ADAPTING YOUR LECTURE NOTES (FOR USERS OF WEYGANDT ET AL., ACCOUNTING PRINCIPLES, 4/C/E) Elizabeth A. Zaleschuk ACCOUNTING Canadian Eighth Edition Volume 1 Charles T. Horngren / Walter T. Harrison / M. Suzanne Oliver Peter R. Norwood / Jo-Ann L. Johnston Toronto, Toronto, Ontario. Pearson Prentice Hall. All rights reserved. This work is protected by Canadian copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the Internet) will destroy the integrity of the work and is not permitted. The copyright holder grants permission to instructors who have adopted Accounting, Canadian Eighth Edition, by Horngren/Harrison/Oliver/Norwood/Johnston to post this material online only if the use of the website is restricted by access codes to students in the instructor s class that is using the textbook and provided the reproduced material bears this copyright notice.
2 INTRODUCTION Educators have not yet decided how to teach two sets of accounting standards to introductory accounting students. After much deliberation and debate, the authors of Accounting decided to provide an introductory accounting text that permits Canadian instructors to choose an approach to match their teaching style and meet the educational goals of their institution. The body of the chapter is based on GAAP for private enterprises. Each chapter concludes with a brief explanation of reporting requirements for international financial reporting standards (IFRS), which will be studied in detail in more advanced accounting courses. Adapting Your Lecture Notes provided by Pearson Canada Inc. serves a dual purpose. First, this supplement will ease the conversion of your lecture notes from Accounting Principles, Fourth Canadian Edition, by Weygandt, Kieso, Kimmel, Trenholm, and Kinnear to Accounting Canadian Eighth Edition, by Horngren, Harrison, Oliver, Norwood, and Johnston. Second, this supplement highlights the accounting changes for publicly accountable enterprises that will report under IFRS. I suggest for elevator prep to skim the last Learning Objective in these transition notes for the chapter since it addresses IFRS. Locating IFRS at the conclusion of the chapter permits omission of IFRS without disrupting the flow of GAAP information for the student. Instructors, when they choose, can incorporate the impact of IFRS into the current chapter material, or IFRS can be treated as a separate topic within introductory accounting. The Canadian Eighth Edition continues with MyAccountingLab. A new feature called Did You Get It? located at the conclusion of each Learning Objective sends the student to this valuable resource for the answers. Multimedia Library contains video and animation shorts that students can access at any time for review or to cover material from missed lectures. The suggestions contained in this supplement progress from the general to the specific. First, there is an overview of each text s Table of Contents. Second, there is a comparison of the chapter Learning Objectives. Third, there is a list of the major differences between the two texts. The comparison of Learning Objectives works particularly well when the pages are printed and placed side-by-side. Finally, the supplement compares in detail the subjects covered on a chapter-by-chapter basis. For conciseness, material with equivalent coverage in both texts is not discussed. For further information, contact your local area sales representative, at www.pearsoned.ca/highered/repfinder to arrange a demonstration of the new features in the Canadian Eighth Edition of Accounting. Elizabeth A. Zaleschuk Douglas College New Westminster, BC
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4 WEYGANDT - BRIEF CONTENTS CHAPTER CONTENTS Part 1 1 Accounting in Action 2 The Recording Process 3 Adjusting the Accounts 4 Completion of the Accounting Cycle 5 Accounting for Merchandising Operations 6 Inventory Costing 7 Internal Control and Cash Appendix A Specimen Financial Statements: The Forzani Group Ltd. Appendix B Sales Taxes Appendix C Subsidiary Ledgers and Special Journals Part 2 8 Accounting for Receivables 9 Long-Lived Assets 10 Current Liabilities Appendix A Specimen Financial Statements: The Forzani Group Ltd. Appendix B Sales Taxes Appendix C Subsidiary Ledgers and Special Journals
5 HORNGREN BRIEF CONTENTS CHAPTER CONTENTS Volume 1 Prologue The Accounting Profession: Career Opportunities 1 Accounting and the Business Environment 2 Recording Business Transactions 3 Measuring Business Income: The Adjusting Process 4 Completing the Accounting Cycle 5 Merchandising Operations and the Accounting Cycle 6 Accounting for Merchandise Inventory 7 Accounting Information Systems 8 Internal Control and Cash 9 Receivables 10 Property, Plant, and Equipment; Goodwill; and Intangible Assets 11 Current Liabilities and Payroll Appendix A Canadian Western Bank 2008 Annual Report Appendix B Sun-Rype Products Ltd. 2008 Annual Report Appendix C Standard Setting in Canada Appendix D Typical Charts of Accounts for Different Types of Businesses
6 WEYGANDT STUDY OBJECTIVES Part 1 Chapter 1 Chapter 2 Chapter 3 STUDY OBJECTIVES Accounting in Action 1 Explain why accounting is important to accountants and non-accountants. 2 Explain generally accepted accounting principles and assumptions. 3 Use the accounting equation and explain the meaning of assets, liabilities, and owner s equity. 4 Analyze the effects of business transactions on the accounting equation. 5 Prepare financial statements. The Recording Process 1 Define debits and credits and illustrate how they are used to record business transactions. 2 Describe the basic steps in the recording process, explain what a journal is, and journalize business transactions. 3 Explain what a ledger is, and post journal entries. 4 Explain the purpose of a trial balance, and prepare one. Adjusting the Accounts 1 Explain the time period assumption, revenue recognition principle, matching principle and accrual basis of accounting. 2 Prepare adjusting entries for prepayments. 3 Prepare adjusting entries for accruals. 4 Describe the nature and purpose of an adjusted trial balance and prepare one. 5 Prepare adjusting entries for the alternate treatment of prepayments. (Appendix 3A)
7 HORNGREN LEARNING OBJECTIVES Volume 1 Chapter 1 Chapter 2 Chapter 3 LEARNING OBJECTIVES Accounting and the Business Environment 1 Define accounting, and describe the users of accounting information 2 Explain why ethics and rules of conduct are crucial in accounting and business 3 Describe and discuss the forms of business organizations 4 Explain the development of accounting standards, and describe the concepts and principles 5 Describe and use the accounting equation to analyze business transactions 6 Prepare and evaluate the financial statements 7 Explain the development of international financial reporting standards (IFRS) Recording Business Transactions 1 Define and use key accounting terms 2 Apply the rules of debit and credit 3 Analyze and record transactions in the journal 4 Post from the journal to the ledger 5 Prepare and use a trial balance 6 Apply international financial reporting standards (IFRS) to recording business transactions Measuring Business Income: The Adjusting Process 1 Distinguish accrual-basis accounting from cash-basis accounting 2 Apply the recognition criteria for revenues and expenses 3 Make adjusting entries 4 Prepare an adjusted trial balance 5 Prepare the financial statements from the adjusted trial balance 6 Describe the adjusting-process implications of international financial reporting standards (IFRS) CHAPTER 3 APPENDIX A1 Account for a prepaid expense recorded initially as an expense A2 Account for an unearned (deferred) revenue recorded initially as a revenue
8 WEYGANDT STUDY OBJECTIVES Part 1 Chapter 4 Chapter 5 Chapter 6 STUDY OBJECTIVES Completion of the Accounting Cycle 1 Prepare closing entries and a post-closing trial balance. 2 List the steps in the accounting cycle. 3 Prepare correcting entries. 4 Prepare a classified balance sheet. 5 Illustrate measures used to evaluate liquidity. 6 Prepare a work sheet (Appendix 4A) 7 Prepare reversing entries (Appendix 4B). Accounting for Merchandising Operations 1 Describe the differences between service and merchandising companies 2 Prepare entries for purchases under a perpetual inventory system. 3 Prepare entries for sales under a perpetual inventory system. 4 Perform the steps in the accounting cycle for a merchandising company. 5 Prepare multiple-step and single-step income statements. 6 Calculate the gross profit margin and profit margin. 7 Prepare the entries for purchases and sales under a periodic inventory system and calculate cost of goods sold (Appendix 5A). Inventory Costing 1 Describe the steps in determining inventory quantities. 2 Calculate ending inventory and cost of goods sold in a periodic inventory system using inventory cost flow assumptions. 3 Determine the effects of inventory cost flow assumptions and inventory errors on the financial statements. 4 Demonstrate the presentation and analysis of inventory. 5 Calculate ending inventory and cost of goods sold in a perpetual inventory system using inventory cost flow assumptions. (Appendix 6A). 6 Estimate ending inventory using the gross profit and retail inventory methods. (Appendix 6B).
9 HORNGREN LEARNING OBJECTIVES Volume 1 Chapter 4 Chapter 5 Chapter 6 LEARNING OBJECTIVES Completing the Accounting Cycle 1 Prepare an accounting work sheet 2 Use the work sheet to complete the accounting cycle 3 Close the revenue, expense, and withdrawal accounts 4 Correct typical accounting errors 5 Classify assets and liabilities as current or long-term, and prepare a classified balance sheet 6 Use the current ratio and debt ratio to evaluate a company 7 Describe the accounting-cycle and financial-reporting implications of international financial reporting standards (IFRS) CHAPTER 4 APPENDIX A1 Describe and prepare reversing entries Merchandising Operations and the Accounting Cycle 1 Use sales and gross margin to evaluate a company 2 Account for the purchase and sale of inventory under the perpetual inventory system 3 Adjust and close the accounts of a merchandising business under the perpetual inventory system 4 Prepare a merchandiser s financial statements under the perpetual inventory system 5 Use the gross margin percentage and the inventory turnover ratio to evaluate a business 6 Describe the merchandising-operations effects of international financial reporting standards (IFRS) CHAPTER 5 APPENDIX A 7 Account for the purchase and sale of inventory under the periodic inventory system 8 Compute the cost of goods sold under the periodic inventory system 9 Adjust and close the accounts of a merchandising business under the periodic inventory system 10 Prepare a merchandiser s financial statements under the periodic inventory system CHAPTER 5 APPENDIX B 11 Compare the perpetual and periodic inventory systems Accounting for Merchandise Inventory 1 Account for perpetual inventory under the specific-unit-cost, FIFO, and moving-weighted-average-cost methods 2 Compare the effects of the FIFO and moving-weighted-average-cost methods 3 Account for periodic inventory under the FIFO and weighted-average-cost methods 4 Apply the lower-of-cost-and-net-realizable-value rule to inventory 5 Measure the effects of inventory errors 6 Estimate ending inventory by the gross margin method and the retail method 7 Assess the inventory recording and reporting impacts of international financial reporting standards (IFRS)
10 WEYGANDT STUDY OBJECTIVES Part 1 Chapter 7 Part 2 Chapter 8 STUDY OBJECTIVES Internal Control and Cash 1 Explain the activities that help achieve internal control. 2 Apply control activities to cash receipts. 3 Apply control activities to cash disbursements. 4 Operate and account for a petty cash fund. 5 Describe the control features of a bank account. 6 Prepare a bank reconciliation. 7 Report cash on the balance sheet. Accounting for Receivables 1 Record accounts receivable transactions. 2 Calculate the net realizable value of accounts receivable and account for bad debts. 3 Account for notes receivable. 4 Demonstrate the presentation, analysis, and management of receivables. 5 Show how notes receivable are recognized in the accounts. Chapter 9 Long-Lived Assets 1 Apply the cost principle to property, plant, and equipment. 2 Explain and calculate amortization. 3 Revise periodic amortization. 4 Account for the disposal of property, plant, and equipment. 5 Calculate and record amortization of natural resources. 6 Identify the basic accounting issues for intangible assets. 7 Illustrate the reporting and analysis of long-lived assets.
11 HORNGREN LEARNING OBJECTIVES Volume 1 Chapter 7 Chapter 8 Chapter 9 LEARNING OBJECTIVES Accounting Information Systems 1 Describe an effective accounting information system 2 Understand the elements of computerized and manual accounting systems 3 Journalize and post transactions using the sales journal, the cash receipts journal, and the accounts receivable subsidiary ledger 4 Journalize and post transactions using the purchases journal, the cash payments journal, and the accounts payable subsidiary ledger 5 Balance the ledgers 6 Use special journals to record and post transactions with sales taxes 7 Assess the impact on accounting information systems of international financial reporting standards (IFRS) Internal Control and Cash 1 Define internal control 2 List and describe the components of internal control and control procedures 3 Prepare a bank reconciliation and the related journal entries 4 Apply internal controls to cash receipts 5 Apply internal controls to cash payments 6 Make ethical business judgments 7 Assess the impact on cash of international financial reporting standards (IFRS) Receivables 1 Define common types of receivables, and design internal controls for receivables 2 Use the allowance method to account for uncollectibles, and estimate uncollectibles by the percent-of-sales, aging-of-accounts-receivable, and the percent-of-accounts-receivable methods 3 Explain the direct write-off method to account for uncollectibles 4 Account for credit-card and debit-card sales 5 Account for notes receivable 6 Report receivables on the balance sheet 7 Use the acid-test ratio and days sales in receivables to evaluate a company 8 Understand the impact on accounts receivable of international financial reporting standards (IFRS) CHAPTER 5 APPENDIX A1 Discount a note receivable
12 WEYGANDT STUDY OBJECTIVES Part 2 Chapter 10 STUDY OBJECTIVES Current Liabilities 1 Account for definitely determinable liabilities 2 Account for estimated liabilities 3 Account for contingent liabilities. 4 Prepare the current liabilities section of the balance sheet. 5 Calculate the payroll for a pay period (Appendix 10A).
13 HORNGREN LEARNING OBJECTIVES Volume 1 Chapter 10 Chapter 11 LEARNING OBJECTIVES Property, Plant, and Equipment; Goodwill; and Intangible Assets 1 Measure the cost of property, plant, and equipment 2 Calculate and account for amortization 3 Account for other issues: Amortization for income-tax purposes, partial years, and revised assumptions 4 Account for the disposal of property, plant, and equipment 5 Account for natural resources 6 Account for goodwill and intangible assets 7 Understand the impact on property, plant, and equipment of international financial reporting standards (IFRS) 8 Understand the impact on intangible assets of international financial reporting standards (IFRS) A1 CHAPTER 10 APPENDIX Explain capital cost allowance and amortization for income-tax purposes Current Liabilities and Payroll 1 Account for current liabilities of known amount 2 Account for current liabilities that must be estimated 3 Compute payroll amounts 4 Record basic payroll transactions 5 Use a payroll system, implement internal controls, and report current liabilities on the balance sheet 6 Describe the impact on current liabilities of international financial reporting standards (IFRS)
14 GENERAL DIFFERENCES (1) The depth of detail contained in Horngren, without increasing complexity, is the major difference between the two texts. The integration of material from various business disciplines throughout the business student s undergraduate program requires the successful student to create and maintain a reference library. The Horngren text will function as the accounting reference text. (2) New material is illustrated with formal journal entries and posted to T-accounts, thus students see the effect of new concepts on the financial statements. (3) The unique vocabulary of varying areas in business is a challenge for the student to master. Horngren aids the accounting student by providing a list of Similar Accounting Terms following Accounting Vocabulary for each chapter. (4) All page references, unless specifically noted, are to Accounting, Canadian Eighth Edition, by Horngren, Harrison, Oliver, Norwood, and Johnston. (5) Students can combine Learning Objectives located on the first page of each chapter with the new feature in this edition Did You Get It? located at the conclusion of each Learning Objective, for a quick review of the chapter material. The answers for Did You Get It? are located in MyAccountingLab. (6) The following learning aids are available for students in MyAccountingLab. (a) Take a Test (b) Study Plan (c) Videos (d) Animations (e) PowerPoint Presentations (f) Excel Spreadsheet Template files (g) Accounting Cycle Tutorial (h) Full Canadian Western Bank and Sun-Rype Products Ltd. 2008 Annual Reports (7) The end-of-chapter Summary Problem for Your Review covers many aspects of the chapter material and compares in difficulty to average exam questions.
15 CHAPTER 1 Accounting and the Business Environment Frequently, Horngren topics per chapter parallel Weygandt, but the material in Horngren is explained in greater detail without increasing rigour or complexity. For this chapter, add the following to your Weygandt lecture notes. (1) Conceptual framework. (2) Characteristics of useful information. (3) CICA Handbook, Sections 1000 and 1100 (4) Constraints: Cost/benefit and materiality (5) Application of professional judgement. (6) Explain the difference between publicly accountable companies and those companies that are not publicly accountable. (7) The importance of ethics and ethical behaviour. For this chapter, delete the following from your Weygandt lecture notes. (1) Definitions for commonly used account names Move to Chapter 2 FOR THE STUDENT Did You Get It? Basic questions located at the conclusion of each Learning Objective. Faculty can incorporate the questions into their lecture material, or recommend students complete the questions prior to moving on to the next Learning Objective. Answers are located in MyAccountingLab. DID YOU GET IT? PAGE 5 7 9 13 20 23 25 SIMILAR ACCOUNTING TERMS Technical vocabulary must be learned by all students beginning the study of accounting. Mastering the language of accounting is difficult as the profession uses several different words and phrases that have identical meanings. Refer students to page 30.