Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Make your likes visible on Facebook?

Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.

No, thanks

Accounting 101 - Study Guide for Grade 11 Accounting

Hey Everyone! This is a presentation on important things you should have learned in Accounting in Grade 11
by

Alexzandrea HInds

on 28 January 2013

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Accounting 101 - Study Guide for Grade 11 Accounting

The Accountant and Accounting Clerk What is Accounting? There are five main activities that involve accounting: ACCOUNTING 101 By: Alexzandrea Hinds The Balance Sheet A balance sheet is a statement showing the financial position of a person, business or other organization. General Accepted Accounting Principles GAAP's are guidelines established by professional accountants to be followed in the preparation of accounting records and financial statements Debit and Credit Theory Debit Ledger Accounts The Journal The Two-Column General Journal Trial Balance A trial balance is a listing of the account balances in a ledger. Income Statement Accounting is a system of dealing with financial information that provides for decision-making A knowledge of accounting can be beneficial when:
Owning a own business
Everyday Life
On the job
Making it a Profession gathering financial information
preparing and collecting permanent records
rearranging, summarizing and classifying financial information
preparing information reports and summaries
establishing controls to promote accuracy and honesty among employees TYPES OF BUSINESS 1. THE SERVICE BUSINESS
Sells a service to the public
i.e Hair Salon, Dental Clinic, Car Repairs etc.
2. THE MERCHANDISING BUSINESS
Buys goods and resells them to the public
i.e Grocery Stores, Clothing Outlets etc.
3. THE MANUFACTURING BUSINESS
Buys raw materials and turns it into something new
Produces raw materials
i.e Farms, Steel mills, Construction Companies etc.
4. THE NON-PROFIT ORGANIZATION
Does not earn a profit but provides a social need
i.e A Church, Community Center, Organization etc. Accounting Clerk vs Accountant The work of an accounting clerk is clerical in nature and deals with routine matters, making payroll calculations and records accounting entries in the books of the accounts
The work of an accountant is to ensure all GAAP's are followed, prepares reports based on data produced by the accounting system, has a professional high-level position and participates in management meetings The Accounting Cycle Later on, the accounting cycle will be easier to understand because of everything learned but here is a sneak peak 1. Transactions occur 2. Transactions
recorded in journal 3. Journal entries posted to the
ledger accounts 4.Trial balance and interim financial
statements prepared 5. Work sheet prepared 6. Formal financial
statements prepared 7. Ledger accounts adjusted
and closed 8. post-closing trial balance
prepared The first 4 are tasks done day to day and every month of the fiscal period. The other 4 are tasks done near the end of the fiscal period. i.e This is an
example of a
balance sheet
on a spreadsheet Determining Financial Position Assets - a list and total of things that you own that have a dollar value Liabilities - a list and total of debts Owner's Equity - The difference of the total assets and the total liabilities. The difference is known as Capital. Fundmental Accounting Equation A = L + OE Derivatives A - L = OE
A - OE = L Claims Against the Assets The Owner and the creditors have claims on the assets, however, creditors are settled first when closing down the business; the owner than can benefit off of what's left. (GAAP) There are multiple guidelines to learn and many will be added throughout the course GAAP - The Business Entity Concept The business entity concept provides that accounting for a business organization must be kept separate from the personal affairs of its owner, or from any other business of organization (The owner must keep all personal assets - personal.) All personal transactions made must be deducted from the business accounts GAAP - The Continuing Concern Concept The continuing concern concept assumes that a business will continue to operate unless it is known that it will not. This is also known as the going concern concept.
The dollar value associated with a business that is alive and well are straightforward GAAP - The Principle of Conservatism The principle of conservatism provides that accounting for a business should be fair and reasonable Accountants are required to makes sure that all estimates and evaluations are accurate. They do it in a way that assets or profits are neither over or underestimated. GAAP - The Objectivity Principle The objectivity principle states that accounting will be recorded on the basis of objective evidence
The department dealing with evidence will have the same values for transactions and only will record with facts not opinions
Source documents back up the objectivity principle very well These are the steps made during the fiscal period; They are continous throughout the period is associated with the increases on accounts involving the assets, expenses and drawings in the business. i.e Supplies; Miscellaneous Expense; A.Hinds, Drawings. When credit accounts are debited, they decrease i.e Accounts Payable. Credit is associated with the increase on accounts involving the liabilities, capital and revenue. i.e Bank Loan; A.Hinds, Capital; fees earned. When debit accounts are credited, they decrease i.e. Bank Double - Entry System of Accounting The system of accounting in general use in which every transaction is recorded both as a debit in one or more accounts and as a credit in one or more accounts. Under this system, the total of the debit entries equals the total number of the credit entries. an account is a page specially designed to record the changes in each individual item affecting the financial position. There is one account for each such item
All of the accounts together is called a Ledger, which is a group or file of accounts
The accounts in a ledger can be taken from the balance sheet's opening balances
Ledgers have four important features
1. Each individual balance sheet item is given its own specially divided page with the name at the top.
2. The dollar value for each item is recorded on the first line. This is the beginning value.
3. All values must be recorded on the appropiate side (either debit or credit).
4. A balance sheet and a ledger both show financial position On Account Terminology 1. If an item is purchased on credit, this means it was not paid for at the time. This is called purchase on account
2. When an item is sold on credit, it was not paid for at the time. This is called sale on account.
3. When money is paid out to a creditor to pay for money owed to them, this is known as payment on account
4. When payment is received to reduce an amount owed, this is known as receipt on account Expectational Account Balances Asset Occasionally, an account would have a debit balance will end up having a credit balance or vise versa.
Reasons for having an exceptional balance in an account can be:
1. you overpaid an accounts payable
2. an unsatisfied customer returns merchandise
3. you return goods to a company Let's say someone make a receipt on account of 100 dollar but what they owed was $75. They paid $25 more dollars than what is needed leaving the accounts receivable account with a credit balance of $25. Liability Let's say you make a payment on account of $42 dollars but you only owed 36. The accounts payable balance would be debited by $6 dollars. A/R - The rich person $125 $100 $25 A/P - The Lucky Company $42 $36 $6 Assets Liabilites Owner's Equity Revenue Expenses Current Assets Fixed Assets Bank
Accounts Receivable
Supplies
Prepaid Insurance Equipment
Truck or Automobile
Land / Building
Less or More Accumulated Depreciation Current Liabilities Accounts Payable
PST Payable
GST Payable
Less or More GST Recoverable Long-Term Liabilities Bank Loan
Mortgage Payable Person's Name, Capital
R.Andomname, Drawings Fees Earned
Commission
Interest Earned
Whatever task it is and what is earned Bank Charges
Depreciation
General
Insurance
Miscellaneous
Rent
Supplies
Telephone
Utilities
Wages Possible Ledger Accounts Temporary Account Income Summary It helps determine whether all of the accounts are in balance. Taking off a trial balance is normally done at the end of each month. Steps for taking off a Trial Balance 1. List all account in the order of Assets, Liabilities, Owner's Equity, Revenue and Expenses (ALOREX) and their balances
2. Balance all debit accounts in the debit column and all credits in the credit column
3. Add up the two columns (make sure the totals are on the same line, they are double underlined, and agree with each other)
4. Check to see if both columns have the same value. If they do not, apply the quick tests to make the ledger balance (Seen Later)
5. Write a heading at the top, The heading "Trial Balance" and the date the sheet was made. Equity Section
and
Additions to
the Balance Sheet GAAP - The Time Period Concept GAAP - The Matching Principle Chart of Accounts Assets: 100 - 199
Liabilities: 200 - 299
Owner's Equity: 300 - 399
Revenue: 400 - 499
Expense: 500 - 599 Source Documents Adjusting Entries Closing Entries Worksheet Taxes A journal is a book in which the accounting entries for all transactions are first recorded. It is also know as the book of original entry because each balanced accounting entry is recorded there first.
A journal entry is made up of all of the accounting changes for one transaction, in the form in which they are writeen up in a general journal.
Journalizing is the process of recording accounting entries in the journal

Important things about journal entries:
Recording the date
1. The year is entered on the first line of each page; Don't repeat for each entry.
2. The month is entered on the first line of each page; Don't repeat unless new month occurs on the same page
3. Record the day on the first line of each journal entry

Steps in Recording Journal Entries:
Enter the date
Enter the name(s) of the account(s) being debited with the value in the debit column
Enter the name(s) of the account(s) being credited indented by 1.5 cm with the value in the credit column
Write a brief explanation for each entry underneath the last credit item The Revenue Recognition Convention The revenue recognition convention states that revenue must be recorded in the accounts (recognized) at the time the transaction is completed. (Recording revenue when a bill is sent to a customer)
Revenue is taken into accounts on a periodic basis The time period concept provides that accounting will take place over specific time periods known as fiscal periods
These fiscal periods are of equal length and are used when measuring the financial progress of the business The matching principle states that each expense item related to the revenue earned must be recorded in the same period as the revenue it helped to earn
Sometimes it can be simple to record revenue made just by matching up the numbers in the same period
Other times, it can be difficult to record revenue because it affects more than one period. A chart of accounts is a list of the ledger accounts and their numbers arranged in ledger order
Normally, there is a gap between each account in case new ones are added. A source document is a business paper that shows the nature of a transaction and provides all of the information needed to account for properly.
There are over several types of source documents commonly used to record entries for the accounting department. PST The provincial sales tax was created to raise funds
A retail sales tax is a % tax based on the value of goods sold to the customer
PST is a liability and can not be remitted back to business; it must be paid for every month
The PST tax rate is 8%. GST The goods and services tax is a tax on the sale of most goods and services.
There are two aspects to the GST tax:
1. When items are sold, the GST can function like the PST tax. It is collected from the customer and remitted to the government
2. When items are purchased, the GST paid can be refunded back to the consumer.
The GST tax rate is 5% HST The harmonized sales tax is the combination of both the PST and GST.
The HST tax rate is 13% Calculating Remittance of the GST Tax If the GST Payable account has a greater value than the GST Recoverable account, the bank decreases, like in the example.
If the GST Payable account has a lower value than the GST Recoverable account, the bank increases. Owner's Equity When recording a balance sheet at the end of the fiscal period, changes are made to the balance sheet
The equity section now includes the balance of the capital from the year before, the net income or net loss, drawings, the increase or decrease in capital and the new balance
This helps determine the financial position and any changes made throughout the year. Taxes Taxes are recorded in the Liability Section
They are current liabilities and the GST remittance is calculated in that section An Income statement is a financial statement that summarizes the items of revenue and expense and shows the net income or net loss of a business for a given time period. Sequence of Balancing Steps Step 1. Re-add trial balance columns
Step 2. Check transfer of account balances from ledger to trial balance
Step 3. Re-add from point of previous balance. Double-check account indicator (i.e. DR or CR)
Step 4. Check postings from point of previous balance.
Watch for:
incorrect amounts
amounts not posted
amounts posted twice
amounts posted in wrong column
Step 5. Check to see each journal entry balances Start take off trial balance Does the trial balance balance? yes no file trial balance for future reference End Apply the four tests Does the trial balance balance ? yes no Perform next step in balancing sequence Any errors found? no yes make corrections and recalculate trial balance totals The initial step in any of the quick tests is to calculate the trial balance difference - the amount by which the trial balance is out. Test 1. If the difference is a multiple of 10 (like $10, $100 etc), there was most likely an addition was most likely made
Test 2. Check both the ledger and the journal to see if the trial balance difference is equal to an amount entered in the ledger or the journal.
Test 3. Divide the trial balance difference by two. Then search the trial balance and ledger accounts for this divided out amount. Look to see if a debit amount has been posted or transferred as a credit, or vise versa. This is known as a twice of the amount of the error.
Test 4. If the trial balance has a difference of 9, it's most likely a transportation error. Posting Introduced in this chapter: The balance column account has three money columns: one for debit amounts, one for credit amounts and a separate one for the balance Opening an account:
Step 1. Obtain unused account page
Step 2. Write the name for the new account at the top of the page
Step 3. Write in account number (chart of numbers)
Step 4. Insert new account in its proper place in the ledger Posting is the process of transferring information from the journal to the ledger Six steps in Posting:
1. Turn to the proper account in the ledger.
2. Record the date. Use next unused line in the account.
3. Record the page number from the journal (i.e. J12) in the P.R. column (The page number is found at the top)
4. Record the amount. Debit amounts in the debit column and credit amounts in the credit column.
5. Calculate and enter the new account balance in the balance column and indicate whether the balance is debit or credit in DR/CR column.
6. Record the account number to which the posting was made in the P.R. column on the same line as the amount being posted When preparing financial statements , the accountants must ensure that:
all accounts are brought up to date
all late transactions are taken into account
all calculations have been made correctly
all GAAP's have been complied with Adjusting Entries is an entry made before finalizing the books for the period to apportion amounts of revenue or expenses to the proper accounting period or operating divisions Normally, the adjusting entries are done at the end of the fiscal period and recorded on the last day.
Some of these transactions consist of supplies expense (supplies used for the fiscal period), Insurance expense (The amount of prepaid insurance used for the fiscal period) and Late Purchase such as supplies, telephone bills etc. A worksheet is an informal business paper used to organize and plan the information for the financial statements All accounts receivable accounts are put under one controlled account;
All accounts payable accounts are put under one controlled account as well Steps in preparing a Work Sheet Step 1. Write a headings
Step 2. Enter all account in the first two columns and take off a trial balance (It is essential that your triaL balance columns are correct before continuing)
Step 3. Make all necessary adjustments in the adjustments
Step 4. Extend the amounts to the
Full transcript