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Introduction to Financial Accounting
Instructor: Office: Office Hours: Phone: E-mail: Aziz Rajwani Henry Angus 359 Monday to Thursday, 4:30-6:00 and after class 604-822-8533 email@example.com
Purpose of Course:
Financial Accounting is principally concerned with the construction and interpretation of financial reports prepared for parties external to the issuing firm or entity. The major objectives of this course are to develop an understanding of the concepts, principles and conventions upon which financial accounting is based, and more importantly to provide an analytical basis upon which to intelligently interpret financial statements. Consideration will be given to accounting techniques and the formulation of financial reports; however, the course will focus on understanding accounting policies, their rationale and the implications for users of the financial accounting information. The user orientation approach will include interpretation and assessment of financial statements from a variety of North American corporations. An important learned outcome of Busi/Comm 293 is that students develop their critical-thinking and problem-solving skills.
Expectation of students:
Consistent with the above noted learning expectation, students are expected and encouraged to: • • • • • • attend all classes having completed the initial pre-reading of the textbook materials or any material supplied by the instructors actively participate in class discussions deal with classmates in a professional manner submit homework on the stipulated days and times write midterms and finals on the days and times stipulated in the course outline not use their computers except for taking notes during class
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Derivation of the Course Grade:
The course grade will be determined using the following weighting for the different components of the course: Final Exam 50% Midterm 35% Assignments 15% 100% You must achieve an aggregate passing grade on the examination components in order to pass the course. [(MT*35% + FINAL*50%) ≥ 42.5%] At least 90% of an examination will be common to all students. However, it is quite possible that 10% will be instructor-specific, reflecting differences in the specifics of the material covered in class. Assignments: The homework assignments are due at the beginning of class. Late assignments will not be accepted nor will any assignments be remarked. Submit assignments based on the .pdf templates posted on WebCT and only use one side of the paper. The primary purpose of the assignments is to provide direct, ongoing feedback and to assist you in preparation for examinations. This course moves quickly and is cumulative in nature, getting behind can make this course overwhelming.
Required Materials/Resources available:
FINANCIAL ACCOUNTING: A USER PERSPECTIVE, Hoskin, Fizzell and Davidson, Fourth Canadian Edition, John Wiley & Sons Canada Ltd. Note, this textbook comes with very useful supplementary online learning materials at http://ca.he.wiley.com/WileyCDA/ Select students, then first aid Station, then the textbook. You are strongly encouraged to use this learning tool to enhance your understanding of the course content. In particular, there is an outstanding “Accounting Cycle Tutorial”. In Busi/Comm 293 we spend only two classes on the bookkeeping/accounting cycle process. If you are uncomfortable or unfamiliar with bookkeeping you are strongly encouraged to use this tutorial to enhance your skills. A common reason that some students do not perform well in Busi/Comm 293 is that they do not master the bookkeeping (debit, credit) process at the start of the course. Later, when it is assumed that students have mastered these concepts, many become overwhelmed by the later chapter content, which is built on this early understanding and mastery. More generally, throughout the course you are encouraged to use the “Study by Chapter” materials. The combination of “Demonstration Problems”, “Multiple Choice Quizzes”, “Power Point Presentations” and other materials are an excellent supplement to the textbook and lectures.
A $35 materials fee (for class handouts) must be paid to the duplicating services centre (HA 423) or online at www.sauder.ubc.ca/theStore/store/. This fee must be paid by May 16th please. Thank you. Keep your receipt (in case of “errors”…). Grades may be withheld if the fee is not paid. No handouts will be provided to students who have not paid the fee by the beginning of class on the 21st of May. [FYI, I don’t get a single cent of the fee.]
Review/Supplementary Problems: Review/Supplementary problems are an integral component of the course requirements. These problems have been selected to provide examples of procedural and conceptual issues and are intended to assist students in understanding and responding to technical and discussion/essay type questions encountered during the course and on examinations. “Practice” Examinations: There will be one midterm and one final examination with solutions posted on WebCT. The assignments, in conjunction with your reading and class discussion, will equip you to successfully
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complete the examinations. The examination questions will be comprehensive in nature requiring you to thoughtfully integrate your knowledge providing quantitative and qualitative responses. WebCT:
Periodically, materials will get posted on Web CT (www.webct.ubc.ca). For your campus-wide login (“CWL”) go to www.it.ubc.ca If you need technical support, please e-mail firstname.lastname@example.org WebCT will contain the critical files for the course, including assignments, assignment solutions, and a midterm and final examination with solutions. Students are advised to check this site regularly for updates.
E-Mail: I will also be e-mailing you (as necessary). If you don’t have an e-mail account, you can get one at www.interchange.ubc.ca Please make sure that your e-mail address is up-to-date: Go to www.students.ubc.ca Under “Quicklinks”, click on Student Service Centre (SSC). Login to the SSC, and under “Personal Information”, click on e-mail change. Examinations: Cell phones are NOT allowed on the desks during exams. Thus, make sure you have a watch to keep track of time. At the start of the exams, turn your cell phones OFF and PUT THEM AWAY in your jacket/pants/bag/purse/”murse”. Programmable calculators are not permitted for examination purposes.
Class 1 2 3 Date May 5 May 7 FRIDAY May 9 6:30-9:30pm May 12 May 14 May 19 May 21 FRIDAY May 23@@@ 6:30-8:30pm May 26 May 28 June 2 June 4 June 9 June 11 Final Exam June 16 6:30-9:30pm Topic Readings### Introduction to Financial Accounting Chapter 1 Accounting Cycle/Recording of Transactions Chapters 2/3 Chapter 3 Recording of Transactions Extra class in lieu of May 19th holiday Location to be announced Revenue Recognition Chapter 4 Cash, Temporary Investments, Accounts Chapter 6 Receivables No class - Statutory Holiday Inventory Chapter 7 Midterm exam (Chapters 1–4, & 6) Location to be announced Capital Assets Chapter 8 Current & Long-term Liabilities Chapters 9/10 Long-term Liabilities Chapter 10 Shareholders’ Equity Chapter 11 Statement of Cash Flows Chapter 5 Financial Statement Analysis Chapter 12 Date is scheduled by UBC. Location will be announced in late May. There is no supplemental exam should you not write the exam on this date.
7 8 9 10 11 12
### Refer to the “Learning Outcome and Exam Skill Level Expectation” on the following pages for details as to what you are responsible for.
@@@ Be very careful to ensure that you have no conflicts with this time.
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Learning Outcome and Exam Skill-Level Expectation M C I Master: You are expected to be able to complete relatively technical/analytical problems on this topic plus discuss its conceptual/theoretical merits. Conceptual: You are expected to be able to thoughtfully discuss the conceptual/ theoretical merits of this topic, and complete simple technical/analytical problems related to it. Ignore: You are not responsible for this topic. Overview of Corporate Financial Reporting Learning Objective Define accounting and understand its relationship to economic decision-making. Understand what an annual report is and what it contains. Describe the major forms of organization in which accounting is used. Identify several users of financial statements and begin to understand how they use accounting information. Know what the term Generally Accepted Accounting Principles (GAAP) means. Identify the qualitative characteristics of accounting information. Describe the three fundamental business activities. Identify the major financial statements and describe their major components. Begin to understand the role of ethics in financial accounting. Transaction Analysis and Accounting Entries Learning Objective Understand the basic accounting equation. Analyze simple transactions and describe their effect on the basic accounting equation. Describe the difference between accrual-basis accounting and cash-basis accounting. Describe how inventory is accounted for when it is purchased and when it is sold. Identify operating activities and describe their impact on retained earnings. Describe the revenue recognition and matching process. Prepare a balance sheet, income statement, and cash flow statement after a series of transactions. Calculate three profitability ratios. Begin to analyze the information on a cash flow statement. Chapter 2 Chapter 1 Skill C C I C C I C C C Skill M M C C C M M C I Skill M M M M M M M C C C C
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Chapter 3 Double Entry Accounting Systems Learning Objective 1. Understand the relationship of debits and credits in the recording of transactions. 2. Understand the difference between permanent and temporary accounts. 3. Identify the steps in the accounting cycle. 4. Analyze transactions and record them in journal format. 5. Post transactions to T-accounts and prepare a trial balance 6. Understand the necessity of adjusting entries and determine how they should be recorded. 7. Describe why closing entries are necessary. 8. Understand the difference between a single and multi-step income statement. 9. Calculate a gross margin percentage. 10. Describe the criteria for unusual or infrequent items, discontinued operations, and extraordinary items. 11. Understand the criteria for listing items on a balance sheet.
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Chapter 4 Revenue Recognition Learning Objective Describe the cash-to-cash cycle of a retail company. Explain the relationship between performance and revenue recognition. List and explain the criteria for revenue recognition. Describe various applications of the revenue recognition criteria. Calculate amounts to be recognized under the completed contract method and the percentage of completion method. Explain the impact various revenue recognition methods have on earnings recognition. Understand how return on investment can give you one measure of performance. Calculate the return on investment under some basic scenarios. Chapter 5 Cash Flow Statement Learning Objective Understand the importance of cash to a company’s financial health. Describe the relationship between the cash flow statement and the income statement in assessing management performance. Describe the cash-to-cash cycle for a retail company through a discussion of the lead/lag relationship. Identify some solutions to cash flow problems. Identify the three major activities disclosed in the cash flow statement and describe the components of each activity. Prepare a cash flow statement from a company’s balance sheets and income statement (using the Indirect Approach). Provide a basic analysis of a company’s financial health using a cash flow statement. Chapter 6
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Cash, Temporary Investments, and Accounts and Notes Receivable Learning Objective Skill 1. Discuss the main control issues related to cash. C 2. Recognize the importance of cash to the success of a business. C 3. Prepare a simple bank reconciliation. I 4. Identify the criteria for the classification of an investment as temporary. C 5. Explain why temporary investments are recorded using market valuations. C 6. Prepare the journal entries associated with the acquisition, holding, and selling of M temporary investments (using the Allowance Method). 7. Explain why estimating the potential uncollectibility of accounts receivable is required. M 8. Identify two methods for recognizing uncollectibility and describe the circumstances M under which each is appropriate. 9. Describe the two main types of note receivable and explain the circumstances under I which each is used. 10. Calculate interest associated with notes receivable and prepare the necessary journal I entries. 11. Calculate the current ratio, the quick ratio, and the accounts receivable turnover ratio. M 12. Explain how the current ratio, the quick ratio, and the accounts receivable turnover M ratio help users to understand short-term liquidity issues.
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Chapter 7 Inventory Learning Objective 1. Discuss the importance of inventory to the overall success of a company. 2. Describe the valuation criteria used for inventory in Canada. 3. Describe how the lower of cost and market rule is applied to inventory. 4. Explain the difference between the perpetual inventory system and the periodic inventory system. 5. Discuss some criteria used by companies when choosing an inventory system. 6. Describe the three cost flow assumptions and calculate cost of goods sold and ending inventory under each. 7. Explain the shortcomings of LIFO and why it is rarely used in Canada. 8. Describe the impact of inflation on each of the cost flow assumptions. 9. Estimate a value for ending inventory using the cost-to-sales ratio method. 10. Calculate the inventory turnover ratio and explain how it can be interpreted by users. 11. Journal entries for inventory, sales, sales returns and sales discount under a perpetual inventory system. 12. Appendix: Calculate cost of goods sold and ending inventory using the three cost flow assumptions under a perpetual inventory system. Capital Assets – Tangible and Intangible Learning Objective 1. Describe the valuation methods used for capital assets. 2. Identify the acquisition costs that are usually added to the capital asset account at acquisition. 3. Describe the purpose of amortization and implement the most common methods of amortization, including capital cost allowance. 4. Identify the factors that influence the choice of amortization method. 5. Describe and implement changes in amortization estimates and methods. 6. Account for the disposal and write down of capital assets. 7. Describe and implement the amortization method used most frequently for natural resources. 8. Explain the accounting difficulties associated with intangible assets. 9. Amortize intangible assets, where appropriate. 10. Calculate the return on assets ratio and discuss the potential implications of the results. Chapter 9 Short-Term Liabilities Learning Objective 1. Describe the valuation methods used for liabilities in Canada. 2. Explain why companies use working capital loans and lines of credit. 3. Explain why accounts payable are sometimes thought of as “free debt”. 4. Prepare journal entries to record a company’s payroll. 5. Calculate the amount of interest that is owed on a short-term note payable. 6. Describe how warranty obligations differ from current liabilities such as AP 7. Describe situations where unearned revenue must be recorded. 8. Explain why the portion of long-term debt that is due in the next year is recorded as a current liability. 9. Explain what a commitment is and how it is recognized by a company. 10. Explain contingencies and the criteria governing their accounting treatment. 11. Describe why future income taxes exist. 12. Calculate future income taxes in amortization and warranty situations. Chapter 8
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Chapter 10 Long-Term Liabilities Learning Objective Describe the basic characteristics of a bond. Explain how bonds are issued and how the pricing of bonds is affected by risk. Calculate a bond’s issue price and prepare journal entries for the issuance of the bond and interest payments subsequent to the issuance for bonds issued at par, below par, and above par. Discuss the advantages and disadvantages of leasing. Distinguish between an operating lease and a capital lease and prepare journal entries for a lessee under both conditions. Explain the distinguishing features of a defined contribution pension plan and a defined benefit plan. Describe other employment benefits and explain how they are treated in Canada. Calculate the debt/equity ratio and the times-interest-earned ratio and write a statement describing the financial health of a company using the information from these ratios. Chapter 11 Shareholders’ Equity Learning Objective Distinguish among different types of organizations and explain the advantages and disadvantages of each form. Describe the different types of shares and explain why corporations choose to issue a variety of share types. Prepare journal entries for share transactions, including the issuance and payment of dividends. Describe the different types of dividends and explain why companies might opt to issue one type of dividend rather than another. Explain the purpose of the statement of retained earnings. Calculate and interpret the price/earnings ratio and the return on shareholders’ equity ratio, which are often used for decision-making. Chapter 12 Financial Statement Analysis Learning Objective Explain why knowledge of the business is important when attempting to draw conclusions about a company’s future health. Describe the various ways of analyzing a company’s financial statements. Describe the types of ratios that are best suited to providing insight into specific decisions. Calculate specific ratios and explain how the ratios can be interpreted. Assess the financial health of a company through the use of ratios.
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