Class notes

Class Notes Acct 1220 class 1-5

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Course
ACCT 1220 (ACCT1220)

Institution
University Of Guelph (U Of G )

Class Notes Acct 1220 class 1-5Class Notes Acct 1220 class 1-5Class Notes Acct 1220 class 1-5Class Notes Acct 1220 class 1-5Class Notes Acct 1220 class 1-5Class Notes Acct 1220 class 1-5Class Notes Acct 1220 class 1-5vClass Notes Acct 1220 class 1-5

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Uploaded on August 28, 2024
Number of pages 8
Written in 2021/2022
Type Class notes
Professor(s) Dr. g
Contains 1-5

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Friday, Sept. 10

 Accounting is not only about numbers
 Numbers reflect what is happening in the background

Financial Statements: Purpose and Use
Uses and Users of Accounting
 Accounting identifies and records economic events of an organization and
communicates to interested users
 There are internal and external users

Users of Financial Information
 Internal users work for the company/organization and are involved in running the
company/organization (ie. managers)
 External users don’t work for company. (ie. investors, customers, and taxing authorities)

Ethical behaviour
 Accounting preparers must have high ethical standards for info to have value
o Actions are legal and responsible
o Consider organization’s interests
 Accountants, other professionals, and most companies have rules or codes of conduct
to guide ethical behaviour

Proprietorship
 Owned by one person
 Simple to set up
 Owner has control over business
 Limited life
 Unlimited liability
 Income tax paid by owner

Partnership
 Similar to propretiship, but is owned by more than one person
 Formalized in a written agreement
 Limited life
 Each partner has unlimited liability
 Income tax paid by individual partners

Corporation
 Separate legal entity owned by shareholders
 Indefinite life
 Ease of raising capital
 Shareholders enjoy limited liability
 Corporation pays income tax
 May be public or private
o Public if shares are traded on a stock market (ie. TSX)

, o Private if shares are not available to the general public

Generally Accepted Accounting Principles (GAAP)
 Rules and practices for the preparation of financial statements
 Different for publicly-traded and private corps
o Public use International Financial Reporting Standards (IFRS)
o Private may use IFRS or Accounting Standards for Private Enterprises (ASPE)
 Proprietorships and partnerships generally follow ASPE for external reporting
o Not required to follow any particular standards for internal use

Types of Business Activities
 Financing
 Investing
 Operating

Financing Activities
 Obtaining funds to finance the operations of a business
o Examples
 Selling or repurchasing shares (equity financing)
 Borrowing money or repaying loans (debt financing)
 Forms of debt
o Bank indebtedness, bank loans
o Long-term debt such as mortgages, bonds, finance leases

Investing Activities
 Purchase or sale of long-lived assets needed to operate the company
o Examples
 Purchase or sale of property, plant and equipment, intangible assets
 Purchase or sale of investments (ie. shares or debt securities of other
companies)

Operating Activities
 Main day-today activities of the business
o Examples
 Sources of income
 Expenses
 Related accounts such as accounts receivable and accounts payable

Financial Statements
 Statement of income
o Reports revenue and expense for a specific period of time
 Statement of change in equity
o Reports changes in each component of shareholders equity during a period of
time
 Statement of financial position
o Shows the assets, liabilities, and shareholders’ equity at a specific time
 Statement of cash flows
o Shows how company obtained cash and how that was used

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