WHAT WE DID TO MAKE IT BETTER!

You spoke, we listened. The primary changes in this edition were motivated by comments and suggestions provided by our existing and potential new adopters. The most significant changes are as follows:

• Restructured text materials to clearly distinguish revenue, expense, and dividend accounts from the retained earnings account. We introduced the term “accounts” in Chapter 1 and clearly defined revenue, expense, dividend, and retained earnings as separate accounts. Also, we introduced the closing process in Chapter 1 and expanded coverage of this topic in Chapters 2, 3 and 4. We added several new exercises and added new requirements to existing problems that deal specifically with the issue of account classification and the closing process.
• Expanded and updated coverage of ethics to include other features of corporate governance. Indeed, the heading in Chapter 2 formerly titled “Importance of Ethics ” is now titled “Corporate Governance. ” More specifically, we expanded the coverage of Sarbanes-Oxley. We replaced the content related to Cressey ’s common features of ethical misconduct with content that covers the primary features of the fraud triangle. The reference to the fraud triangle is more current and germane because it is found directly in contemporary accounting literature.
• Moved coverage of gains and losses from Chapter 3 to Chapter 5. This enabled us to use single-step income statements in Chapters 1 through 4. The single-step income statement is simpler and avoids the conflict in how interest is reported on the income statement versus the statement of cash flows. The multi-step income statement is introduced in Chapter 5.
• Replaced coverage of the net method of accounting for cash discounts with coverage of the gross method. While we remain convinced that the net method is theoretically preferable, we recognize that the gross method is easier to teach and used more frequently in the real world.
• Added coverage of the effective interest rate method for amortizing bond discounts and premiums to an end-of-chapter appendix. We continue to use the straight-line method in the main body of the text because of its simplicity. However, several instructors expressed the desire to include the effective interest rate method because of its theoretical superiority and widespread use in practice.
• Rewrote Chapter 12 to shift the focus from the direct method of accounting for cash flows from operating activities to the indirect method. We continue to use the direct method in Chapters 1 through 11 while students are forming their knowledge of the statement of cash flows. However, we believe that indirect method is more appropriate at an advanced level because of its wide spread use in practice.
• Added a full featured separate chapter covering financial statement analysis which is available online. We continue to cover financial statement analysis in each chapter of the text. However, some instructors prefer to cover financial statement analysis in more detail and as a separate subject. Making a financial statement analysis chapter available online enables us to provide the detailed coverage that some instructors prefer while keeping the hard copy of the text at a reasonable length. Please review the table of contents to familiarize yourself with the financial statement analysis coverage that is included in the text.
• Streamlined the text by more effective use of appendices. We moved content related to the audit function to an appendix. Content related to investment securities and time-value-of-money was moved to appendices located at the end of the book. The appendix covering not-for-profit accounting was deleted. A new appendix covering the effective interest rate method of accounting for bond discounts and premiums was added.

Chapter Specific Changes

Chapter 1 An Introduction to Accounting

• Changed chapter title to An Introduction to Accounting.
• Redesigned chapter to enhance clarity and readability.
• Defined the term “accounts ” and clearly distinguished revenue, expense, and dividend accounts from the retained earnings account.
• Added an introduction to the closing process.
• Added a new Check Yourself problem to highlight account classification and the closing process.
• Added new exercises and changed requirements to several of the exercises and problems to provide coverage of the closing process.
• Added a section covering careers in accounting.
• Added a new Reality Bytes.
• Redesigned formulas and graphics to promote clarity.
• Moved discussion of the Price/Earnings ratio to an end of chapter Appendix.

Chapter 2 Accounting for Accruals

• Expanded coverage of ethics to include other features of corporate governance. Broadened coverage of Sarbanes-Oxley and replaced coverage of common features of ethical misconduct (Cressey) with coverage of the fraud triangle.
• Expanded coverage of closing process. Rewrote the section on closing and added a new Check Yourself exercise. Added exercises and problems that emphasize closing.
• Moved coverage of auditing to appendix.

Chapter 3 Accounting for Deferrals

• Moved coverage of gains and losses to Chapter 5. This enables the use of the single step income statement and avoids the conflict between how interest is reported on the income statement versus the statement of cash flows.
• Replaced the Focus on International Issues textbox discussion with new scenario.
• Added exercises and problems related to financial statement analysis.

Chapter 4 The Double-Entry Accounting System

• Replaced Reality Bytes sidebar with new scenario.

Chapter 5 Accounting for Merchandising Businesses

• Extensive chapter rewrite to enhance organizational structure and readability.
• Replaced coverage of the net method of accounting for cash discounts with coverage of the gross method.
• Added coverage of gains and losses.
• Expanded coverage of multistep versus single step income statements.
• Expanded the end-of-chapter materials by adding twelve new exercises.

Chapter 6 Accounting for Inventories

• Changed title from Accounting for Merchandising Businesses—Advanced Topics to A ccounting for Inventories.
• Moved appendix on investments in marketable securities to appendix at end of book.
• Streamlined exhibits to highlight the key elements affecting the financial statements.
• Expanded the end-of-chapter materials by adding twelve new exercises.

Chapter 7 Internal Control and Accounting for Cash

• Added exercises and problems related to financial statement analysis.

Chapter 8 Accounting for Receivables and Payables

• Changed title from Accounting for Accruals—Advanced Topics to Accounting for Receivables and Payables.
• Added exercises and problems related to financial statement analysis.

Chapter 9 Accounting for Long-Term Operational Assets

• Replaced Reality Bytes sidebar with new scenario.
• Added exercises and problems related to financial statement analysis.

Chapter 10 Accounting for Long-Term Debt

• Added coverage of the effective interest rate method for amortizing bond premiums and discounts to an end-of-chapter appendix.
• Moved coverage of time value of money to an appendix.
• Expanded the end-of-chapter materials by adding twelve new exercises.

Chapter 11 Accounting for Equity Transactions

• Deleted appendix related to not-for-profit accounting.
• Updated exercises, problems, and cases.
• Added exercises and problems related to financial statement analysis.

• Extensive chapter rewrite to shift focus from the direct method of accounting for cash flows from operating activities to the indirect method.
• Created new end-of-chapter materials to reflect emphasis on indirect method.

Chapter 13 Financial Statement Analysis (on the text Web site, www.mhhe.com/edmonds6e )

• Added a full-featured separate chapter covering financial statement analysis which is available online.
• Updated Financial Analyst section of each chapter with current data and new companies where appropriate. Added end-of-chapter materials to assure that all chapters contained exercises and problems related to financial analysis.
• Updated the annual reports for The Topps Company, Inc., and Harley-Davidson, Inc., that accompany the text.
• Updated ATC Problems 1 and 2 in each chapter that relate to the annual reports that accompany the text.
• Updated the summary of financial ratios section in Appendix C.
• Updated the Annual Report Projects with new solutions for (1) The Topps Company, Inc., (2) Harley-Davidson, Inc., and (3) professor-selected companies.