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• Accounting is a system for organizing and dealing with financial data to provide information for decision-making.
• There are five main activities in accounting:
  • Gathering financial information about a business or organization's activities.
  • Preparing and collecting permanent records, which provide evidence of transactions like payments, purchases, and payroll.
  • Rearranging, summarizing, and classifying financial information into a usable form.
  • Preparing information reports and summaries for management decisions, to serve external groups like investors and bankers, and to measure a business's profits.
  • Establishing controls to promote accuracy and honesty among employees to ensure ethical business conduct.
• A good accounting system answers questions for business owners or managers, such as:
  • Is the business profitable?
  • Is there enough money to meet needs?
  • What are the production costs for a product?
  • Are customers paying on time?
  • How much is owed to a specific company?
  • Who was a specific check issued to?
• Other entities like companies and organizations also seek accounting insights, for example:
  • Should money be lent to a business?
• Studying accounting is important because:
  • Many jobs need clerical and accounting skills.
  • It helps with personal finances, like budgeting and income tax.
  • It is essential for making sound business decisions as an owner.
• A professional accountant meets requirements from Canadian accounting organizations to get designations such as:
  • Chartered Professional Accountant (CPA)
  • Certified General Accountant (CGA)
  • Certified Management Accountant (CMA)
• Public accountants serve the general public for a fee with services such as:
  • Income tax preparation
  • Audits
• An audit examines a company's books, records, and procedures to verify the accuracy of financial statements.
• Professional accountants may choose:
  • Management accounting for companies
  • Institutional accounting for government or universities
  • Public accounting for individuals
• Due to complex government regulations, businesses need accounting experts to ensure compliance.
• Businesses fall into one of four categories:
  • Service businesses sell services, like hair salons or dental clinics
  • Merchandising businesses resell goods at a higher price, like clothing stores or supermarkets
  • Manufacturing businesses convert raw materials into new products for profit, such as auto makers or steel plants
  • Non-profit organizations address social needs, like churches or charities
• Three forms of business ownership include:
  • Sole Proprietorship: one owner, typically a small business
  • Partnership: more than one owner
  • Limited Company/Corporation, owned by many shareholders, existing separately with its own rights and obligations
• Accounting work is split into three categories:
  • Routine Daily Activities: Daily tasks like processing bills and recordingtransactions.
  • Periodic Accounting Activities: Regularly occurring tasks like payroll or preparing financial reports.
  • Miscellaneous Activities: Unpredictable tasks like filling a vacant position.

The Accounting Cycle

• Accounting activities occur in cycles over fiscal periods, which are usually a year long.
• The Accounting Cycle
  • Transactions occur
  • Transactions recorded in journal
  • Journal entries posted to ledger accounts
  • Trial balance and interim financial statements prepared
  • Worksheet prepared
  • Formal financial statements prepared
  • Ledger accounts adjusted and closed
  • Post-closing trial balance prepared
• To become a qualified accountant in Canada, you must complete a course prescribed by one of three accounting organizations:
  • Canadian Institute of Chartered Accountants
  • Certified General Accountants Association of Canada
  • Society of Management Accountants of Canada.
• Becoming a professional accountant requires about seven years of post-secondary study and work experience.
• A proposal is in place to merge the three accounting organizations into a Chartered Professional Accountant or CPA designation.
• Transition is expected to take 10 years affecting 200,000 people/students.
• New accounting rules, standards were introduced in 2011, moving Canadian accounting principles to global standards.
• Accounting and bookkeeping are similar, but have different levels of responsibility.
• Bookkeepers or accounting clerks handle clerical tasks and routine ledger management.
• Accountants need more education and experience to interpret data and ensure compliance.
• Accountants use computer software to meet career demands.
• Accounting clerks use software like Sage Simply Accounting or Intuit Quickbooks for transactions and reports.
• Senior accountants set up entire systems and choose software for businesses.
• Spreadsheet programs are useful for mathematical tasks and reports.