Principles of Financial Accounting: Course Syllabus and Core Topics Overview

Course Overview

Introduction

This course, "Principles of Financial Accounting" (ACC 120), introduces students to the foundational concepts, processes, and ethical considerations of financial accounting. The course emphasizes the analysis, summarization, reporting, and interpretation of financial information for business decision-making. Upon completion, students will be able to prepare financial statements, understand the role of accounting in decision-making, and address ethical issues in accounting.

Course Objectives

• Analyze financial data to support business decision-making using foundational accounting information systems.

• Summarize and record transactions accurately to produce reliable accounting information for reporting.

• Prepare and interpret financial statements to evaluate an organization’s performance and financial position.

• Apply ethical standards when collecting, analyzing, and communicating financial information in business contexts.

Required Materials

• Textbook: Horngren’s Accounting, 14th edition (Miller-Nobles, Mattison, Matsumura, Prentice Hall)

• Calculator: BAS11 or equivalent accounting calculator

• Technology: Laptop/Tablet, Microsoft Excel, PDF reader, reliable WiFi

Grading Distribution

The course uses a variety of assessment methods, including digital practice, instructor-reviewed tasks, chapter assessments, projects, and class participation. The grading scale is as follows:

• A = 90-100

• B = 80-89

• C = 70-79 (minimum for transfer)

• D = 60-69

• F = 0-59

Major Topics and Learning Outcomes

The course is organized into modules that align with key chapters and concepts in Principles of Accounting. Below is a structured summary of the main topics, learning objectives, and relevant academic context.

1. Introduction to Accounting

Importance and Users of Accounting Information

• Accounting is the process of identifying, measuring, and communicating financial information to permit informed judgments and decisions by users.

• Users of accounting information include internal users (management, employees) and external users (investors, creditors, regulators).

• Example: Investors use financial statements to assess the profitability and financial health of a company before investing.

Organizations and Rules Governing Accounting

• Generally Accepted Accounting Principles (GAAP) are the standard framework of guidelines for financial accounting.

• Financial Accounting Standards Board (FASB) and Securities and Exchange Commission (SEC) are key organizations in the U.S. that establish and enforce accounting standards.

The Accounting Equation

• The fundamental equation is: $\text{Assets} = \text{Liabilities} + \text{Equity}$

• Assets: Resources owned by the business.

• Liabilities: Obligations owed to outsiders.

• Equity: Owner’s residual interest in the assets after deducting liabilities.

• Example: If a company has $50,000 in assets and $30,000 in liabilities, equity is $20,000.

2. Transaction Analysis and the Accounting Cycle

Double-Entry Accounting and T-Accounts

• Every transaction affects at least two accounts (debits and credits).

• Normal balances: Assets and expenses have debit balances; liabilities, equity, and revenues have credit balances.

• T-accounts are visual representations used to analyze transactions.

Journalizing and Posting

• Transactions are first recorded in the journal (chronological order), then posted to the ledger (by account).

• Example: Purchasing supplies for cash is recorded as a debit to Supplies and a credit to Cash.

Trial Balance and the Accounting Cycle

• Unadjusted trial balance: Lists all accounts and their balances before adjustments.

• Accounting cycle: The sequence of steps from transaction analysis to the preparation of financial statements and closing entries.

3. Accrual Accounting Concepts

Cash Basis vs. Accrual Basis

• Cash basis: Revenues and expenses are recognized when cash is received or paid.

• Accrual basis: Revenues and expenses are recognized when earned or incurred, regardless of cash flow.

• Example: Under accrual accounting, revenue from a service performed in December is recorded in December, even if cash is received in January.

Adjusting Entries

• Deferrals: Adjustments for revenues and expenses that have been paid or received in advance (e.g., prepaid rent, unearned revenue).

• Accruals: Adjustments for revenues and expenses that have been incurred but not yet recorded (e.g., accrued salaries, interest receivable).

• Purpose: To ensure that revenues and expenses are recognized in the correct period (matching principle).

4. Financial Statements Preparation

Types of Financial Statements

• Income Statement: Reports revenues and expenses to show net income or loss.

• Statement of Owner’s Equity: Shows changes in equity during the period.

• Balance Sheet: Presents assets, liabilities, and equity at a specific point in time.

• Classified Balance Sheet: Separates current and non-current assets and liabilities.

• Statement of Cash Flows: Summarizes cash inflows and outflows from operating, investing, and financing activities.

Closing Entries and Post-Closing Trial Balance

• Closing entries: Transfer balances from temporary accounts (revenues, expenses, withdrawals) to permanent accounts (equity).

• Post-closing trial balance: Ensures all temporary accounts have zero balances and only permanent accounts remain.

5. Merchandising Operations and Inventory

Merchandising Operations

• Merchandisers buy and sell goods (retailers, wholesalers).

• Two inventory systems: Perpetual (continuous tracking) and Periodic (updates at period end).

Inventory Accounting Methods

• FIFO (First-In, First-Out): Oldest inventory costs are assigned to cost of goods sold first.

• LIFO (Last-In, First-Out): Most recent inventory costs are assigned to cost of goods sold first.

• Weighted Average: Average cost per unit is used for all units sold.

• Lower-of-Cost-or-Market Rule: Inventory is reported at the lower of its cost or market value.

Inventory Turnover and Days’ Sales in Inventory

• Inventory Turnover: $\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$

• Days’ Sales in Inventory: $\text{Days' Sales in Inventory} = \frac{365}{\text{Inventory Turnover}}$

6. Internal Controls and Cash

Internal Control Principles

• Internal control is a system of policies and procedures to safeguard assets, ensure reliable accounting, promote operational efficiency, and encourage adherence to policies.

• Key components include control environment, risk assessment, control activities, information and communication, and monitoring.

Bank Reconciliation

• Compares the company’s cash records with the bank statement to identify discrepancies.

• Adjustments may include outstanding checks, deposits in transit, bank fees, and errors.

7. Long-Lived Assets

Property, Plant, and Equipment (PP&E)

• PP&E includes tangible assets used in operations (e.g., buildings, machinery).

• Recorded at cost, including all expenditures necessary to acquire and prepare the asset for use.

Depreciation Methods

• Straight-Line: $\text{Annual Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}}$

• Units-of-Production: $\text{Depreciation per Unit} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Total Estimated Units}}$

• Double-Declining-Balance: $\text{Depreciation Expense} = 2 \times \text{Straight-Line Rate} \times \text{Book Value at Beginning of Year}$

Disposal, Natural Resources, and Intangibles

• Disposal of assets involves removing the asset and its accumulated depreciation from the books and recording any gain or loss.

• Natural resources (e.g., oil, minerals) are depleted over time.

• Intangible assets (e.g., patents, copyrights) are amortized over their useful lives.

8. Ethics in Accounting

• Accountants must adhere to ethical standards, including integrity, objectivity, and confidentiality.

• Ethical dilemmas may arise in financial reporting, requiring professional judgment and adherence to codes of conduct.

9. Course Structure and Participation

• Modules are organized by textbook chapters and include readings, exercises, projects, and group discussions.

• Active participation, timely completion of assignments, and adherence to academic honesty policies are required.

• Use of AI tools is regulated and must be disclosed and cited when permitted.

10. Key Formulas and Ratios

• Return on Assets (ROA): $\text{ROA} = \frac{\text{Net Income}}{\text{Average Total Assets}}$

• Debt Ratio: $\text{Debt Ratio} = \frac{\text{Total Liabilities}}{\text{Total Assets}}$

• Current Ratio: $\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$

• Gross Profit Percentage: $\text{Gross Profit Percentage} = \frac{\text{Gross Profit}}{\text{Net Sales}}$

• Asset Turnover Ratio: $\text{Asset Turnover Ratio} = \frac{\text{Net Sales}}{\text{Average Total Assets}}$

• Cash Ratio: $\text{Cash Ratio} = \frac{\text{Cash + Cash Equivalents}}{\text{Current Liabilities}}$

11. Sample Table: Comparison of Inventory Costing Methods

Method	Cost Flow Assumption	Effect on COGS (Rising Prices)	Effect on Net Income (Rising Prices)
FIFO	Oldest costs assigned to COGS first	Lower	Higher
LIFO	Newest costs assigned to COGS first	Higher	Lower
Weighted Average	Average cost per unit	Middle	Middle

Additional info:

• This summary is based on the course syllabus and schedule, which covers the foundational topics in Principles of Accounting as outlined in standard college curricula.

• Students are expected to engage with both theoretical concepts and practical applications, including ethical considerations and the use of technology in accounting.