Why do companies go through a closing process? What accounts are closed in that process? Are they really closed and ‘erased’ from the accounting system?

ACCT 301 – Weekly Homework

The primary reading material source is http://www.principlesofaccounting.com/    For additional information, use the downloadable/searchable 1004 page Hermanson textbook available within LEO as a secondary resource. 

SCENARIO:  You are a new hire for a major corporation completing your eight week rotation related to accounting, financial reporting, budgeting, cost control, and profit maximization. As part of your rotation you are learning how to use accounting information to make managerial decisions.

You will read the assigned chapters, then submit a written report in the LEO assignment folder summarizing your knowledge of the week’s concepts. You should create this report to provide documentation/evidence of your assigned chapter readings and self-asseessment exercises (Fill in the Blanks, and Multiple Choice questions at end of each chapter) as noted in the course schedule.  You can provide further evidence of your understanding of the course material by incorporating items from your SEC 10-K company to illustrate your comprehension of information and your ability to relate course topics to practical applications.  [Use Snip It Tool or other Technology to copy and paste your results when necessary when relating to your SEC 10-K company.  A series of projects focused on your SEC10K corporation will be completed and submitted separately.]

REQUIREMENT:  As described above, upon completion of the readings and quizzes (the week’s assigned chapters are detailed below) you need to write a report as a Word document and upload it to this week’s Homework assignment folder.   Summarize what you learned through your readings and practice quizzes.  Demonstrate an understanding of the week’s concepts.  The more detailed writeups documenting a solid understanding of the material will earn the highest homework points. 

Week 2:

A. Read and complete the self-graded questions for ch 4, 5, & 6  at PoA. (http://www.principlesofaccounting.com/ ). 

Understanding the Journal Entry debit/credit system is an important skill to have.  This understanding enables you to understand how business transactions are recorded into the accounting system, how that system processes and summarizes those transactions, and how the summary of those transactions is reported in the form of the financial reports.  Read the assigned chapters on the POA website, then use the practice quizzes (the quizzes appear at the top of the first screen for each chapter as Fill in the Blank and Multiple Choice). 

B. Review your SEC 10-K company’s balance sheet (statement of position) and income statement (statement of earnings). Your SEC 10-K company should have inventory reported on the balance sheet and Cost of Goods Sold reported on the income statements.

Each time inventory is sold, two transactions occur:  revenues (sales) are recorded, and inventory is used up to become an expense.  This means two journal entries are recorded: 

DR  Cash (or accounts receivable if on account)
     CR  Sales
(to record sales revenues earned)

DR  Cost of Goods Sold
     CR Inventory
(To record inventory becoming the expense of the sale)

Consider the impact of recording these transactions.   What key profit factor do you learn from this journal entry?

Provide a summary of the accounting concepts learned through the readings and practice quizzes for this week.  Demonstrate your understanding of the week’s concepts.  The more detailed your write-up documenting your understanding the higher it will be graded.  (See Rubric for details.)

After addressing the above topics, additional topics you can incorporate into your weekly homework assignment:

  • Why do companies go through a closing process? What accounts are closed in that process?  Are they really closed and ‘erased’ from the accounting system?
  • Discuss the additional accounting issues faced by merchandisers/retailers that service companies do not address.
  • What does a system of internal controls achieve?  (You can apply this to internal controls over cash, or a general discussion of internal controls.)
  • What topic(s) gave you trouble this week (if any)?/What topic(s) do you feel you were able to grasp?  Post questions in the homework discussion thread!

The most important aspect of this write-up is to document your understanding of the week’s concepts!

Remember all submissions and postings in our class must be in your own words. Deliverables are to be single spaced with double spacing between paragraphs. These are business reports, thus proper spelling, grammar, and professional writing is expected.  Your report submission serves as your new hire eight-week rotation report to your supervisor regarding the knowledge learned for this week’s material related to accounting and financial reporting.

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