Introduction to Introduction to Financial Accounting Financial Accounting

Grade 11 Grade 11 University/College Preparation University/College Preparation

BAF3MIBAF3MI Room 214Room 214

Mr. D. RourkeMr. D. Rourke

Classroom Requirements:Classroom Requirements:

1.1. Come to class prepared! Come to class prepared! 2.2. Pencil!Pencil! 3.3. Binder, workbook, textbook & lined paper.Binder, workbook, textbook & lined paper. 4.4. CalculatorCalculator 5.5. Date, title and organize all notes, tests and Date, title and organize all notes, tests and

handouts in your binder.handouts in your binder. 5.5. Have a friend pick up assignments and Have a friend pick up assignments and

handouts should you be absent from class.handouts should you be absent from class. 6.6. Check website for assigned work.Check website for assigned work.

www.wah.bwdsb.on.cawww.wah.bwdsb.on.ca

AssessmentAssessment

Audits 10%Audits 10% Assignments 15%Assignments 15% Tests 45%Tests 45% Final Exam 30%Final Exam 30% The final examination consists of sixty The final examination consists of sixty

multiple choice questions and five multiple choice questions and five problems.problems.

Learning skills.Learning skills.

Principles of AccountingPrinciples of Accounting 3rd Edition 3rd Edition

D'Amico, Palmer, D'AmicoD'Amico, Palmer, D'Amico©2002©2002

Chapter One – The Balance SheetChapter One – The Balance Sheet

Unit One – Financial PositionUnit One – Financial Position

What Learning You Will Demonstrate:What Learning You Will Demonstrate: determine the financial position of a business determine the financial position of a business classify items as assets, liabilities, or owner's classify items as assets, liabilities, or owner's

equity equity calculate owner's equity calculate owner's equity prepare a balance sheet and prepare a balance sheet and use correct recording procedures use correct recording procedures

The Purpose of AccountingThe Purpose of Accounting

to provide financial information for decision to provide financial information for decision making.making.

What does a person require in What does a person require in order to begin a business?order to begin a business?

AssetsAssets items of value owned by a person or businessitems of value owned by a person or business Something a person or business owns.Something a person or business owns.

Categories:Categories:

1.1. Cash - currency, cheques, money orders, bank deposits.Cash - currency, cheques, money orders, bank deposits.2.2. Accounts Receivable - total amount due from customers.Accounts Receivable - total amount due from customers.3.3. Government BondsGovernment Bonds4.4. FurnitureFurniture5.5. Office EquipmentOffice Equipment6.6. Automobiles - cars, trucksAutomobiles - cars, trucks7.7. LandLand8.8. BuildingsBuildings

How does a business acquire these How does a business acquire these assets?assets?

1.1. BorrowingBorrowing

2.2. Investment by the owner(s)Investment by the owner(s)

Creditor - a person/business to whom money or goods is owed.

Debtor - a person/business who owes money or goods.

Borrowing = Debt = LiabilitiesBorrowing = Debt = Liabilities

LiabilitiesLiabilities - the debts of a business or person. - the debts of a business or person. - something a business or person owes.- something a business or person owes.

Categories:Categories:

1.1. LoansLoans2.2. Accounts Payable - amounts owing to creditors Accounts Payable - amounts owing to creditors

for purchases of goods and services.for purchases of goods and services.3.3. Mortgage - a long-term debt where the building or Mortgage - a long-term debt where the building or

land is used as collateral for the debt.land is used as collateral for the debt.

Investment by the owner(s) =Investment by the owner(s) =

Owner’s Equity Owner’s Equity

Owner’s EquityOwner’s Equity - claim of the owner against the asset of - claim of the owner against the asset of the business.the business.

Personal Equity (Net Worth)Personal Equity (Net Worth) - the difference between - the difference between the cost of items owned and debts owed.the cost of items owned and debts owed.

The Balance Sheet EquationThe Balance Sheet Equation

Assets = Liabilities + Owner’s EquityAssets = Liabilities + Owner’s Equity

$57 000 = $12 000 + ?$57 000 = $12 000 + ?

$57 000 = $12 000 + $45 000 $57 000 = $12 000 + $45 000

Do exercises 1 – 3, page 13Do exercises 1 – 3, page 13

Balance SheetBalance Sheet

a financial statement that lists the assets, a financial statement that lists the assets, liabilities and owner’s equity at a specific liabilities and owner’s equity at a specific date.date.

Assets are listed in their order of liquidity Assets are listed in their order of liquidity (the order they would likely be converted (the order they would likely be converted into cash).into cash).

Liabilities are listed according to the order Liabilities are listed according to the order they are due to be paid (maturity order).they are due to be paid (maturity order).

GAAPsGAAPs

Generally Accepted Accounting Generally Accepted Accounting Principles (GAAPs)Principles (GAAPs) - standard - standard accounting rules and guidelines.accounting rules and guidelines.

GAAPsGAAPs

Business Entity PrincipleBusiness Entity Principle-requires that -requires that each business be considered a separate each business be considered a separate entity, and that the financial data for the entity, and that the financial data for the business be kept separate from the business be kept separate from the owner’s personal financial data.owner’s personal financial data.

GAAPsGAAPs

Cost Principle Cost Principle – assets are shown on the – assets are shown on the balance sheet at the cost of their balance sheet at the cost of their acquisition.acquisition.

Do exercises 4 – 8, pages 13 & 14Do exercises 4 – 8, pages 13 & 14

Chapter One – The Balance SheetChapter One – The Balance Sheet

Unit Two – Business TransactionsUnit Two – Business Transactions

When Learning You Will Demonstrate the skills When Learning You Will Demonstrate the skills necessary to:necessary to:

Record trans actions that will affect assets, Record trans actions that will affect assets, liabilities and owner’s equity on a transaction liabilities and owner’s equity on a transaction analysis sheet.analysis sheet.

Prove the mathematical accuracy of a Prove the mathematical accuracy of a transaction analysis sheet, andtransaction analysis sheet, and

Prepare a balance sheet from a completed Prepare a balance sheet from a completed transaction sheet.transaction sheet.

Business TransactionBusiness Transaction

An exchange of things of value.An exchange of things of value. a financial event that affects Assets, a financial event that affects Assets,

Liabilities or Owner’s Equity.Liabilities or Owner’s Equity.

The term The term “accounting period”“accounting period” refers to the refers to the length of time between the preparation of length of time between the preparation of financial reports.financial reports.

Do exercises 9 – 14, pages 21 – 24.Do exercises 9 – 14, pages 21 – 24.