Accounting 1
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Course Introduction

 

Core Standards of the Course

STRAND 1
Generally Accepted Accounting Principles. Students will define (GAAP) generally accepted accounting principles and basic business structures.

Standard 1
Define accounting and generally accepted accounting principles (GAAP). Accounting: The collecting, recording, and reporting of financial information. GAAP: Generally Accepted accounting principles. GAAP concepts:

1. Business Entity: A principle that treats a business as separate from its owners for accounting purposes. independent of government or personal accounts.
   
2. Going Concern: The assumption that a business will continue to operate unless evidence suggests otherwise.
   
3. Accounting Period: Dividing financial activities into specific time periods for reporting, like fiscal years.
   
4. Revenue Recognition: Determining when and how revenue should be recorded based on the nature of
   

Standard 2

1. Indentify each step of the accounting cycle
   
   • Step 1 - Analyze business transactions to determine debit(s) and credit(s) and the use of a T-account.
   • Step 2 - Journalize transactions in a general journal
   • Step 3 - Post debit(s) and credit(s) from the general journal to ledger
   • Step 4 - Prepare a trial balance to prove that debits equal credits
   • Step 5 - Prepare the following financial statements:
   • Income Statement (profit and loss)
   • Balance sheet
   • Step 6 - Journalize and post-closing entries
   • Step 7 - Prepare post-closing trial balance
2. Definitions of key terms and concepts.
   
   • T-Accounts: A tool used to analyze transactions
   • Debits: The amount recorded on the left side of the T-account
   • Credits: The amount recorded on the right side of the T-account
   • General Journal: A chronological record of all financial transactions.
   • General Ledger: A collection of the summary of all accounts used by a business.
   • Trial Balance: A list of account balances to prove that debits equal credits in the ledger.
   • Income Statement: Shows revenues and expenses to calculate net income over a period of time.
   • Balance Sheet: Provides a snapshot of a business's financial position with the accounting equation.
   • Closing Entries: Entries made to reset temporary accounts for the next accounting period.
   • Post-Closing Trial Balance: A list of permanent account balances after closing entries have been made to ensure balance before a new period.

Standard 3
Identify and explain business structures

1. Identify and differentiate among the three forms of business ownership.
   
   • Sole proprietorship: A sole proprietorship is a simple and common structure chosen to start a business. It is owned and run by one individual with no distinction between the business and you, the owner. The owner is entitled to all profits and is responsible for all your business's debts, losses, and liabilities.
   • Partnership: an arrangement between two or more people to oversee business operations and share its profits and liabilities.
2. Identify and differentiate among the three types of businesses.
   
   • Service: focus on intangible services and primarily track service revenue and expenses.
   • Merchandising: A business that purchases and resells goods.
   • Manufacturing: A business that uses raw materials to create goods for wholesalers.

STRAND 2
Accounting Equation. Students will identify the three basic accounting equation elements, apply them to accounts, and use them in the accounting equation.

Standard 1
Identify the characteristics of an asset, liability, and owner's equity.

1. Asset: property owned by the business
   
2. Liability: creditors' financial claim to assets (debt)
   
3. Owner's Equity: an owner's financial claim to assets
   
4. Explain the classifications of accounts as assets, liabilities, or owner's equity.
   

Standard 2
Demonstrate an understanding of the fundamental accounting equation.

1. Accounting equation: Assets = Liabilities + Owner's Equity
   
2. Explain why the accounting equation must be in balance to ensure that GAAP are met
   
3. Demonstrate how to find the missing variable in the accounting equation.
   

Performance Skills

1. Calculate missing elements of the accounting equation.
   
2. Classify various accounts as either assets, liabilities, or owner's equity.
   

STRAND 3
Double Entry Accounting. Students will explain the process of analyzing transactions using double-entry accounting and T-accounts to determine debit(s), credit(s) and normal balance.

Standard 1
Explain the basic steps of double-entry accounting in business transactions.

1. Double-entry accounting: recording the debits and credits of each transaction that will affect at least two accounts. Using the following steps
   
   • Identify which accounts are affected.
   • Classify the affected accountsas an asset, liability, or owner's equity.
   • Determine the affected accounts and the amounts that will increase or decrease.
   • Identify increase, decrease, and normal balance of assets, liability and owner's equity accounts.
2. Normal Balance: The normal balance in accounting is always on the increase side (debit or credit) of an account used to record changes in that account.
   

Standard 2
Analyze how debit and credits affect each individual account.

Standard 3
Explain how to use T-accounts as a tool to analyze business transactions into debit(s) and credit(s).

1. Label a T-account
   
2. Enter the debit(s) and credit(s) on the T-account
   
3. Recognize the effect of debit(s) and credit(s) on the accounting equation using T-accounts.
   
4. Identify the normal balancefor each account.
   
5. Verify the accounting equation is in balance.
   
6. Assets organized by liquidity: How quickly an asset can be converted into cash or used to settle obligations.
   
7. Liabilities are organized alphabetically
   
8. Owner's Equityare organized alphabetically
   
   • Capital
   • Revenue, Sales or Service
   • Expenses
   • Withdrawal
9. Chart of Accounts frequently used numbering system includes the following:
   
   • Assets = 100s
   • Liabilities = 200s
   • Capital = 300s
   • Revenue = 400s
   • Expenses = 500s

Performance Skills
Double-entry Accounting

1. Create a chart of accounts
   
2. Calculate changes to accounts using double-entry accounting while keeping the accounting equation in balance.
   
3. Analyze transactions that increase/decrease assets, liabilities and owner's capital accounts, record them in T-accounts, and prove the equality of debits and credits
   

STRAND 4
Journal Entries. Students will identify and use source documents to journalize transactions in the general journal, post journal entries to the general ledger, and prepare a trial balance. Define a trial balance: a financial report in which the balances of all ledgers are compiled into debit and credit account column totals that are equal.

Standard 1
Compare and contrast the differences in the following source documents: Source Documents: Documents that provide evidence of a financial transaction.

1. Checks - cash purchases
   
2. Invoices - sales on account
   
3. Receipts - provided to customer for cash transactions
   
4. Memorandums - when other source documents are not produced or available
   
5. Cash Register Tape - cash received from sales for that day
   

Standard 2
Demonstrate and explain the purpose of the general journal and journalize transactions by analyzing source documents.

1. Explain the Purpose of a General Journal.
   
   • General Journal: is used to maintain accurate chronological records and ensure the accounting equation remains balanced.

Standard 3
Demonstrate and explain the purpose of the general ledger and post debits and credits from the general

1. Explain the Purpose of a General Ledger account
   
   • General ledger is used to compile all financial transactions of a business creating a comprehensive and detailed record of the company's entire financial activity.
2. Steps to recording transactions in the general ledger
   
   • Post information from the general journal to the general ledger.
3. Steps to recording transactions in the general ledger
   
   • Calculate and record new account balance.
4. Steps to recording transactions in the general ledger
   
   • Explain how to trace a transaction back to its source. Methods may include post-referencing or audit trail.

Standard 4
Create a trial balance. Clarify the concept of ensuring that debits and credits are in equilibrium, even though they may not always signify accuracy.

1. Identify the proper order of accounts on a trial balance.
   
2. Identify and use mathematical methods for locating and correcting errors shown by the trial balance
   
   • Difference of 1, 10, 100, 1000, (typically refers to addition error)
   • Evenly divided by 9 (typically refers to transposition or slide error)
   • Evenly divided by 2 (typically refers to a debit or credit in the wrong location)
   • Same amount as a transaction (typically omitted a debit or credit)
3. Journalize and post correcting entries.
   
   • Correcting an error in posting to the wrong account
   • Correcting an incorrect amount and an amount posted to the wrong column
   • Recording a debit or a credit in the wrong account.
4. Common posting errors include (but are not limited to):
   
   • Omitting journal entry
5. Common posting errors include (but are not limited to):
   
   • Reversing the debit and credit in a transaction.
6. Common posting errors include (but are not limited to):
   
   • Recording a debit or a credit in the wrong account.

Performance Skills

1. Analyze and journalize business transactions using source documents.
   
2. Post debit(s) and credit(s) from a general journal to accounts in the general ledger.
   
3. Prepare a trial balance.
   
4. Analyze, journalize and post correcting entries
   

STRAND 5
Financial Statements. Students will describe the process of creating the income statement and balance sheet.

Standard 1
Identify the appropriate headings for the income statement and balance sheet.

1. Company name
   
2. Report name
   
3. Date (income statement -> period of time, balance statement -> specific point in time)
   

Standard 2
Explain the process of creating an income statement. Income Statement: a document used to report the profit or loss of an entity. (P&L statement)

1. Identify the elements of an income statement.
   
2. Revenue: is the total money a business brings in from selling its goods or services.
   
3. Expenses: are the costs a business incurs in order to operate and produce its goods or services
   
4. Net income: Net income is the total profit of a business after all expenses and taxes have been subtracted from its revenue.
   
5. Net loss: If expenses exceed revenue, the result is a net loss.
   
6. Explain the formula to calculate the net income.
   

Standard 3
Define ending capital and the calculation for the ending capital account balance.

1. Identify elements that change in capital- Net income (net loss), Withdrawals/drawing, Investments
   
2. Define Capital: in accounting refers to the money invested in a business by its owners. The funds used to start or grow the business.
   
   • Net income or Net loss
   • Withdrawals/drawing
   • Investments
   • Compute the ending account balance
3. Explain the formula to calculate ending capital
   
   • Beginning capital+ investments +/- net income (net loss) - withdrawals/drawing= endingcapital (statement of changes in owners equity)

Standard 4
Explain the process of creating a balance sheet.

1. Identify the elements of a balance sheet.
   
   • Assets
   • Liabilities
   • Owner's Equity (ending capital)
2. Explain the relationship between the balance sheet and the accounting equation.
   
   • This is the Aha "Oprah Moment" where students should realize that they have been learning this the whole time.
3. Explain the relationship between the balance sheet and the income statement.
   
   • The profit or loss (net income or net loss) from the income statement affects the equity section of the balance sheet.

Performance Skills
Prepare an income statement and a balance sheet

STRAND 6
Closing Process. Students will describe how to close an accounting period

Standard 1
Identify and describe the purpose of permanent and temporary accounts.

1. Permanent: assets, liabilities and capital
   
2. Temporary: revenue, expenses and withdrawals/drawing
   

Standard 2
Define a closing entry and describe how closing entries change capital (e.g. net income increases capital, net loss and withdrawals/drawing decreases capital) Closing entry: A journal entry to zero out a temporary account.

Standard 3
Describe the difference between a trial balance and a post-closing trial balance.

1. Post-closing trial balance: a list of balances from the general ledger after closing entries are made, ensuring only permanent accounts remain active and that total debits equal total credits.
   

Performance Skill
Analyze, journalize, and post closing entries and prepare a post-closing trial balance.

STRAND 7
Cash Control. Students will explain the importance of cash control documents and systems in relation to the protection of the business' cash.

Standard 1
Define and describe banking documents. Banking Documents: deposit slips, checks, bank statements, electronic fund transfers (EFTs), debit card transactions

1. Define the information needed to produce banking documents.
   
2. Describe the types of check endorsements (blank, restrictive, and special) and when they would be used
   
3. Endorsements: a signature or a stamp that is placed on the bank to show the transferof ownership.
   
4. Discuss internal controls to mitigate fraud and unethical behaviors (using a cash register and safe, daily cash deposits, and segregation of duties)
   
5. Explain the three elements of the fraud triangle (opportunity, pressure, rationalization) and the relation to internal controls.
   

Standard 2
Describe the process of reconciling a bank statement with the checkbook balance and identify the necessary journal entries.

1. Define the information needed to reconcile the bank statement with the checkbook
   
2. Identify the journal entries needed to update the general ledger cash balance (service charges and non-sufficient funds charges and checks)
   
3. Prove the cash balance by using the checkbook, bank statement, and general ledger cash balance.
   

Standard 3
Describe the process and purpose of a Petty Cash fund and includethe controls used to manage it.

1. Establish a petty cash fund by creating a journal entry in the general journal.
   
2. Complete a petty cash slip or form to account for cash usage
   
3. Reconcile the petty cash account
   
4. Replenish the petty cash account
   

Performance Skill

1. Prepare deposit slips, checks, and bank reconciliation.
   
2. Analyze, journalize and post journalentries related to bank reconciliation
   
3. Complete the process to establish and replenish a Petty Cash fund (journalentry, complete form or slip, reconcile and replenish)
   

STRAND 8
Pathways, Post Secondary, and Careers. Students will understand the opportunities to graduate as a pathway completer, the post-secondary programs, and Career opportunities in Finance.

Standard 1
The Finance Pathway

1. Explorer Courses: Small Business Math & Startup, Economics, and Investing & Wealth Management, Real Estate, and Business Law.
   

Standard 1
The Finance Pathway

1. Concentrator Courses: Accounting 2, and Advanced Accounting
   

Standard 1
The Finance Pathway

1. Completer Courses: Business, Finance, and Marketing Capstone & Internships
   

Standard 2
Explore Post Secondary school programs in your region

1. Tech colleges & certifications
   
2. Associate degree programs
   
3. 4-year Bachelor's degrees
   

Standard 3
Explore why students may want to be an accountant, financial planner, Certified Public Accountant, or have a career as a Financial Analyst.

1. Describe career potential in averagge salaries, benefits, flexibility, Work/Life Balance.
   

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