BAT4m Unit 1: Review of Grade 11 Accounting Do you remember anything?!

 Generally Accepted Accounting Principles  Guidelines established by professional accountants to be followed in the preparation of accounting records and financial statements  Used to establish common standards across the board for comparative (and competitive) purposes What does GAAP stand for? Why do accountants use GAAP? What does GAAP stand for? Why do accountants use GAAP?

 CICA (Canadian Institute of Chartered Accountants) has the main responsibility for developing GAAP in Canada.  Objective of GAAP is to communicate information which is useful to investors and creditors.  All companies whose shares (stocks) or debt (bonds) are publicly traded, must follow IFRS since Jan 1, What does GAAP stand for? Why do accountants use GAAP? What does GAAP stand for? Why do accountants use GAAP?

 One of the basic GAAP principle  Assets should be recorded at their original cost.  For example, Park Accounting purchased land at $100, years ago. Now it is worth $800,000. How do we present it in Balance Sheet?  There are some exceptions, but we will cover them later chapters. Cost Principle Cost Principle

 Provides that accounting for a business should be fair and reasonable.  Accountants are required to make evaluations and estimates, to deliver opinions and to select procedures.  Assets or profits are neither overstated or understated 8) What is the principle of conservatism?

 When GAAP is developed, certain assumptions are made. Going concern assumption Monetary Unit assumption Economic Entity Assumption  These assumptions create a foundation for the accounting process. GAAP Assumption GAAP Assumption

 It assumes that the company will continue to operate in the foreseeable future.  Although some businesses fail (or go bankrupt), most companies generally continue for a long time.  This is why we honor cost principle for assets like land. Going Concern Assumption Going Concern Assumption

 It requires that only business transaction which can be expressed as an amount of money be included in the accounting records.  Canada $, Europe: Euro China: Yuan  When Apple corporation announced that Steve Jobs got a pancreatic cancer, what kind of journal entry was made? The morale of employees were probably down…. Monetary Unit Assumption Monetary Unit Assumption

 An economic entity is any organization or unit in society.  The business and owner are separate entity.  It requires that activities of the entity to be kept separate from the activities of its owner. Economic Entity Assumption Economic Entity Assumption

 If the Mr. Park, who runs Park Accounting Inc bought MK purse for his wife with his personal credit card? With the business credit card? Is this a business transaction? Economic Entity Assumption Economic Entity Assumption

 Students will get into groups of 2 people and make a skit scenario, which shows that an accountant is supervising a bookkeeper’s work and realize that he or she made a mistake because the bookkeeper did not understand the GAAP or IFRS. (One scenario for each GAAP)  You will hand in your paper copy at the beginning of tomorrow’s class. You will not present.  You are demonstrating that you understand the GAAP.  Make sure you write down your name, which GAAP assumption you are referring to.  2 marks for each GAPP principle or assumption, so it will be out of 10 marks. Class Activity Class Activity