Accounting 2
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Course Introduction

 

Core Standards of the Course

STRAND 1
Students will define generally accepted accounting principles and basic business structures and each step of the basic accounting cycle as related to a merchandising corporation.

Standard 1
Identify and define the three forms of business structures

1. Sole Proprietorship: A business owned by one person. The owner is entitled to all profits and is responsible for all the business's debts, losses, and liabilities.
   
2. Partnership: a business owned by two or more people who share its profits, and are responsible for its debts, losses and liabilities.
   
3. Corporation: a separate legal entity whose owners are stockholders. The losses and liabilities are limited to their investment.
   

Standard 2
Identify each step of the accounting cycle for a merchandising corporation.

1. Step 1 - Analyze business transactions to determine debit(s) and credit(s)
   
2. Step 2 - Journalize transactions in a general journal
   
3. Step 3 - Post debit(s) and credit(s) from the general journal to ledger
   
4. Step 4 - Prepare a trial balance to prove that debits equal credits
   
5. Step 5 - Journalize and post adjusting entries
   
6. Step 6 - Prepare the following financial statements:
   
   • Income statement
   • Statement of retained earnings
   • Balance sheet
7. Step 7 - Journalize and post-closing entries
   
8. Step 8 - Prepare post-closing trial balance
   

STRAND 2
Students will explain and identify calculations, reports, and journal entries related to payroll.

Standard 1
Explain and identify calculations and reports related to payroll activities.

1. Explain the formulas for gross earnings based on an hourly rate, salary, commission, and salary plus commission
   
2. Identify and explain employee deductions including taxes FICA (social security and Medicare), federal, state and other voluntary deductions used to calculate net pay.
   
3. Identify and explain employers' payroll taxes (social security, Medicare, federal unemployment, and state unemployment) and employee benefits paid by the employer
   
4. Discuss and interpret forms and reports related to payroll:
   
   • Employment Forms
   • W-4
   • W-2
   • I-9
   • Reports
   • Payroll Register
   • Employees' Earnings Record

Standard 2
Identify the journal entries for employee payroll, employer payroll taxes and payment of payroll tax liabilities.

Performance Skills

1. Calculate, journalize, and post employee payroll
   
2. Calculate, journalize, and post employer payroll taxes, and payroll tax liabilities
   

STRAND 3
Students will identify source documents and journalize entries related to sales and cash receipt transactions.

Standard 1
Identify and evaluate source documents related to sales and cash receipt transactions.

1. Sales invoices
   
2. Cash register tapes
   
3. Receipts
   

Standard 2
Journalize and post transactions related to sales and cash receipts transactions.

1. Sale of merchandise
   
2. Sales tax
   
3. Sales returns and allowances (contra sales account)
   
   • Contra Account: an account that reduces the value of a related account
4. Sales discounts (contra sales account)
   
5. Accounts receivable subsidiary ledger
   

Performance Skill
Calculate, journalize, and post transactions for sale of merchandise with and without sales tax, sales returns and allowances, and sales discounts

STRAND 4
Students will identify source documents and journalize entries related to purchases and cash payment transactions.

Standard 1
Identify and evaluate source documents related to purchases and cash payment journal entries.

1. Checks
   
2. Purchases invoices
   

Standard 2
Describe the process for journalizing and posting transactions related to purchases and cash payments.

1. Purchases of merchandise
   
2. Cash payments
   
3. Purchases returns and allowances (contra purchases account)
   
4. Purchases discounts (contra purchases account)
   
5. Accounts payable subsidiary ledger
   

Performance Skill
Calculate, journalize and post transactions for purchases of merchandise, purchases returns and allowances, and purchases discounts.

STRAND 5
Students will explain and describe the purpose and procedures for common adjusting entries and how they affect the relationship between the trial balance and adjusted trial balance.

Standard 1
Explain the purpose of adjusting entries and how they relate to the matching principle.

1. Matching Principle: Matching expenses to the period which they were incurred to the revenue earned in the same period.
   

Standard 2
Calculate, journalize and post the following adjusting entries:

1. Inventory changes
   
2. Supplies used
   
3. Prepaid Insurance expired
   
4. Corporate federal income tax adjustment
   

Standard 3
Explain the relationship between the trial balance and the adjusted trial balance.

1. Adjusted trial balance: A trial balance prepared after the adjusting entries are posted
   

Performance Skill
Identify and calculate adjustments, journalize adjusting entries, post to general ledger accounts, and prepare an adjusted trial balance.

STRAND 6
Evaluate changes to the income statement, balance sheet, and stockholders' equity for a merchandising corporation.

Standard 1
Compare and contrast the income statement between a service sole-proprietorship and a merchandising corporation.

1. Cost of merchandise sold: Beginning inventory + Net Purchases - Ending Inventory
   
2. Gross profit: Net sales - Cost of Merchandise sold
   
3. Depreciation expense: Portion of an assets value that has been used up during that period
   
4. Uncollectible accounts: Accounts receivable that cannot be collected
   
5. Operating income: Gross profit - operating expenses
   
6. Corporate federal income tax expense: tax assessed by federal government on business profit.
   

Standard 2
Compare and contrast the balance sheet between a service sole-proprietorship and a merchandising corporation.

1. Inventory: The amount of merchandise on hand
   
2. Accumulated depreciation: Total amount of depreciation expense that has been recorded since the purchase of a plant asset
   
3. Allowance for uncollectible accounts: The percentage of accounts receivable expected to be uncollected
   
4. Current assets: Cash and other assets that can be converted into cash or consumed within a year
   
5. Current Liabilities: Liabilities due within a year
   
6. Plant assets: Assets that are used for a number of years
   
7. Long-term liabilities: Liabilities owed for more than a year
   
8. Stockholders' equity: The assets remaining in a business once all liabilities are paid. Assets - liabilities = Stockholders' Equity
   
9. Capital stock: Total shares of ownership in corporation
   
10. Retained earnings: amount earned by a corporation that is not yet distributed to the stockholders
    

Standard 3
Define and identify the two permanent accounts in stockholders' equity and how they change during the accounting period.

1. Net income (net loss): The difference between total revenue and total expenses
   
2. Dividends: earnings distributed to stockholders
   

Standard 4
Calculate and interpret common financial ratios and their uses to stakeholders.

1. Gross profit margin (Gross profit/Sales)
   
2. Return on sales (Net income/Sales)
   
3. Quick ratio (Cash+Accounts receivable/Current liabilities)
   
4. Debt-to-equity (Total liabilities/Total stockholders' equity)
   
5. Return on equity (Net income/Total stockholders' equity)
   

Performance Skill
Prepare a balance sheet and income statement for a merchandising corporation and calculate financial ratios.

STRAND 7
Explain and describe closing journal entries and the post-closing trial balance.

Standard 1
Explain the purpose of closing journal entries as they apply to a merchandising corporation.

Standard 2
Describe the difference between a trial balance and a post-closing trial balance for a merchandising corporation.

Performance Skill
Journalize and post closing entries and create a post-closing trial balance.

STRAND 8
Students will define depreciation and explain the process for calculating, journalizing, and posting straight- line depreciation.

Standard 1
Explain how depreciation expense relates to GAAP and the matching principle.

Standard 2
Explain and define the procedure for calculating depreciation using the straight-line method.

1. Straight-line Depreciation: (cost of the asset - estimated salvage value) ÷ estimated useful life of an asset
   
2. Identify original cost, salvage value, and useful life of the asset
   
3. Calculate partial-year depreciation: (cost of the asset - estimated salvage value) ÷ estimated useful life of an asset x number of months asset was used /12
   

Standard 3
Calculate, journalize, and post adjusting journal entry for depreciation.

Performance Skill
Calculate depreciation using the straight-line method, journalize, and post the adjusting entry for depreciation.

STRAND 9
Students will identify and explain different write-off methods and procedures to record write-offs using the allowance method.

Standard 1
Identify what "writing off" an accounts receivable means, why it is necessary, and the two common write-off methods.

1. Write-off: Canceling the balance of a customer account because the customer does not pay
   
2. Direct write-off method: Recording uncollectible accounts expense only when an amount is actually known to be uncollectible
   
3. Allowance method: Crediting the estimated value of uncollectible accounts to a contra account.
   

Standard 2
Calculate and journalize entries related to the allowance method for writing off uncollectible accounts.

1. Record the adjusting journal entry using the allowance method.
   
2. Calculate the adjustment amount using the net sales method.
   
3. Calculate the adjustment amount using the aging method.
   
4. Write-off to close uncollectible account.
   
5. Reopen a previously written-off account.
   
6. Record payment for reopened account.
   

Standard 3
Explain concept of Book Value of Accounts Receivable and how to calculate it (Accounts Receivable - Allowance for Uncollectible Accounts).

Performance Skill
Calculate, journalize, and post journal entries using the allowance method for uncollectible accounts receivable.

STRAND 10 (Optional)
Students will explore different accounting career options and how ethics and technology affect the accounting profession.

Standard 1
Explore examples of ethics in the accounting profession.

Standard 2
Identify and explore the use of automated accounting software, such as:

1. Spreadsheets
   
2. QuickBooks
   
3. Industry-standard accounting and tax software
   

Standard 3
Explore Internet sites and mobile apps for accounting purposes (e.g. American Institute of Certified Public Accountants, start here go places, IRS, Intuit, Accounting today, Journal of Accountancy, Securities and Exchange Commission, Xero, Sage).

Standard 4
Explore careers in the field of accounting (e.g. accountant, accounting clerk, Certified Public Accountant).

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http://www.uen.org - in partnership with Utah State Board of Education (USBE) and Utah System of Higher Education (USHE).  Send questions or comments to USBE Specialist - THALEA  LONGHURST and see the CTE/Financial Services website. For general questions about Utah's Core Standards contact the Director - THALEA  LONGHURST.

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