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[pic] Math for the Workplace 12 [pic]

Bookkeeping Information Sheet

Number Sense

Bookkeepers work with integers, decimals, fractions, ratios, and percentages. They work with monetary values most of the time. Therefore, bookkeepers must be very comfortable working with numbers to the hundredth place value and accurately rounding numbers to the hundredth place.

Operation Sense

Calculations performed by bookkeepers include, but are not limited to, calculating taxes, unit and total costs, gross profit and margin, payroll taxes, allowances, and depreciation. They must understand and be able to calculate simple and compound interest. All calculations must be done with 100% accuracy due to the effect on daily business decisions. Bookkeepers generally use a system of dual-entry bookkeeping, where assets equal the liabilities and equity (Assets = Liabilities + Equity). Accuracy is essential as each entry affects the trial balance from which the financial statements are generated. These statements are important to the various stakeholders such as banks and the Canada Revenue Agency.

They must be very comfortable using technology such as calculators and accounting software. Since each employer uses different accounting software, bookkeepers must be comfortable using a variety of accounting software such as Quickbook, AccPac, and/or Simply Accounting.

Measurement

Measurement for bookkeepers is mostly the conversion of money. They must understand foreign exchange rates and be able to apply these accurately. They must also be able to convert quickly hourly wages to yearly wages and vice versa.

Statistics

Much of a bookkeeper’s time is spent on the organization and display of financial data. They are the keepers of financial data. They must collect, organize, and display large quantities of data accurately and effectively. Often this data must be presented in reports where the clear representation of the information is critical. They must also be able to interpret data displays.

Bookkeepers must be able to read and interpret information in tables such as payroll and tax charts. They must also be able to read and interpret specialized reports, e.g. reports on industry norms provided by A.C. Neilson or Dunn and Bradstreet.

Possible Project Idea

Create a Financial Statement

Begin the project by providing a simple trial balance dated November 30, 200X - give account numbers, names, and current balances. Also provide for each account the prior year ending balance.

(See back for project details.)

[A] Give a listing of several transactions that need to be posted:

← Payroll – 5 employees at varying levels of income for 2 pay period ending December 31, 200X

← Invoices – 4 supplier invoices that need to be posted to:

o Inventory

o Capital assets

o Operational supplies

o Travel

• Sales – 3 transactions that need to be posted, one by cash and two by credit. Students will need to be given a small listing of accounts comprising the accounts receivable balance and the date the transaction occurred.

• Amortization: - Students should research the varying methods of amortization calculations (provide students with a small list of opening balance of capital assets and accumulated amortization, say 3 or 4 items):

o Declining balance

o Double declining balance

o Straight line

o By units processed

• Inventory - Students should research the three methods of inventory calculations (provide students with a small list of inventory items):

o LIFO

o FIFO

o Weighted average

Once these concepts are understood, the student should then ask for:

▪ Original costs for items

▪ Recent costs for items

▪ History of purchases for items within year (say 2 or 3 purchases)

• Accounts Receivable / Allowance for Doubtful Accounts: Students should understand the basis of the 30/60/90 days outstanding report and determine for themselves what amount the allowance for doubtful accounts should be.

[B] Once completed, many variations of the balance sheet and income statement are possible. But which one is better?? Should the company use the LIFO method for inventory? Should the company use the declining balance for amortization? Once all this is considered…

• Income Taxes should be calculated at 30% of net income on the best income statement.

o Entry: Debit: Income Tax Provision (Income Statement)

o Credit: Income Tax Payable (Balance Sheet)

[C] Students should be able to present the completed trial balance in proper financial statement format. This format is available from various sources such as CGA NS, CMA NS, CANS or the internet.

[D] Finally, the student should prepare both vertical and horizontal percentage analysis of the income statement and balance sheet accounts and at least 5 different accounting ratios such as:

• Accounts receivable turnover

• Accounts payable turnover

• Inventory turnover

• Gross Margin

• Current Ratio

• Quick Ratio

• Financial Leverage

• Debt to Equity Ratio

The student should be able to identify quickly problems from one year to the next by comparing the percentages and the ratios. They should be able to provide the owner with their concerns and recommendations in a 250 – 300 word summary. Be sure that there is a definite conclusion to the project.

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