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First Year Accounting Activities


 

Chapter 1
Starting a Proprietorship

As you begin your career, many of you will decide to start your own business, much as Barbara Treviño did in Chapter 1. Starting a business is no small undertaking. There are many things to consider, such as the type of business to open, the legal aspects, and the characteristics needed to be a successful business owner. The U.S. Small Business Administration provides a web site to help you plan your business.

www.sba.gov

1. What questions should you ask yourself if you are thinking about starting your own business? How would you answer these questions?

2.
What is a business plan? Why do you need one to start your own business?

3.
Why is it important to know accounting when starting your own business?

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Chapter 2
Starting a Proprietorship: Changes that Affect Owner's Equity

In the Explore Accounting feature, you learned that revenue should be counted as revenue when it is earned, regardless of when the cash is received. That is, if cash is collected before a product is delivered or a service is provided, then revenue should not be recognized until the promised action has been completed. Consider how this affects airlines.

www.southwest.com

1. Almost everyone pays for airplane tickets before they actually take a flight. Should an airline recognize the flight revenue when it collects the money or when the actual flight takes place?

2. Go to Southwest Airlines' web site and find its annual report. (Select the "About SWA" link to view a page that includes a link titled "Student Kits.") When does Southwest recognize its flight revenue?

3. How much "unearned revenue" did Southwest report in its most recent balance sheet? (Hint: Check "Air traffic liability"on the balance sheet.)

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Chapter 3
Analyzing Transactions into Debit and Credit Parts


In the Explore Accounting feature, you learned that the owner of a proprietorship must pay taxes on the net income earned from the business. As the proprietor of a business, there are many things you should know about paying your taxes. The Internal Revenue Service has a publication that offers tax tips and advice for business owners. Use the link below to access the IRS web site. Click on "Forms and Publications" near the bottom of the page and make your way to Publication #583, "Starting a Business and Keeping Records."

www.irs.gov

1. On which tax form does the owner of a proprietorship report net income of the business?

2. What types of records should a business owner keep for tax purposes? How long should the records be kept?

3. What are some ways a business owner can minimize taxes? Discuss the legal and ethical aspects of your answers.

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Chapter 4
Journalizing Transactions

In the Accounting At Work feature, it was mentioned that Mary M. Witherspoon is a district vice-president of the American Business Women's Association (ABWA). The ABWA's mission is "to bring together businesswomen of diverse occupations and to provide opportunities for them to help themselves and others grow personally and professionally through leadership, education, networking support and national recognition."

www.abwahq.org

1. When was the ABWA founded?

2. What are some of the services the ABWA provides to working women?

3. According to U.S. Census data, women are currently starting businesses at twice the rate of men. What do you think are some reasons for this trend?

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Chapter 5
Posting to a General Ledger

In the Cultural Diversity feature, accounting in ancient civilizations is described. Timothy Gillis, Associate Professor of Accounting at Quinebaug Valley Community-Technical College in Connecticut, has done much research on the history of accounting. He displays an accounting history timeline at the URL listed below.

www.qvctc.commnet.edu/QVCTC/brian/QVHTMLS/ACCOUN/acop2.gif

1. According to the timeline, what was the first form of accounting?

2. When was the first accounting textbook published? Who was the author?

3. How has technology affected accounting in the last 50 years?

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Chapter 6
Cash Control Systems

Many of you will soon open a checking account, if you haven't done so already. In doing so, you will need to choose a bank which offers services that meet your needs. Provident Bank, with locations throughout Ohio and Florida, offers many traditional as well as innovative banking services.

www.provident-bank.com

1. Provident offers five types of checking accounts, some requiring you to maintain a minimum monthly balance of a certain amount. Why might banks require this minimum balance?

2. When was "Jeanie"-Provident's entry into electronic funds transfer-launched?

3. Provident is one of many banks that now offer online banking via the Internet. What benefits and risks might you experience with online banking? What does Provident Bank do to ensure the security of online banking?

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Chapter 7
Work Sheet for a Service Business

The Global Perspective feature explains the use of two measurement systems in the United States: the customary system and the metric system. The United States is one of the few major industrial countries that do not use the metric system exclusively. The U.S. Metric Association (USMA) is a national nonprofit organization that advocates U.S. conversion to the metric system.

http://lamar.colostate.edu/~hillger/

1. Who was the first person to propose a decimal-based measurement system for the United States? When was this proposed?

2. Which other countries, besides the United States, do not use the metric system?

3. Should the United States change to the metric system? Why or why not?

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Chapter 8
Financial Statements for a Proprietorship

As explained in the Explore Accounting feature, a corporation that trades its stock on a U.S. stock exchange must submit an annual report to the Securities and Exchange Commission (SEC). The SEC maintains on online database of these reports, called EDGAR (Electronic Data Gathering, Analysis, and Retrieval). You can search the EDGAR database to find the financial statements of a company simply by typing in the company's name. Search the EDGAR archives for The Coca-Cola Company's most recent annual (10-K) report.

www.sec.gov/edgarhp.htm

1. Who is Coca-Cola's Chief Executive Officer (CEO)? Give a brief description of his or her experience with Coca-Cola.

2. Locate Coca-Cola's balance sheet. What were its total current assets for the most recent year?

3. Locate Coca-Cola's income statement. What was its net income for the most recent year? Did net income increase or decrease from the previous year?

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Chapter 9
Recording Adjusting and Closing Entries for a Service Business

In the Explore Accounting feature, you learned about public accounting firms. The five largest public accounting firms, known as the "Big 5," include Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick, and PricewaterhouseCoopers. You can learn more about these firms by browsing their web sites. Go to the PricewaterhouseCoopers site now.

www.pwcglobal.com

1. PricewaterhouseCoopers was formed by the consolidation of two large public accounting firms in 1998. Who were the two firms?

2. What types of services does PricewaterhouseCoopers offer?

3. Describe some of the entry-level career opportunities available at PricewaterhouseCoopers. What types of accounting skills and knowledge are necessary for these positions?

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Chapter 10
Journalizing Purchases and Cash Payments

A merchandising business purchases and sells goods. A retail merchandising business sells to those who use or consume the goods, while a wholesale merchandising business buys and resells merchandise to other merchandising businesses. One of the largest retail merchandising businesses in the world is Wal-Mart, which started as a small five-and-dime store in rural Arkansas.

www.wal-mart.com

1. How many Wal-Mart stores are there today? How many people does Wal-Mart employ?

2. What were Wal-Mart's sales for the most recent year? How does this compare to the previous year?

3. Who might be some of Wal-Mart's vendors?

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Chapter 11
Journalizing Sales and Cash Receipts

In this chapter, you learned about credit card sales. Major bank-approved credit cards include VISA, MasterCard, and Discover. Visit VISA's web site to learn more about its products and services.

www.visa.com

1. How long have credit cards been a viable method of payment?

2. List ten tips for safe credit card usage.

3. What advantages and disadvantages do credit cards offer consumers? businesses?

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Chapter 12
Posting to General and Subsidiary Ledgers

Not long ago, businesses did all of their accounting work manually. Accounting has changed dramatically over the last twenty years, with the advent of personal computers, accounting software, and other technologies. One of the most popular accounting software programs today is QuickBooks.

www.intuit.com/quickbooks

1. What are some accounting processes that QuickBooks automates?

2. How have computerized accounting systems, such as QuickBooks, changed the way accounting is done?

3. Is it still necessary to understanding accounting when using a computerized accounting system? Why or why not?

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Chapter 13
Preparing Payroll Records

Social security tax is a federal tax paid for old-age, survivors, and disability insurance. Social security taxes are paid by both employees and employers. Social security tax is calculated on employee earnings up to a maximum amount paid in a calendar year (known as a tax base).

www.ssa.gov

1. When was the social security program established? What was the purpose of establishing it?

2. Since its inception, what are the total social security payments that have been made to beneficiaries?

3. The social security program is not currently in long-range actuarial balance, which means it is not projected to have sufficient income to pay all promised benefits over the next 75 years. What do you think should be done to promote the future of the social security program?

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Chapter 14
Payroll Accounting, Taxes, and Reports

The Internal Revenue Service (IRS) provides a helpful web site for both individuals and business owners who are required to file federal taxes. The site includes information on tax regulations, answers to frequently asked questions, and downloadable tax forms and instructions for completing them.

www.irs.ustreas.gov

1. Who is the current commissioner of the IRS?

2. Download the latest-year's instructions for Forms W-2 and W-3. Which employers must file Form W-2?

3. When must Forms W-2 and W-3 be filed?

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Chapter 15
Work Sheet for a Merchandising Business

In this chapter, you learned that the amount of goods on hand is called inventory. You also learned that the amount of goods on hand for sales to customers is called merchandise inventory. A retail merchandising business, such as OfficeMax, may have a significant amount of merchandise inventory. Go to the OfficeMax web site and find its most recent annual report

www.officemax.com

1. Look at the balance sheet for OfficeMax. How much merchandise inventory did OfficeMax have for the most recent year?

2. Would office supplies used by OfficeMax employees be considered merchandise inventory? Why or why not?

3. What are some pros and cons of a retail merchandising business having a large merchandise inventory?

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Chapter 16
Financial Statements for a Partnership

Founded in 1978 in Atlanta, Georgia, The Home Depot is North America’s largest home improvement retailer. The Home Depot currently operates in 43 U.S. states and 5 Canadian provinces, with plans to expand into Puerto Rico and South America. Locate Home Depot’s most recent financial statements on its web site.

www.homedepot.com

1.  What was Home Depot’s operating income for the most recent year?

2.  For the most recent income statement, calculate the component percentages for Cost of Merchandise Sold, Gross Profit, Total Operating Expenses, and Operating Income. What do these numbers tell you?

3.  How can you determine if Home Depot’s component percentages are acceptable?

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Chapter 17
Recording Adjusting and Closing Entries for a Partnership

In the Small Business Spotlight feature, you learned about franchises. A franchise is the right or license granted to an individual or group to market a company's goods or services in a particular territory. You can learn more about franchises by visiting The Franchise Handbook Online.

www.franchise1.com

1. What are some of the franchises you can learn about on The Franchise Handbook Online web site?

2. What are the franchise fee and capital requirements associated with purchasing a Baskin Robbins Ice Cream franchise?

3. Do you think it is better to own a franchise or your own business? Explain your answer.

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Chapter 18
Recording Purchases and Cash Payments Using Special Journals

In this chapter, you learned about list prices and trade discounts. A list price is also known as the manufacturer's suggested retail price. You can find the list prices for most models of new and used cars on the Kelley Blue Book web site.

www.kbb.com

1. What is the suggested retail price for a new four-door Honda Civic DX?

2. What is the dealer invoice price for a new four-door Honda Civic DX? Why is there a difference in the dealer invoice price and the suggested retail price?

3. Why might it be helpful to know the dealer invoice price when purchasing a new car?

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Chapter 19
Recording Sales and Cash Receipts

The International Chamber of Commerce (ICC) promotes international trade, investment, and the market economy system worldwide. It makes rules that govern the conduct of business across borders and provides many services to international businesses.

www.iccwbo.org

1. How many members are in the ICC?

2. With what other prominent international organizations does the ICC work?

3. The ICC publishes Incoterms, a set of international sales terms, to attempt to coordinate international sales. Why do you think it is important to establish a set of uniform sales terms for international trade?

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Chapter 20
Accounting for Uncollectible Accounts Receivable

Safeway is the third-largest food and drug chain in the United States, behind only Kroger and American Stores. To maximize profits, large retailers like Safeway, Kroger, and American stores must monitor their uncollectible accounts. Go to Safeway's web site and locate its annual report.

www.safeway.com

1. Assume that Safeway estimates that 0.6% of its total sales on account will be uncollectible. What would be Safeway's estimated uncollectible accounts expense for the most recent year?

2. Suppose that, after months of unsuccessful collections efforts, Safeway determines that 25% of it estimated uncollectible accounts expense is uncollectible. How would Safeway record the write-off of these uncollectible accounts?

3. Should companies charge a penalty for late payment? Why or why not?

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Chapter 21
Accounting for Plant Assets and Depreciation

In the Explore Accounting feature, you learned about accounting for leases. A lease that is accounted for as a rental is known as an operating lease. A lease that is accounted for as a purchase of an asset is known as a capital lease. Locate the most recent annual report for Federal Express on its web site.

www.fedex.com

1. Locate the notes to the financial statements. What rent expense was associated with operating leases for the most recent year?

2. Does Federal Express have more operating leases or more capital leases?

3. Why might Federal Express choose to lease plant assets rather than buy them?

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Chapter 22
Accounting for Inventory

With over 285 stores in 32 states and annual revenues of over $8 billion, Best Buy is the #1 consumer electronics and appliance specialty retailer in the United States. Go to Best Buy's annual report on its web site to learn more about Best Buy's merchandise inventory.

www.bestbuy.com

1. What amount of merchandise inventory did Best Buy report on its most recent balance sheet?

2. Best Buy uses a computer system to keep perpetual inventory records. Would Best Buy also need to perform an annual periodic inventory? Why or why not?

3. When does Best Buy's fiscal year end? Why might a company choose a date other than December 31 on which to end its fiscal year?

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Chapter 23
Accounting for Notes and Interest

As you continue your education and begin your career, you will most likely need to take out a loan for college, a car, or your first home. When taking out a loan, it is wise to shop around for the best interest rate. The Internet is a good place to research current interest rates. BanxQuote Banking, Mortgage, and Finance Center offers such information.

www.banx.com

1. What is the current interest rate for a 36-month loan on a new automobile?

2. Why do you think the interest rate for a 48-month automobile loan is higher than the rate for a 36-month loan?

3. How can some lenders offer lower interest rates than others?

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Chapter 24
Accounting for Accrued Revenue and Expenses

In the Explore Accounting feature, you learned about the parts of an annual report. The first section of an annual report is devoted to management's analysis and discussion. This section provides management with an opportunity to promote the corporation. The second section of an annual report contains the financial statements, notes to the financial statements, auditor's report, and financial analysis. Find McDonald's annual report on its web site.

www.mcdonalds.com

1. Summarize the Letter to Shareholders. Was the message in the letter positive or negative?

2. Who audited McDonald's annual report? What was the conclusion of the Auditor's Report?

3. Based on the information in the Year in Review section of the annual report, would you invest in McDonald's? Why or why not?

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Chapter 25
Distributing Dividends and Preparing a Work Sheet

An owner of one or more shares of a corporation is called a stockholder. Dividends are earnings distributed to stockholders. CNN's Financial Network devotes a section of its web site to the stock market.

www.cnnfn.com/markets/

1. What is the stock symbol for Disney? When did Disney last pay a dividend?

2. What were the 52-week high and low prices for General Electric stock?

3. As of September 1998, Microsoft had never paid a dividend on its stock. Why do you think Microsoft has chosen not to pay a dividend, despite it being such a successful company?

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Chapter 26
Financial Statements and End-of-Fiscal-Period Entries for a Corporation

There are many ways to obtain the annual report for a corporation. You can call, write, fax, or e-mail the company's investor relations department. Or you can download a copy of the annual report if it is available on the company's web site. Obtain a copy of Sears' most recent annual report from its web site.

www.sears.com

1. Compute the component percentages for Sears' income statement, using total revenues as the base for calculation. What do these numbers tell you?

2. Compute Sears' working capital and current ratio. What do these numbers tell you?

3. What kinds of information can you learn from reading the notes to Sears' financial statements? Why do you think it is important to read the notes to the financial statements when analyzing a company's annual report?

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Last Update: 09/19/2000

 


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