grade 12 accounting systems course preview€¦ · ... completing the accounting cycle for a...

Grade 12 Accounting Systems (40S)

A Course for Independent Study

Field Validation Version

G r a d e 1 2 a c c o u n t i n G S y S t e m S (4 0 S )

A Course for Independent Study

Field Validation Version

2017Manitoba Education and Training

Manitoba Education and Training Cataloguing in Publication Data

Grade 12 accounting systems (40S) : a course for independent study—Field validation version

This resource is available in print and electronic formats. ISBN: 978-0-7711-7531-2 (print) ISBN: 978-0-7711-7532-9 (pdf)

1. Accounting—Study and teaching (Secondary). 2. Accounting—Study and teaching (Secondary)—Manitoba. 3. Accounting—Programmed instruction. 4. Distance education—Manitoba. 5. Correspondence schools and courses—Manitoba. I. Manitoba. Manitoba Education and Training. 657

Copyright © 2017, the Government of Manitoba, represented by the Minister of Education and Training.

Manitoba Education and Training Winnipeg, Manitoba, Canada

Every effort has been made to acknowledge original sources and to comply with copyright law. If cases are identified where this has not been done, please notify Manitoba Education and Training. Errors or omissions will be corrected in a future edition. Sincere thanks to the authors, artists, and publishers who allowed their original material to be used

All images found in this resource are copyright protected and should not be extracted, accessed, or reproduced for any purpose other than for their intended educational use in this resource.

Any websites referenced in this resource are subject to change without notice. Educators are advised to preview and evaluate websites and online resources before recommending them for student use.

Available in alternate formats upon request.

c o n t e n t S

Acknowledgements vii

Introduction 1Overview 3What Will You Learn in This Course? 3How Is This Course Organized? 3What Resources Will You Need for This Course? 5Who Can Help You with This Course? 6How Will You Know How Well You Are Learning? 7How Much Time Will You Need to Complete This Course? 9When and How Will You Submit Completed Assignments? 11What Are the Guide Graphics For? 13Module Cover Sheets 15

Module 1: Accounting Principles Review 1Introduction 3Lesson 1: Accounting Concepts Review 5Lesson 2: The Accounting Cycle (Part 1) 13Lesson 3: The Accounting Cycle (Part 2) 51Assignment 1.1: Completing the Accounting Cycle for a Service Business 63 Module 1 Summary 73Learning Activity Answer Key 1

C o n t e n t s iii

G r a d e 1 2 A c c o u n t i n g S y s t e m siv

Module 2: Merchandising Firms 1Introduction 3Lesson 1: Introduction to Accounting for Merchandising Firms 5Lesson 2: Selling Merchandise 15Lesson 3: Purchasing Inventory 33Lesson 4: The Income Statement for a Merchandising Business 43Lesson 5: Inventory Valuation 51Assignment 2.1: The Periodic Inventory System 57Module 2 Summary 63Learning Activity Answer Key 1

Module 3: Merchandising Firms: The Perpetual Inventory System 1Introduction 3Lesson 1: Introduction to the Perpetual Inventory System 5Lesson 2: Selling Merchandise 13Lesson 3: Purchasing Inventory 29Assignment 3.1: The Perpetual Inventory System 43Module 3 Summary 49Learning Activity Answer Key 1

Module 4: Special Journals 1Introduction 3Lesson 1: The Purchases Journal 5Lesson 2: The Sales Journal 19Lesson 3: The Cash Receipts Journal 31Lesson 4: The Cash Payments Journal 45Assignment 4.1: Using the Special Journal System 61Module 4 Summary 65Learning Activity Answer Key 1

C o n t e n t s v

Module 5: Adjusting Entries 1Introduction 3Lesson 1: Basic Adjustments 5Lesson 2: Adjusting Bad Debts 23Lesson 3: Adjusting for Accruals 35Lesson 4: Adjusting for Unearned and Unrecorded Revenue 47Assignment 5.1: Advanced Adjustments 57Module 5 Summary 61Learning Activity Answer Key 1

Module 6: Completing the Accounting Cycle 1Introduction 3Lesson 1: Completing the Worksheet and Updating the Inventory Account 5Lesson 2: Preparing the Financial Statements 15Lesson 3: Journalizing Adjusting and Closing Entries 29Lesson 4: Completing the Accounting Cycle 53Assignment 6.1: Completing the Accounting Cycle for a Merchandising Business 69Module 6 Summary 71Learning Activity Answer Key 1

Module 7: Accounting in Action 1Introduction 3Lesson 1: Introduction to Financial Analysis 5Lesson 2: Introduction to Corporate Accounting 29Lesson 3: Careers in Accounting 41Assignment 7.1: Financial Analysis and Accounting as a Career 49Module 7 Summary 57Learning Activity Answer Key 1

G r a d e 1 2 A c c o u n t i n g S y s t e m svi

a c k n o w l e d G e m e n t S

Manitoba Education and Training gratefully acknowledges the contributions of the following individuals in the development of Grade 12 Accounting Systems (40S): A Course for Independent Study, Field Validation Version.

Writer Angela Baraniuk Dakota CollegiateLouis Riel School Division

Content Reviewer Susana Hawryshko Garden Valley CollegiateGarden Valley School Division

Development Team Members

John Froese Daniel McIntyre Collegiate InstituteWinnipeg School Division

Monica Gadsby West Kildonan CollegiateSeven Oaks School Division

Will Habing River East CollegiateGarden Valley School Division

Susana Hawryshko Garden Valley CollegiateGarden Valley School Division

Sharon McRae Vincent Massey CollegiatePembina Trails School Division

Manitoba Education and Training

Staff

Carole BilykCoordinator(until June 2016)

Development UnitInstruction, Curriculum and Assessment Branch

Louise BoissonneaultCoordinator

Document Production Services UnitEducational Resources Branch

Diane CourcellesPublications Editor


Lynn HarrisonDesktop Publisher


Myrna KlassenActing Coordinator

Distance Learning UnitInstruction, Curriculum and Assessment Branch

Gilles LandryProject Manager

Learning Support and Technology UnitInstruction, Curriculum and Assessment Branch

Dan LemieuxProject Leader

Learning Support and Technology UnitInstruction, Curriculum and Assessment Branch

A c k n o w l e d g e m e n t s vii


Introduction

i n t r o d u c t i o n

Overview

Welcome to Grade 12 Accounting Systems. In this course, you will be introduced to accounting for a merchandising business where you will learn how to complete the accounting procedures under both the periodic and perpetual inventory systems. Students interested in a career in accounting or finance, or students who may one day own their own business, are encouraged to take this course.

As a student enrolled in a distance learning course, you have taken on a dual role—that of a student and a teacher. As a student, you are responsible for mastering the lessons and completing the learning activities and assignments. As a teacher, you are responsible for checking your work carefully, noting areas in which you need to improve and motivating yourself to succeed.

What Will You Learn in This Course?

In this course, you will learn how to process business transactions that deal with merchandise inventory (items you plan to resell) in order to understand the unique relationship between sales and cost of goods sold. You will also learn how to move beyond the General Journal and use a five journal or Special Journal system. Advanced adjustments and financial analysis will also be covered. Ultimately, you will learn how to “complete the books” for a merchandising business.

How Is This Course Organized?

The Grade 12 Accounting Systems course consists of the following seven modules:QQ Module 1: Accounting Principles ReviewQQ Module 2: Merchandising FirmsQQ Module 3: Merchandising Firms: The Perpetual Inventory SystemQQ Module 4: Special JournalsQQ Module 5: Adjusting EntriesQQ Module 6: Completing the Accounting CycleQQ Module 7: Accounting in Action

I n t r o d u c t i o n 3

G r a d e 1 2 A c c o u n t i n g S y s t e m s4

Each module in this course consists of several lessons, which contain the following components: QQ Lesson Focus: The Lesson Focus at the beginning of each lesson identifies

one or more specific learning outcomes (SLOs) that are addressed in the lesson. The SLOs identify the knowledge and skills you should have achieved by the end of the lesson.

QQ Introduction: The Introduction gives an explanation of what you will be learning in that lesson.

QQ Lesson: The main body of the lesson is made up of the content that you need to learn. It contains text, explanations, images, and diagrams.

QQ Learning Activities: Most lessons include one or more learning activities that will help you learn about the lesson topics and prepare you for the assignments and the final examination. Once you complete a learning activity, check your responses against those provided in the Learning Activity Answer Key found at the end of each module. You will not submit the completed learning activities to your tutor/marker.

QQ Assignments: Assignments are found at the end of each module. You will mail or electronically submit all your completed assignments to your tutor/marker for assessment at the end of each module. In total, all assignments are worth 75 percent of your final course mark.

QQ Summary: Each lesson ends with a brief review of what you just learned.


What Resources Will You Need for This Course?

You do not need a textbook for this course. All the content is provided directly within the course. You will, however, need access to a variety of resources.

You will require access to an email account if you plan toQQ communicate with your tutor/marker by emailQQ use Blackboard Learn to submit completed assignments

A valid email account is required for your Blackboard Learn profile. The website address for Blackboard Learn is https://bblearn.merlin.mb.ca. You were issued a username and password when you registered for this course.

The required and optional resources for this course are identified below.

Required Resources

For this course, you will need the following electronic resource(s). If you do not have access to the Internet, or if you need a copy of the resource(s), contact the Distance Learning Unit at 1-800-465-9915.Q Microsoft Excel Files: Throughout this course, you will need Excel data

files to complete the learning activities, the assignments, and the final examination. These files are available on Blackboard Learn at https://bblearn.merlin.mb.ca. If you do not have access to the Internet, or if you need a copy of the files, contact the Distance Learning Unit at 1-800-465-9915.

Optional Resources

It would be helpful if you had access to the following resources.Q Printer: With access to a printer, you could make a copy of your assignments

before submitting them so that if your tutor/marker wants to discuss an assignment with you over the phone, each of you will have a copy. It would also allow you to continue studying or to complete further lessons while your original work is with the tutor/marker. Printing your assignments will also ensure that you keep a copy in case the originals are lost.

Q Calculator: Access to a calculator would be beneficial.

https://bblearn.merlin.mb.ca



Who Can Help You with This Course?

Taking an independent study course is different from taking a course in a classroom. Instead of relying on the teacher to tell you to complete a learning activity or an assignment, you must tell yourself to be responsible for your learning and for meeting deadlines. There are, however, two people who can help you be successful in this course: your tutor/marker and your learning partner.

Your Tutor/Marker

Tutor/markers are experienced educators who tutor ISO students and mark assignments and examinations. When you are having difficulty with something in this course, contact your tutor/marker, who is there to help you. Your tutor/marker’s name and contact information were sent to you with this course. You can also obtain this information in the Who Is My Tutor/Marker? section of the distance learning website at www.edu.gov.mb.ca/k12/dl/iso/assistance.html.

Your Learning Partner

A learning partner is someone you choose who will help you learn. It may be someone who knows something about accounting, but it doesn’t have to be. A learning partner could be someone else who is taking this course, a teacher, a parent or guardian, a sibling, a friend, or anybody else who can help you. Most importantly, a learning partner should be someone with whom you feel comfortable and who will support you as you work through this course.

Your learning partner can help you keep on schedule with your coursework, read the course with you, check your work, look at and respond to your learning activities, or help you make sense of assignments. You may even study for your examination(s) with your learning partner. If you and your learning partner are taking the same course, however, your assignment work should not be identical.

www.edu.gov.mb.ca/k12/dl/iso/assistance.html

www.edu.gov.mb.ca/k12/dl/iso/assistance.html


How Will You Know How Well You Are Learning?

You will know how well you are learning in this course by how well you complete the learning activities, assignments, and examination.

Learning Activities

The learning activities in this course will help you to review and practise what you have learned in the lessons. You will not submit the completed learning activities to your tutor/marker. Instead, you will complete the learning activities and compare your responses to those provided in the Learning Activity Answer Key found at the end of each module.

Make sure you complete the learning activities. Doing so will not only help you to practise what you have learned, but will also prepare you to complete your assignments and the examination successfully. Many of the questions on the examination will be similar to the questions in the learning activities. Remember that you will not submit learning activities to your tutor/marker.

Assignments

Each module in this course contains assignments, which you will complete and submit to your tutor/marker for assessment. The assignments are worth a total of 75 percent of your final course mark.

The tutor/marker will mark your assignments and return them to you. Remember to keep all marked assignments until you have finished the course so that you can use them to study for your examination.

Final Examination

This course contains a final examination. QQ The final examination is based on Modules 1 to 7, and is worth 25 percent

of your final mark in this course. You will write the final examination when you have completed Module 7.

You will write the final examination under supervision.


How to Study for Your ExaminationTo do well on your examination, you should review all the work you have completed from the modules, including all learning activities and assignments.

The questions on the examination are set up exactly like the learning activities and the assignments. In other words, you will be asked to do the same tasks on three separate occasions—on the learning activities, on the assignments, and on the examination.

Requesting Your ExaminationYou are responsible for making arrangements to have the examination sent to your proctor from the Distance Learning Unit. Please make arrangements before you finish Module 7 to write the final examination.

To write your examination, you need to make the following arrangements:Q If you are attending school, your examination will be sent to your school

as soon as all the applicable assignments have been submitted. You should make arrangements with your school’s ISO school facilitator to determine a date, time, and location to write the examination. For more information on examination procedures, please contact your ISO school facilitator or visit the Grading and Evaluation section of the distance learning website at www.edu.gov.mb.ca/k12/dl/iso/assignments.html.

Q If you are not attending school, check the Examination Request Form for options available to you. The form was mailed to you with this course. Three weeks before you are ready to write the examination, fill in the Examination Request Form and mail, fax, or email it to

Distance Learning Unit 500–555 Main Street PO Box 2020 Winkler MB R6W 4B8 Fax: 1-204-325-1719 Toll-Free Telephone: 1-800-465-9915 Email: [email protected]

www.edu.gov.mb.ca/k12/dl/iso/assignments.html


How Much Time Will You Need to Complete This Course?

Learning through independent study has several advantages over learning in the classroom. You are in charge of how you learn and you can choose how quickly you will complete the course. You can complete as many lessons as you wish in a single session. You do not have to wait for your teacher or classmates.

From the date of your registration, you have a maximum of 12 months to complete this course, but the pace at which you proceed is up to you. Read the following suggestions on how to pace yourself.

Chart A: Semester 1

If you want to start the course in September and complete it in January, you can follow the timeline suggested below.

Module Completion Date

Module 1 Middle of SeptemberModule 2 End of SeptemberModule 3 Middle of OctoberModule 4 End of OctoberModule 5 End of NovemberModule 6 Middle of DecemberModule 7 End of DecemberFinal Examination End of January

Chart B: Semester 2

If you want to start the course in January and complete it in May, you can follow the timeline suggested below.


Module 1 Middle of JanuaryModule 2 End of JanuaryModule 3 Middle of FebruaryModule 4 End of FebruaryModule 5 End of MarchModule 6 Middle of AprilModule 7 End of AprilFinal Examination End of May


Chart C: Full School Year (Not Semestered)

If you want to start the course in September and complete it in May, you can follow the timeline suggested below.


Module 1 End of SeptemberModule 2 End of OctoberModule 3 End of NovemberModule 4 End of DecemberModule 5 End of JanuaryModule 6 Middle of FebruaryModule 7 End of FebruaryFinal Examination End of May

Timelines

Do not wait until the last minute to complete your work, since your tutor/marker may not be available to mark it immediately. It may take a few weeks for your tutor/marker to assess your work and return it to you or your school.

If you need this course to graduate this school year, remember to schedule and complete your final examination by May 31.


When and How Will You Submit Completed Assignments?

When to Submit Assignments

While working on this course, you will submit completed assignments to your tutor/marker seven times. The following chart shows exactly what assignments you will be submitting at the end of each module.

Submission of AssignmentsSubmission Assignments You Will Submit

1 Module 1: Accounting Principles Review Module 1 Cover Sheet Assignment 1.1: Completing the Accounting Cycle for a Service Business

2 Module 2: Merchandising Firms Module 2 Cover Sheet Assignment 2.1: The Periodic Inventory System

3 Module 3: Merchandising Firms: The Perpetual Inventory System Module 3 Cover Sheet Assignment 3.1: The Perpetual Inventory System

4 Module 4: Special Journals Module 4 Cover Sheet Assignment 4.1: Using the Special Journal System

5 Module 5: Adjusting Entries Module 5 Cover Sheet Assignment 5.1: Advanced Adjustments

6 Module 6: Completing the Accounting Cycle Module 6 Cover Sheet Assignment 6.1: Completing the Accounting Cycle for a Merchandising Business

7 Module 7: Accounting in Action Module 7 Cover Sheet Assignment 7.1: Financial Analysis and Accounting as a Career


How to Submit Assignments

In this course, you have the choice of submitting your assignments either by mail or electronically. QQ Mail: Each time you mail something, you must include the print version of

the applicable Cover Sheet (found at the end of this Introduction).QQ Electronic submission: Each time you submit something electronically,

you must include the electronic version of the applicable Cover Sheet. You can use the Cover Sheets available on Blackboard Learn at https://bblearn.merlin.mb.ca or you can scan the Cover Sheets located at the end of this Introduction.

Complete the information at the top of each Cover Sheet before submitting it along with your assignments.

Submitting Your Assignments by Mail If you choose to mail your completed assignments, please photocopy/scan

all the materials first so that you will have a copy of your work in case your package goes missing. You will need to place the applicable module Cover Sheet and assignment(s) in an envelope, and address it to Distance Learning Unit 500–555 Main Street PO Box 2020 Winkler MB R6W 4B8

Your tutor/marker will mark your work and return it to you by mail.

Submitting Your Assignments Electronically Assignment submission options vary by course. Sometimes assignments can

be submitted electronically and sometimes they must be submitted by mail. Specific instructions on how to submit assignments were sent to you with this course. You can also obtain this information in the Grading and Evaluation section of the distance learning website at www.edu.gov.mb.ca/k12/dl/iso/assignments.html.

If you are submitting assignments electronically, make sure you have saved copies of them before you send them. That way, you can refer to your assignments when you discuss them with your tutor/marker. Also, if the original hand-in assignments are lost, you are able to resubmit them.

Your tutor/marker will mark your work and return it to you electronically.

The Independent Study Option office does not provide technical support for hardware-related issues. If troubleshooting is required, consult a professional computer technician.






What Are the Guide Graphics For?

Guide graphics are used throughout this course to identify and guide you in specific tasks. Each graphic has a specific purpose, as described below.

Accounting Standard: These accounting standards are known across Canada and must be remembered.

Assignment/Written Assignment: Complete an assignment. You will submit your completed assignments to your tutor/marker for assessment at the end of every module.

Examination: Write your final examination at this time.

Key Word: Note that a new important term is being explained.

Learning Activity: Complete a learning activity. This will help you to review or practise what you have learned and to prepare for an assignment or an examination. You will not submit learning activities to your tutor/marker. Instead, you will compare your responses to those provided in the Learning Activity Answer Key found at the end of the applicable module.

Learning Partner: Ask your learning partner to help you with this task.

Mail or Electronic Submission: Mail or electronically submit your completed assignment(s) to your tutor/marker for assessment at this time.

Note: Take note of and remember this important information or reminder.

Phone Your Tutor/Marker: Telephone your tutor/marker.

Remember: If you have questions or need help at any point during this course, contact your tutor/marker or ask your learning partner for help.Good luck with the course!


Notes


Module 1 Accounting Principles Review

M o d u l e 1 : A c c o u n t i n g P r i n c i p l e s R e v i e w 3

m o d u l e 1 : a c c o u n t i n G P r i n c i P l e S r e v i e w

Introduction

This module is essentially a review of the Grade 11 course. Accounting is a skill-based course. As such, foundational skills are needed in order to move on to the next level and continue to build your skill set. In this module, you will review the accounting procedures for each of the steps of the accounting cycle as they relate to service firms (a business that performs a service for a fee). Module 1 is designed to ensure you have the foundational skills, and you understand the basic concepts and principles of financial accounting before moving on to your next challenge: learning the accounting procedures required to complete the accounting cycle for a merchandising firm (a business that produces or sells goods in order to earn a profit).

This module is comprised of three lessons. There will be one learning activity at the end of each lesson and one assignment at the end of the module. The learning activities will help you prepare for the assignment. Remember, every module builds on the last, so it is important that you understand the concepts before moving on! If you are having trouble with a concept, review the course notes again, take another look at your learning activities, and seek help from a learning partner or your tutor/marker.

Assignments in Module 1

You will complete the following assignment, which you will send to your tutor/marker when you have completed Module 1.

Lesson Assignment Marks

3 Assignment 1.1: Completing the Accounting Cycle for a Service Business

70


Notes


l e S S o n 1 : a c c o u n t i n G c o n c e P t S r e v i e w

Lesson Focus

By the end of this lesson, you should be able toq define accountingq identify the role of accounting in businessq classify assets, liabilities, and owner’s equity accountsq demonstrate an understanding of the accounting equationq demonstrate an understanding of accounting standards and their

impact on accounting

Introduction

This lesson will review the basic accounting concepts covered in the Grade 11 Accounting course and will focus on accounting concepts related to a service business.

What Is Accounting?

A business is an organization that offers a product (good or service) to customers. There are many different types of businesses: small, medium, and large businesses; for-profit and not-for-profit businesses; businesses that offer services, businesses that sell merchandise, and businesses that manufacture items. No matter the type of business, they all require accounting.

Accounting is sometimes called “the language of business.” It involves identifying, measuring, recording, interpreting, and communicating the results of business activities. It is used as the basis of controlling resources, determining profits, and measuring accomplishments.


The Role of Accounting

The purpose of accounting is to provide decision makers with useful information to assist them in making business and economic decisions. Decision making is carried out by individuals, businesses, communities, organizations, and governments.

Account Classifications

As you just read, the accounting process involves a lot of activities so organization is important. One way this is done is by classifying accounts. Accounts are individual items that appear on the balance sheet; there is one account for each item affecting the financial position of a business. All of the accounts together form what is called the ledger. (You will review the ledger in Lesson 2.) For now, let’s take a look at the different account classifications for a service business.

Assets

Anything of value owned by a business is considered an asset. Assets are the economic resources of a business. Assets can be further classified as current assets or fixed assets.

Current assets are assets expected to be converted into cash within one year of the balance sheet (e.g., Cash, Accounts Receivable, Supplies).

Fixed assets are long-term, operating assets used within the business to generate revenue for several years beyond the balance sheet date (e.g., Office Equipment, Building, Land).

Liabilities

Money that is owed by a business is considered a liability. Liabilities are the claims of the creditors against the total assets. Liabilities can be further classified as current liabilities or long-term liabilities.

Current liabilities are debts owing which will be due within one year of the balance sheet date (e.g., Accounts Payable, Bank Loan Payable—when due within one year and also referred to as a demand loan).

Long-term liabilities are debts that normally are not due to be paid within one year of the balance sheet date (e.g., Mortgage Payable, Bank Loan Payable—when due in a period longer than one year).


Owner’s Equity

Owner’s Equity is the amount of money that an owner brings into the business. It is called capital or net worth and is the claim of the owner(s) against the total assets. Within the Owner’s Equity category there are two temporary account classifications: revenue and expense. QQ Revenues are an increase in equity resulting from the proceeds of the sale

of goods or services. QQ Expenses are a decrease in equity resulting from the costs of the materials

and services used to produce revenue.

The Accounting Equation

The accounting equation is a fundamental accounting concept and is the foundation of all financial accounting procedures. The accounting equation is Assets = Liabilities + Owner’s Equity

Example: Doug’s Doggy Daycare

ASSETSCashAccounts Receivable—F. MontgomerySuppliesEquipmentTotal Assets

$18,000.001,500.00

20,000.0030,000.00

$69,500.00

LIABILITIESAccounts Payable—Dog Treats, Inc.Accounts Payable—Puppy PlaysetsBank LoanTotal Liabilities

$5,000.002,000.00

20,000.00$27,000.00

Let’s complete the accounting equation. Assets = Liabilities + Owner’s Equity $69,500.00 = $27,000.00 + ?

Using the accounting equation to solve for the unknown, you get $69,500.00 - $27,000.00 = $42,500.00

$42,500.00 represents the Owner’s Equity or claim against the total assets.


The accounting equation basically explains how Doug’s Doggy Daycare’s assets were accumulated: credit was granted and money was borrowed to acquire them (liabilities) and the owner invested some of his own personal assets (owner’s equity). Another way of saying this is that the owner currently has $69,500.00 in assets. In order to accumulate those assets, he acquired debts totaling $27,000.00. He has also invested $42,500 of personal assets into this business.

Note: If the accounting equation does not balance, then a financial error has been made. It is important that the accounting equation balance after every financial transaction!

Accounting Standards

Accounting standards are standards that must be followed by all accountants so that there is consistency (standardization) in the industry. In the Grade 11 course, you learned about the following accounting standards:QQ Business Entity Principle—Businesses must keep their finances separate

from the personal finances of the owners.QQ Time Period Principle—Businesses must consistently use the same time

period for their financial records.QQ Matching Principle—Businesses must match revenue against expenses for

a specific accounting period.QQ Revenue Recognition Principle—Revenue must be recognized and

recorded at the time of the sales of goods and services.QQ Expense Recognition Principle—Expenses must be recognized and

recorded when they are incurred while making revenue.QQ Objectivity Principle—A transaction is only recorded when there is

written proof (source document) that the transaction occurred.QQ Cost Principle—Assets must be listed on the balance sheet in the amount

of their original cost.

Standardization is important in accounting; anyone looking at financial records and statements must be able to expect that accounting standards have been followed so that they can make informed financial decisions. Accountants must follow these accounting standards in their practice. Throughout this course, you will continue to apply these and several new accounting standards to all of your accounting work.


Learning Activity 1.1

Accounting is a skill-based course so it is important that you complete all learning activities to ensure you understand the concepts in the lesson. The next lesson will build on this knowledge.1. Answer the following questions:

a) What are the five activities involved in the function of accounting?b) What is the purpose of accounting?c) List at least three different groups of people who may make decisions

based on accounting information.

2. Accounts are classified for organizational purposes. Review the following list of accounts or financial items and identify the correct account classification from the following choices:

a) Current Asset b) Fixed Asset c) Current Liability d) Long-Term Liability e) Owner’s Equity f) Revenue g) Expense

Account or Financial Item

Classification

CashTelephone BillFees EarnedGST PayableEquipmentDrawingsTruckAccounts ReceivableMortgage PayableBank Loan (on demand)CapitalAdvertising CostSupplies

continued


Learning Activity 1.1 (continued)

3. The accounting equation is Assets = Liabilities + Owner’s Equity. Use the accounting equation to calculate the missing figures in the table below.

Assets Liabilities Owner’s Equity

$560,000.00 $390,500.00$18,000.00 $67,450.00

$36,700.00 $4,300.00$12,425.50 $8,200.00

$199,546.25 $65,489.00

4. Consistency and standardization are important in accounting; therefore, all accountants must follow the Accounting Standards. Read each scenario below and match it with the applicable accounting standard being questioned or described. Your choices are listed below. Hint: Each accounting standard is used only once; however, one of the scenarios applies to two standards. a) Business Entity Principleb) Time Period Principlec) Matching Principled) Revenue Recognition Principlee) Expense Recognition Principlef) Objectivity Principleg) Cost Principle

Scenario AccountingStandard

Jill got a great deal on a delivery truck for her new business. She paid $17,000.00 for it but has been told it is really valued at $25,000.00. She is not sure what amount she should record.Nick is meeting with some potential investors next week and they would like to see his July Income Statement. He did not have a great month in July, so he is thinking of just substituting the revenue he earned in June on the July statement.Sara purchased airline tickets for her family to take a vacation. She is wondering if she can include this as a Travel Expense on her floral business’ books.Jon’s accountant is going to be away at their typical year-end so he is thinking of changing the fiscal period for this year to 14 months instead of 12 months.Syeda purchased advertising for her new hair salon. The total bill is not due for six months so she is planning on waiting until she actually pays the bill before she records anything. Manvir purchased office supplies for his business. He threw out the receipt as he sees no need to keep it.


End-of-Lesson Checklist

QQ Now that you have completed Learning Activity 1.1, use the Module 1 Learning Activity Answer Key to ensure that your answers are correct. It is found at the end of Module 1.

QQ Go back to the lesson focus at the beginning of this lesson. Are you able to do everything on the list? If not, you may need to go back and review a few things. Remember, the next lesson builds on the outcomes you just finished.


Notes

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Released 2017

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