Financial Accounting for Future Business Leaders (with Thomson One)

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ISBN: 9780324181456 | 0324181450
Cover: Hardcover
Copyright: 1/16/2003

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This text offers a blend of procedures and concepts. The initial chapters are unique in the marketplace because they focus on how transactions affect financial statements while minimizing the coverage of debits and credits. The heart of the financial chapter is organized around the balance sheet, with real company examples used in both the body of the chapters as well as the end-of-chapter materials. Cash basis accounting is used in the accounting cycle chapters before accrual accounting is presented. This is a key distinguishing feature.

The Role of Accounting in Business

(48)

The Nature of Business

(7)

Types of Businesses

(1)

Forms of Business

(1)

Business Strategies

(2)

Value Chain of a Business

(1)

Business Stakeholders

(2)

Business Activities

(2)

Financing Activities

(1)

Investing Activities

(1)

Operating Activities

(1)

What Is Accounting and Its Role in Business?

(1)

Financial Statements

(6)

Income Statement

(1)

Retained Earnings Statement

(1)

Balance Sheet

(1)

Statement of Cash Flows

(3)

Interrelationships Among Financial Statements

(1)

Accounting Concepts

(3)

Business Entity Concept

(1)

Cost Concept

(1)

Going Concern Concept

(1)

Matching Concept

(1)

Objectivity Concept

(1)

Unit of Measure Concept

(1)

Adequate Disclosure Concept

(1)

Accounting Period Concept

(1)

Horizontal Analysis

(1)

Summary of Learning Goals

(1)

Glossary

(25)

The Cash Basis of Accounting

(44)

Elements of an Accounting System

(2)

Rules

(1)

Framework

(1)

Controls

(1)

Cash and Accrual Bases of Accounting

(2)

Using the Cash Basis of Accounting

(1)

Using the Accrual Basis of Accounting

(1)

Summary of Differences Between the Cash and Accrual Bases of Accounting

(1)

Using the Cash Basis for a Corporation's First Period of Operations

(4)

Financial Statements for a Corporation's First Period of Operations

(3)

Income Statement

(1)

Retained Earnings Statement

(1)

Balance Sheet

(1)

Statement of Cash Flows

(1)

Using the Cash Basis for the Second Period of Operations

(2)

Advantages and Disadvantages of the Cash Basis

(1)

Vertical Analysis

(1)

Summary of Learning Goals

(1)

Glossary

(26)

The Accrual Basis of Accounting

(54)

The Accrual Basis of Accounting and the Matching Concept

(2)

Using the Accrual Basis of Accounting for Family Health Care's November Transactions

(4)

The Adjustment Process

102

(8)

Deferrals and Accruals

103

(2)

Adjustments for Family Health Care

105

(5)

Financial Statements

110

(3)

Interpreting Accrual and Cash Basis Income

113

(1)

The Accounting Cycle

114

(1)

Common-Sized Financial Statements

115

(2)

Appendix: Reconciliation: Net Cash Flows From Operations and Net Income

117

(2)

Summary of Learning Goals

119

(1)

Glossary

120

(28)

Accounting Information Systems

148

(58)

Business Information Systems

150

(1)

Basic Accounting Systems

151

(2)

Transaction Processing Systems

153

(7)

The Account

153

(1)

Rules of Debit and Credit

154

(2)

The Journal

156

(1)

Posting to the Ledger

157

(1)

Trial Balance

158

(2)

Financial Reporting System

160

(8)

Adjusting Entries

160

(5)

Closing Entries

165

(1)

Post-Closing Trial Balance

165

(3)

EBITDA

168

(1)

Appendix: The Statement of Cash Flows

169

(2)

Summary of Learning Goals

171

(1)

Glossary

172

(34)

Accounting for Merchandise Operations

206

(56)

Merchandise Operations

208

(2)

Financial Statements for a Merchandising Business

210

(6)

Multiple-Step Income Statement

211

(2)

Single-Step Income Statement

213

(1)

Retained Earnings Statement

214

(1)

Balance Sheet

214

(1)

Statement of Cash Flows

214

(2)

Sales Transactions

216

(4)

Sales Discounts

218

(1)

Sales Returns and Allowances

219

(1)

Purchase Transactions

220

(2)

Purchase Discounts

221

(1)

Purchases Returns and Allowances

221

(1)

Transportation Costs and Sales Tax

222

(2)

Transportation Costs

222

(2)

Sales Tax

224

(1)

Dual Nature of Merchandise Transaction

224

(2)

Merchandise Shrinkage

226

(1)

Effects of Inventory Misstatements on the Financial Statements

227

(2)

Gross Profit and Operating Profit Analysis

229

(1)

Appendix: Statement of Cash Flows: The Indirect Method

230

(3)

Cash Flows from Operating Activities

231

(2)

Cash Flows Used for Investing Activities

233

(1)

Cash Flows Used for Financing Activities

233

(1)

Summary of Learning Goals

233

(1)

Glossary

234

(28)

Internal Control and Cash

262

(50)

Internal Control

264

(5)

Objectives of Internal Control

264

(1)

Elements of Internal Control

265

(1)

Control Environment

265

(1)

Risk Assessment

266

(1)

Control Procedures

267

(1)

Monitoring

268

(1)

Information and Communication

269

(1)

Prevention and Detection of Employee Fraud

269

(6)

Preventive Controls

270

(1)

Detective Controls

270

(2)

Risk Factors Relating to Employee Fraud

272

(1)

Examples of Employee Fraud

273

(2)

Cash Controls Over Receipts and Payments

275

(3)

Control of Cash Receipts

275

(1)

Controlling Cash Received from Cash Sales

276

(1)

Controlling Cash Received in the Mail

276

(1)

Control of Cash Payments

277

(1)

Voucher System

277

(1)

Electronic Funds Transfer

278

(1)

Bank Accounts

278

(3)

Use of Bank Accounts

278

(279)

Bank Statement

279

(1)

Bank Accounts as a Control Over Cash

280

(1)

Bank Reconciliation

281

(3)

Special-Purpose Cash Funds

284

(1)

Financial Statement Reporting of Cash

284

(1)

Cash Ratios

285

(3)

Ratio of Cash Flow to Net Income

285

(1)

Ratio of Cash to Monthly Cash Expenses

286

(2)

Summary of Learning Goals

288

(1)

Glossary

289

(23)

Receivables

312

(46)

Classification of Receivables

314

(1)

Accounts Receivable

314

(1)

Notes Receivable

315

(1)

Other Receivables

315

(1)

Internal Controls for Receivables

315

(2)

Uncollectible Receivables

317

(1)

Allowance Method for Uncollectibles

318

(4)

Write-Offs to the Allowance Account

318

(1)

Estimating Uncollectibles

319

(3)

Direct Write-Off Method for Uncollectibles

322

(1)

Notes Receivable

323

(2)

Characteristics of Notes Receivable

323

(1)

Accounting for Notes Receivable

324

(1)

Reporting Receivables on the Balance Sheet

325

(1)

Managing Accounts Receivable

326

(2)

Screening Customers

326

(1)

Determining Credit Terms

327

(1)

Monitoring Collections

327

(1)

Accounts Receivable Turnover and Days' Sales in Receivables

328

(2)

Summary of Learning Goals

330

(1)

Glossary

331

(27)

Inventories

358

(44)

Inventory Classification for Merchandisers and Manufacturers

360

(2)

Internal Control of Inventory

362

(1)

Inventory Cost Flow Assumptions

363

(3)

Inventory Costing Methods Under a Perpetual Inventory System

366

(3)

First-In, First-Out Method

366

(1)

Last-In, First-Out Method

366

(2)

Average Cost Method

368

(1)

Computerized Perpetual Inventory Systems

368

(1)

Inventory Costing Methods under a Periodic Inventory System

369

(2)

First-In, First-Out Method

369

(1)

Last-In, First-Out Method

369

(1)

Average Cost Method

370

(1)

Comparing Inventory Costing Methods

371

(2)

Use of the First-In, First-Out Method

372

(1)

Use of the Last-In, First-Out Method

372

(1)

Use of the Average Cost Method

373

(1)

Valuation of Inventory at Other Than Cost

373

(2)

Valuation at Lower of Cost or Market

373

(1)

Valuation at Net Realizable Value

374

(1)

Quick Response

375

(1)

Inventory Analysis and Interpretation

375

(5)

Inventory Efficiency Ratios

375

(1)

Lifo Reserve and the Balance Sheet

376

(3)

Lifo Reserve and the Income Statement

379

(1)

Summary of Learning Goals

380

(1)

Glossary

381

(21)

Fixed Assets and Intangible Assets

402

(46)

Nature of Fixed Assets

404

(4)

Classifying Costs

405

(1)

The Cost of Fixed Assets

405

(3)

Accounting for Depreciation

408

(7)

Factors in Computing Depreciation Expense

408

(4)

Comparing Depreciation Methods

412

(1)

Depreciation for Federal Income Tax

412

(1)

Revising Depreciation Estimates

413

(2)

Natural Resources

415

(1)

Fixed Asset Disposals

415

(2)

Discarding Fixed Assets

415

(1)

Selling Fixed Assets

416

(1)

Project Stage Capital and Revenue Expenditures

417

(3)

Analyzing Fixed Assets

420

(2)

Operational Utilization Analysis

420

(1)

Financial Utilization Analysis

420

(2)

Intangible Assets

422

(3)

Patents

423

(1)

Copyrights and Trademarks

423

(1)

Goodwill

424

(1)

Reporting Fixed Assets and Intangible Assets

425

(3)

Summary of Learning Goals

428

(1)

Glossary

429

(19)

Liabilities

448

(52)

The Nature of Liabilities

450

(1)

Accounts Payable

451

(1)

Notes Payable and Maturities Currently Due

452

(2)

Discounted Notes Payable

453

(1)

Current Maturities of Long-Term Debt

453

(1)

Contingent Liabilities

454

(2)

Employer Liabilities

456

(4)

Recording Payroll

456

(1)

Liability for Employer Payroll Taxes

457

(1)

Recording and Paying Payroll Taxes

458

(1)

Employees' Fringe Benefits

459

(1)

Disclosing and Analyzing Current Liabilities

460

(2)

Nature of Long-Term Liabilities

462

(1)

Issuing, Redeeming, and Disclosing Bonds Payable

463

(4)

Bonds Issued at Face Amount

463

(1)

Bonds Issued at a Discount

464

(1)

Amortizing a Bond Discount

464

(1)

Bonds Issued at a Premium

465

(1)

Zero-Coupon Bonds

465

(1)

Bond Redemption

466

(1)

Long-Term Liability Disclosure

467

(1)

Investment in Bonds

467

(4)

Accounting for Bond Investments-Purchase, Interest, and Amortization

467

(3)

Accounting for Bond Investments--Sale

470

(1)

Balance Sheet Presentation of Bond Investments

470

(1)

Analyze and Interpret Leverage

471

(3)

Summary of Learning Goals

474

(1)

Glossary

475

(25)

Stockholders' Equity: Capital Stock and Dividends

500

(46)

Nature of a Corporation

502

(3)

Characteristics of a Corporation

502

(2)

Forming a Corporation

504

(1)

Sources of Paid-In Capital

505

(3)

Common Stock

505

(1)

Market for Common Stock

506

(1)

Preferred Stock

506

(2)

Issuing Stock

508

(2)

Premium on Stock

508

(1)

No-Par Stock

509

(1)

Stock Options

510

(1)

Treasury Stock

510

(2)

Stock Splits

512

(1)

Analyzing Financing Alternatives

512

(2)

Accounting for Dividends

514

(3)

Cash Dividends

515

(1)

Stock Dividends

516

(1)

Analyze Dividends

517

(2)

Dividend Yield

517

(1)

Dividend Payout Ratio

518

(1)

Reporting Stockholders' Equity

519

(3)

Reporting Retained Earnings

519

(1)

Reporting Stockholders' Equity on the Balance Sheet

520

(2)

Summary of Learning Goals

522

(1)

Glossary

523

(23)

Special Income and Investment Reporting Issues

546

(50)

Corporate Income Taxes

548

(5)

Payment of Income Taxes

548

(1)

Temporary Differences between Taxable Income and Reported Income

549

(2)

Allocation of Income Taxes

551

(1)

Reporting and Analyzing Deferred Taxes

552

(1)

Permanent Differences

553

(1)

Unusual Items Affecting Net Income

553

(2)

Discontinued Operations

553

(1)

Extraordinary Items

554

(1)

Changes in Accounting Principles

555

(1)

Unusual Items Affecting Income from Continuing Operations

555

(2)

Fixed Asset Impairments

555

(1)

Restructuring Charges

556

(1)

Earnings per Common Share

557

(2)

Comprehensive Income

559

(2)

Accounting for Investments in Stocks

561

(5)

Available-for-Sale Equity Investments

562

(1)

Equity Method

563

(2)

Sale of Investments in Stocks

565

(1)

Business Combinations

566

(2)

Mergers and Consolidations

566

(1)

Parent and Subsidiary Corporations

567

(1)

Consolidated Financial Statements

567

(1)

Market-Based Financial Measures

568

(4)

Price-Earnings Ratio

568

(1)

Price-Book Ratio

569

(3)

Summary of Learning Goals

572

(2)

Glossary

574

(22)

Statement of Cash Flows

596

(68)

Reporting Cash Flows

598

(4)

Cash Flows from Operating Activities

599

(1)

Cash Flows from Investing Activities

600

(1)

Cash Flows from Financing Activities

601

(1)

Noncash Investing and Financing Activities

601

(1)

No Cash Flow per Share

602

(1)

Statement of Cash Flows--The Indirect Method

602

(9)

Retained Earnings

603

(1)

Cash Flows from Operating Activities

604

(1)

Depreciation

605

(1)

Current Assets and Current Liabilities

606

(1)

Gain on Sale of Land

607

(1)

Reporting Cash Flows from Operating Activities

607

(1)

Cash Flows Used for Payment of Dividends

608

(1)

Common Stock

608

(1)

Bonds Payable

608

(1)

Building

609

(1)

Land

609

(1)

Preparing the Statement of Cash Flows

610

(1)

Statement of Cash Flows--The Direct Method

611

(5)

Cash Received from Customers

612

(1)

Cash Payments for Merchandise

612

(1)

Cash Payments for Operating Expenses

613

(1)

Gain on Sale of Land

614

(1)

Interest Expense

614

(1)

Cash Payments for Income Taxes

614

(1)

Reporting Cash Flows from Operating Activities--Direct Method

615

(1)

Analysis and Interpretation of Cash Flows

616

(3)

Measuring Noncash Working Capital Efficiency

616

(2)

Free Cash Flow

618

(1)

Appendix: Work Sheet for Statement of Cash Flows

619

(7)

Work Sheet--Indirect Method

619

(3)

Work Sheet--Direct Method

622

(4)

Summary of Learning Goals

626

(1)

Glossary

627

(37)

Financial Statement Analysis

664

Horizontal and Vertical Analysis

667

(5)

Horizontal Analysis

667

(3)

Vertical Analysis

670

(2)

Common-Size Statements

672

(1)

Other Analytical Measures

672

(1)

Profitability Analysis

672

(4)

Rate Earned on Stockholders' Equity

672

(1)

Rate Earned on Total Assets

673

(1)

Comprehensive Profitability Analysis

674

(2)

Margin Analysis and Asset Efficiency Analysis

676

(6)

Margin Analysis

676

(1)

Asset Efficiency

677

(1)

Accounts Receivable Analysis

677

(2)

Inventory Analysis

679

(2)

Fixed Asset Analysis

681

(1)

Asset Efficiency Summary

681

(1)

Leverage Analysis

682

(5)

Current Ratio

683

(1)

Quick Ratio

684

(1)

Ratio of Fixed Assets to Long-Term Liabilities

685

(1)

Ratio of Liabilities to Stockholders' Equity

686

(1)

Number of Times Interest Charges Earned

686

(1)

Leverage Summary

687

(1)

Stockholder Ratios

687

(2)

Earnings per Share

688

(1)

Price-Earnings Ratio

688

(1)

Dividend Yield

689

(1)

Summary of Analytical Measures

689

(2)

Corporate Annual Reports

691

(2)

Financial Highlights

692

(1)

President's Letter to the Stockholders

692

(1)

Management Discussion and Analysis

692

(1)

Independent Auditor's Report

693

(1)

Historical Summary

693

(1)

Summary of Learning Goals

693

(1)

Glossary

694

Appendices:

A Interest Tables

(1)

B Code of Professional Ethics for Accountants

(1)

C Using the Internet for Financial Research

(1)

D The Home Depot Annual Report

(1)

Glossary

(1)

Company Index

(1)

Subject Index

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Financial Accounting for Future Business Leaders (with Thomson One)

Summary

Table of Contents

Supplemental Materials