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University of Toronto Scarborough
Financial Accounting
Mark Fitzpatrick

Vocabulary / Key Phrases internal audit – when a company is evaluated by an employee working for the company corporations being people – corporations can be sued rather than suing owners, corporations take on the role of a legal entity enterprise software – software that can do pretty much anything, e.g. SAP goodwill – reference to the movie Goodwill Hunting featuring Matt Damon, goodwill is the extra stuff that does not appear on a balance sheet, e.g. the extra value of land that has gained over time crib / side sheet – sheets used in Excel and used to analyze data quickly firesale – selling products at a reduced cost due to damage or other factors such as bankruptcy window dressing – making the net income appear higher than it actually is, usually involving lay-offs to remove expenses, used to encourage investors to invest money in the company drawing – the salary of the owner on a balance sheet, can replace Capital, e.g. Michael Scott, Drawing liquidation – occurs when a business sells its assets for cash, usually due to bankruptcy or due to the desperate need for cash Communication Topics Accounting cycle Outer Ring – ongoing activities and activities done once a month 1) Transactions occur 2) Transactions recorded in journal 3) Journal entries posted to ledger accounts 4) Trial balance and interim financial statements prepared Inner Ring – activities usually done once a year 5) Work sheet prepared 6) Formal financial statements prepared 7) Ledger accounts adjusted and closed 8) Post-closing trial balance prepared Forms and types of businesses Forms of businesses 1) Sole proprietorship – single owner 2) Partnership – two or more owners 3) Limited company/corporation – legal entity owned by shareholders Types of businesses 1) Service business – sells skills to the public, there is no tangible product 2) Merchandising business – sells tangible goods to consumers 3) Manufacturing/producing business – creates products to sell to merchandising businesses 4) Non-profit organization – organizations created to provide a social benefit and not created to earn a financial profit Accounting questions and people who need accounting People who need accounting 1) Bankers – they need to know if they should lend money to a business 2) Potential investors – they need to know if they should buy stocks of a business 3) Owners – they need to know if they should sell their business 4) Absentee owners – they need to know if the business is well run, or if the business is growing 5) Labour unions – they need to know if the business can pay more to their employees 6) Government – they need to know if the business is paying the proper amount of taxes Accounting Questions (SAMPLES) 1) Is the business earning enough profit? 2) Are the selling prices high enough? 3) How much does a company owe to the business? 4) How much does the business owe to a company? 5) What is the value of all the goods for sale? 6) Do any goods need to be restocked? 7) To who was a cheque issued? 8) How much does it cost to produce a product 9) How much did an individual earn last year Big ideas/5 critical areas of business Big Ideas 1) Fundamental accounting practices – demonstrate an understanding of basic procedures and principles for a service business 2) Advanced accounting practices – demonstrate an understanding of basic procedures and principles for a merchandizing business 3) Internal control, financial analysis, and decision making 4) Ethics, technology, and careers – assess the impact of technology on the accounting functions in business 5 Critical Areas of Business 1) Digital literacy – ability to use technology 2) Financial literacy – understand finance and money 3) Business skills – skills needed to be successful in the business world 4) Communication in a business – communications skil
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