Table of Contents

1. Accounting Information for Business Decisions
2. Accounting Information System
3. Reporting and Preparing Financial Statements
4. Reporting and Analyzing Merchandising Activities
5. Reporting and Analyzing Inventories
6. Reporting and Analyzing Cash and Internal Controls
7. Reporting and Analyzing Receivables and Investments
8. Reporting and Analyzing Long-Term Assets
9. Reporting and Analyzing Current Liabilities
10. Reporting and Analyzing Long-Term Liabilities
11. Reporting and Analyzing Equity
12. Reporting and Analyzing Cash Flows
13. Financial Statement Analysis and Interpretation

1. Financial Statement Information A-1
2. Present and Future Values in Accounting B-1
3. Reporting and Analyzing Long-Term Investments C-1
4. * Reporting and Analyzing Partnerships
5. * Reporting and Preparing Special Journals

*Appendixes D and E are available as PDF files from the book’s Web site and as print copy from a McGraw-Hill representative.

Contents

Information Age

Influence of Accounting
Business and Investment
Focus of Accounting
Setting Accounting Rules
Accounting and Technology

Forms of Business Organization

Sole Proprietorship
Partnership
Corporation

Activities in Organizations

Financing
Investing
Operating

Financial Statements

Income Statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows

Users of Accounting Information

External Information Users
Internal Information Users

Ethics and Social Responsibility

Understanding Ethics
Social Responsibility

Opportunities in Practice

Financial Accounting
Managerial Accounting
Tax Accounting
Accounting-Related Opportunities
Accounting Specialization
Outlook and Compensation

Decision Analysis: Return on Investment

Generally Accepted Accounting Principles

Financial Reporting Environment
International Accounting Principles
Principles of Accounting

Transactions, Documents, and Accounts

Transactions and Events
Source Documents
The Account
Asset Accounts
Liability Accounts
Equity Accounts

Transactions and the Accounting Equation

Transaction Analysis-Part I
Transaction Analysis-Part II
Summary of Transactions

Processing and Analyzing Transactions

Ledger and Chart of Accounts
Debits and Credits
Double-Entry Accounting
Journalizing and Posting Transactions
Analyzing Transactions
Accounting Equation Analysis
Financial Statement Links

Trial Balance

Preparing a Trial Balance
Using a Trial Balance
Searching for and Correcting Errors
Presentation Issues

Unadjusted Financial Statements

Unadjusted Income Statement
Unadjusted Statement of Retained Earnings
Unadjusted Balance Sheet
Unadjusted Statement of Cash Flows

Decision Analysis: Return on Equity and Debt Ratio

 3 Reporting and Preparing Financial Statements

Timing and Reporting

The Accounting Period
Purpose of Adjusting
Recognizing Revenues and Expenses
Accrual Basis versus Cash Basis

Adjusting Accounts

Framework for Adjustments
Adjusting Prepaid Expenses
Adjusting for Depreciation
Adjusting Unearned Revenues
Adjusting Accrued Expenses
Adjusting Accrued Revenues
Links to Financial Statements
Adjusted Trial Balance
Accrual Reversals in Future Periods

Preparing Financial Statements

Closing Process

Temporary and Permanent Accounts
Recording Closing Entries
Post-Closing Trial Balance
Reviewing the Accounting Cycle

Classified Balance Sheet

Classification Structure
Classification Categories

Decision Analysis: Profit Margin and Current Ratio

Appendix 3A Alternative Accounting for Prepaids

Appendix 3B Work Sheet as a Tool

Appendix 3C Reversing Entries

Merchandising Activities

Reporting Financial Performance
Reporting Financial Condition
Operating Cycle
Inventory Systems

Merchandise Purchases

Trade Discounts
Purchase Discounts
Managing Discounts
Purchase Returns and Allowances
Discounts and Returns
Transportation Costs
Transfer of Ownership
Recording Purchases Information

Merchandise Sales

Sales Transactions
Sales Discounts
Sales Returns and Allowances

Additional Merchandising Issues

Cost and Price Adjustments
Adjusting Entries
Closing Entries
Merchandising Cost Flows
Merchandising Cost Accounts

Income Statement Formats

Multiple Step Income Statement
Single-Step Income Statement
Merchandising Cash Flows

Decision Analysis: Acid-Test and Gross Margin Ratios

Appendix 4A Comparing Periodic and Perpetual Inventory Systems

Assigning Costs to Inventory

Specific Identification
First-In, First-Out
Last-In, First-Out
Weighted Average
Inventory Costing and Technology

Inventory Analysis and Effects

Financial Reporting
Tax Reporting
Consistency in Reporting
Errors in Reporting Inventory

Inventory Items and Costs

Items in Merchandise Inventory
Costs of Merchandise Inventory
Physical Count of Merchandise Inventory

Other Inventory Valuations

Lower of Cost or Market
Retail Inventory Method
Gross Profit Method

Decision Analysis: Inventory Turnover and Days’ Sales in Inventory

Appendix 5A Assigning Costs to Inventory-Periodic System

Internal Control

Purpose of Internal Control
Principles of Internal Control
Technology and Internal Control
Limitations of Internal Control

Control of Cash

Cash, Cash Equivalents, and Liquidity
Control of Cash Receipts
Control of Cash Disbursements

Banking Activities as Controls

Basic Bank Services
Bank Reconciliation

Decision Analysis: Days' Sales Uncollected

Appendix 6A Document Flow in a Voucher System

Accounts Receivable

Recognizing Accounts Receivable
Valuing Accounts Receivable
Direct Write-Off Method
Allowance Method
Estimating Bad Debts Expense
Installment Accounts Receivable

Notes Receivable

Computation for Notes
Receipt of a Note
Honoring and Dishonoring a Note
End-of-Period Interest Adjustment

Converting Receivables to Cash before Maturity

Selling Accounts Receivable
Pledging Accounts Receivable
Discounting Notes Receivable

Short-Term Investments

Accounting for Short-Term Investments
Valuing and Reporting Short-Term Investments

Decision Analysis: Accounts Receivable Turnover

Section 1-Plant Assets

Cost of Plant Assets

Land
Land Improvements
Buildings
Machinery and Equipment
Lump-Sum Purchase

Depreciation

Factors in Computing Depreciation
Depreciation Methods
Partial-Year Depreciation
Revising Depreciation
Reporting Depreciation

Revenue and Capital Expenditures

Ordinary Repairs
Betterments and Extraordinary Repairs

Disposals of Plant Assets

Discarding Plant Assets
Selling Plant Assets
Exchanging Plant Assets

Section 2-Natural Resources

Acquisition Cost and Depletion
Plant Assets Used in Extracting Resources

Section 3-Intangible Assets

Accounting for Intangible Assets
Patents
Copyrights
Leaseholds
Leasehold Improvements
Franchises and Licenses
Goodwill
Trademarks and Trade Names

Cash Flow Impacts of Long-Term Assets

Decision Analysis: Total Asset Turnover

Characteristics of Liabilities

Defining Liabilities
Classifying Liabilities
Uncertainty in Liabilities

Known (Determinable) Liabilities

Accounts Payable
Sales Taxes Payable
Unearned Revenues
Short-Term Notes Payable
Payroll Liabilities

Estimated Liabilities

Health and Pension Benefits
Vacation Pay
Bonus Plans
Warranty Liabilities
Income Tax Liabilities
Deferred Income Tax Liabilities

Contingent Liabilities

Accounting for Contingent Liabilities
Reasonbly Possible Contingent Liabilities

Long-Term Liabilities

Known Long-Term Liabilities
Estimated Long-Term Liabilities
Contingent Long-Term Liabilities

Decision Analysis: Times Interest Earned Ratio

Appendix 9A: Payroll Reports, Records, and Procedures

Basics of Bonds

Bond Financing
Types of Bonds
Bond Trading
Bond-Issuing Procedures

Bond Issuances

Issuing Bonds at Par
Bond Discount or Premium
Issuing Bonds at a Discount
Amortizing a Bond Discount
Issuing Bonds at a Premium
Amortizing a Bond Premium
Issuing Bonds between Interest Dates
Accruing Bond Interest Expense
Bond Pricing

Bond Retirement

Bond Retirement at Maturity
Bond Retirement before Maturity
Bond Retirement by Conversion

Long-Term Notes Payable

Installment Notes
Mortgage Notes

Decision Analysis: Pledged Assets to Secured Liabilities

Appendix 10A: Present Values of Bonds and Notes

Appendix 10B: Leases and Pensions

Corporate Form of Organization

Characteristics of Corporations
Organizing and Managing a Corporation
Stock of a Corporation
Basics of Capital Stock

Common Stock

Issuing Par Value Stock
Issuing No-Par Value Stock
Issuing Stock for Noncash Assets

Preferred Stock

Issuing Preferred Stock
Dividend Preference
Convertible Preferred Stock
Callable Preferred Stock
Motivation for Preferred Stock

Dividends

Cash Dividends
Stock Dividends
Stock Splits

Treasury Stock

Purchasing Treasury Stock
Reissuing Treasury Stock
Retiring Stock

Reporting Income Information

Continuing Operations
Discontinued Segments
Extraordinary Items
Changes in Accounting Principles
Earnings per Share
Stock Options

Retained Earnings

Prior Period Adjustments
Changes in Accounting Estimates
Statement of Changes in Stockholders'Equity

Decision Analysis: Book Value per Share, Dividend Yield, and Price-Earnings Ratio

Basics of Cash Flow Reporting

Purpose of the Statement of Cash Flows
Importance of Cash Flows
Measuring Cash Flows
Classifying Cash Flows
Noncash Investing and Financing
Format of the Statement of Cash Flows
Preparing the Statement of Cash Flows

Cash Flows from Operating

Reporting Operating Cash Flows
Direct Method of Reporting
Indirect Method of Reporting

Cash Flows from Investing

Analysis of Noncurrent Assets
Analysis of Other Assets

Cash Flows from Financing

Analysis of Noncurrent Liabilities
Analysis of Equity
Proving Cash Balances

Decision Analysis: Cash Flow Analysis

Appendix 12A: Spreadsheet Preparation of the Statement of Cash Flows

Basics of Analysis

Purpose of Analysis
Building Blocks of Analysis
Information for Analysis
Standards for Comparisons
Tools of Analysis

Horizontal Analysis

Comparative Statements
Trend Analysis

Vertical analysis

Common-Size Statements
Common-Size Graphics

Ratio Analysis

Liquidity and Efficiency
Solvency
Profitability
Market Prospects
Summary of Ratios

Decision Analysis: Analysis Reporting

A Financial Statement Information A-1

B Present and Future Values in Accounting B-1

C Reporting and Analyzing Long-Term Investments C-1

D* Reporting and Analyzing Partnerships

E* Reporting and Preparing Special Journals