AFM131 Chapter Notes - Chapter 16: International Financial Reporting Standards, Financial Statement, Bookkeeping

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lemonbeetle804

14 Jun 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM131

Professor

David H A

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Chapter 16:

Accounting: The recording, classifying, summarizing, and interpreting of financial

events and transactions in an organization to provide management and other

interested parties the financial information they need to make good decisions.

Five key working areas:

- Managerial Accounting

- Financial Accounting

- Auditing

- Tax Accounting

- Government and not-for-profit accounting

Managerial Accounting: Accounting used to provide information and analyses to

managers inside the organization to assist them in decision making.

Financial Accounting: Accounting information and analyses prepared for people

outside the organization.

Annual Report: A yearly statement of the financial condition, progress, and

expectations of an organization.

Private Accountant: An accountant who works for a single firm, government

agency, or not-for-profit organization.

Public Accountant: An accountant who provides his or her accounting services to

individuals or businesses on a fee basis.

International Financial Reporting Standards (IFRS): The common set of

accounting principles, standards, and procedures that accountants and companies

use to compile financial statements.

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Auditing: The job of reviewing and evaluating the records used to prepare a

opa’s fiaial stateets.

Independent Audit: An evaluation and unbiased opinion about the accuracy of a

opa’s fiaial stateets.

Forensic Accounting: A relatively new area of accounting that focuses its

attention on fraudulent activity.

Tax Accountant: An accountant trained in tax law and responsible for preparing

tax returns or developing tax strategies.

Government and not-for-profit accounting: Accounting system for organizations

whose purpose is not generating a profit but rather serving ratepayers, taxpayers,

and others according to a duly approved budget.

Chartered Professional Accountant (CPA) designation: The internationally

recognized Canadian accounting designation.

Accounting Cycle: A six-step procedure that results in the preparation and

analysis of the major financial statements.

Bookkeeping: The recording of business transactions.

Journal: The record book where accounting data are first entered.

Double-entry Bookkeeping: The concept of every business transaction affecting

at least two accounts.

Ledger: A specialized accounting book in which information from accounting

journals is accumulated into accounts and posted so that managers can find all of

the information about a specific account in one place.

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AFM131 Full Course Notes

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Accounting: the recording, classifying, summarizing, and interpreting of financial events and transactions in an organization to provide management and other interested parties the financial information they need to make good decisions. Managerial accounting: accounting used to provide information and analyses to managers inside the organization to assist them in decision making. Financial accounting: accounting information and analyses prepared for people outside the organization. Annual report: a yearly statement of the financial condition, progress, and expectations of an organization. Private accountant: an accountant who works for a single firm, government agency, or not-for-profit organization. Public accountant: an accountant who provides his or her accounting services to individuals or businesses on a fee basis. International financial reporting standards (ifrs): the common set of accounting principles, standards, and procedures that accountants and companies use to compile financial statements. Auditing: the job of reviewing and evaluating the records used to prepare a (cid:272)o(cid:373)pa(cid:374)(cid:455)"s fi(cid:374)a(cid:374)(cid:272)ial state(cid:373)e(cid:374)ts.

Related Questions

QUESTION 1 The knowledge of financial accounting can assist people with decisions such as whether to extend credit to a business. True False 0.2 points Saved QUESTION 2 Employees of a company would not have a reason to use the information provided by financial accounting. True False 0.2 points Saved

QUESTION 3 Financial accounting should be used for assessing the financial health of large organizations only. True False 0.2 points Saved

QUESTION 4 Financial accounting can be helpful for a job candidate who is assessing the financial future of a potential employer. True False 0.2 points Saved QUESTION 5 Lenders might use the information produced by financial accounting when making loan decisions. True False 0.2 points Saved

QUESTION 6 Credit analysts prefer not to use information provided by financial accounting, as it is not accurate. True False 0.2 points Saved

QUESTION 7 Financial accounting is helpful to investment advisors. True False 0.2 points Saved

QUESTION 8 Financial accounting is more useful than managerial accounting. True False 0.2 points Saved

QUESTION 9 The decision to buy or rent equipment is an example of a decision aided by managerial accounting. True False 0.2 points Saved

QUESTION 10 Which of the following statements is true of financial accounting? A. It is used by external parties to make investment decisions. B. It is used to make lease or purchase decisions. C. Managerial accounting is another name for financial accounting, D. It is primarily used to make internal decisions of a business. E. The effectiveness of advertising can be judged using financial accounting. 0.2 points Saved QUESTION 11 The charge for using money over time, often associated with long-term loans, is known as: A. interest. B. principal. C. distribution charge. D. cash dividend. E. preferred dividend. 0.2 points Saved QUESTION 12 Which of the following is a common feature of financial and managerial accounting? A. Both have same objectives B. Both are prepared according to U.S. GAAP C. Both are reported at year end in the annual report D. Both are analyzed by external users while making investment decisions E. Both are used by the management in making decisions 0.2 points Saved

QUESTION 13 Dividends are required to be paid to stockholders on an annual basis. True False 0.2 points Saved

QUESTION 14 An individual who owns one or more shares of stock in a corporation is an owner of that corporation. True False 0.2 points Saved

QUESTION 15 Corporations do not exist as separate legal entities apart from their owners. True False 0.2 points Save Answer

QUESTION 16 It is very difficult to buy or sell ownership shares of a corporation in a stock exchange. True False 0.2 points Saved

QUESTION 17 Stock markets match up investors who wish to buy shares with those who wish to sell them. True False 0.2 points Saved

QUESTION 18 Legal process by which owners of an organization apply to a state government to have it identified as an entity legally separate from its owners is called: A. stocking. B. filling. C. attributing. D. registration. E. incorporation. 0.2 points Saved

QUESTION 19 An advantage of ownership in a sole proprietorship over ownership in a corporation is: A. tax benefits. B. having a board of directors. C. the ability to raise capital through issuance of stock. D. separation of owner and business as legal entities. E. limited liability for debts. 0.2 points Saved

QUESTION 20 Who hires the management of a corporation? A. Stockholders B. Board of directors C. Creditors D. Government E. SEC 0.2 points Saved QUESTION 21 Inventory refers to the: A. excess amount paid for an asset over its fair value. B. intangible assets of a business. C. merchandise bought or manufactured for the purpose of selling. D. amount of net income reinvested by company for future operations. E. revenue generated from investment. 0.2 points Saved QUESTION 22 Investors use financial information to predict whether a: A. company will recruit more employees. B. company's stock price will increase C. company has invested in buildings. D. company will pay salaries. E. company's bond price will increase. 0.2 points Saved

QUESTION 23 Financial accounting can be compared to a portrait. True False 0.2 points Saved

QUESTION 24 Financial statements provide the form and structure for the conveyance of financial information that will create a likeness of the reporting organization. True False 0.2 points Saved

QUESTION 25 The information reported in financial statements must be exact for an investor to make any decision. True False 0.2 points Saved

beigeant306

BOR CPAs, Inc. is a closely held corporation owned by threestockholders who used the initials of their last names to form thecorporationâs name: Cyrus Bailey, John Ogden, and Samuel Rogers.The firmâs Certified Public Accountants (CPAs) perform audits ofboth public companies and privately owned companies. BORâs CPAsalso provide tax services to both individuals and businesses.

The corporation is divided into two profit centers: the AuditDivision and the Tax Division. Each division is composed of twocost centers. The Audit Division is composed of two cost-centerdepartments: Public Company Audits and Private Company Audits. TheTax Division is composed of two cost-center departments also:Individual Tax and Business Tax.

BOR, a decentralized organization, is interested in evaluatingthe performance of the two divisions. The stockholders areresponsible for deciding on investment in the two divisions. CyrusBailey is in charge of the performance evaluation, and turns to youfor assistance. Mr. Bailey is only interested in evaluatingoperations at the profit center (division) level, and not at thecost center (department) level.

Mr. Bailey is considering temporarily using some of the stafffrom the Tax Division to assist the Audit Division during theupcoming busy audit season, and would like to evaluate the effectof this on net income. The Tax Division is estimated to have 800hours of excess capacity.

The unit for determining sales revenue in both divisions is the"engagement", which means the total agreed-upon work for a givenclient in either audit or tax for a given year. The company chargeson average a fee of $75,000 per audit engagement, and $15,750 pertax engagement.

The company has its own Payroll Office, which provides payrollservices to both divisions and will allocate its total expenses tothe two divisions as service department charges.

The following chart shows some basic data for the company:

Hourly market rate for staff (theprice the company would have to pay from an outside contractor forstaff services)	$110.00
Average hourly cost rate for staff(the average price the company pays to its staff)	$50.00
Number of paychecks issued by AuditDivision	110
Number of paychecks issued by TaxDivision	340
Total expense for PayrollOffice	$29,250
Amount of assets invested in AuditDivision by BOR CPAs, Inc.	$10,000,000
Amount of assets invested in TaxDivision by BOR CPAs, Inc.	$4,000,000

Mr. Bailey asks that you prepare Divisional Income Statementsshowing what 20Y1 results would have been had the Audit Divisionpurchased all the excess capacity of the Tax Division, using anegotiated transfer price. The divisional managers tell you that,with the excess capacity of the Tax Division of 800 hours, theAudit Division can perform 4 more audits during the year, and theAudit Division would agree to a negotiated rate of $80.00 per hourto be paid to the Tax Division for the additional hours required,with the Tax Division selling all its excess capacity to the AuditDivision. The Tax Division would still be responsible for payingthe salaries of their employees.

Complete the following Income Statements. Enter all amounts aspositive numbers. If there is no amount or an amount is zero, enterâ0â.

BOR CPAs, Inc.

Income Statements

For the Year Ended December 31, 20Y1

1		Audit Division	Tax Division	Total Company
2	Fees earned:
3	Audit fees (16 engagements)	$1,200,000.00		$1,200,000.00
4	Tax fees (45 engagements)		$708,750.00	708,750.00
5	Transfer-pricing fees
6	Expenses:
7	Variable:
8	Audit hours provided by Audit Division	180,000.00		180,000.00
9	Tax hours provided by Tax Division		236,250.00	236,250.00
10	Excess capacity hours paid to salaried staff
11	Audit hours provided by Tax Division
12	Fixed expenses	50,000.00	65,500.00	115,500.00
13	Income from operations before service department charges
14	Service department charges for payroll
15	Income from operations

You are now able to put together all the information youâvecollected and analyze the data. In the following table, âROIâstands for âReturn on Investment.â

Complete the following tables using the information from theother panels and selection lists provided.

	Audit Division
	Profit Margin	x	Investment Turnover	=	ROI
No Transfer		x		=
Market Price		x		=
Negotiated Price		x		=
Cost Price		x		=

	Tax Division
	Profit Margin	x	Investment Turnover	=	ROI
No Transfer		x		=
Market Price		x		=
Negotiated Price		x		=
Cost Price		x		=

	BOR CPAs, Inc.
	Profit Margin	x	Investment Turnover	=	ROI
No Transfer		x		=
Market Price		x		=
Negotiated Price		x		=
Cost Price		x		=

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AFM131 Chapter Notes - Chapter 16: International Financial Reporting Standards, Financial Statement, Bookkeeping

AFM131 Full Course Notes

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