Student Handout and Activities
Additional Activities will be Uploaded Into Schoology
2.5 Weeks - 9 + 4
1.1 Describe the need for financial information
1.2 Explain the concept of accounting
1.3 Discuss the role of ethics in accounting
1.4 Explain the use of technology in accounting
1.5 Explain legal considerations for accounting
1.6 Discuss the roles and responsibilities of accounting-standard-setting bodies (i.e., SEC, FASB, IASB, GASB) (SP)
1.7 Explain the nature of accounting standards
1.8 Explain types of business ownership
Unit Assessment:
Objectives:
a. Discuss characteristics of useful financial information (e.g., credible, transparent, timely, understandable, comparable, reliable, etc.).b. Describe the usefulness of financial information in identifying trends.c. Explain how managers use financial information (e.g., in planning strategies, executing strategies, and feedback from execution of the strategy).d. Discuss the usefulness of financial information in contracts.e. Discuss how analysis of financial data aids in understanding accounting treatment.f. Describe how analysis of financial data aids in verifying information.g. Explain how analysis of financial data aids in determining variance.h. Discuss how analysis of financial data guides financial decision-making.Exit Activity:
Explain to the students that financial information is important to individuals both inside and outside an organization. Divide the class into groups of three or four students and ask each team to conduct secondary research to develop a one-page written report that answers the following questions:
1. Who inside a company typically needs financial information? How do those individuals use the financial information?
2. Who outside a company needs financial information? How do they use the financial information?
3. What characteristics must financial information possess to be useful?
Ethics Case for Students: Alexis works as a managerial accountant for a large retail company. One of her most important responsibilities is interpreting her company’s financial information and recommending appropriate actions to upper management. Alexis’s company is considering making renovations to its main office building, which is outdated and in need of repairs. Her manager asks Alexis to determine whether the company has enough money in the budget to afford major renovations this year.
Alexis really wants the office building to be updated – she’s sick of the ant problem, the lack of insulation, and the broken kitchen appliances – but the budget doesn’t quite justify the expense. Alexis figures, however, that the money will be made up once the busy holiday season brings in additional revenues. She’s considering “fudging the numbers” so that the renovations will be a go – after all, improving the office building would increase employee morale and decrease turnover, saving the company money in the long run. What do you think? What should Alexis recommend that her company do? (Ethical Principles Involved: Integrity, Transparency, Rule of Law, Viability)
Financial Information—Discussion Guide
Slide #2 THINK ABOUT IT
Anybody who makes business decisions will inevitably need to analyze financial information. Whether they relate to personal finance or the financial aspects of a business, knowing how to locate and interpret financial information is crucial for making smart business decisions.
KEY CONCEPTS
Slide #3 Financial information is any record or data related to the financial activities of an individual or organization.
Slide #4 Financial information must be understandable, not just to the people who prepare it, but to everyone who uses it.
Slide #5 Financial information must also be relevant to be useful.
Slide #6 Financial information used in making decisions must be reliable.
Discussion #2: Ask students to discuss the difference between a personal code of ethics and industry standards. Why might a person need both to perform a job well?
Slide #7 It is difficult to gain any useful knowledge from a single data set alone. Rather, data and information are most useful when compared and analyzed against other data and information.
Discussion #3: Ask students to discuss why a user might need to compare financial information from businesses in different industries. What kinds of users might be interested in these comparisons?
Objectives:
a. Define the following terms: accounting, accounting system, cash accounting method, accrual accounting method, cost accounting, and managerial accounting.b. Identify purposes of accounting.c. Explain who uses accounting data.d. Describe requirements that an accounting system should fulfill.e. Explain the need for accounting standards.f. Differentiate between cash accounting method and accrual accounting.g. Explain the nature of managerial accounting.h. Discuss the nature of cost accounting.i. Explain the flow of financial data from customer transaction to financial information users.Activity:
Write a script for a training video that could be shown to new business employees to introduce someone to accounting.
1. What are the purposes of accounting?
2. Who often uses a company’s accounting data?
3. What requirements should companies expect their accounting systems to fulfill?
4. What are two types of accounting methods?
5. What is the purpose of managerial accounting?
6. How and why is cost accounting performed?
7. How does financial data typically flow through a company from customer transaction to financial information users?
When finished each student should submit their script to the teacher for review. (This could be done in a group as well)
NOTE: Students are not required to create a video; they are only writing the video script.
Ethics Case for Students: Several years ago Susannah, an accountant, started a small clothing boutique with her best friend Jennifer. The boutique recently suffered a major loss after an entire shipment of inventory was ruined by a water line break that flooded the store. Jennifer tells Susannah that she is worried about the boutique’s financial health – and that she is considering shutting it down. Susannah is devastated – she’s confident that she can find a way to work the numbers so that the store can stay open.
After spending hours with the budget, Susannah is frustrated and tired. She realizes that Jennifer is right – the store’s finances have been going downhill for quite some time. She knows that the boutique can’t stay open for much longer without going bankrupt. But Susannah has invested so much time and effort into the store that she can’t bear the thought of it closing. She’s debating simply telling Jennifer that everything is fine and dealing with the store’s debts later. What do you think? Should Susannah tell Jennifer the truth? (Ethical Principles Involved: Integrity, Trust, Transparency, Respect, Viability)
Accounting—Discussion Guide
Slide #8 THINK ABOUT IT
Have you ever had a goal to save for a big purchase or to budget your money? If so, you probably found it helpful to keep track of all the money that you saved or spent. When you keep careful records, you know exactly how much money you can spend or save at any given time. That is because you are keeping track of (accounting for) your money. Businesses need to account for their money to accomplish their goals, too.KEY CONCEPTS
Slide #9 Accounting is the process of gathering, recording, organizing, and reporting financial data.
Slide #10For a business’s accounting records to be useful, a business must make sure that everyone handling its financial records follows the same methods or procedures.
Slide #11 In the cash accounting method, business transactions are recorded when the money involved in the transaction changes hands.
Discussion #1: Ask students to identify some types of businesses that might use the cash method of accounting. What types of businesses might prioritize knowing how much cash is on hand?
Slide #4 Businesses using the accrual accounting method journalize transactions at the time they occur, even if no money is exchanged right away.
Discussion #2: Ask students to think about what types of businesses would use the accrual method of accounting. For which types of businesses would the cash on hand be less important than other information like sales numbers in a given month?
Discussion #3: Ask students why the national standards for accounting would prefer the accrual method over the cash method of accounting.
Objectives:
a. Explain the purpose of having ethical guidelines in accounting.b. Compare the accounting profession's client with that of the medical or legal profession.c. Explain how the use of accounting ethics benefits businesses.d. Describe why accountants are required to act with due care.e. Discuss the relationship between an accountant's independence and conflicts of interests.f. Compare the difference between following the rules and doing what is right in accounting.g. Discuss the role of confidentiality in accounting.h. Describe the need for full disclosure in public filings.i. Explain the need for transparency in accounting.j. Describe the use of a code of ethics in accounting.Activity:
In teams or individual, students should research existing ethical standards and codes of conduct for the accounting profession and then develop their own recommended accounting code of ethics. Each team’s or student's recommended code of ethics should be well-organized, clear, and concise. When finished, each team or student should submit its suggested code of ethics.
Ethics in Accounting—Discussion Guide
Slide #13 THINK ABOUT IT
Ethics are especially important to those who provide critical services and handle sensitive and/or private information. Not unlike a doctor’s patients, an accountant’s clients must be able to trust that their personal information is being handled with the care that they need.
KEY CONCEPTS
Slide #14 Ethics are the basic principles that govern behavior. They help people know how to do what is right in their personal and professional lives.
Discussion #1: Ask students to discuss why they think it is so important for accountants to remain ethical. What could happen if accountants behave unethically? How could negative consequences affect even people and organizations outside the company they work for?
Slide #15 Businesses benefit greatly from ethical accounting practices.
Slide #16 Ethical behavior includes more than just following the rules or laws.
Discussion #2: Ask students why they think there are so many different sets of ethical standards for accountants. Can they think of any problems this could lead to? Would it be better if there were only one single set of standards? What potential problems could having just one set lead to?
Slide #17 While organizational, professional, and governmental ethics criteria can vary greatly in their specifics, several common principles can help guide all accountants to ethical behavior.
Discussion #3: Ask students to think of examples of when an accountant may need to choose between honesty and confidentiality of their clients. What could result from their choosing to maintain confidentiality? What if they chose to behave honestly instead?
Objectives:
a. Identify technology used in accounting (e.g., spreadsheets, accounting software, the Internet, etc.).b. Discuss functions of technology in accounting (e.g., track and record financial transactions, create financial reports, automatic closing, etc.)c. Explain benefits of accounting technology (e.g., increased functionality, improved accuracy, faster processing, better external reporting, etc.).d. Discuss risks of using technology in accounting (e.g., sabotage, fraud, etc.).e. Describe ways in which accounting systems can be customized based on a specific industry's or business's needs.Activity:
Utilize the Students Turned Teachers exercise
Technology in Accounting—Discussion Guide
Slide 18# THINK ABOUT IT
Although there are still some accountants who prefer the pen-and-paper approach, most modern accounting takes place on a computer. Technology has led to some significant improvements in an accountant’s ability to perform many tasks quickly and easily. However, each improvement to accounting technology brings new challenges to professional, ethical, and security concerns.
KEY CONCEPTS
Slide #19 The field of accounting has been completely revolutionized by the use of computers.
Discussion #1: Ask students to discuss what they predict might change about accounting with the addition of AI and blockchain. Is it possible that there will be no need for accountants anymore? What would a shifted role for accountants look like?
Slide #20 Generally, computerized accounting systems aid in performing the following accounting functions:
Slide #21 While the basic functions of accounting tend to remain the same whether using paper ledgers or cloud-based software, technology continues to offer many benefits to the industry, such as:
Discussion #2: Ask students if they can think of any possible downsides to moving from a paper-based system to a computer-based system. There are many benefits, so why might some people prefer the older technology?
Slide #22 While there is added security in computerized and cloud-based accounting systems, these technologies can lead to new risks and security issues.
Discussion #3: Ask students to work together to come up with ideas about how to make computer-based systems less susceptible to fraud. How could the software be changed to make it harder to disguise fraud? Would there be any drawbacks to these changes?
Objectives:
a. Explain financial accounting and reporting standards set by the Financial Accounting Standards Board (FASB).b. Discuss the impact of Securities and Exchange Commission (SEC) laws and regulations on the accounting industry.c. Discuss aspects of the Sarbanes-Oxley Act of 2002 affecting accounting activities.d. Explain the role of the Public Company Accounting Oversight Board (PCAOB) in regulating and disciplining accounting firms.e. Describe state laws and regulations impacting accounting.f. Identify possible consequences of disregarding accounting laws and regulations.g. Explain the fiduciary responsibilities of accountants.Activity:
Search the Internet to locate information about current laws and regulations impacting accounting activities.
Record your findings in a chart containing two columns—“Law/Regulation” on the left, and “Implications” on the right. For each law or piece of regulation (both self-regulation and government regulation), the team should determine how the regulation impacts accounting. When finished, the team should submit its chart to the instructor for review.
Legal Considerations in Accounting—Discussion Guide
Slide #23 THINK ABOUT IT
No person can be an expert on every single subject. Eventually, everyone has to rely on another person to perform a service or give advice on a subject about which they know little. That reliance means having to trust someone else to do their job well. This is especially the case in specialized fields like accounting.
KEY CONCEPTS
Slide #24 In many cases, accountants must be trusted to perform their jobs well not only by the person or company hiring them, but also by the government and the general public.
Discussion #1: Ask students to think of other examples of how unethical accounting can have serious consequences beyond those for the company that participates in it.
Slide #25 In the United States, the federal agency that regulates financial markets and is charged with protecting the investing public from fraud or malpractice is the Securities and Exchange Commission (SEC).
Slide #26 In response to a number of financial scandals in the early 2000s, the federal government passed the Sarbanes-Oxley Act of 2002.
Discussion #2: Ask students if they think managers and top-level executives should be held responsible for inaccurate or fraudulent activities that happen in their companies.
Slide #27 Just as the FASB maintains the GAAP within the boundaries of the U.S., the Governmental Accounting Standards Board (GASB) is responsible for managing GAAP as it is used by state and local governments.
Slide #28 A fiduciary is a person or organization that acts on behalf of another person or persons and is legally required to act in their best interests. This means that a fiduciary cannot benefit personally from the decisions they make on another person’s behalf.
Discussion #3: Ask students if they think that all accountants should be required to be fiduciaries. What possible problems might occur if accountants or financial professionals are not legally required to act in their clients’ best interests?
Objectives:
a. Define the terms: public sector, private sector, nongovernmental entity, nonprofit entity, and codification.b. Explain the importance of accounting standards for financial markets.c. Discuss the impact of codification on generally accepted accounting principles hierarchy.d. Discuss the impact of professional accounting associations on accounting standards (e.g., AICPA)e. Distinguish between public sector and private sector accounting-standard setting bodies (e.g., SEC, FASB, GASB). f. Distinguish between domestic and international accounting-standard setting bodies (e.g., SEC, FASB, IASB).Activity:
Divide the class into pairs. Instruct each pair of students to develop a “guide” to the different accounting-standard-setting bodies. Allow each team to select a format/media (e.g., presentation, brochure, poster, etc.) of its choice for the guide. Explain that the target audience for the guide is introductory accounting students at a local university or community college. Upon completion, invite a locale postsecondary accounting instructor to review the guides and select the one that s/he feels is most appropriate and accurate to share with his/her students.
Standards-Setting Bodies—Discussion Guide
Slide # 29 THINK ABOUT IT
Both in the United States and around the world, a number of organizations contribute to the setting and updating of accounting standards. These organizations are important as they have significant impact on the practice of accounting and financial reporting. As the interconnectivity of global financial markets continually shifts and evolves, the similarities and differences between these standards can have important ramifications for the companies and fields for which they provide guidelines. It can become just as important to know about these standards-setting organizations as it is to know about the standards themselves.
KEY CONCEPTS
Slide #30 Accounting standards establish guidelines for the production of financial reports that allow comparisons between businesses and across industries.
Discussion #1: Ask students if they think it would be better to have each country establish its own set of accounting standards or if there should be one set that applies in all countries. Why?
Slide #31 The IASB is a private, nonprofit organization whose goal is to serve the public interest. It is responsible for the establishment and maintenance of the International Financial Reporting Standards (IFRS).
Slide #32 Much like the IASB, the Financial Accounting Standards Board (FASB), which maintains the Generally Accepted Accounting Principles (GAAP) standards used in the U.S., is a private, nonprofit organization.
Discussion #2: Ask students why a government body would ask a private-sector company to set the standards for an industry for which the government has oversight responsibilities. What are some of the benefits of letting private sectors set their own standards? What are some of the benefits of the government setting the standards?
Slide #33 The GAAP hierarchy is a four-level framework that classifies FASB and AICPA principles and pronouncements by their level of authority.
Discussion #3: Ask students to make their own hierarchy of the rules they have to follow in school. If they had a question about an activity in the classroom, would they first consult the teacher or the student handbook for the entire school? Why? Is this the opposite of the GAAP hierarchy system? Why would the classroom be different than the accounting industry in how the hierarchy is set?
Curriculum Planning Level: CS
Objectives:
a. Explain the overall purpose of accounting standards.b. Identify common accounting frameworks (i.e., GAAP, IFRS).c. Discuss topics generally addressed by accounting standards (e.g., financial statement presentation, assets, business combinations, industry-specific accounting, etc.).d. Explain key principles undergirding accounting standards (e.g., historical cost, revenue recognition, matching, etc.).e. Describe basic assumptions underlying accounting standards (e.g., business entity, going concern, time period, monetary unit, etc.)Activity:
Divide the class into six groups. Assign each group one of the following accounting assumptions or principles: separate entity assumption, going concern assumption, time period assumption, historical cost principle, revenue recognition principle, and full disclosure principle. Ask each group to prepare and prepare a one minute elevator pitch to someone that knows nothing about accounting. The elevator pitch may be recorded using audio or audio & video.
** Be prepared your instructor may ask you to role play live with them.
Accounting Standards—Discussion Guide
Slide #34 THINK ABOUT IT
One important aspect of accounting is the development of financial statements. These are records that show a business’s financial activities. However, due to the existence of a wide variety of organizations and industries, there is a need to ensure that anyone viewing these statements can understand and interpret them. This is where accounting standards come in.
KEY CONCEPTS
Slide #35 Accounting information by itself is not very useful. Businesses need to summarize the information and put it in a form that can be easily read and understood.
Slide #36 An accounting framework is a published set of rules used as guidelines to measure, recognize, present, and disclose the information in an organization’s financial statements.
Discussion #1: Ask students if they think that the United States should follow the IFRS instead of its own standards.
Both the GAAP and the IFRS are general frameworks that cover a range of standard accounting practices, situations, and topics including:
Financial statement preparation
Assets
Liabilities
Equity
Business combinations/acquisitions
Industry-specific accounting
The Financial Accounting Standards Board (FASB), the organization responsible for maintaining the GAAP, has established this framework on the foundation of four basic assumptions and four basic principles, which together are known as the Conceptual Framework for Financial Reporting.
Slide #37 There are four underlying assumptions on which the GAAP is built.
Discussion #2: Ask students why they think the going concern assumption is important for accounting practices. What would it mean if this assumption were not in place and businesses were required to sell all assets and pay off all debt at a certain point?
Slide #38 The four basic principles of the GAAP are:
Discussion #3: Ask students if they think a company should be permitted to hide certain financial information if it is about the inner-workings of the company. Why or why not?
Curriculum Planning Level: CS
Objectives:
a. Define the following terms: sole proprietorship, partnership, corporation, merger, consolidation, expansion, franchise, limited-liability company, product trade-name franchise, and business-format franchise.b. List two types of businesses that would probably use a sole proprietorship form of ownership.c. Cite the purposes of forming a partnership.d. List two types of partnership arrangements.e. Describe the process for forming a corporation.f. Describe three types of corporations.g. Explain three ways in which corporations grow.h. Describe the advantages and disadvantages of sole proprietorships.i. Describe the advantages and disadvantages of partnerships.j. Discuss the advantages and disadvantages of corporations.k. Describe the importance of franchises in our society.l. Explain factors which affect the choice of ownership form.Activity:
Instruct each student to identify the form of ownership used by five local businesses. Then, divide the class into groups of three or four. Each small group should generate a list of reasons that the owners would have chosen those forms of ownership.
Ethics Case for Students: Zeke has been the sole proprietor of a small bookstore and coffee shop for many years. Recently, a large corporate bookstore chain opened right down the street from Zeke’s store. It has lower prices and a larger selection, so it has taken away a lot of Zeke’s business. He is not sure how much longer he can stay open. Was it ethical for the large corporation to move into Zeke’s area? Should it have looked elsewhere? Or does it have a right to put a small business out of operation? (Ethical Principles Involved: Accountability, Fairness, Respect, Viability)
Types of Business Ownership—Discussion Guide
Slide #39 THINK ABOUT IT
Different types of businesses have different requirements for ownership, taxation, accounting, and financial reporting, among many other considerations. Depending on which type of business a person owns or works for, there could be significant differences in what is required of her/him.
KEY CONCEPTS
Slide #40 There are millions of businesses operating in the United States today.
Slide #41 A sole proprietorship is owned by one person who assumes all the profits and risks from the business.
Discussion #1: Ask students if they know anyone who owns a sole proprietorship. Do they have any employees or is the owner the only person who works for the business?
Slide #42 A business that is owned by two or more people is called a partnership.
Slide #43 A corporation functions independently of its owners but is treated as a person with legal rights, duties, and powers.
Corporations are generally established as one of four types. The type of corporation determines how the business is taxed by the government and which legal guidelines it must follow.
Slide #44 There are three ways that corporations can grow once they’ve been established:
Slide #45 A hybrid structure enables owners to combine the advantages of a corporation with the benefits of either a sole proprietorship or a partnership.
Discussion #2: Ask students if they were going to open a business what type would they want to open. What factors will they consider before making this decision?