1. C H A P T E R 1 Accounting: The Key to Success ACCT72 Intro Acctg
April 23, 2017
Accounting: The Key to Success
C H A P T E R 1

2. ACCT72 Intro Acctg
April 23, 2017
Learning Objectives
Describe the purpose and importance of accounting. (LO1)
Describe forms of business organization. (LO2)
Identify users and uses of, and opportunities in, accounting. (LO3)
Identify and explain why ethics and social responsibility are crucial to accounting. (LO4)

3. ACCT72 Intro Acctg
April 23, 2017
Learning Objectives
Identify, explain, and apply accounting principles. (LO5)
Identify and explain the content and reporting aims of financial statements. (LO6)
Analyze business transactions by applying the accounting equation. (LO7)
Prepare financial statements reflecting business transactions. (LO8)

4. What is Accounting? A system (process and rules)
ACCT72 Intro Acctg
April 23, 2017
What is Accounting?
A system (process and rules)
Related to the preparation of Financial Information
To be used in
Analysis
Decisions
Management
Agreement on HOW info will be reported – General Accepted Accounting Principles
GAAP v IFRS (next week)
Goal of Accounting? Good info for people who need it.
LO 1

5. Bookkeeping or Recordkeeping
ACCT72 Intro Acctg
April 23, 2017
Bookkeeping or Recordkeeping
Recording of financial transactions
Manual or electronic
Purpose is to create a reliable bank of data
Clerk
Scribe
Recorder

6. Forms of Organization Sole Proprietorship Partnership Corporation LO 2
ACCT72 Intro Acctg
April 23, 2017
Forms of Organization
Sole Proprietorship
Partnership
Corporation
LO 2

7. Sole Proprietorships Dog sitters Drug dealers Can have employees
ACCT72 Intro Acctg
April 23, 2017
Sole Proprietorships
One owner
Separate entity for accounting purposes
Not a separate legal entity from the owner
Unlimited liability
Limited life
Owner taxed on profits
Dog sitters
Drug dealers
Can have employees
Payments to owner are NOT payroll – No T4 and no deductions
LO 2

8. Partnerships Essentially a group of proprietors Two or more owners
ACCT72 Intro Acctg
April 23, 2017
Partnerships
Two or more owners
Separate entity for accounting purposes
Not a separate legal entity from the owners
Unlimited liability
Limited life
Owners taxed on profits
Essentially a group of proprietors
LO 2

9. Corporations Owners get Salary or Dividends One or more owners
ACCT72 Intro Acctg
April 23, 2017
Corporations
One or more owners
Separate entity for accounting purposes
Separate legal entity from the owner(s)
Limited liability
Unlimited life
Corporation taxed on profits
Size doesn’t matter
Owners get Salary or Dividends
LO 2

10. Non-Business Organizations
ACCT72 Intro Acctg
April 23, 2017
Non-Business Organizations
Not-for-profit and government organizations
No identifiable owner
Examples: schools, charities, libraries, hospitals, police, shelters
LO 2

11. See Page 5 of the Textbook
ACCT72 Intro Acctg
April 23, 2017
See Page 5 of the Textbook

12. Exercise Exercise 1-1 pg 43 (What kind is it?)
ACCT72 Intro Acctg
April 23, 2017
Exercise
Exercise 1-1 pg 43 (What kind is it?)
QS 1-2 pg 39 (Accounting v Bookkeeping)

13. Users of Accounting Information
ACCT72 Intro Acctg
April 23, 2017
Users of Accounting Information
Internal
Managers
Employees
Owners?
External: Not directly involved in running the organization
Bankers and other creditors
Investors and potential investors
Unions
External auditors
CRA
Investors v Managers v Owners: All the same people, or NOT
LO 3

14. Typical Questions Asked by Internal Users
ACCT72 Intro Acctg
April 23, 2017
Typical Questions Asked by Internal Users
What are the manufacturing expenses per unit of product?
What is the most profitable mix of services?
How much do we have to sell to break even?
How much profit did we earn last month?
Are we keeping our expenses under control?
See Page 6
LO 3

15. Typical Questions Asked by External Users
ACCT72 Intro Acctg
April 23, 2017
Typical Questions Asked by External Users
Can the company repay current loans?
Is the purchaser able to pay for goods purchased?
Do revenues include only those for the current period?
Have all expenses been recorded?
Is net income large enough to support a request for increased pay?
LO 3

16. ACCT72 Intro Acctg
April 23, 2017
Ethics in Accounting
One of the primary goals of accounting is to provide useful information for decision making.
In order for the information to be useful, it must be trusted.
Accountants must act in an ethical manner in order for the information they produce to be trusted.
LO 4

17. Ethical Obligations of Accountants
ACCT72 Intro Acctg
April 23, 2017
Ethical Obligations of Accountants
Maintain a high level of professional competence
Treat sensitive information as confidential
Exercise due care and professional judgment
Must not be associated with deceptive information
LO 4

18. Practice Exercise 1-4 page 44 (Ethics) ACCT72 Intro Acctg
April 23, 2017
Practice
Exercise 1-4 page 44 (Ethics)

19. Accounting Opportunities
ACCT72 Intro Acctg
April 23, 2017
Accounting Opportunities
Broad fields of accounting include:
Financial accounting
Managerial accounting
Taxation
Accounting-related fields
LO 3

20. Accounting Opportunities
ACCT72 Intro Acctg
April 23, 2017
Accounting Opportunities
Accountants may work as:
Private accountants
Public accountants
Government accountants
LO 3

21. Professional Certification
ACCT72 Intro Acctg
April 23, 2017
Professional Certification
Professional certifications in Canada:
Certified General Accountant (CGA)
Certified Management Accountant (CMA)
Chartered Accountant (CA)
LO 3

22. Exercise Critical Thinking Mini Case page 62 Problem? Goals?
ACCT72 Intro Acctg
April 23, 2017
Exercise
Critical Thinking Mini Case page 62
Problem?
Goals?
Assumptions?
Facts?
Conclusion and Consequences?
CT 1-1 Note to instructor: Student responses will vary therefore the answer here is only suggested and not inclusive of all possibilities; it is presented in point form for brevity.
Goal(s)*: — Correctly state sales reports* 
Problem(s): — Misclassification of items under GAAP
Assumption(s)/Principle(s): — The report should be prepared in accordance with GAAP to protect users of the information … so that users know on what basis amounts have been recorded/reported.
Facts: — as shown in the September sales report prepared by the sales person
Conclusion(s)/Consequence(s):
— August 28 sale should be in August and not in September; consequence of current reporting is that August revenue, net income, and equity was understated and September revenue, net income, and equity are overstated
— September 10 purchase of desk is to be recorded as an asset and not expensed; consequence of current reporting is that September expenses will be overstated causing net income, assets, and equity to be understated.
— September 2–30 lunch costs should have been expensed; consequence of current reporting is that statements won’t balance (it appears there are two credit entries with no debit) and that expenses are understated with net income and equity overstated.
— October 5 appears to be recorded correctly.
*This should be the goal since it is assumed that the owner(s) of the business want accurate reports. However, the salesperson might want to overstate the sales to make himself/herself look good; the marketing manager might want to overstate sales for the same reason. The goal is highly dependent on ‘perspective’.

23. Homework – Additional Practice
ACCT72 Intro Acctg
April 23, 2017
Homework – Additional Practice
First D2L Quiz DUE before seminar starts!
Exercise 1-3
Problem 1-1A