BAT4m Unit 1: Review of Grade 11 Accounting

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BAT4mUnit 1 Review of Grade 11 Accounting

• Do you remember anything?!

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What does GAAP stand for? Why do accountants
use GAAP?

• 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

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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, 2011.

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Cost Principle

• One of the basic GAAP principle
• Assets should be recorded at their original cost.
  
• For example, Park Accounting purchased land at
  100,000 15 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.

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8) What is the principle of conservatism?

• 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

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GAAP Assumption

• 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.

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Going Concern 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.

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Monetary Unit 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.

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Economic Entity 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.

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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?

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Class Activity

• Students will get into groups of 2 people and
  make a skit scenario, which shows that an
  accountant is supervising a bookkeepers 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 tomorrows 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.