tut test 5 prep.docx

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University of Toronto Scarborough
Financial Accounting
Mark Fitzpatrick

Communication Question Topics - Accounting Cycle * - Uses of the Worksheet - Types of Accounts - Payment Systems - Cash Receipts - Cash Control Accounting Cycle 1. Transactions occur 2. Accounting entries recorded in the journal 3. Journal entries posted to the ledger accounts 4. Ledger balanced by means of a trial balance 5. Work sheet prepared 6. Formal income statement and balance sheet prepared 7. Adjusting entries journalized and posted 8. Closing entries journalized and posted 9. Post-closing trial balance - Steps 1 & 2 performed daily - Steps 3 & 4 performed monthly - Steps 5 – 9 performed at the end of each fiscal period - Steps 1 – 4 performed by junior personnel - Steps 5 – 9 performed by senior personnel Uses of the worksheet - page 333 in the textbook - used to add transparency - used to see all the transactions at once Types of accounts - page 322 in the textbook - control accounts - contra/valuation accounts - real accounts - nominal accounts Application Questions KNOW HOW TO: - Complete an 8-column worksheet - Journalize/post adjustments - Depreciate accounts - Journalize/post closing entries - Prepare balance sheets - Prepare income statements - Take off a post-closing trial balance - Use a 2 column general journal - Create classified statements - Create bank reconciliations - Deal with petty cash VOCABULARY AND EXTRA INFORMATION Depreciation: tangibles Amortization: intangibles Depletion: resources - accountants often use side/crib sheets to show the depreciation of assets Pre-paid: payments made before the product/service is received, e.g. insurance Late invoices are received after the end of a fiscal period and can include supplies Perpetual and period inventory relate to a merchandising business Large companies will often acquire detailed information about their expenses to determine whether they are put to use by employees Salvage/Residual Value – the estimated value the asset can be sold for at the end of its use Salvage value is often fixed Leased assets have significantly smaller payments Accelerated Depreciation - since depreciation is an expense, it lowers net income - businesses like depreciating assets because they lower net income which ultimately lowers taxes paid by the business Depreciation is a NON-CASH EXPENSE - there is no cash involved, it is simply the reduction of the value of an asset which has already been purchased using cash 50% rule is applied by the government (CCRA) - this is to prevent a whole-year of depreciation being applied to an asset purchased righ
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