Ontario Grade 12 BAT4M Financial Accounting Principles (Grade 12, University/College Preparation)
Chapters: 4
1. The Use of Accounting Information to Make Decisions
1 The Use of Accounting Information to Make Decisions · 2 Ethics · 3 Career Opportunities
- Introduction to Accounting – Accounting is the language of business. It identifies money events, records them, classifies and summarises them, and then gives the results to the people who need them — owners, managers, banks, investors and the government.
- Ethics in Accounting – Banks, investors, workers and governments make decisions using accounting numbers, so the numbers must be honest. Accountants face pressure to bend them. A code of ethics guides them with five principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Strict standards and new issues such as AI, cyber security and climate reporting keep changing the accountant's role.
- Careers in Accounting – Accounting offers jobs at every level, from bookkeeper to chief financial officer, in firms, industry, government and not-for-profits. Professional accountants study for a degree, pass a professional body's exams and complete supervised experience to earn a designation such as CPA, CA, ACCA or CMA. Professional bodies set exams, enforce a code of ethics and require lifelong learning.
2. The Accounting Cycle
1 Accounting Principles and Practices · 2 Accounting Cycle in a Computerized Environment · 3 Ethics and Issues in Accounting
- Theory Base of Accounting – Accounting follows common rules called GAAP so that every firm's accounts mean the same thing. Three basic assumptions — going concern, consistency and accrual — stand first. Other principles like business entity, money measurement, historical cost, dual aspect, matching and conservatism decide what to record, when and at what value.
- Adjustments in Financial Statements – Adjustments are items found after the trial balance that must be brought into the final accounts so that profit is true (accrual and matching). The golden rule: every adjustment appears in two places — once in the trading or profit and loss account and once in the balance sheet (or twice within them).
- Ethics in Accounting – Banks, investors, workers and governments make decisions using accounting numbers, so the numbers must be honest. Accountants face pressure to bend them. A code of ethics guides them with five principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Strict standards and new issues such as AI, cyber security and climate reporting keep changing the accountant's role.
3. Accounting Practices for Assets
1 Short-Term Assets · 2 Inventory Procedures · 3 Capital Assets
- Accounts Receivable and Accounts Payable – When a business sells on credit, the customer owes it money: an account receivable (a current asset). When it buys on credit, it owes the supplier: an account payable (a current liability). Credit terms such as 2/10, n/30 offer a discount for paying early. Each customer and supplier has a page in a subledger that must agree with the control account. Because some customers never pay, businesses estimate bad debts with an allowance. A written promise to pay with interest is a note receivable.
- Inventory Accounting: Systems, Costing Methods and Controls – Inventory is the stock of goods a business holds to sell. Inventory accounting decides how much the goods sold cost (cost of goods sold) and how much the goods left are worth (closing inventory). When prices change, the answer depends on the costing method: FIFO or weighted average (specific identification for unique items). Businesses track stock with a perpetual or periodic system, count it physically, protect it with internal controls, and watch how fast it sells with inventory turnover.
- Depreciation, Provisions and Reserves – Depreciation is the fall in value of a fixed asset because of use, time and new technology; its cost is spread over its useful life by the straight line method (same amount yearly) or the written down value method (same rate on the reducing balance). A provision is a charge against profit for a known loss or liability; a reserve is a part of profit kept back to strengthen the business.
4. Partnerships and Corporations
1 Partnerships · 2 Corporations
- Partnership Fundamentals: Deed, Capital and Sharing Profit – A partnership is two or more people who share the profit of a business they run together. Their agreement (deed) says how profit is shared. If there is no deed, the Partnership Act 1932 gives the rules. Profit is first used for partners' interest, salary and commission in a P&L Appropriation Account, and the rest is shared in the profit-sharing ratio.
- Accounting for Share Capital – A company raises money by selling shares. Money usually comes in parts: application, allotment and calls. Journal entries record each part, including premium, extra applications, unpaid calls, advance payments, shares given for assets, and shares taken back (forfeited) and sold again (reissued). Share capital is shown in the balance sheet under Shareholders' Funds.