Warren, Reeve, and Duchac Accounting (22e) Map to Georgia Accounting Guide. Describe the accounting process. Define related terms.

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1 Warren, Reeve, and Duchac Accounting (22e) Map to Georgia Accounting Guide Competency After completing this section, the student will: Warren, Reeve, Duchac outcomes ACCOUNTING VOCABULARY AND CONCEPTS 2 The accounting process Describe the accounting process. Define related terms. 1.1 Describe the role of accounting in business and explain why accounting is called the language of business 1.1 List business stakeholders. 1.1 Define ethics and list the three factors affecting good ethical conduct. 1.2 Explain what is meant by generally accepted accounting principles. 1.2 Describe how generally accepted accounting principles are developed. 1.3 Define assets, liabilities, and stockholders equity. Accounting elements Define the accounting elements. THE ACCOUNTING CYCLE AND ACCOUNTING FOR A PERSONAL SERVICE BUSINESS The accounting ify business transactions. equation Relate the effect of business transactions to the accounting equation. Record business Record business transactions in transactions the journal. Post journal entries to the ledger accounts. 1.3 State the accounting equation. 1.3 Given two elements of the accounting equation, solve for the third element. 1.4 Use the accounting equation as a framework to record transactions Define a business transactions. 1.4 Use the accounting equation as framework for recording transactions 2.1Prepare journal entries 2.1 Record entries in T accounts. 2.2 Post journal entries to

2 Financial statements End of period procedures After completing this section, the student will: Prove the accuracy of the ledger. Prepare a worksheet. Prepare financial statements. Prepare adjusting entries. Prepare closing entries. Prepare reversing entries. THE ACCOUNTING CYCLE AND ACCOUNTING FOR A MERCHANDISING ENTERPRISE Calculate cash discounts. Accounting for sales and purchases Special journals Record business transactions in special journals. Warren, Reeve, Duchac outcomes standard accounts. 2.2 Post journal entries to a T account. 2.3 Discover errors in journalizing, posting, or preparing trial balances. 4.1 Using an end of period spreadsheet (worksheet), describe how the unadjusted trial balance accounts are affected by adjustments and how the adjusted trial balance accounts flow into the income statement and balance sheet. 4.2 Prepare an income statement, retained earnings statement, and a balance sheet. 1.5 Prepare a statement of cash flows. 3.1 Explain why accrual accounting requires adjusting entries. 3.2 Prepare adjusting journal entries. 4.3 Prepare closing entries Appendix B Prepare journal entries to record sales discounts and sales returns and allowances. 6-3 Prepare journal entries to record purchase discounts and purchases returns and allowances. 5-2 Prepare a revenue, cash receipts, purchases, and cash payments journal with posting to subsidiary and control ledger accounts. Subsidiary ledgers Record business transactions in 5-2. Define subsidiary ledger

3 The periodic summary Financial statements After completing this section, the student will: subsidiary ledgers. Prepare schedules of accounting receivables and payables. Determine the need for adjusting entries. Calculate adjustments. Record adjusting entries. Prepare a worksheet. Prepare financial statements. Analyze financial statements. Warren, Reeve, Duchac outcomes and accounts for customers and creditors. 5-2 Prepare a revenue, cash receipts, purchases, and cash payments journal with posting to subsidiary and control ledger accounts. 5-2 Prepare a revenue, cash receipts, purchases, and cash payments journal with posting to subsidiary and control ledger accounts. 3-1 Explain why accrual accounting requires adjusting entries. 3-2 Give an example of a prepaid expense, unearned revenue, accrued revenue, and accrued expense. 3-2 Prepare and adjusting entry for prepaid expense, unearned revenue, accrued revenue, and depreciation expense. 4.1 Using an end of period spreadsheet (worksheet), describe how the unadjusted trial balance accounts are affected by adjustments and how the adjusted trial balance accounts flow into the income statement and balance sheet. 4.2 Prepare an income statement, retained earnings statement, and a balance sheet. 1.5 Prepare a statement of cash flows Describe the uses and limitations of analytical measures.

4 Year end procedures After completing this section, the student will: Record closing entries. Warren, Reeve, Duchac outcomes 15.2 and 15.3 Calculate and interpret the: current ratio. quick ratio. accounts receivable turnover ratio. days sales in receivables ratio. inventory turnover ratio. day s sales in inventory ratio. fixed assets to long-term liabilities ratio. liabilities to stockholders equity ratio. number of times interest charges are earned ratio. net sales to assets ratio. rate earned on total assets ratio. rate earned on stockholders equity ratio. rate earned on common stockholders equity ratio. price-earnings ratio. dividends per share and dividend yield 4-3 Prepare the closing entries for revenues, expenses, Owner s drawing, and income summary. Appendix B Record reversing entries. CASH CONTROL 10 Accounting for cash Define cash. 8-2 Define cash. Explain a cash transaction's effect on the cash account. Record business transactions involving cash in cash related journals. Prove the accuracy of the cash 2-1 Prepare journal entries. 2-1 Determine the normal balance for an account. 2-1 List the rules of debit and credit. 8-5 Journalize any necessary entries on the company s records based upon the bank reconciliation. 8-5 Prepare a bank

5 After completing this section, the student will: account. Establish and maintain a petty cash fund. Manage a checking account. Prepare a bank reconciliation. Warren, Reeve, Duchac outcomes reconciliation. 8-6 Journalize the entry to establish a petty cash fund. 8-6 Journalize the entry to replenish a petty cash fund. 8-4 Describe how the use of bank accounts helps control cash. 8-4 Describe a bank statement and provide examples of items that appear on a bank statement as debit and credit memoranda. 8-5 Describe a bank reconciliation. 8-5 Prepare a bank reconciliation. Course Guide Competency After completing this section, RECEIVABLES 6 Record losses from 9-3 Prepare journal entries to Direct write-off uncollectible accounts using write off an account using the method the direct write-off method. direct write off method. Allowance method Record losses from uncollectible accounts using the allowance method based on sales and on accounts receivable. 9-4 Prepare journal entries to write off an account using the allowance method. 9-4 Prepare journal entries to write off an account using the allowance method. 9-4 Determine the adjustment, bad debt expense, and net realizable value of accounts receivable using the percent of sales method. 9-4 Determine the adjustment, bad debt expense, and net realizable value of accounts receivable using the analysis of

6 Notes receivable Year end accrual After completing this section, Record the write-off of an account under the direct writeoff method. Record the recovery of an account previously written off when the direct allowance method was used. Describe and explain the nature and use of notes receivable and calculate related interest. Describe and record transactions involving notes receivable and prepare notes receivable register. Record accrued interest receivable at year's end. receivables. 9-5 Describe the difference in accounting for uncollectible accounts under the direct writeoff and allowance methods. 9-3 Prepare journal entries to write off an account using the direct write off method. 9-4 Prepare journal entries for the reinstatement and collection of an account previously written off. 9-6 Describe the characteristics of a notes receivable. 9-6 Determine the due date and maturity value of a note receivable. 9-6 Prepare journal entries for the receipt of the payment of a notes receivable. 9-6 Prepare a journal entry of a dishonored note receivable. 9-6 Determine the due date and maturity value of a note receivable. Discounting notes receivable Financial statement presentation Record transactions relating to the discounting of notes receivable. Describe the financial statement presentation of both the allowance for uncollectible accounts and the loss from uncollectible accounts. 9-6 Prepare journal entries for the receipt of the payment of a notes receivable. 9-7 Describe how receivables are reported in the Current Assets section of the balance sheet. 9-7 Describe disclosures related to receivables that should be reported in the financial statements. INVENTORY 7 Inventory systems Describe system of inventory use in accounting for a merchandising business. 7.1 Describe how perpetual inventory system enhances control over inventory. 7.1 Describe why taking a

7 Inventory valuation After completing this section, Identify the two principal inventory systems used in business today. Compute the cost of inventory using the FIFO, LIFO, weighted average, specific identification, and lower cost of market methods of inventory valuation. physical inventory enhances control over inventory. 7.1 Describe how perpetual inventory system enhances control over inventory. 7.1 Describe why taking a physical inventory enhances control over inventory. 7.2 Describe FIFO, LIFO, and average cost flow methods. 7.2 Describe how the choice of cost flow assumptions affects the income statement and the balance sheet. 7.3 Determine the cost of inventory and cost of merchandise sold using the perpetual inventory system under the FIFO and LIFO methods. 7.4 Determine the cost of inventory and cost of merchandise sold using a periodic inventory system under the FIFO, LIFO, and average cost methods. 7-5 Indicate which inventory cost flow method will yield the highest and the lowest ending inventory and net income under periods of rising prices. 7-6 Determine inventory using lower of cost or market. 7-6 Illustrate the use of net realizable value for spoiled or damaged inventory. Estimate ending inventory using the gross profit and simplified retail methods. 7-7 Estimate ending inventory using the retail method. 7-7 Estimate ending inventory using the gross profit method. PLANT ASSETS 9 Recording plant assets Determine the cost of plant assets Define fixed assets List the types of cost that

8 Depreciation and depletion Amortization Disposition of a long term asset After completing this section, Record in the general journal the cost of plant assets. Calculate and record in the general journal the depreciation of plant assets using a variety of depreciation methods. Calculate and record in the general journal depletion expense for depletable assets. Calculate and record the amortization of an intangible asset. Record in the general journal the disposition of a long term asset. should and should not be included in the cost of a fixed asset List the types of cost that should and should not be included in the cost of a fixed asset Provide examples for ordinary repairs, asset improvements, and extraordinary repairs Provide journal entries for ordinary repairs, asset improvements, and extraordinary repairs Define and describe depreciation List the factors used in determining depreciation Compute straight-line depreciation Compute units-ofproduction depreciation Compute double declining balance depreciation Define and describe depletion Compute a depletion rate Prepare the journal entry to record depletion Prepare a journal entry to amortize the cost of patents and copyrights Prepare the journal entry to record the impairment of goodwill Prepare the journal entry for discarding a fixed asset Prepare journal entries for the sale of a fixed asset Prepare journal entries for the exchange of similar assets. PAYROLL 10 Computing and Compute and record in the 11-2 Compute employee net

9 recording payroll Employer payroll taxes After completing this section, general journal an employee's gross earnings, including overtime earnings, deductions, and net pay. Record gross earnings, deductions, and net pay in the payroll register. Record in the general journal the distribution of the payroll for the employees. Record individual earnings in the individual's earnings record. Compute and record in the general journal the employer's FICA tax and federal and state unemployment taxes. pay, including decutions for social security and Medicare tax Journalize the employee s earnings, net pay, and payroll liabilities from the payroll register Journalize the employee s earnings, net pay, and payroll liabilities from the payroll register Describe elements of a payroll system, including the employee s earnings record, payroll checks, and internal controls Calculate the federal withholding tax from a wage bracket withholding table Journalize the employee s earnings, net pay, and payroll liabilities from the payroll register Journalize the payroll tax Payment of payroll taxes Record the payment of FICA tax and federal income tax. expense. Record the payment of federal and state unemployment taxes. PAYABLES 4 Describe and explain the Promissory notes nature and use of promissory and interest notes and calculate related interest. Year end accrual Accruals & deferrals Describe and record transactions involving notes payable and prepare a notes payable register. Record accrued interest payable at year's end. Describe and explain the adjusting entries related to accruals and deferrals Journalize the payroll tax expense Determine the interest from interest-bearing and discounted notes payable Determine the interest from interest-bearing and discounted notes payable Determine the interest from interest-bearing and discounted notes payable. 3-1 Give an example of prepaid expense, unearned revenue, accrued revenue, and accrued expense.

10 After completing this Competency section, 3-2 Prepare and adjusting entry Record transaction journal for prepaid expense, unearned entries related to accruals and revenue, accrued revenue, and deferrals. depreciation expense. PARTNERSHIPS Identify the advantages and Demonstrate an understanding Partnership disadvantages of of the characteristics of a formation proprietorships, partnerships, partnership. and limited liability companies. Division of profit or loss Addition or withdrawal of a partner Account for the formation of a partnership. Account for the division of net income or net loss between partners. Account for the addition or withdrawal of a partner Journalize the initial formation of a partnership and establish partner capital Determine and journalize the income distributed to each partner Prepare for partner admission by revaluing assets to approximate current market values Distinguish between partner admission through purchase from an existing partner or purchase from the partnership Determine partner bonuses Apply the four steps for liquidating a partnership for either gain or loss upon realization. SALES TAX RETURNS 1 Prepare sales tax returns used Sales tax return in business for the reporting preparation and remittance of sales taxes. Calculator By Touch Method Demonstrate use of the Calculator by touch method. Course Guide 6-3 Prepare journal entries for collection and payment of sales taxes by the seller. Non-text objective After completing this section, Competency ACCOUNTING FOR A CORPORATION 10 Characteristics of a corporation Define major terms associated with corporations Describe the characteristics of corporations.

11 Corporation capital Organization Structures Characteristics of capital stock After completing this section, Identify the primary subdivisions of corporate capital. Discuss business organization structures and different types of corporations such as P.C. and L.L.C. Summarize the differences in the equity sections for sole proprietorships, partnerships, and corporations. Define capital stock, its classes, its characteristics, and all associated terms Describe what is meant by paid-in capital Describe what is meant by net income rained in the business prepare a simple Stockholders Equity section of the balance sheet Identify the advantages and disadvantages of proprietorships, partnerships, and limited liability companies Prepare the Stockholders Equity section of the balance sheet Prepare a statement of stockholders equity Prepare the statement of partnership equity Describe the characteristics of common and preferred stock, including rights to dividends. Issuing stock Recognize the sale of stock at par, at a premium and at a discount, and record journal entries appropriate to each. Illustrate stock premium and discounts on the balance sheet Journal the entry for common and preferred stock issued at par, and issued at for more than par value Prepare the Stockholders Equity section of the balance sheet Prepare a statement of stockholders equity. Treasury stock Define treasury stock Define treasury stock 13-5 Describe the accounting for treasury stock. Record journal entries for 13-5 Journalize entries for the treasury stock transactions. purchase and sale of treasury stock. Paid-in capital Identify and define the primary sources of paid-in capital Describe what is meant by paid-in capital. Earnings and income Illustrate the application of 14-1 Describe unusual items

12 tax Competency Extraordinary items in the financial statements After completing this section, income taxes to corporate earnings. List and illustrate the major categories of unusual items relating to net income. affecting prior period financial statements Identify and report gains and losses from discontinued operations and extraordinary items Prepare earnings per share disclosures for discontinued operations and extraordinary items Describe unusual items affecting prior period financial statements. STATEMENT OF CASH FLOWS 5 Financial statement analysis Discuss the various methods of preparing the Statement of Cash Flows Assemble data and prepare the Statement of Cash Flow. Describe the basic analytical procedures used such as percentages, analyses, ratios, and turnovers. Calculate percentages, ratios, and turnovers as applied to solvency and profitability measures ify transactions that either provide or use cash into either operating, investing, or financing activities Prepare a statement of cash flows using the indirect method Prepare a statement of cash flows using the direct method Prepare a statement of cash flows using the indirect method Prepare a statement of cash flows using the direct method Describe the uses and limitations of analytical measures Prepare a horizontal analysis from a company s financial statements Prepare a vertical analysis from a company s financial statements and 17.3 Calculate and interpret the: current ratio. quick ratio.

13 Annual reports After completing this section, Describe the contents of Corporate Annual Reports. accounts receivable turnover ratio. days sales in receivables ratio. inventory turnover ratio. day s sales in inventory ratio. fixed assets to long-term liabilities ratio. liabilities to stockholders equity ratio. number of times interest charges are earned ratio. net sales to assets ratio. rate earned on total assets ratio. rate earned on stockholders equity ratio. rate earned on common stockholders equity ratio. price-earnings ratio. dividends per share and dividend yield 14.2 Calculate and interpret basic earnings per share Calculate and interpret earnings per share on common stock Describe the elements of a corporate annual report (including MDA, Report on Adequacy of Internal Controls, and Report on Fairness of Financial Statements). DEPARTMENTAL ACCOUNTING 2 Distinguish between financial accounting and managerial accounting. Define planning. Define control Describe the differences between financial accounting and managerial accounting Describe the planning, directing, controlling, and feedback elements of the budget process Describe examples of how managerial accounting aids managers in decision making.

14 Responsibility accounting After completing this section, Define responsibility accounting. Utilize responsibility accounting's principles for cost, profit, and investment centers. Define budget. Define budget performance report. Define and illustrate gross profit by department Describe the common types of responsibility centers and the role of responsibility accounting Describe the responsibility reporting for a cost center Describe the responsibility reporting for a profit center Describe the responsibility reporting for an investment center Compute rate of return on investment Describe a static budget and explain when it might be used Describe and prepare a flexible budget and explain when it might be used Prepare a budget performance report Describe the responsibility reporting for a profit center. (see Exhibit 6, p. 1075) Define and illustrate operating income by department Determine how service department charges are allocated to profit centers Compute income from operations for a profit center. COST ACCOUNTING 15 General principles Illustrate similarities between manufacturing and merchandising. Distinguish between cost of merchandise sold and cost of goods sold. Differentiate between job order and process accounting and give examples of items 18-3 Describe the differences between merchandising and manufacturing company balance sheets Prepare a statement of cost of goods manufactured Prepare an income statement of a manufacturing company Compare and contrast the job order cost system with the process cost system.

15 Job order cost accounting After completing this section, produced under each system. Summarize the process of accounting for materials, including appropriate documentation, determination of material cost, and the journal entry to record the flow of materials into production Describe a job order cost system Describe the flow of materials and how materials costs are assigned in a job order cost system Prepare a journal entry to record materials used in production. Define factory overhead, explain the use of the factory overhead ledger, and list the major sources of charges to this account. Name and connect the controlling accounts and subsidiary ledgers normally used in job order cost accounting. Record journal entries for the issuance of materials, factory labor, and factory overhead. Prepare journal entries for goods completed and transferred to finished goods Describe and illustrate how factory overhead costs are accumulated and assigned in a job order cost system Compute the predetermined factory overhead rate Describe and illustrate how to dispose of the balance in the factory overhead account Describe and illustrate the flow of costs in a job order cost system Describe how factory labor hours are recorded and how labor costs are used in production Prepare the journal entry to record factory labor used in production Prepare a journal entry to record materials used in production Prepare the journal entry to record factory overhead applied to production Describe and illustrate how costs are accumulated for work in process and finished goods inventory and assigned to cost

16 Distinction between job order and process cost accounting Service departments and cost allocation Processing costs Equivalent units of production After completing this section, Prepare journal entries for the cost of goods sold. Cite major areas of similarities between job order and process cost accounting. Define service departments and explain the allocation of service department costs to departmental factory overhead accounts. List the elements which comprise processing costs. Explain the calculation of the unit processing cost. Define and explain the concept of equivalent units. Demonstrate the computation of equivalent units of production for the month. Apply the above results to the calculation of the cost of goods finished for an accounting period. Show the computation of the of goods sold in a job order cost system Describe and illustrate the flow of costs in a job order cost system Describe and illustrate how costs are accumulated for work in process and finished goods inventory and assigned to cost of goods sold in a job order cost system Compare and contrast the job order cost system with the process cost system Determine how service department charges are allocated to profit centers Identify the characteristics of a process manufacturer Describe the material and cost flows of a process manufacturer Determine the whole units charged to production and to be assigned costs Compute the equivalent units with respect to materials Compute the equivalent units with respect to conversion Compute the costs per equivalent unit Allocate the costs to beginning inventory, units started and completed, and ending inventory Compute the ending

17 Journal entries Standard costs After completing this section, cost of units in process at the end of the month. Summarize the data on the cost of production report. Record journal entries for the allocation of service department costs. Record journal entries for the flow of factory costs between departments. Record journal entries for the application of factory overhead and determine the amount and nature of the balances in departmental factory overhead accounts. Record journal entries for routine business transactions related to manufacturing operations. Explain standard costs. Illustrate the process of determining standard costs. Define standard cost variances for a variety of applications. inventory balances Prepare a cost of production report Prepare journal entries for process costing transactions Summarize cost flows in T account form Prepare journal entries for process costing transactions Summarize cost flows in T account form Prepare journal entries for process costing transactions Summarize cost flows in T account form Define ideal and normal standards and explain how they are used in setting standards Explain and illustrate how standards are used in budgeting Compute and interpret direct materials and direct labor variances Compute and interpret factory overhead controllable and volume variances Compute and interpret direct materials price and quantity variances Compute and interpret direct labor rate and time variances Compute and interpret factory overhead controllable and volume variances.

18 After completing this section, Competency 23-4 Journalize the entries to record the purchase and use of Prepare journal entries for direct materials at standard, standard cost application. recording favorable or unfavorable variances. BUDGETING 3 Nature and objectives of budgeting Define budget, and list its major objectives Describe the planning, directing, controlling, and feedback elements of the budget process Describe the behavioral issues associated with tight goals, loose goals, and goal conflict. Budget period and procedures Cash budget and budget performance report Illustrate budget periods. Describe in general terms the budgeting process. Make distinctions between the master budget and its components. Summarize cash budget use and explain its preparation Describe a static budget Describe the use of computers in continuous budgeting Illustrate the connection between the major income statement and balance sheet budgets Prepare sales budget Prepare a production budget Prepare a direct materials budget Prepare a direct labor cost budget Prepare a factory overhead cost budget Prepare a cost of goods sold budget Prepare a selling and administrative expense budget Prepare cash receipts and cash payments budgets. Prepare a cash budget Prepare cash receipts and cash payments budgets. Illustrate budget performance report use Prepare a budget performance report. Flexible budgets State the primary reasons for 22-1 Describe and prepare a

19 After completing this section, Competency using flexible budgets. flexible budget and explain when it might be used Describe and prepare a Distinguish between fixed and flexible budget and explain variable overhead costs. when it might be used. Prepare a flexible budget for 22-1 Describe and prepare a several levels of productive flexible budget and explain activity. when it might be used. LONG TERM LIABILITIES Define the concept of a bond. Identify and explain different 15.1 Calculate and compare the types of long term liabilities. effect of alternative financing plans on earnings per share. Record the issuance of Bonds Payable. Journalize the accrual and payment of bond interest. Record the amortization of bond premiums and discounts Define the characteristics of a bond Describe the factors that determine the price of a bond Calculate the price of a bond Journalize thee issuance of bonds at face value and the payment of periodic interest Calculate the present value of the face amount of a bond Calculate the present value of the periodic bond interest payments Calculate the price of a bond Journalize the issuance of bonds at face value and the payment of periodic interest Journalize the issuance of bonds at a discount Journalize the amortization of a bond discount Journalize the issuance of bonds at a premium Journalize the amortization of a bond

20 Dividends Stockholders' equity on the balance sheet After completing this section, Record the retirement of a bond issue. Journalize transactions involving bond sinking funds. Present long term liabilities on the Balance Sheet. Define cash dividend and stock dividend. Calculate total dividends and dividends per share for preferred and common stock. Record journal entries for cash and stock dividends. Define stock split. Prepare the stockholders equity section of the balance sheet. premium Explain bond redemptions Journalize the redemption of bonds payable Illustrate the balance sheet presentation of bond investments and bonds payable Describe the characteristics of common and preferred stock including rights to dividends Describe the characteristics of common and preferred stock including rights to dividends. (Exhibit 4) 13.4 Journalize the entries for the declaration and payment of cash and stock dividends Journalize the entries for the declaration and payment of stock dividends Define and give an example of a stock split Describe the accounting for and effects of a stock split on the financial statements Prepare the Stockholders Equity section of the balance sheet.