Financial Accounting 12 - Analysis

PRESCRIBED LEARNING OUTCOMES

It is expected that students will:

• analyse financial statements and changes in financial position for various businesses
• explain the use of budgeting in managing personal and business finances
• defend recommendations based on a comparison of budgeted and actual transactions
• explain methods used to issue debt, common and preferred shares, bonds, and promissory notes
• propose methods to deal with employee errors, theft, and fraud
• compare different types of investments
• explain and justify the use of various inventory methods

SUGGESTED INSTRUCTIONAL STRATEGIES

• Have students work in groups to learn from one another how to analyse financial reports. For example:
  • Students review a business's financial statements and discuss what conclusions they can draw from the reported changes. Groups itemize any information they think is lacking or requires explanation.
  • Students compare the budget for a small business against actual expenses. They analyse reasons for discrepancies and provide recommendations for the business's manager. Different groups compare and defend their recommendations.
  • Students role-play situations in which the same inventory is valued using different methods. For example, students role-play company directors discussing which method they can justify in reports to shareholders, creditors, and tax officials.
• Provide students with news reports on current accounting issues to explain sources of loss (either cash or goods). Then have them research news reports on employee errors, theft, and fraud in business. Ask them to report on the methods used for controlling each and to propose effective methods of responding to given problems.
• Have students create a mock investment fair in which they staff booths offering various forms of loans and investments. Invite other students or guests to tour the booths and ask about the services offered and how they are issued.
• Invite a financial planner to the class to present various options for individuals or businesses. Encourage students to ask questions about the strengths and weaknesses of each option. Then have students in groups prepare multimedia presentations comparing the options.

SUGGESTED ASSESSMENT STRATEGIES

• Ask each student to examine a balance sheet and a list of transactions that affect non-current accounts and to prepare a Statement of Change in Financial Position. Check their work to ensure that they identify:
  • increases or decreases in working capital
  • changes in the company's non-current accounts
  • a list of sources of and uses for working capital
• Provide financial statements for a number of companies. Have students decide which company they would invest in and why. Ask them to analyse the financial statements and develop a list of questions they would ask the company accountants. Note the extent to which their questions show recognition of the need to analyse working capital, ratios, markets, and trends.
• Ask students to prepare personal budgets based on real or imaginary incomes and expenses. Have them adjust their budgets to include saving to purchase expensive items. Hold a class discussion about budgets and note the extent to which students can identify when and why to use a budget in personal and business situations.
• Discuss promissory notes with the class, noting evidence that students understand their function, when and by whom they are issued, and the action lenders may take when a note is dishonoured.
• Engage students in a discussion about inventory methods. Note the extent to which they:
  • identify the four methods of inventory valuation
  • demonstrate understanding of how these methods will affect the financial statements

• Accounting: The Basis for Business Decisions, Seventh Edition
• Financial Accounting, Canadian Third Edition

• Designing an Accounting System using ACCPAC Simply Accounting

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