Students should be able to
explain the need for and the advantages of a computerized payroll systemexplain the components of the computerized payroll systemload the Payroll option in the integrated accounting packagecreate a payroll employee fileedit, add and delete employees in the employee fileprint a list of the employeesrecord payroll transactions on input forms if used with the integrated packageenter the payroll transactions into the computeredit any payroll transactions that may have been entered in errorpost the payroll transactionsprint the reports that may be available with the integrated package including apayroll register, cheques, monthly report and annual T-4 statementsexplain what principles are involved in the payroll function
UNIT 6: OPTIONS
Budgeting Spreadsheets
Students should be able to
explain the purpose of and the need for budgetsidentify types of budgetsidentify and discuss the sources of information in preparing budgetsprepare budgetscompare budget figures to actual operating figuresanalyze results of financial operationsexplain the advantages of having a computerized spreadsheet for budgetingpurposesdemonstrate the use of a specific software package:
load up and exit the computerized spreadsheet softwareuse the basic editing operations to set up labels and numeric data, edit, anderase cellsinsert and delete columns and rowschange column Widthsdevelop formulas to perform the basic calculation operationschange the formats of numeric cells and the justification of labelsmove and copy single cells to a range of cellsset up the print range and print spreadsheet cells and the cell formulasuse the file command to save, list and retrieve spreadsheetsmove and copy blocks of cells
ACCOUNTING SYSTEMS ! 8 10
create a budget using specific informationanalyze the budget comparing the figures to actualalter the data given specific "what if" scenarioscalculate variances from actua!, using the spreadsheetcalculate percentages for the variancesanalyze the effectiveness of having a computerized budget versus the manualbudgets prepared earlier
Manufacturing Accounting
Students should be able to
identify the elements of manufacturing costsdescribe the elements of manufacturing costsillustrate and describe the flow of elements through the manufacturing cycleidentify and explain the two systems of costingidentify the need for and the purpose of cost accountingapply costs to work flowidentify and explain the methods of applying overhead costsapply overhead costs to work flowprepare, post and explain the journal entries to match flow with work flowprepare trial balances and financial statements for manufacturing business
Personal Income Tax
Students should be able to
explain the need for and the purpose of preparing a personal income tax returnidentify and define the components of a personal income tax returnprepare personal income tax returns from given informationexplain the need for and the importance of preparing income tax returns for theowners of unincorporated businessesidentify and define the components of income tax returns for the owners ofunincorporated businessesprepare income tax returns from given information for the owners ofunincorporated businessesexplain the need for and the purpose of preparing corporate income tax returns
Partnership Accounting
Students should be able to
define partnershipidentify the need for and the purpose of a partnership agreement
ACCOUNTING SYSTEMS 11
prepare journal entries for the formation of a partnershipidentify the methods of distributing profits and lossesprepare journal entries for the distribution of profits and lossesprepare working papers and financial statements for partnerships
Corporation Accounting
Students should be able to
define corporationidentify the need for and the purpose of a corporation as a legal entityidentify the methods of financing a corporationdefine and classify shareprepare and post journal entries for equity financing of a corporationexplain the procedure for allocating corporate earningsprepare journal entries for corporate income taxesprepare journal entries for retained earningsprepare journal entries for the distribution of dividends and reservesprepare corporate financial statementsexplain the need for and the purpose of long-term borrowingidentify the methods of long-term borrowingdefine and classify bondsprepare journal entries for bond issuesprepare journal entries for interest expenseprepare journal entries for bond sinking fundsprepare journal entries for the redemption or retirement of bond issuesprepare the corporate financial statements
Analyzing Financiai Statements
Students should be able to
explain the need for and the purpose of the analysis of corporate financial reportsprepare a general analysis from given comparative income statements andcomparative balance sheetsexplain the need for and the purpose of creditor analysis of financial reportsidentify and define the components of creditor analysis for corporate financialreportsprepare a creditor analysisexplain the need for and the purpose of investor analysis of corporate financialreportsidentify and define the components of investor analysis for corporate financialreportsprepare an investor analysis
ACCOUNTING SYSTEMS 12
ACCOUNTINGSYSTEMS 405
UNIT 1: REVIEW OF ACCOUNTING PRINCIPLES
GOAL: To have students review basic accounting principles.
OBJECTIVES METHODS
1.0 Basic Concepts of the AccountingCycle
Students should be able to
1.1 demonstrate annderstanding of the
Accounting Principlesobjectives
1.2 review or complete theobjectives in AccountingPrinciples for PayrollAccounting
Evaluate and review as necessary sothat students can meet the objectivesof Accounting Principles for BasicConcepts, The Cycle, ControllingCash, Merchandise Accounting,Payroll.
0 ACCOUNTING SYSTEMS
22
15
UMT 2: SYNOPTIC JOURNAL
GOAL: To introduce students to the synoptic journal.
OBJECTIVES METHODS
1.0 Combination Journal
Students should be able to
1.1 identify the need for the Explain that since all the separatecombination journal journals may be included on a single
record sheet, the combination journalmay be known by another name:synoptic journal.
The teacher should prepare a bulletinboard or have students prepare acombination journal to show that thisis not a new concept.
1.2 record entries in acombination journal Analyze each transaction from a series
of transactions and discuss how itwould be recorded in a special journalbefore illustrating the entry in thecombination journal.
Have students record the same entriesin the combination journal.
1.3 forward totals from onepage to another Emphasize that prior to forwarding
totals from one page to another pageof the combination journal the journalpage should be balanced. Debitsshould equal credits on every page ofthe combination journal.
Demonstrate the footing of columns,balancing and forwarding of totals in acombination journal.
Have students foot the columns,balance and forward the totals.
ACCOUNTING SYSTEMS 16
UNiT 2: SYNOPTIC JOURNALS (CONT.)
OBJECTIVES METHODS
1.4 total and rule the Demonstrate the totalling and ruling ofcombination journal the combination journal and have
students total and rule examples of acombination journal.
1.5 prove the combination Discuss and demonstrate the steps injournal the proving of the combination journal.
1.6 post those columns that Discuss and explain the steps inaffect general ledger posting from the combination journalaccounts to the ledgers
Post daily the amounts in theaccounts receivable and accountspayable columns individually to thecustomer and the creditor accountsin the subsidiary ledgersPost the amounts in the generalcolumn individually to the generalledger at the end of the monthPost all column totals, except thegeneral column, at the end of themonth to the general ledger
1.7 .use error location Review the techniques introduced intechniques to locate errors Accounting Principles to aid in thein the combination/synoptic location of errors in the combinationjournal journal.
1 .8 evaluate the combination Discuss the advantages andjournal system in terms of disadvantages of the combinationadvantages anddisadvantages
journal.
ACCOUNTING SYSTEMS
94
1 7
UNIT 3: ADJUSTMENTS AND CLOSING ENTRIES
GOAL: To teach students the procedure for adjustments and closing entries.
OBJECTIVES METHODS
1.0 Adjusting Entries
Students should be able to
1.1 explain the need for and Emphasize that adjustments arethe purpose of adjusting necessary if financial statements areentries for accrued expense to be correct. Explain that one of the
main purposes of accounting is toprovide information for decision-making and that the financialstatements (balance sheet, incomestatement) contain this information.Therefore, if the basis for decision-making is the data in the financialstatements, it is essential that thestatements be as accurate as possible.
The purpose of adjusting the book isto ensure that all the accounts and thefinancial statements are accurate.
At this time the teacher should stressthe Matching Principle of the GAAPS(see Appendix I).
1.2 prepare adjustments Identify the accounts which mayrequire adjusting to bring them up todate
Revenues and Expenses (rent,insurance, supplies)DepreciationBad Debts (doubtful accounts)Inventory (may have been includedas a closing entry)
ACCOUNTING SYSTEMS 18
UNIT 3: ADJUSTMENTS AND CLOSING ENTRIES (CONT.)
OBJECTIVES METHODS
1.3 calculate adjustments Demonstrate and have studentspractice calculating appropriateadjustments.
2.0 Worksheet
Students should be able to
2.1 explain the need for andthe purpose of the ten-column worksheet/spreadsheet
The primary purposes of theworksheet with adjustments are to
compute adjustments to the trialbalance accounts before thepreparation of the financialstatementssort accounts into the principleaccount for the financial statements
Other functions of the worksheet areto
bring all the end-of-periodcalculations together on one sheetof paper for the convenience of theaccountantprovide a basis for the adjustingentries which are ontered to thejournalprovide a basis for making closingentriescalculate and prove the profit/netincome.
The teacher should explain that theincome statement columns of theworksheet are used as a guide forclosing entries.
ACCOUNTING SYSTEMS 1 9
UNIT 3: ADJUSTMENTS AND CLOSING ENTRIES (CONT.)
OBJECTIVES METHODS
2.2 prepare a worksheet withadjustments
Place a ten-column worksheet on thechalkboard or on an overheadtransparency and discuss the five mainsections
Trial BalanceAdjustmentsAdjusting Trial BalanceIncome StatementBalance Sheet
Explain that the worksheet is not astatement. Indicate that it is anaccountant's working paper.
Emphasize that the worksheet coversa specific accounting period because itis used to compute net income or netloss for the period.
Demonstrate the completion of thedifferent sections of the worksheet inorder of sections
Trial BalanceAdjustmentsAdjusted Trial BalanceIncome Statement and BalanceSheet
Review the classification of accounts,pointing out that all accounts on theworksheet may be classified as eitherpermanent accounts or temporaryowner's equity accounts.
ACCOUNTING SYSTEMS
2720
UNIT 3: ADJUSTMENTS AND CLOSING ENTRIES (CONT.)
OBJECTIVES.
METHODS
Use the following as some generalsuggestions for introducing the ten-column worksheet
Have students complete theworksheet at their desks at the timeit is being completed on thechalkboard or overhead transparencyDuplicate and distribute to thestudents worksheet forms with thetrial balance filled in to save classtime (use the same trial balance asshown on the chalkboard oroverhead transparency)Use whole numbers in the trialbalance to eliminate arithmeticproblems and to permit fullconcentration on the procedureOpen new accounts at the bottomof the worksheet when adjustmentsnecessitate
3.0 Financial Statements
Students should be able to
3.1 prepare the financialstatements
Review the preparation of the financialstatements.
Refer to the income statement andbalance sheet sections of theworksheet for information required tocomplete each of these statements.
Demonstrate the preparation of theincome statement and balance sheetusing a step-by-step approach.
1111 ACCOUNTING SYSTEMS
2 321
UNIT 3: ADJUSTMENTS AND CLOSING ENTRIES (CONT.)
OBJECTIVES METHODS
3.2
3.3
record the adjusting andclosing entries
prepare the post-closingtrial balance
Have students complete thestatements at their desks at the timethey are being completed on thechalkboard or on an overheadtransparency.
Refer to the adjustments columns ofthe worksheet for information requiredto prepare the adjusting entries.Journalize and post these entries tothe ledger.
Refer to the income statementcolumns of the worksheet forinformation required to prepare theclosing entries. Journalize and postthese entries to the ledger. Emphasizethe four step method to closing theledger
Close the credit amounts in theincome statement to Revenue andExpense SummaryClose the debit amounts in theincome statement to the Revenueand Expense SummaryClose Revenue and ExpenseSummary to CapitalClose Drawing to Capital
Demonstrate the preparation of thepost-closing trial balance from thegeneral ledger accounts.
Have students prepar2 the same post-closing trial balance at their desks.
ACCOUNTING SYSTEMS
23
22 411,
UNIT 3: ADJUSTMENTS AND CLOSING ENTRIES (CONT.)
OBJECTIVES METHODS
Discuss the three checks which maybe used to prove the accuracy of thepost-closing trial balance
The totals of the post-closing trialbalance must agreeThe accounts listed in the post-closing trial balance must bepermanent (real) accounts onlyThe balance of the capital accountmust be the same as the finalowner's equity in the balance sheet
4.0 Reversing Entries
Students should be able to
4.1 identify the need forreversing entries foraccrued revenue andaccrued expenses in thenext accounting period
Emphasize the following points duringthe discussion of reversing entries
Reversing entries are convenienceentriesReversing entries eliminate the needfor remembering to debit liabilityaccount when accrued expenses arepaidReversing entries eliminate the needfor remembering to credit an assetaccount when accrued income isreceived
Definition of Reversing EntryA journal entry made at the beginningof a new fiscal period to readjust anadjusting entry made in the precedingfiscal period.
0 ACCOUNTING SYSTEMS
3 0
23
UNIT 3: ADJUSTING AND CLOSING ENTRIES (CONT.)
OBJECTIVES METHODS1
4.2
4.3
record the reversing entriesfor accrued revenue andaccrued expenses
post the reversing entriesfor the accrued revenueand accrued expenses tothe general ledger
Explain which adjusting entries are tobe reversed.
Rule: Reverse all adjusting entries thatopen new balance sheet accounts.
Discuss and explain when reversingentries should be made.
Explain that reversing entries are madeon the first day of the new accountingperiod so that the new asset andliability accounts opened by theadjusting entries can be closed andnormal entries entered during the newfiscal period.
Demonstrate the recording of thereversing entries and have studentsrecord the same entries.
Explain and demonstrate the postingof the reversing entries.
Have students post the same entries.
ACCOUNTING SYSTEMS 24
UNIT 4: INVENTORY SYSTEMS
GOAL: To teach students the principles of inventory systems.
OBJECTIVES METHODS
1.0 Inventory Control
Students should be able to
1.1 identify the need for and Discuss the need to control inventorythe purpose of inventorycontrol
of merchandise to prevent shrinkage,shortages and to account foroverages. Emphasize the relationshipof inventory control to the following
Calculation of cost of goods soldPreparation of accurate financialstatements
Discuss the use of a computer-assisted system in inventory control.
Determine if some of the studentshave helped take a periodic inventoryin store or any business where theymay have been employed. Havestudents present brief reports on theirexperiences.
1.2 identify the two basic Acquaint the students with the namestypes of inventory systems of the two basic types of inventory
systems
Periodic inventoryPerpetual inventory
Explain and define the two types ofinventory.
ACCOUNTING SYSTEMS
:3 2
25
UNIT 4: INVENTORY SYSTEMS (CONT.)
OBJECTIVES METHODS
1 .3
1 .4
describe the types ofinventory systems
analyze and recordtransactions for bothinventory systems
Periodic Inventory
A merchandise inventory that isdetermined by counting, weightingor measuring the items ofmerchandise on hand.
Perpetual Inventory
A merchandise inventory that isdetermined by keeping a continuousrecord of the increase, the decreaseand the balance on hand.
Use examples of business forms toillustrate the two types.
Use journal entries and T-accounts toanalyze the special entries required forthe Periodic and Perpetual inventoryrecords.
Compare the accounts of the twotypes of systems.
Transparency Masters 19 and 20 onPeriodic Inventory and incomestatement could be used at this time.
Transparency Masters 21 and 22 onperpetual inventory and incomestatement could be used at this time.
ACCOUNTING SYSTEMS 26
UMT 4: INVENTORY SYSTEMS (CONT.)
OBJECTIVES METHODS
1.5 compare the advantagesand disadvantages of thetypes of inventory systems
List and explain the advantages anddisadvantages of the periodic system.Use practical examples to illustrate theadvantages and disadvantages.
Advantages
Inexpensive and easy to operateUseful for small businesses (grocerystores, hardware stores) who find itimpractical to have each sale andpurchase recorded on an inventorycard for low-priced items.
Disadvantages
Does not provide an easy way ofknowing the exact cost of goodssoldDoes not provide continuous and up-to-date information about problemsexcept on periodic basisDoes not provide management withquantity control over stock forreordering purposes
List and explain the advantages anddisadvantages of the perpetualinventory system. Illustrate theexplanation with practical examples ofthe advantages and disadvantages.
ACCOUNTING SYSTEMS 27
UNIT 4: INVENTORY SYSTEMS (CONT )
OBJECTIVES METHODS
Advantages
Accounting records and proceduresassist with determining lossesquicklyPerpetual recording is practical forlarge items with a high value andbusinesses having homogeneousproductCurrent information about inventorylevels assists with deciding when tochange marketing procedures forslow-moving stockRecords may be easily computerizedthrough cash registg applications
Disadvantages
More records are required to operatethe systemIncreased costs for personnel andequipment required to operate thesystemKeeping records up to date requiresmore monitoring and reviewShrinkage is not evident until aphysical inventory taking isconducted
Point out that many firms usecomputer systems to keep inventoryrecords current. Have studentsbecome familiar with the procedurescommonly used in large departmentstores where computer assisted cashregisters are used.
ACCOUNTING SYSTEMS
3528
UNIT 4: INVENTORY SYSTEMS (CONT.)
OBJECTIVES METHODS
2.0 Inventory Valuation
Students should be able to
2.1 identify the principles ofinventory valuation
2.2 identify the methods ofinventory valuation
Define and discuss, with illustrations,the principles of inventory valuation
Inventory-at-cost principle(merchandise is valued at the timeof acquisition at the total laid downcost cost landed cost)Realization Principle (no increase inthe value of merchandise in stockshall be recognized until an actualsale is transacted)Pricing for loss or decrease in value(inventory priced at cost value ormarket value, whichever is lower)
Discuss and illustrate valuationmethods used by the accountingprofession
Average CostFirst-ln, First-Out Basis (FIFO)Last-ln, First-out Basis (LIFO)Specific Identification
IIIACCOUNTING SYSTEMS
1 ;
29
UNIT 4: INVENTORY SYSTEMS (CONT.)
OBJECTIVES METHODS
2.3 calculate the value of Demonstrate the calculation of theinventory using the value of inventory using the differentdifferent methods of methods. Have students calculate andinventory valuation compare the methods of valuation.
Point out that the method of valuationchosen by a business will dependupon the following
Products in which it dealsPrice fluctuations of the productsThe valuation method used bysimilar businessesThe rules or customs expected bygovernments
Discuss the impact of the differentinventory valuation methods.
2.4 compare the different Identify and explain the principlesprinciples of inventory followed when reporting inventoriesvaluation on financial statements
2.5 identify how inventory The inventory valuation methodcosts are presented in selected should be followed fromfinancial statements. year to year and should be disclosed
on the financial statementsAny change in the inventoryvaluation method should bedisclosed and its effect on incomereported in financial statements
ACCOUNTING SYSTEMS
:3 7
30 0
UNIT 5: APPLICATION PACKAGES
GOAL: To provide the student with computer skills to complete theaccounting cycle of a merchandising business.
OBJECTIVES METHODS
1.0 General Ledger
Students should be able to
1.1 explain the need for andthe advantages of acomputerized generalledger system
1.2 explain the components ofthe computerized generalledger system
1.3 load the general ledgeroption in the integratedaccounting package
1 .4 print a chart of accounts tobe used in the generalledger option for theaccounting period
1.5 edit or make additions orsubtractions to the chart ofaccounts and reprint
1 .6 record general ledgertransactions on an inputform if necessary
1.7 enter the general ledgertransactions into thecomputer
ACCOUN IING SYSTEMS
33
31
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
1.8 edit and correct the generalledger transactions
1.9 post the transactions
1.10 print appropriate generalledger reports includinggeneral journal and generalledger reports
1.11 print a trial balance
1.12 prepare The adjustingentries that are appropriateand record them on thecorrect forms
1.13 enter and post all adjustingentries to the appropriategeneral ledger accounts
1.14 print appropriate financialstatements
1.15 enter the appropriateentries to perform the year-end closing
1.16 print the final generalledger reports
ACCOUNTING SYSTEMS
3
32
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
2.0 Accounts Receivable
Students should be able to
2.1 explain the need for andthe advantages of using acomputerized accountsreceivable system
2.2 explain the components ofthe accounts receivablesystem
2.3 load the accountsreceivable option in theintegrated accountingpackage
2.4 create a customer's file tobe used as your accountsreceivable subsidiary ledgerfor the accounting period
2.5 list the new customer fileto check for accuracy
2.6 edit and add newcustomers to the file whennecessary
2.7 enter new sales invoicesinto the appropriatecustomer accounts usingproper input forms
ACCOUNTING SYSTEMS
4 0
33
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
2.8 enter customer paymentsinto the appropriatecustomer accounts
2.9 edit accounts receivabletransactions enterederroneously
2.10 post the transactionsinvolving the accountsreceivable option using thecomputer
2.11 explain what accounts areautomatically updated witheach accounts receivabletransaction 1
2.12 explain the relationshipbetween the accountsreceivable subsidiary ledgerand the general ledger
2.13 print the accountsreceivable reports involvingcustomer accounts andaccounts receivablesummary
ACCOUNTING SYSTEMS4
34
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
3.0 Accounts Payable
Students should be able to
3.1 explain the need for andthe advantage of acomputerized accountspayable systems
3.2 explain the components ofthe computerized accountspayable system
3.3 list the vendor file to checkfor accuracy
3.4 edit and add new vendorsto the vendor file as isnecessary
3.5 input transactions thatinvolve the vendors in thevendor file during theaccounting period
3.6 edit purchase entries madeduring the accountingperiod
3.7 record payments tovendors transacted duringthe accounting period
0 ACCOUNTING SYSTEMS 35
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
3.8 explain what accounts areautomatically updated witheach of the transactionsmade
3.9 use the accounts payableoption to post thetransactions
3.10 explain the relationship thatexists between theaccounts payablesubsidiary ledger and thegeneral ledger
3.11 print the reports that arerequired within theaccounts payable option ofthe integrated package
ACCOUNTING SYSTEMS 4 36
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
4.0 Inventory
Students should be able to
4.1 explain the need for andthe advantages of acomputerized inventorymanagement system
4.2 explain the components ofthe computerized inventorymanagement system
4.3 load the inventorymanagement option in theintegrated accountingpackage
4.4 create an inventory filewith items related to thespecific business that willbe used in the accountingperiod
4.5 record inventorytransactions on any inputforms used in theintegrated accountingpackage
4.6 enter the inventorytransactions includingadditions and subtractionsto the inventory items intothe computer
4.7 edit any inventorytransactions entered inerror
ACCOUNTING SYSTEMS 37
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
4.8 post the transactions usingthe inventory managementoption
4.9 explain the relationshipbetween Inventory andaccounts receivable andaccounts payable
4.10 print the various inventoryreports available within theinventory managementoption
ACCOUNTING SYSTEMS 38 III
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
5.0 Payroll
Students should be able to
5.1 explain the need for andthe advantages of acomputerized payrollsystem
5.2 explain the components ofthe computerized payrollsystem
5.3 load the Payroll option inthe integrated accountingpackage
5.4 create a payroll employeefile
5.5 edit, add, and deleteemployees in the employeefile
5.6 print a list of theemployees
5.7 record payroll transactionson input forms if used withthe integrated package
5.8 enter the payrolltransactions into thecomputer
5.9 edit any payrolltransactions that may havebeen entered in error
ACCOUNTING SYSTEMS 39
4 6
UNIT 5: APPLICATION PACKAGES (CONT.)
OBJECTIVES METHODS
5.10 post the payrolltransactions
5.11 print the reports that maybe available with theintegrated packageincluding a payroll register,cheques, monthly reportand annual T-4 statements
5.12 explain what principles areinvolved in the payrollfunction
ACCOUNTING SYSTEMS 40
UNIT 6: OPTIONS
GOAL: To provide students with advanced skills in accounting.
OBJECTIVES METHODS
1.0 Budgeting Spreadsheets
Students should be able to
1.1 explain the purpose of and Explain the role of budgeting inthe need for budgets accounting records. Refer to familiar
instances of budget use
. Student organizations (council)School systemFamilylocal government
Emphasize the importance that each ofthese groups knows how muchrevenue to anticipate and whatexpenditures can be made from theanticipated revenue.
Budget Accounting
A phase of accounting dealing withthe planning and the controlling offuture business operations.
Budgeting
Planning and controlling financialoperations of a business.
Budget
A written financial plan of abusiness for a specified timeexpressed in dollars.
ACCOUNTING SYSTEMS 41
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
1.2 identify types of budgets
Indicate that a change in one item inthe budget will affect another item inthe budget.
Explain that the role of the budget is
A planning guideAn operational control guideA departmental coordination guide
Identify and discuss two broadcategories of budgets
Long-range budgets (capitalbudgets long-range plans forfinancing specific projects)Short-range budgets (masterbudget annual revenue, costs andprofit plans for a business).
Identify and discuss two types ofannual budgets
Budgeted income statement anestimate of expected revenue,expenses and net income for a fiscalperiod of a businessCash budget (cash flowstatement an estimate of theexpected cash receipts and cashpayment for fiscal period(s) of abusiness
ACCOUNTING SYSTEMS 42 0
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
1.3 identify and discuss thesources of information inpreparing budgets
1.4 prepare budgets
List and discuss the following stepsfor preparing budgets
Selecting a time periodDetermining type(s) of budget(s) toprepareIdentifying the sources of data forpreparing budgetsUsing past records in obtaining datafor budgets
Discuss sources of information forbudget preparation
Company recordsGeneral economic informationConsultation with managers andstaffGocd judgementCompetitionBusiness cyclesLaw and customsOthers
Discuss the formats used fordeveloping and preparing budgets.
Emphasize a simplified approach forbudget preparation.
Demonstrate the preparation ofbudgets by using a simple example:budget for a school basketball team.
Have students prepare similar budgets,personal budgets or budgets from casestudies.
Proceed to the preparation of simplebusiness budgets.
ACCOUNTING SYSTEMS 43
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
1.5 compare budget figures to Have students study budgets andactual operating figures compare the budgeted amounts with
actual operating amounts.
1.6 analyze results of financial Study comparative budgets to analyzeoperations results of financial operations and to
recommend changes in planning futurebudgets.
1.7 explain the advantages ofhaving a computerizedspreadsheet for budgetingpurposes
1.8 demonstrate the use of a The specific commands, terminologyspecific software package and options available in each package
will dictate how much of each sectionload up and exit thecomputerized
can be done.
spreadsheet software The teacher's competency and interestuse the basic editing in these areas will determine theoperations to set up extent to which each topic isiabels and numeric data,edit and erase cells
examined.
insert and deletecolumns and rowschange column widthsdevelop formulas toperform the basiccalculation operationschange the formats ofnumeric cells and thejustification of labelsmove and copy singlecells to a range of cells
ACCOUNTING SYSTEMS 44
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
set up the print rangeand print spreadsheetcells and the cellformulasuse the file command tosave, list and retrievespreadsheetsmove and copy blocks ofcells
1.9 create a budget usingspecific information
1.10 analyze the budgetcomparing the figures toactual
1.11 alter the data given specific"what if" scenarios
1.12 calculate variances fromactual, using thespreadsheet
1.13 calculate percentages forthe variances
1.14 analyze the effectivenessof having a computerizedbudget versus the manualbudgets prepared earlier
ACCOUNTING SYSTEMS 45
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
2.0 Manufacturing Accounting
Students should be able to
2.1 identify the elements ofmanufacturing costs
2.2 describe the elements ofmanufacturing costs
Discuss the need for measuring thecost of producing (manufacturing)goods. Emphasize the importance ofidentifying and measuring the costs ofproducing goods through a system ofcost accounting.
Identify the following components ofmanufacturing cost
Direct materialsDirect labourFactory overhead
Discuss and describe the elements ofmanufacturing costs. Use practicalexamples from different types ofmanufacturing businesses
Flour manufacturerMiningFish processingMeat processingBakeriesLumber processing
Identify and discuss the followingthree categories of factory overhead
Indirect materialsIndirect labourOther factory overhead
Use practical examples during thediscussion of the three categories offactory overhead.
ACCOUNTING SYSTEMS
,r;
46
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
2.3 illustrate and describe the Explain how the elements of costflow of elements through (labour, materials, overhead) flowthe manufacturing cycle through the manufacturing cycle from
raw (direct) materials, to goods inprocess and to finished goods.
2.4 identify and explain the Explain and discuss the twotwo systems of costing accounting systems used in recording
for cost accounting. Use practicalexamples and accounting forms fromdifferent types of manufacturingbusinesses.
Job costing
An accumulation of costs for eachjob or group of jobs produced
Process costing
An accumulation of costs related toeach department or phase or phaseof production.
Discuss the purpose of accountingrecords recording, transferring andsummarizing for the manufacturingcosts.
2.5 identify the need for and the Identify and discuss the followingpurpose of cost accounting purposes of cost accounting
Cost findingCost control
Explain the relationship of a costingaccounting system of a manufacturingbusiness to the flow of operationswith the business.
4) ACCOUNTING SYSTEMS 47
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
Point out that overhead costs arebased on a percent rate on directlabour cost in the department(s)involved in the manufacturing process.Indicate that it is necessary toestimate the overhead to estimate theoverhead costs because the actualcosts cannot be calculated until thecompletion of the manufacturingprocess.
2.7 identify and explain the Discuss the application of overheadmethods of applying costs to the work flow of theoverhead costs manufacturing process.
, 2.8 apply overhead costs to Use T-accounts to explain the journalwork flow entries required to match the cost
flow with the work flow.
2.9 prepare, post and explain Demonstrate the preparation and the, the journal entries to match posting of journal entries.,
flow with work flowHave students prepare and postjournal entries.
2.10 prepare trial balances and Explain that a manufacturing businessfinancial statements for has three inventories to account for inmanufacturing business preparing financial reports
Raw materialsWork in processFinished goods
ACCOUNTING SYSTEMS
5 I. J
48
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
Demonstrate the preparation of trialbalances, statements of costs ofgoods manufactured, incomestatements and balance sheets.
Have students prepare the samestatements following a step-by-stepapproach.
information
Explain that Revenue Canada,Taxation, administers the Income TaxAct.
Discuss the relationship of incometaxes to the cost of governmentservices (funds required to run thecountry).
Discuss these components of apersonal income tax return
Sources and amount of incomeDeductionsTaxable income tax
Study the forms related to income tax.
List and discuss the basic steps forfiling an income tax return.
Demonstrate the preparation of apersonal income tax return.
Have students prepare personalincome tax returns.
ACCOUNTING SYSTEMS
5r,
49
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
3.4 explain the need for and Explain that owners of unincorporatedthe importance of preparing businesses file income tax returns toincome tax returns for the provide funds to run the country as doowners of unincorporatedbusinesses
individual wage earners.
3.5 identify and define the Emphasize that the income tax lawscomponents of income tax require each individual who owns areturns for the owners of business to report the details of theunincorporated businesses business operations as part of the
owner's personal income tax return.
Each owner of an unincorporatedbusiness must submit the followingwith a personal income tax return
Statement of income and expensesSupporting documents
income statementbalance sheet
3.6 prepare income tax returns,from given information, for
Demonstrate the preparation of anincome tax return for an owner of an
the owners ofunincorporated businesses
unincorporated business.
Have students prepare the sameincome tax return.
Discuss the principle of quarterlyinstallments to pay income taxes forowners of unincorporated businesses.
ACCOUNTING SYSTEMS
5 "
50
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
3.7 explain the need for and thepurpose of preparingcorporate income tax returns
Explain that corporations file incometax returns and pay income tax toprovide funds to pay for governmentservices and for the expenses ofrunning the country.
Emphasize that the income tax lawsrequire that each business operatingas a corporation must file aCorporation Income Tax Return andpay income taxes.
4.0 Partnership Accounting
Students should be able to
4.1 define partnership
4.2 identify the need for andthe purpose of apartnership agreement
Encourage the students to develop adefinition of the term partnership.
Partnership
A form of business organization inwhich two or more persons operateas co-owners of a business, sharingcosts, profits and liabilities byagreements.
Discuss the need for and the purposeof a partnership agreement. Identifythe statutes regulating partnerships.Explain the relationship between legaland financial aspects of thepartnership.
4) ACCOUNTING SYSTEMS
5
51
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
Partnership agreement
a written agreement that sets forththe various conditions under which apartnership is to operate.
Statutes affecting partnerships
Partnership ActLimited Partnership ActPartnership Registration Act
Explain the advantages anddisadvantages of partnerships
Advantages
More capitalBetter credit standingMore owner talentKeeping valuable employeesPersonal incentiveFew legal restrictions
Disadvantages
Unlimited personal liabilityPossible management disagreementCapital limited to partner resourcesLimited life of the businessSharing of net income
ACCOUNTING SYSTEMS
5' 3
52
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
4.3
4.4
prepare journal entries forthe formation of apartnership
identify the methods ofdistributing profits andlosses
Discuss the relationship of thepartnership agreement to the openingjournal entry for the formation of apartnership.
Demonstrate, using various examples,the preparation of the opening entryand have students prepare the sameentries.
Point out that a partnership agreementshould include a section about thedistribution of profits and losses. Inthe absence of such a section, theprofits and losses would be dividedequally according to law.
Methods of calculating each partner'sshare of net income/loss
Give an equal amount to eachpartnerUse an agreed-upon ratio such as35% to one partner and 65% to theother partnerUse the ratio of each partner'scapital investment to the totalcapitalAllow interest on each partner'scapital investmentsAllow salaries to one or more of thepartnersUse a combination of two or more ofthe above methods
ACCOUNTING SYSTEMS 53
UNIT 6: OPTIONS (CONT.) iOBJECTIVES METHODS
4.5 prepare journal entries forthe distribution of profitsand losses
4.6 prepare working papers andfinancial statements forpartnerships
Use examples from the textbook todemonstrate the preparation of journalentries and have students prepare thesame entries.
Demonstrate the preparation of andhave students prepare worksheets,schedules of partners' equity, incomestatement and balance sheets. Whencomparing the charts of accounts forpartnerships, point out that the onlydifferent between the charts forpartnerships and sole proprietorship isthe capital section.
5.0 Corporation Accounting
Students should be able to
5.1 define corporation Corporation
A business which is owned by threeor more persons and has legal entityof its own.
Discuss the types of corporations
PrivatePublicCrown
ACCOUNTING SYSTEMS
6 i
54 110
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
5.2 identify the need for andthe purpose of acorporation as a legal entity
Explain the legal requirements forforming a corporation. Include in thisdiscussion the need for the Articles ofIncorporation (the written applicationto the federal or provincial governmentfor permission to form a corporation)and the Certificate of Incolporation(the approved Articles ofIncorporation).
Explain the advantages anddisadvantages of a corporation.
Advantages
Separate legal existenceContinuous existenceLimited liability of the ownersMore capitalTransferability of ownershipProfessional management
Disadvantages
Cost to establishGovernment restrictionsCorporate income taxationSome lack of personal incentiveLack of privacy
Discuss debt (borrowing moneythrough bond issues) and equity(selling or issuing shares) financing ofcorporations.
ACCOUNTING SYSTEMS
62
55
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
5.3 identify the methods of Point out that the articles offinancing a corporation incorporation indicate the kind and the
total amount of capital stock that maybe issued by a corporation.
Discuss par value and non par valuestock.
5.4 define and classify shares Discuss the difference betweencommon shares and preferred shares.
Common shares
Shares that give voting rights but donot give the shareholder any specialpreferences
Preferred shares
Shares that give shareholderspreferences in earnings anddividends
Use T-accounts to analyzetransactions for equity financing.
5.5 prepare and post journal Demonstrate and have students to theentries for equity financing of preparation and posting of journala corporation entries for equity financing.
Explain the procedure for allocatingcorporate earnings to share capital andretained earnings.
5.6 explain the procedure for Explain that the income of aallocating corporate earnings corporation determined for income tax
purposes is the difference between5.7 prepare journal entries for
corporate income taxestotal revenue and total expenses.
ACCOUNTING SYSTEMS 56
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
5.8 prepare journal entries forretained earnings
5.9 prepare journal entries forthe distribution of dividendsand reserves
Define and discuss retained earnings.
Retained earnings
Corporate net profit after taxes andnot yet distributed to shareholders.
Demonstrate the preparation of journalentries to record retained earnings.
Have students prepare entries torecord retained earnings.
Define and discuss dividends (theportion of after-tax net income of acorporation paid to the shareholders)of a corporation. Explain that thedividends are paid out of retainedearnings.
Point out that the closing phase of theaccounting cycle for a corporation issimilar to the closing phase forpartnerships and proprietorships.
Demonstrate the preparation of thejournal entries for the distribution ofdividends and reserves.
Make use of T-accounts to illustratehow various transactions affectcorporate records of capital.
80 ACCOUNTING SYSTEMS 57
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
5.10 prepare corporate financial Have students study and discuss thestatements statement for corporations.
Demonstrate the preparation of andhave students prepare financialstatements for corporations. Includebalance sheets, income statementsand anecdotal reports to shareholders.
5.11 explain the need for and Discuss the reasons that a corporationthe purpose of long-term tends to borrow a large sum of moneyborrowing for a long period of time to expand
and develop the business.
5.12 identify the methods of Point out that large loans may belong-term borrowing difficult to obtain from one financial
institution or one individual.Therefore, corporations may divide thetotal amount of a large loan into aseries of promises to pay (bonds) ofvarying amounts for sale to the public.
Explain that bonds are similar topromissory notes because they arewritten promises to pay creditors.
Bond
A printed promise of a corporationto pay a specified amount at aspecified date some time in thefuture and to pay the interest atstated intervals.
_
ACCOUNTING SYSTEMS
65
58
UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
5.13 define and classify bonds
Floating a loan
Obtaining cash by selling bonds.
Bond issue
All of the bonds representing thetotal amount of the loan
Bondholder
The owner of a bond.
Discuss the various types of bondclassifications. Explain that theclassification of corporate bondsrelates to the type of security which acorporation offers the bondholders orthe way in which the interest is paidto the bondholder.
Debenture bonds
Bonds not protected by collateral
Secured bonds
Bonds protected by collateral
Registered bonds
Bonds on which the interest is paiddirectly to the bondholder by theissuing corporation
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UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
5.14
5.15
prepare journal entries forbond issues
prepare journal entries forinterest expense
Coupon bonds
Bonds on which the interest iscollected by detaching the bondcoupons when they become due andby presenting them to a financialintermediary for the interest.
Use simple transactions and analyzethe journal entries by using T-accounts. Explain that bonds issuedare long-term liabilities (bondspayable).
Demonstrate the journal entries andhave students prepare the sameentries. Discuss the costs of bondissues.
Use T-accounts to analyze thetransactions.
Bond sinking fund
An amount set aside to pay a bondissue when due.
Explain that a corporation depositsmoney, on a regular basis, in a bondsinking fund to cover a portion of thebond issue.
Emphasize that the bond sinking fundhas two main purposes
The corporation is assured that itwill have cash available to pay bondissue when it falls due
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UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
5.16
5.17
5.18
prepare journal entries forbond sinking funds
prepare journal entries forthe redemption orretirement of bond issues
prepare the corporatefinancial statements
The investors may require a bondsinking fund as a condition of theirbuying the bonds to assure themthat the bond issue will be paidwhen due.
Demonstrate the preparation of andhave students prepare journal entriesfor a bond sinking fund.
Retirement of a bond issueThe cancellation of a bond issue bypaying the bonds at maturity.
Use T-accounts to analyzetransactions.
Demonstrate the preparation ofworksheets, income statements,statement of shareholders' equity andbalance sheets for corporations.
Have students complete the samefinancial statements using a step-by-step approach.
6.0 Analyzing Financial Statements
Students should be able to
6.1 explain the need for andthe purpose of the analysisof corporate financialreports
Discuss the purpose of annualcorporate financial reports.
Explain that a corporate financialreport outlines the financial status of acorporation for various groups ofpeople
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UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
ManagementCreditorsInvestorsGovernment
6.2 wepare a general analysis Have students study comparativefrom given comparative financial statements to determine howincome statements and changes in the firm's financial positioncomparative balance sheets can happen.
Demonstrate the preparation of andhave students prepare comparativefinancial statements.
6.3 explain the need for and Explain that creditors are interested inthe purpose of creditory comparing debts owing to theanalysis of financial reports amounts available to pay them,
inventory to sales, accounts receivableto sales, etc. Indicate that the maininterest of short-term creditors is theability of the corporation to pay itscurrent debts and to meet its currentoperating expenses. Point out thatlong-term creditors are interested inthe rate that loaned money will uarnover the debt period and whethercon-Ipany earnings will pay interest onborrowed money.
6.4 identify and define the Methods of Analysis used by Short-components of creditoranalysis for corporate
term Creditors
financial reports Current Ratio (current assets/currentliabilities)Quick Ratio (cash and accountsreceivable/current liabilities)Inventory Turnover (sales/averageinventory)Accounts Receivable Turnover(sales/average accounts receivable) I
ACCOUNTING SYSTEMS
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UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
6.5
6.6
prepare a creditor analysis
explain the need for andthe purpose of investoranalysis of corporatefinancial reports
Methods of Analysis used by Long-term Creditors
Yield rate on bondsCoverage of bond interestDebt ratio (net income-averageaccounts receivable)
Discuss the analysis of the workingcapital position of a corporation.
Discuss the analysis of earnings onloaned money and on payment ofinterest.
Have students determine the followingfrom given data
Current ratioQuick ratioYield rate on bondsDebt ratio
Discuss the interest of investors infollowing results from investments
GrowthIncomeSafety
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UNIT 6: OPTIONS (CONT.)
OBJECTIVES METHODS
6.7
6.8
)
identify and define thecomponents of investoranalysis for corporatefinancial reports
prepare an investor analysis
Methods of Analysis used by Investors
Ratio of profit to salesReturn on invested capitalEarnings per sharePrice-earnings ratioYield rateDivident payout ratio
Explain the methods used by investorsto analyze corporate financial reports.
Have students determine the followingfrom given data
Ratio of profit to salesReturn on invested capitalEarnings per sharePrice-earnings ratioYeild rate -
Dividend payout ratio
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BIBLIOGRAPHY
NOTE: Refer to the current Manitoba Textbook Bureau Catalogue for additional textsand resources.
TEXTS
Cougler. A Systems Approach. John Wiley and Sons Canada Ltd., 1992.Working Papers.Teacher's Resource Package and Data Disk.
Cougler. Introductory Accounting. John Wiley and Sons Canada Ltd., 1990.Student Workbook with Working Papers.Teacher's Manual.
D'Amico and Magnan. Accounting An Introduction. Copp Clark Pitman Ltd.,1991.Working Papers.Answer Key.Teacher's Manual.
D'Amico and Palmer. Principles of Accounting. Copp Clark Pitman Ltd., 1987.Study Guide and Working Papers 1, 2.Teacher's Edition.Teacher's Manual.
D'Amico and Wilson. Applied Accounting. Copp Clark Pitman Ltd., 1982.Study Guide.Teacher's Manual.
Dauderes. Financial Accounting An Introduction to Decision Making. HBJ-HoltCanada, 1987.Study Guide.Solutions. Manual.Instructor's Resource Manual.
Gibson. Accounting Principles A Skill Building Approach. John Wiley and SonsCanada Ltd., 1992.Student Workbooks 1 and 2.Teacher's Resource Package and Data Disk.
ACCOUNTING SYSTEMS 72 65
Kaluza. Accounting: A Systems Approach. Second edition.1985.Teacher's Manual, Parts 1 and 2.Working Papers, 1, 2 and 3.Accounting Projects and Simulations.Key to Projects and Simulations.Visicalc Problem Supplement.
McGraw-Hill Ryerson,
Kaluza, et al. Accounting: A Systems Approach. Third edition.Ryerson, 1991.Teacher's Resource Book and Key.Study Guide and Working Papers 1, 2 and 3.
McGraw-Hill
King. Building Bookkeeping Skills. Second edition. Copp Clark Pitman Ltd., 1986.Working Papers.Instructor's Manual.
King, R. L. Timson Rugs An Accounting Simulation. Second edition. Copp ClarkPitman Ltd., 1988.Instructor's Guide.
Schafer, et al. Century 21 Accounting: Introductory Course. Third Canadian edition.Nelson Canada Ltd., 1991.Teacher's Manual.Working Papers in two parts.Teacher's Edition.
Syme, G. E. and Ireland. Accounting. Prentice-Hall Canada Inc., 1990.Workbooks A and B.Teacher's Key A and B.Teacher's Guide.
Syme, G. E. Accounting 1. Fourth edition.Workbook.Teacher's Guide. .
Teacher's Key A and B.
Prentice-Hall Canada Inc., 1988.
Kaluza. Elements of Accounting: A Senior Course.Ryerson, 1979.
Kaluza. Elements of Accounting: A Senior Course.Ryerson, 1989.Working Papers 1, 2 and 3.Teacher's Manual.
Second edition.
Third edition.
McGraw-Hill
McGraw-Hill
ACCOUNTING SYSTEMS 66
7 (..)1.4
Landry, et al. Century 21 Accounting, Advanced Course. First Canadian edition.Nelson Canada Ltd., 1979.Teacher's Reference Guide.Workbooks 1 and 2.Teacher's Edition, Combined Workbooks 1 and 2.
Landry, et al. Century 21 Accounting, Advanced Course. Second Canadian edition.Nelson Canada Ltd., 1992.Workbooks 1 and 2.Teacher's Key 1 and 2.Teacher's Resource Manual and Diskettes.
COURSEWARE RESOURCES
Baker, Allen and Klooster. Automated Accounting for the Microcomputer. Canadianedition. Nelson Canada Ltd., 1986.Teacher's Manual.Diskettes: Apple II Plus, Apple Ile, Apple Ilc, IBM PC, PCjr.
Bedford Accounting. Canadian edition. Educational version.Requires MS-DOS 2.1 or higher.
4110Can be used on stand alone with dual d rives, Novell Network System, IBM EdnetSystem or the ICON using QDOS (CAC).Instructional Workbook.Software Packages includes instructional workbook: PC version 53/4" and 3 Y2"and Mac version 3 Y2".
Deutsch, E. Accpac Plus Applications Workbook. Version 5.0. McGraw-Hill Ryerson,1990.Teacher's Manual.
Genzer and McMurray. Using Accpac Plus Worktext. Addison-Wesley PublishersLtd., 1990.Teacher's Guide and Solutions Disk.
Ireland. School Accounting Modules. Second edition. Certified General AccountantsAssociation of Manitoba, 1991.Practice set comes complete with data diskettes to run on MS-DOS andMacintosh computers using Accpac Bedford Integrated Accounting (DOS) andAccpac Bedford Simply Accounting (MAC). Spreadsheet models require MicrosoftWorks.
ACCOUNTING SYSTEMS 67
Kaluza. Microcomputer Accounting Applications. McGraw-Hill Ryerson, 1986.Student Workbook.Instructor's Manual.
Mumford, M. Accpac Bedford Worktext. Nelson Canada Ltd., 1991.Teacher's Manual and Diskettes.Overview 1 and 2 Guide GST Addendum.
Pro Tutor Accounting. Tronica (1985) Inc., 1989.Student's Package (software and manual)
MS-DOS version: 128K one driveApple Ile, Ilc, IIGS version: 128K 80 column card.
Teacher's Package (software and manual)MS-DOS version: 128K dual disk driveApple Ile, Ilc, IIGS version: 128K 80 column card.
Purbhoo and Purbhoo. Learning Accpac Bedford. Addison-Wesley Publishers Ltd.,1991.For use with Accpac Bedford Education version 3.4A software.Teacher's Support Package.
Yee and Harrison. Deejay Sound and Vision Practice Set. C.V. Mosby Ltd., 1990.Requires MS-DOS computer and printer and either Accpac Plus General Ledger(version 4.2 or 5.0) or Accpac Bedford Integrated Accounting.
Zimmer. Cantax TiPlus Training Course with Case Studies.Site licence for current year program $100.00.Available in MS-DOS format only. Please indicate 53/4" or 31/2" diskettes.Hardware requirements include 640K memory, 1 hard drive, 1 floppy drive andprinter capable of printing 10 and 17 characters per inch.Order direct from:
Cantax Corporation Ltd.68 Pumpmeadow Crescent S.W.Calgary, AB T2V 5C6Attention: Pat Smith Fax (403) 253-6281
RESOURCE
For current materials that can be used in the business education classroom, obtain amembership ($20 fee) in the
Canadian Foundation for Economic Education2 St. Clair Ave. West, Suite 501Toronto, ON M4V IL5
ACCOUNTING SYSTEMS 684I