Course
Profile
Introduction to Accounting, Grade 11, Workplace Preparation, Catholic
Unit 1: Introduction to the World of Accounting
Time: 20 hours
Unit
Developers: Michael
Grottoli, Kimberly Jenkins, Christopher Woods
Students
are introduced to the major concepts in accounting such as the accounting
equation and debit/credit theory. Students also develop an understanding of the
importance of the role of accounting in a business for financial control and
decision making. The unit begins with an explanation of assets, liabilities,
and owner’s equity and their relationship within the accounting equation.
Students then learn to organize these accounts into a balance sheet. The
relevance of balance sheet ratios and analysis is explored using case studies.
Next, students begin to develop accounting entry skills by using a transaction
worksheet to record balance sheet transactions. These skills can be used in
recording the data in a spreadsheet. Finally, students are introduced to debit
and credit theory by recording balance sheet transactions on T-accounts and
creating a trial balance.
Given
that accounting is a process-driven pursuit, this unit is connected to
subsequent units because it provides students with introductory skills and
knowledge that are necessary to form a basic understanding of accounting
procedures. Consequently, students have a knowledge foundation from which to
learn more advanced accounting concepts. The expectations are clustered in a
manner that allows students to study and apply one or two accounting principles
prior to advancing to a new skill.
If the
co-op module is being used, this is an excellent time to employ a Job Shadowing
assignment. The assignment would include questions addressing the nature of
accounting, an interview with an accountant in the industry and their career
path, and a career panel for questioning.
|
Activity |
Time |
Expectations |
Assessment |
Tasks |
|
1.1:
The Balancing Act |
120 min |
WAV.01,
CMV.03, WA1.01, AC1.01, CM3.01, CM3.03 CGE2b,
2c, 2e |
Knowledge/ Communication |
-
calculate student’s personal worth -
calculate business worth - manipulate
the accounting equation |
|
1.2:
Introducing the Balance Sheet |
120 min |
AC2.05,
CMV.03, CM3.01, CM3.03 CGE2a,
2b |
Knowledge/ Thinking/ Application |
-
prepare a balance sheet |
|
1.3: Let’s
Take a Closer Look at the Balance Sheet |
120 min |
DMV.01,
DMV.02, DMV.03, DM1.01, DM2.01 CGE2b,
2c, 2d, 3c, 4f |
Thinking/ Communication Application |
-
compare balance sheets -
compute ratios and draw inferences -
communicate inferences - write
a report explaining conclusions |
|
1.4:
Transaction Sheet |
180 min |
AC2.01 CGE2b,
2c |
Knowledge/ |
-
complete transaction sheets -
analyse changes in account balances |
|
1.5: Integrating Computer Applications |
180 min |
ACV.03, AC3.01 CGE2b, 2c |
Application |
- learn computing and spreadsheet
fundamentals - integrate technology with accounting (use
spreadsheets to produce balance sheets and transaction sheets) |
|
1.6:
Debits and Credits – The Real Thing |
300 min |
AC1.02,
AC2.04 CGE2a,
2b, 3c |
Knowledge/ Communication Application |
- make
debit/credit entries using T-Accounts -
compare and contrast with transaction sheet -
prepare trial balance and balance sheets |
|
1.7:
The Accounting Cycle – Putting It All Together |
180 min |
ACV.01,
ACV.02, WA1.04, AC1.04 CGE2a,
2b, 2d |
Knowledge/ Thinking/ Communication Application |
-
communicate the accounting cycle through a visual medium -
examine GAAP case studies |
Time: 120 minutes
This
activity introduces students to the purpose of accounting and some of its
related terms. Specifically, students calculate business worth, their personal
worth, and elements of the accounting equation. Each of the parts of the
activity addresses the learning expectations as outlined for this activity.
This activity directly develops students’ thinking and problem-solving skills
as they are introduced to accounting through the discussion and examination of
a case study.
Strand(s): The World of Accounting, The Accounting Cycle,
Finance: Cash Management in a Service Business
Overall
Expectations
WAV.01 -
describe the nature of accounting and its importance in managing a business;
CMV.03 -
analyse the sources of business and personal financing;
Specific
Expectations
WA1.01 -
describe the role of accounting in a service business;
AC1.01 -
explain the relationship among assets, liabilities, and owner’s equity;
CM3.01 - assess
the sources of funds available to finance a service business (e.g., family,
investors, banks);
CM3.03 -
describe the purpose of collateral to secure business and personal financing.
CGE2b -
read, understand, and use written materials effectively;
CGE2c -
present information and ideas clearly and honestly and with sensitivity to
others;
CGE2e -
use and integrate the Catholic faith tradition, in the critical analysis of the
arts, media, technology, and information systems to enhance the quality of
life.
·
The
ability to perform basic mathematical skills is required.
·
The
teacher requires text or worksheets (Appendix A) to complete exercises.
1. Following the introduction of the general
course procedures to students, the teacher distributes Appendix A. Students
complete the Grattoli’s Convenience Store case and then report on their
findings to the class. Students should conclude that profits could be lower due
to shoplifting, employee theft of goods and/or money, or poor cash control and
accounting procedures. As well, lead a discussion with students on the
Christian attitude toward dealing with theft. Engage students in a discussion
of the purpose of accounting in business. Discuss with students the information
that is provided by accounting data such as profitability, efficiency, internal
control (theft), and taxes. As well, have students conclude that the purpose of
accounting is for internal and external decision-making for profit and
not-for-profit organizations.
2. As a class, students select a type of service
business that they would be interested in operating. This business is used to
introduce students to the concepts of assets, liabilities, and owner’s equity.
Prior to introducing accounting concepts, engage students in a discussion of
entrepreneurship and its importance in today’s society. After selecting the
business (e.g., hair salon, video game arcade, video rental, etc.), students list
all of the items that would be needed to begin its operation (e.g., building,
equipment, computers, furniture, etc.). Assign a monetary amount to each item
and an overall total. Explain to students that these are the assets of the
business and define this term. Next, ask students how they plan to pay for
these assets. Draw out from students various liabilities such as bank loans,
supplier loans, and personal loans. Assign monetary amounts to each of the
liabilities and define the term liability. (Ensure that liabilities are less
than assets.) Lastly, ask students how they will pay for the remainder of their
assets. Discuss with students the need to invest personal money into the
business. Explain the relationship between assets, liabilities, and owner’s equity.
3. Students calculate their personal assets,
liabilities, and owner’s equity and discuss their results.
4. Provide examples of manipulating the
accounting equation. Have students complete textbook exercises and/or Appendix
A on classifying assets, liabilities, and owner’s equity. As well, students
complete exercises on calculating the elements of the accounting equation.
The focus
of the assessment is Knowledge/Understanding and Communication. Knowledge/Understanding
is evaluated by the completion of exercises. Communication is evaluated through
class discussion of the Appendix A case.
Some
students may have difficulties reading the case studies outlined in this unit.
These students should be paired with a reading partner or be given less complex
cases. The teacher should check work after each example. A peer helper for this
class would be an asset. For enrichment purposes, students could use the
Internet to find financial information for Canadian companies to be used
throughout this unit.
Appendix
A – The Accounting Equation
Time: 120 minutes
Students learn
about the benefits of using a Balance Sheet format and how to prepare a Balance
Sheet. As well, students are able to define accounts payable and accounts
receivable. Each part of the activity addresses the learning expectations as
outlined for this activity. This activity directly develops
Knowledge/Understanding, Application, and Communication through the preparation
and use of a Balance Sheet.
Overall
Expectations
CMV.03 -
describe the process of accounts receivable and accounts payable management in
a service business.
Specific
Expectations
AC2.05 -
explain how to produce income statements and balance sheets from the worksheet;
CM3.01 -
assess the sources of funds available to finance a service business (e.g.,
family, investors, banks);
CM3.03 -
describe the purpose of collateral to secure business and personal financing.
Ontario
Catholic School Graduate Expectations
CGE2a -
listen actively and critically to understand and learn in light of gospel
values;
CGE2b -
read, understand, and use written materials effectively.
·
Students
should have an understanding of assets, liabilities, owner’s equity, and the
accounting equation.
·
The
teacher may require a balance sheet template or workbook.
1. With the class, transfer the data from the
business worth exercise in Activity 1.1. to the accounting equation format.
Discuss the limitations of using the accounting equation to represent assets,
liabilities, and owner’s equity. Explain to students that a Balance Sheet is a
formal financial statement that can better represent these accounts.
2. With the class, create a Balance Sheet and
define the term Balance Sheet. Make note of the formatting conventions related
to the Balance Sheet, such as centring titles, underlining totals, and
double-underlining final totals.
3. Discuss the following GAAPs: the business
entity, the cost principle, liquidity order, maturity date rule. Refer to the CICA Handbook (see Resources).
4. Explain that money due to the business is
called accounts receivable and money owed by the business is called accounts
payable.
5. Students complete exercises that require them
to prepare Balance Sheets.
6. Have students complete a number of Balance
Sheet exercises and submit one or two for evaluation.
7. Complete a number of case studies from the
textbook regarding the GAAPs covered in the unit.
All four
categories of assessment can be evaluated through the completion of Balance
Sheets and GAAP case studies.
An
example of a Balance Sheet should be available to students at all times.
Students should have a step-by-step method of completing the Balance Sheet.
Some students may need a Balance Sheet form with larger spaces in order to
complete the work. Modify the number and complexity of questions as needed. For
enrichment purposes, students could use company information from the Internet
to produce Balance Sheets. As an alternative, students may complete balance
sheets on a formatted spreadsheet template, or format their own template.
Canadian Institute of Chartered Accountants
Handbook.
Time: 120 minutes
Students
learn to calculate, interpret, and draw conclusions from Balance Sheet ratios.
This activity develops thinking/inquiry through the completion of exercises,
and communication is assessed via the verbal and written comments and
suggestions resulting from the analysis of the ratios.
Strand(s): The Use of Accounting Information in Decision Making
Overall
Expectations
DMV.01 -
describe how accounting information is interpreted to help in decision making;
DMV.02 -
explain the importance of financial statements in the decision-making process;
DMV.03 -
demonstrate an understanding of human, environmental, and ethical issues in the
field of accounting.
Specific
Expectations
DM1.01 -
describe the use of accounting information in decision making by company
personnel (e.g., department managers, owners);
DM2.01 -
assess the capability of a firm to manage its liquidity (e.g., by determining
its ability to pay debts as they come due).
Ontario
Catholic School Graduate Expectations
CGE2b -
read, understand, and use written materials effectively;
CGE2c -
present information and ideas clearly and honestly and with sensitivity to
others;
CGE2d -
write and speaks fluently one or both of Canada’s official languages;
CGE3c -
think reflectively and creatively to evaluate situations and solve problems;
CGE4f -
apply effective communication, decision-making, problem-solving, time, and
resource management skills.
·
Students
should have an understanding of the Balance Sheet.
·
Copies
of Appendix C are required.
1. The teacher leads a discussion with the class
on what information the Balance Sheet does/does not provide (e.g., balance
sheet is a summary of what a business owns and owes but does not indicate
profit or market value of the company).
2. Have students examine a balance sheet from
previous exercises. As a means of assessing their own learning, have students work
in small groups to discuss the financial position of the company. Students
should tell their peers what they feel the financial position is and why. Ask
students if they think that the company is in a good financial position. Show
students how to calculate and interpret working capital, current ratio and debt
to equity ratio.
3. Students complete Appendix C.
4. Discuss the financial position of each
company from Appendix C given the calculation of the new information. Have
students give suggestions to improve the financial position of the business.
5. Discuss how the financial position of the
company could impact other areas of its business such as marketing and going
global.
6. In small groups, using a Balance Sheet from
previous exercises, have students calculate working capital, current ratio, and
debt to equity ratio and comment on the current financial position of the
company and how to improve it. Students communicate their results in written
format and as a presentation to the class.
7. Using the financial information from a Church
or other not-for-profit organization, discuss the differences in assessing
working capital, current ratio, and debt to equity ratio of these
organizations.
8. Students complete assignments from the text.
The focus
of the assessment is Thinking/Inquiry, Communication, and Application, which
are assessed through students’ evaluations of Balance Sheet ratios as found in
the case analysis report. As well, Communication is assessed through the
discussion of profit and not-for-profit companies. Written reports and oral
presentations related to Strategies 4-8 would allow students to demonstrate all
of the assessment categories.
The
teacher should check work after each example to ensure that students are
completing ratios correctly. Students should have a calculator to complete
ratios. A peer helper can help students to determine the financial stability of
each company. For enrichment purposes, students can analyse and compare the
financial statements of two or more Canadian companies.
Appendix
C – Balance Sheet Analysis
Time: 180 minutes
This
activity introduces students to double-entry accounting using a transaction
sheet. Students learn to prepare a Balance Sheet using the new transaction
sheet balances. This activity develops knowledge/understanding and application
through the completion of exercises and assignments.
Strand(s):
The Accounting Cycle
Specific
Expectations
AC2.01 -
demonstrate how to record transactions using the double-entry accounting
system.
Ontario
Catholic School Graduate Expectations
CGE2b -
reads, understands, and uses written materials effectively;
CGE2c - presents
information and ideas clearly and honestly and with sensitivity to others.
·
Students
should have an understanding of Balance Sheet accounts.
·
Diagnostic
testing could be used to determine prior knowledge.
·
Copies
of a transaction sheet (see Workbook) and Appendix B are required.
1. Distribute transaction sheet template to
students. Using the accounts and balances from the business worth exercise in
Activity 1, have students enter the values into the template.
2. List some of the daily financial events that
occur in the business (e.g., purchase of assets, payment of loan, owner invests
in business, etc.). Discuss how these events would affect the account balances
of the business.
3. Define business transaction.
4. Complete five or six transactions as a class,
ensuring that the accounting equation is kept in balance after each.
5. Demonstrate how the final balances of each
account are used to create a new Balance Sheet.
6. Discuss the protocols regarding transactions
– transactions always affect at least two items; the effects are expressed in
dollar amounts; the equation must always be in balance.
7. Complete transactions exercises.
8. Complete transactions assignment. In order to
assess students’ own learning, have students evaluate the transactions
assignment with a partner to find and correct errors or problems.
9. At the end of the activity, Unit Test 1
should be given (see Appendix B).
The focus
of the assessment is Knowledge/Understanding, which is evaluated by the
completion of exercises and an assignment on Transaction Sheets.
Have the peer helper work one-on-one
with students to complete each transaction. The teacher may have to adjust the
number of exercises to be completed. Students should verbalize the effect of
each transaction on the accounts of the business before completing the
transaction analysis sheet. The teacher should check for accuracy after each
transaction. Students who need an enriched program should receive more
exercises to complete.
Appendix
B – Unit Test 1
Time: 180 minutes
This
activity introduces students to the use of spreadsheet software for accounting
purposes. Students must first be shown how to use a spreadsheet program at a
basic level, and then they create Balance Sheets and transaction sheets. This
activity develops application through the completion of these statements using
the spreadsheet program.
Strand(s): The Accounting Cycle
Overall
Expectations
ACV.03 -
apply the recording and reporting process in computer accounting.
Specific
Expectations
AC3.01 - demonstrate,
using accounting software, how to record transactions using the double-entry
accounting system.
Ontario
Catholic School Graduate Expectations
CGE2b -
read, understand, and use written materials effectively;
CGE2c -
present information and ideas clearly and honestly and with sensitivity to
others.
·
Students
should be able to use a spreadsheet at a basic level, have knowledge of Balance
Sheet transactions, and be able to prepare a Balance Sheet.
·
Book
the computer lab.
1. Identify and explain the basic parts of a
computer system so that students are familiar with the technology that they
will be using. As well, discuss and demonstrate the benefits of an
ergonomically correct workplace and keyboarding techniques.
2. Ensure students have an understanding of, and
can perform, the following spreadsheet functions: opening, closing, creating,
and saving files; entering labels and values; creating and filling simple
formulas; using the SUM function; formatting cells and cell contents (e.g.,
borders, underlining, font sizes, etc.).
3. Create a Balance Sheet template with the
students that can be used for all activities.
4. Use this template to prepare Balance Sheets.
5. Create
a transaction sheet template with students that can be used for all activities.
6. Use
this template to complete transaction sheets.
7. Students
complete an assignment.
The focus
of the assessment is Application, which is evaluated by the completion of
exercises and an assignment on the computer.
The
teacher should have as many helpers as possible during these lessons. Peer
helpers and Special Education assistants may be utilized to help students who
encounter difficulties. Provide templates for all exercises. Students may work
in groups to complete computer assignments. Students in an enriched program can
help students in need.
Computer
lab
Spreadsheet
program
Time: 300 minutes
This
activity introduces students to the use of T-accounts and debit/credit theory.
It is crucial that students have a good understanding of debit/credit theory since
it represents the foundation for the rest of the course. Students explain
changes in various business accounts through the use of T-accounts. A trial
balance is completed to ensure the accuracy of changes.
Strand(s): The Accounting Cycle
Specific
Expectations
AC1.02 -
describe the relationship between debit and credit entries;
AC2.04 -
demonstrate the accuracy of accounting records through the use of a trial
balance.
Ontario
Catholic School Graduate Expectations
CGE2a -
listens actively and critically to understand and learn in light of gospel
values;
CGE2b -
reads, understands, and uses written materials effectively;
CGE3c -
thinks reflectively and creatively to evaluate situations and solve problems.
·
Students
should have an understanding of Balance Sheet accounts and transactions.
·
Make
copies of Fred’s Farms T-account sheet (Appendix D).
1. Discuss the advantages and disadvantages of
both the T-Account and the transaction analysis sheet as a method of recording
accounting data. Introduce the T-Account as an alternative device used to
record transactions.
2. Distribute T-Account sheet (Appendix D).
3. Illustrate
how beginning balances are transferred from the Balance Sheet to the T-Account.
Stress to students that the left side of the T-Account is the debit side and
the right side of the T-Account is the credit side. The teacher may wish to
utilize an Analytical Sheet (found in most workbooks).
4. With the class, complete several Balance
Sheet transactions. Clarify to students that debit accounts increase on the
debit side and decrease on the credit side of the T-Account. Alternatively,
clarify that credit accounts increase on the credit side and decrease on the
debit side of the T-Account.
5. Show students how to total and find the
balances for each T-Account.
6. Demonstrate the creation of the Trial Balance
from the T-Account balances for students. Note to students the importance of
the T-Account in verifying that the accounting equation is in balance.
7. Students complete several transaction
exercises involving the recording of transactions on T-Accounts, preparing
Trial Balances, and preparing Balance Sheets.
The focus
of the assessment is Knowledge/Understanding, Communication, and Application.
Knowledge/Understanding is assessed by the completion of exercises.
Communication and Application are assessed through the analysis of the
advantages and disadvantages of the T-Account and the transaction analysis
sheet, using either written reports or oral presentations.
Students
require the debit/credit rules for assets, liabilities, and owner’s equity
accounts. A peer helper or teacher should ensure that each transaction is
accounted for properly. The teacher may modify the number of exercises
assigned. Students may also work in pairs to compete assigned work.
Appendix
D – Fred’s Farms T-accounts
Time: 180 minutes
This
activity communicates the accounting cycle through a visual medium. Students
complete summative exercises and apply GAAP rules to real-life business
situations. Students evaluate their understanding of the accounting cycle and
related GAAP rules.
Strand(s): The Accounting Cycle, The World of Accounting
Overall
Expectations
ACV.01 -
describe the basic accounting cycle for a service business;
ACV.02 -
apply the recording and reporting process in manual accounting.
Specific
Expectations
WA1.04 -
demonstrate an understanding of the guidelines, principles, and concepts of
accounting;
AC1.04 -
describe the steps in the accounting cycle for a service business.
CGE2a -
listen actively and critically to understand and learn in light of gospel
values;
CGE2b -
read, understand, and use written materials effectively;
CGE2d -
write and speaks fluently one or both of
·
Students
should understand the process of entering transactions into T-accounts and
checking accuracy through the completion of a Trial Balance. A properly
formatted Balance Sheet is also a necessity.
·
Make
copies of the assignment (Appendix E), checklist (Appendix F), and Unit Test 2
(Appendix G).
1. Describe the steps of the accounting cycle on
the board, through a poster or a bulletin board. Ideally students will use a
range of creative ideas to present these in a variety of ways.
2. Assign a summative project, which requires
students to take beginning balances and create an initial Balance Sheet, record
transactions in T-accounts, create a Trial Balance to ensure accuracy of work,
and create a modified Balance Sheet. Students then use their knowledge of
financial ratios to determine the financial stability of the company. (See
Appendix E – Unit 1 Accounting Assignment.)
3. Students submit this assignment in report
form for formal evaluation. (See Appendix F for assignment checklist.)
4. Explain the importance of using high quality
written and formatting skills in any business report. Students should
demonstrate their proficiency in English and the use of basic word-processing
skills.
5. A test is given to assess the knowledge of
topics covered in the unit (Appendix G – Unit Test 2). Before the test,
students should create their own mini-test for review purposes. This gives each
student the opportunity to assess their own learning and to identify areas of
strengths of weaknesses. Students should prepare a written assessment of their
learning strengths and weaknesses and submit it to the teacher. This assessment
should be returned after the test for comparison purposes.
The focus
of the assessment includes Knowledge/Understanding, Thinking/Inquiry,
Communication, and Application. These categories are represented on the
checklist in Appendix F for the accounting cycle report. A Unit test is also
utilized.
The
assignment should be broken down into small, sequential steps. The teacher
could evaluate each section as it is completed. Students should use their notes
and text to complete the assignment. The teacher should be flexible with time
limits where required.
Appendix
E – Unit 1 Accounting Assignment
Appendix
F – Unit 1 Accounting Assignment Checklist
Appendix
G – Unit Test 2
Case:
Grattoli’s Convenience Store
Michael
has recently purchased a convenience store at the corner of
In small
groups, list at least three reasons why profits are lower than expected.
Students should be prepared to discuss their answers with the class.
The
Accounting Equation
Instructions:
Calculate the missing value.
|
|
ASSETS = LIABILITIES + OWNER’S EQUITY |
||
|
|
$10 000 |
$1200 |
$8800 |
|
A |
880 |
100 |
|
|
B |
3000 |
|
2500 |
|
C |
720 |
290 |
|
|
D |
|
600 |
2000 |
|
E |
10100 |
|
5200 |
|
F |
5000 |
2300 |
|
|
G |
18 000 |
7000 |
|
|
H |
|
4600 |
2900 |
|
I |
1435 |
|
500 |
|
J |
5275 |
0 |
|
Instructions:
Identify each item below as an Asset, Liability, or Owner’s Equity.
|
ITEM |
ELEMENT |
ITEM |
ELEMENT |
|
A |
Mortgage
Payable |
G |
Accounts
Receivable |
|
B |
Office
Equipment |
H |
Sam
Nguyen (customer) |
|
C |
Sara
Hartney (owner) |
I |
Cash in
bank |
|
D |
Property |
J |
Tony
Angelo (partner) |
|
E |
Machinery |
K |
Bank
Loan Payable |
|
F |
Delivery
Equipment |
L |
X-Ray
Co. (creditor) |
Name:
1. A financial statement that lists assets,
liabilities, and owner’s equity as of a specific date is called a
______________________________.
2. The accounting equation is
____________________________________.
3. Match the following terms to their correct
responses on the right:
1. CREDITOR_____ A. something you owe
2. DEBTOR_____ B. something you own that has monetary value
3. ASSETS_____ C. someone who owes you money
4. LIABILITIES_____ D. someone you owe money to
4. Fill in the missing value.
|
ASSETS |
LIABILITIES |
OWNER’S EQUITY |
|
a) $ 50
000.00 |
$30
000.00 |
$
________ |
|
b) 100 000.00 |
_________ |
60 000.00 |
|
c) _________ |
90 000.00 |
30 000.00 |
5. a) Prepare a Balance Sheet for Angus Clothing
Ltd. on February 12, 20-- from the following information:
|
Accounts
Receivable |
$450 |
Truck |
$5000 |
|
Mortgage |
$39 100 |
Cash |
$7250 |
|
Land/Building |
$95 000 |
Bank
Loan |
$22 000 |
|
Accounts
Payable |
$3000 |
Office
Supplies |
$300 |
|
Furniture
/ Equipment |
$13 000 |
J.
Martin, Capital |
$? |
b) Calculate
the working capital, current ratio and debt to equity ratio for Angus Clothing.
(Show the formulas and your work)
c) As
a bank manager, would you give Ms. Martin a $10 000 loan? Why or why not?
6. a) On the transaction sheet provided, record the
following balances for Sparta Cleaners as of June 1, 20--.
Cash $1000; Accounts Receivable $2000; Supplies
$800; Equipment $10 000; Furniture and Fixtures $5000; Land and Buildings $50
000; Accounts Payable - C. Wong $3000; Bank Loan $10 000; Mortgage $15 000; G.
Hussein, Capital $40 800.
b) Record the following transactions:
June 2 Received $200 from a customer.
June 4 Bought cleaning fluid for $300 from G. Hussein, on account.
June 6 Returned one batch of cleaning fluid which cost $50 because it was defective.
June 10 Owner invested another $8000.
June 12 Paid $10 000 on the bank loan in full.
June 18 Made our regular mortgage payment of $400.
June 19 Bought cleaning supplies for $100 cash.
June 20 Paid $2500 to G. Hussein, a creditor.
c) Total and check the equality of the equation.
|
Greater Stayner Video Rental
Company |
||||
|
as at September 30, 20-- |
||||
|
ASSETS |
LIABILITIES |
|
|||
|
Cash |
$6000 |
Bank
Loan |
$4000 |
|
|
|
Accounts
Receivable |
2000 |
Accounts
Payable |
2000 |
|
|
|
Videos |
20 000 |
Total
Liabilities |
$6000 |
|
|
|
Furniture
and Fixtures |
8000 |
OWNER’S EQUITY |
|
||
|
Equipment |
4000 |
C.
Hall, Capital |
34 000 |
|
|
|
Total
Assets |
$40 000 |
Total
Liabilities & Owner’s Equity |
$40 000 |
|
|
|
Sunnidale Rent-A-Video |
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as at September 30, 20-- |
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|
ASSETS |
LIABILITIES |
|
|||
|
Cash |
$100 |
Bank
Loan |
$5000 |
|
|
|
Accounts
Receivable |
400 |
Accounts
Payable |
4000 |
|
|
|
Videos |
500 |
Total
Liabilities |
$9000 |
|
|
|
Furniture
and Fixtures |
5000 |
OWNER’S EQUITY |
|
||
|
Equipment |
4000 |
C.
Hall, Capital |
1000 |
|
|
|
Total
Assets |
$10 000 |
Total
Liabilities & Owner’s Equity |
$10 000 |
|
|
Questions
1. Does the Balance Sheet indicate the profit of
a company?
2. What does Capital represent on a Balance
Sheet?
3. Does the Balance Sheet show the market value
of the business? Explain why or why not.
4. Calculate the working capital, current ratio,
and debt to equity ratio for Greater Stayner Video Rental Company.
5. Calculate the working capital, current ratio,
and debt to equity ratio for Sunnidale Rent-A-Video company.
6. Assume you are the Loans Manager for the
Clearview Credit Union. Mr. Hall and Mrs. Hartney both ask for $5000 loans. For
each business, write a brief report explaining why you would or would not give
the loan. Use the ratios you calculated as a basis for your decision.
|
Fred’s Farm Balance Sheet as at February 9, 2000 |
|||
|
ASSETS |
LIABILITIES |
||
|
Cash |
$20 000.00 |
Bank
Loan |
$30 000.00 |
|
Accounts
Receivable |
10 000.00 |
Accounts
Payable |
10 000.00 |
|
Equipment |
50 000.00 |
Mortgage
Payable |
55 000.00 |
|
Building |
20 000.00 |
Total
Liabilities |
$95 000.00 |
|
Land |
100 000.00 |
OWNER’S EQUITY |
|
|
|
|
F.
Fernwood, Capital |
105 000.00 |
|
Total
Assets |
$200 000.00 |
Total
Liabilities & Owner’s Equity |
$200 000.00 |
The following
accounts are from Barlow’s Beans and Burgers Restaurant, owned by Bob (Big Guy)
Barlow, as at November 1, 20--:
Cash $18
970.00; Supplies $7350.00; Mortgage Payable $120 000.00; Equipment $12 634.00;
Bank Loan $15 100.00; Accounts Receivable - L. Mooj $2000.00; Accounts
Receivable - D. Entist $1150.00; Land $25 000.00; Building $180 000.00;
Accounts Payable - Fred’s Farms $2630.00; Accounts Payable - Sid’s Supplies
$3000.50
a) Calculate the owner’s equity for Bob.
b) Create a Balance Sheet for Barlow’s Beans and
Burgers Restaurant as at November 1, 20--.
c) Transfer the Balance Sheet accounts to
appropriate T-accounts.
d) Record the following transactions in the
appropriate T-accounts for the month of November:
Nov 2. Purchased supplies at a cost of $2800.00 cash
Nov 3. Mr. Barlow withdraws $1600.00 from his personal savings account, which he deposits in the business bank account
Nov 4. Purchased equipment on account from Sid’s Supplies for $2750.00
Nov 6. Made a regular payment on bank loan for $1400.00
Nov 10. Paid $725.00 on account to Fred’s Farm
Nov 15. Purchased land and an addition to the building for expansion at a cost of $30 000.00 of which $20 000.00 was applicable to land and $10 000.00 to building. The transaction involved the cash payment of $1500.00 with the remainder to be added to the mortgage
Nov 20. Paid $1000.00 on account to Sid’s Supplies
Nov 25. Mr. D. Entist paid his account in full
Nov 29. Mr. Barlow withdraws $500 to purchase Christmas gifts for his family
e) Total and rule all T-accounts.
f) Prepare a trial balance for November 30,
20--.
g) Prepare a Balance Sheet dated November 30,
2--.
h) Using the November 30th Balance Sheet,
calculate the following ratios: current ratio, working capital, and debt to
equity ratio.
i) Assume you are the loans manager for We’re
In the Money Financing Corporation. Mr. Barlow wishes to borrow $100 000.00 in
order to expand his business across Canada. Using the data from his most recent
balance sheet and the ratios calculated in h), would you give Mr. Barlow the
loan? Why or why not?
|
Category/Criteria |
Yes |
No |
|
Application Balance
Sheet Formatting (titles, liquidity, underlining, etc.) |
|
|
|
Balance
Sheet Accuracy |
|
|
|
T-account
Opening |
|
|
|
Recording
of Transactions |
|
|
|
Balancing
of T-accounts |
|
|
|
Trial
Balance |
|
|
|
Financial
Ratios |
|
|
|
Thinking/Inquiry Financial
Analysis |
|
|
|
Communication Communication
of information and ideas |
|
|
Name:
1. Match each of the following terms with the
best definition from the list on the right by writing the letter of the definition
in the space provided. A definition may be used more than once.
1. _____Asset A. The left side of an account
2. _____Liability B. The owner’s share of the assets
3. _____Debit C. An amount owing to someone outside the business
4. _____General Ledger D. The value of items taken out of the business by the owner
5. _____Credit for personal use
6. _____Capital E. Something owned by a business
7. _____Owner’s Equity F. The income of the business for a period
G. The right side of an account
H. The main book of accounts for a business
2. Explain the difference between Accounts
Receivable and Accounts Payable.
3. a) Using the T-accounts provided, record the
following opening balances for Suzie’s Sewing, an upholstery shop as of Jan. 2,
20--.
Cash $20 000; Supplies $1000; Tools $5000;
Equipment $10 000; Furniture and Fixtures $8000; Accounts Payable - Martha’s
Office Supplies $2000; Capital, Tobias Smyth $42 000.
Open new accounts as needed.
b) Record the following:
Jan 4 Purchases a new calculator from Martha’s Office Supplies on
account for $125.
Jan 5 Purchased new shelves for $1000 cash.
Jan 8 The purchase of our new building is finalized at a price of $140
000; of which we paid $14 000 down and borrowed the rest on a mortgage.
Jan 10 Received a sign for the front of our new store from Signs-For-Sale
$1200 on account.
Jan 11 Pays Martha’s Office Supplies in full.
Jan 13 Suzie returned the calculator to Martha’s Office Supplies and got
her money back.
Jan 15 Buys paper from Speedy Print for $100 cash.
Jan 25 Arranges a bank loan for $5000.
Jan 28 Pays Signs-For-Sale $1200 on account.
Jan 30 Pays $2000 off the mortgage.
c) Prepare a Trial Balance on January 31, 20--.
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