Course Code:               ACCT 1002

Course Title:                INTRODUCTION TO FINANCIAL ACCOUNTING

Course Type:               Core

Level:                           1

Semester:                     1           

No. of credits:              3 Credits

Prerequisite:                None

 

 

Course Description

 

This course is an introductory course designed for students of accounting and those in other areas of study. It aims at providing a practical and a theoretical understanding of the principles and concepts involved in the preparation of financial statements. Students are exposed to a conceptual analytical approach with the aim of improving their critical thinking and communicative skills.

 

In the delivery of this course, theory will be discussed in an instructor led lecture environment. For all topics covered at least one in-class question would be completed. It is hoped that this combination of methods will enable students to apply the theories discussed to solve problems.

 

Purpose of Course

 

This course will introduce students to the principles, concepts and applications of financial accounting.

 

Goals

 

By the end of the course, students should be able to:

  • Understand basic accounting issues for the major types of business entities, namely      the sole                proprietorship, the partnership and the corporation.
  • Maintain and update basic accounting records for the above entities.
  • Prepare basic accounting reports (financial statements), namely, the Balance Sheet,       Income                Statement and Statement of Owner’s Equity.
  • Interpret accounting information.
  • Use accounting information in decision-making.

 

Course Content

 

The course content is based on the topics/chapters found in the required text - Introduction to Financial Accounting – Raghunandan, William, Bowrin and Raggay, 2nd Edition.

 

 

Part 1 (Chapters 1 & 2)            Focuses on introducing the student to the double entry system of accounting.

Part 2 (Chapters 3 & 4)            Introduces financial statements of the sole proprietorship, with attendant issues such as adjusting and closing entries and for service and merchandising businesses.

Part 3 (Chapters 5-8)    Features the various books of original entry and internal control issues (Chapter 5) and then launches into details of accounting for the major assets and liabilities, namely, cash (Chapter 5), accounts receivable and payable (Chapter 6 & Appendix), inventory (Chapter 7) and operating assets: property, plant and equipment (Chapter 8).

Part 4 (Chapters 9 & 10)          Deals with accounting for the partnership (Chapter 9) and corporation (Chapter 10).

 

Learning Outcomes

 

Part One

Lesson One – Introduction to Financial Accounting

After studying this lesson, you should be able to:

  • Define accounting and list the users of accounting information.
  • Summarize the uses and limitations of accounting information.
  • Differentiate between financial and management accounting.
  • Explain the use of accounting principles in financial reporting.
  • Define assets, liabilities and owner’s equity, and appreciate the relationship of these components on the accounting equation.
  • Determine the impact of transactions on the accounting equation.
  • Identify the items that make up owner’s equity.
  • Use revenues and expenses to prepare a summary income statement.

Lesson Two – Recording Accounting Information

After studying this lesson, you should be able to:

  • Explain the double entry principle of accounting.
  • Define the term “Account” and demonstrate the use of a chart of accounts.
  • Describe the basic accounting records.
  • Describe the process of journalizing transactions and posting entries to the General and Subsidiary Ledgers.
  • Prepare a Trial Balance.
  • Determine the impact of errors on the trial balance and apply various steps necessary to locate an error.

 

Part Two

Lesson Three – Recording Accounting Information

After studying this lesson, you should be able to:

  • Identify the major elements of an Income Statement, Statement of Owner’s Equity and a Balance Sheet.
  • Explain the impact of the “periodicity” assumption.
  • Apply the revenue recognition principle.
  • Apply the matching principle and record expenses in the proper accounting period.
  • Explain cash basis accounting.
  • Prepare adjusting entries.

Lesson Four – Closing Accounts and Accounting for a Merchandising Business

After studying this lesson, you should be able to:

  • Close a set of books and prepare a post-closing trial balance.
  • Describe the steps in the accounting cycle.
  • Chart the elements of an operating cycle and construct a classified balance sheet.
  • Account for typical transactions in a merchandising business.
  • Compute cost of goods sold and gross profit to prepare financial statements for a merchandising business.

 

Part Three

Lesson Five – Accounting Systems, Control Accounts, Internal Controls and Cash Management

After studying this lesson, you should be able to:

  • Describe the role and importance of an accounting system.
  • Explain the role of and relationship among control accounts, subsidiary ledgers and special journals.
  • Explain the nature of internal control and identify the relevant procedures.
  • Explain Cash Management and identify cash control procedures.
  • Prepare a bank reconciliation.
  • Establish and operate a petty cash system.

Lesson Six – Accounting for Receivables and Payables

After studying this lesson, you should be able to:

  • Identify the costs related to credit sales.
  • Discuss the categories of receivables.
  • Compare and contrast the direct write off and the allowance methods of accounting for uncollectible accounts.
  • Compare and contrast the income statement and the balance sheet methods of accounting for uncollectible accounts.
  • Account for write-offs and subsequent recoveries under the allowance method.
  • Use key ratios to evaluate receivables collections.
  • Determine internal controls that apply to receivables.
  • Calculate and determine journal entries for notes receivable and interest.

Lesson Seven – Inventory

After studying this lesson, you should be able to:

  • Describe the nature of inventory.
  • Explain ownership issues with goods in transit and on consignment.
  • Identify the effects of inventory errors on the financial statements.
  • Apply the following methods to cost inventory: Specific Identification Method, FIFO, LIFO, and Weighted Average Cost method.
  • Apply the lower of cost or market method.
  • Account for inventory purchases using the periodic and perpetual systems.
  • Prepare a single step and multiple step income statement for a merchandising business.

Lesson Eight – Property Plant & Equipment, and Natural Resources

After studying this lesson, you should be able to:

  • Describe the nature of property, plant and equipment (PP&E).
  • Calculate the cost of PP&E.
  • Determine whether expenses related to PP&E are capital or operating expenditure.
  • Explain the concept of depreciation.
  • Compute depreciation using the following methods: Straight Line, Units of Output and declining balance.
  • Account for revisions in depreciation rates.
  • Determine cost and depletion for natural resources.

 

Part Three

Lesson Nine – Partnerships

After studying this lesson, you should be able to:

  • Compare and contrast a partnership business with a sole trader.
  • Account for the formation of a partnership and distribution of profits.
  • Account for the addition and withdrawal of a partner.
  • Account for the liquidation of a partnership.

Lesson Ten – Corporations

After studying this lesson, you should be able to:

  • Identify the features of a corporate entity.
  • Distinguish between common and preference stock, and calculate the dividends associated with them.
  • Describe the nature of paid-in-capital and share capital.
  • Account for par, no-par and stated value stock.
  • Prepare and interpret the stockholder’s equity as presented on the balance sheet.
  • Account for treasury stock.
  • Describe and where relevant account for cash and stock dividends and stock splits.
  • Apply rules for accounting for changes in policy, error or major operating changes.
  • Compute earnings per share and book value per share.

 

Course Assessment

 

The aim of the assessments is to ensure that the student is knowledgeable on the materials presented in the course, and can apply the techniques to solving business problems.


Coursework: (40% of course mark):

  1. 30% - Students will be required to write a coursework exam. This will take the form of thirty multiple choice questions, each worth one mark. The exam will be one hour long and will cover lessons one to five. Examination date will be advised.
  2. 10% - 2 Comprehensive Problems – to be done in groups of five

Instructions for Students/Tutors/Lecturers

  • Assignments to be done in groups of 5 from the same tutorial group.
  • Assignments are due in the week of each numbers are eight, ninth and tenth.
  • Each group must hand the assignments to their respective tutors and not the lecturer
  • Late assignments will not be marked.

 

Final Examination (60% of course mark)
All topics, lessons one to ten will be examined in the final exam. This exam will be two hours long.

 

 

Teaching Strategies

There will be three (3) hours of lectures and one (1) tutorial hour each week.  Instructional methods will include class discussion and problem solving.

 

Lectures: You are expected to read the assigned material prior to each class session and participate actively in class discussions.  Assigned readings and problems represent the minimum preparation for the materials to be considered in lectures.  All lectures and illustrative materials presented in class will be based upon the assumption that all assigned readings have been done and problems attempted prior to the lecture on each topic.  While attendance is not compulsory, students are responsible for all announcements made in class.

If you do not understand something in class, there are probably a few other students who are also experiencing difficulty, so please do not hesitate to ask questions.  Please note that this course material cannot be digested two (2) to three (3) weeks before the examination.  Success in this course can ONLY be achieved by keeping abreast with the material and practicing what you learn by attempting as many questions as possible throughout the semester.

Tutorials:  These are small group meetings designed to develop students’ proficiency in financial accounting techniques through the use of worked examples.  These sessions will also be used to encourage discussion of the material.  Assigned material MUST be attempted prior to each session.  Tutorials will commence the second week of the semester.

 

Resources

Required Text

Introduction to Financial Accounting – Raghunandan, William, Bowrin and Raggay, 2nd Edition

Recommended Reference Texts

Accounting: The Foundation for Business Success – Solomon, Walther, Vargo and Plunkett(SWVP), 5th edition, (South-Western).

Accounting – The Basis for Business Decisions – Meigs & Meigs, 10th edition.

 

Course Calendar

 

Week

 

Lecture Topic (Assigned Reading)

 

Chapter

 

Tutorial Assignment

 

1

Introduction/Course Overview

PART 1

Nature and Purpose of Accounting; Definition of Accounting; Users of Accounting Information; The Accounting Equation

 

1

 

P1-3, P1-4, P1-8, P1-10

2

Double Entry Bookkeeping; Analyzing and Summarizing Transactions in Accounts; The Trial Balance

2

P2-1, P2-5, P2-7, P2-9

 

3

PART 2

Adjusting Journal Entries; Worksheets; Financial Statements

 

3

 

P3-1, P3-6, P3-8, P3-9

4

Completing the Accounting Cycle;

Accounting for Merchandise Business

4

P4-3, P4-5, P4-7, P4-10

5

PART 3

Internal Control; Cash Management and Bank Reconciliations

 

5

 

P5-1, P5-4, P5-7, P5-9

 

Coursework Examination

 

 

6

Accounting for Receivables and Payables

6

P6-1, P6-4, P6-6, P6-12

P6-1A, P6-2A, P6-7A, P6-10A

7

Inventory Systems and Valuation Methods

7

P7-2, P7-5, P7-6, P7-8

8

Property, Plant and Equipment; Natural Resources

8

P8-1, P8-4, P8-20, P8-32, P8-41

9

PART 4

Partnership Accounts

 

9

 

P9-1, P9-3, P9-4, P9-5, P9-11

10

Corporation Accounts I

10

P10-1, P10-3, P10-4, P10-7

11

Corporation Accounts II

10

P10-11, P10-12, P10-13, P10-15

12&13

MAKE UP & REVIEW