A diagnostic, and which modules you may skim

Two cohorts, one paper

About half of a first-year SAF class took Grade-12 accounting; reviews say that half finds the midterm easy and the other half calls this course their worst. The syllabus is the same for both. What differs is where you spend the next six weeks. This lesson gives you a ten-item diagnostic with a key; each item names the module that teaches it, so your wrong answers become a reading list.

The diagnostic

Do the ten items cold, on paper, before reading the key. Harrowgate Landscaping Ltd. is a private company applying ASPE; its year end is 31 December.

1. (Entry) On 1 March Harrowgate pays $1,800 for a one-year insurance policy. Record it.
2. (Entry) On 15 December Harrowgate declares a $5,000 cash dividend, payable 15 January. Record the declaration.
3. (Entry) On 20 December Harrowgate bills a client $3,200 for work completed. Record it.
4. (Compute) Revenue $84,500,expenses$61,200, dividends declared $6,000. Net income?
5. (Compute) Assets $742,000,liabilities$415,500. Shareholders' equity?
6. (Recall) Name the two permanent equity accounts of a corporation.
7. (Recall) Name the three inventory cost formulas allowed in Canada.
8. (Recall) What does ASPE call the periodic write-off of a building's cost?
9. (Recall) Which statement shows opening retained earnings to closing retained earnings?
10. (Recall) When a customer pays a deposit for work not yet done, what does the company credit?

The key, with the module each item belongs to

 1  Dr Prepaid Insurance 1,800 / Cr Cash 1,800        Module 4 (entries), 5 (adjustment)
 2  Dr Dividends 5,000 / Cr Dividends Payable 5,000  Module 4, 6 (closing), 12
 3  Dr Accounts Receivable 3,200 / Cr Service Revenue 3,200   Module 4, 7
 4  Net income 23,300 (dividends are not an expense)   Module 3
 5  Equity 326,500 (the residual)                       Module 3
 6  Common Shares; Retained Earnings                    Module 3, 12
 7  Specific identification; FIFO; weighted average     Module 8
 8  Amortization                                         Module 5, 11
 9  Statement of retained earnings                       Module 3
10  Unearned Revenue (a liability)                       Module 4, 7

Eight or more right, with items 1–3 balanced and on the right accounts: skim Modules 3–5 — read each lesson's prose once, do every journal and numeric block, and let the checkpoints mint your review items. Fewer than eight: take Modules 3–5 at full pace; they are the mechanics everything after the midterm assumes.

Three Grade-12 habits that are wrong here

Proprietorship equity. Grade-12 courses are built on a sole proprietor, so the equity accounts are Owner's Capital and Drawings. AFM 191 is corporations only. Equity is Common Shares and Retained Earnings; a distribution to owners is a Dividend, declared by the directors and closed to Retained Earnings. Canadian corporations issue shares without par value (CBCA s.24), so the whole amount received goes into Common Shares — there is no premium account to remember.

"Depreciation." ASPE's word for allocating a long-lived asset's cost over its life is amortization, and the chart in this course uses it for buildings, equipment and vehicles alike: Amortization Expense and Accumulated Amortization – Equipment. IFRS says depreciation for tangible assets; a marker will read either, but the ASPE appendix on your paper will say amortization.

LIFO. Some Grade-12 texts still teach last-in, first-out as a third cost formula. It is prohibited under ASPE and under IFRS. The three that exist in Canada are specific identification, FIFO and weighted average. Offering LIFO on this paper is a signal to the marker that you learned inventory somewhere else.