Introduction to Financial Accounting: Midterm Exam-AID by York SOS

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ACTG2011
MIDTERM Exam-AID
Review Package
Tutor: Balpreet Singh (bsingh13@schulich.yorku.ca)

York SOS
1

Preface
This document was created by the York University chapter of Students Offering Support (York SOS) to accompany our ACTG2011 Exam-AID session. It is intended for students enrolled in any sections of 2012/2013 INTRODUCTION TO FINANCIAL ACCOUNTING II-ACTG2011 course who are looking for an additional resource to assist their studies in preparation for the exam.

References
Friedlan, John (2010). Financial Accounting: A Critical Approach – 3rd Ed. McGraw Hill.

What is Students Offering Support?
Students Offering Support is a national network of student volunteers working together to r aise funds to r aise the quality of education and life for those in developing nations through r aising marks of our fellow University students. This is accomplished through our Exam-AID initiative where student volunteers run group review sessions prior to a midterm or final exam for a $20 donation. All of the money raised through SOS Exam-AIDs is funneled directly into sustainable educational projects in developing nations. Not only does SOS fund these projects, but SOS volunteers help build the projects on annual volunteer trips coordinated by each University chapter.

York SOS
2

Introduction to Financial Accounting I
Chapter 1 – What is Accounting

Accounting – System for producing information about an entity and communicating it to users for decision making
- The more and better information a person has about a situation the better decisions possible - Information costs money
- Information is limited and thus decisions must be made on assumptions and predictions

2 Fields of Accounting
- Financial Accounting – Provides information to people who are external to the entity. (E.g. Investors, CRA, Lenders, customers). These stakeholders must rely on entity for info - Managerial Accounting – Field of Accounting that provides information to managers of the entity. This information assists them in making decisions for entity. Accounting Environment

- Preparers of accounting information must assess who is using statements and for what reason - The accounting environment influences whom entities provide information to

Entities
- Corporations – Separate Legal entity created. Different shareholders have shares in the corporation. The shareholders are given limited liability.


Corporations can also be private were on person owns all shares



Public Corporations – Corporations whose shares are publicly traded in the stock market

- Proprietorship – One owner, Unlimited Liability
- Partnership – Owned by 2+ people, Unlimited Liability
- Individuals – Also accounting entities as they must file tax returns through CRA

Stakeholders
- After looking at different entities we need to access their stakeholders (anyone who has a interest in the company) their decisions and how the accounting financial statements are prepared accordingly. (e.g. Owners, Lenders, Suppliers, Customers, Shareholders, Government, regulators) Constraints on Managers & Financial Reporting

- IFRS, GAAP for Private Enterprise (ASPE), CRA, Canadian Business Act Page 2 of 28

- Stock exchange securities law
- Voluntary contracts to accounting a certain way
- Bank/lender covenants
Preparers of Financial Statements: decide how and when to release company financial statements and are not neutral


Managers bonus sometimes based on F/S



Tax paid based on F/S



Business selling price based on F/S

- This conflict requires external opinion


External Auditors – They examine the companies F/S in an external audit. Employed by management or CRA to confirm taxes

Chapter 2: Financial Statements
General Purpose Financial Statements – GPFS – One set of general financial statements for all stakeholders. As they are general they do not provide complete information for all stakeholders to make their decisions....
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