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Table of Contents
About the Authors
Acknowledgments
Preface
1
What Is Financial Accounting, and Why Is It Important?
1.1
Making Good Financial Decisions about an Organization
1.2
Incorporation and the Trading of Capital Shares
1.3
Using Financial Accounting for Wise Decision Making
1.4
End-of-Chapter Exercises
2
What Should Decision Makers Know in Order to Make Good Decisions about an Organization?
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2.1
Creating a Portrait of an Organization That Can Be Used by Decision Makers
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2.2
Dealing with Uncertainty
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2.3
The Need for Accounting Standards
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2.4
Four Essential Terms Encountered in Financial Accounting
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2.5
End-of-Chapter Exercises
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3
How Is Financial Information Delivered to Decision Makers Such as Investors and Creditors?
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3.1
Construction of Financial Statements Beginning with the Income Statement
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3.2
Reported Profitability and the Impact of Conservatism
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3.3
Increasing the Net Assets of a Company
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3.4
Reporting a Balance Sheet and a Statement of Cash Flows
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3.5
End-of-Chapter Exercises
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4
How Does an Organization Accumulate and Organize the Information Necessary to Create Financial Statements?
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4.1
The Essential Role of Transaction Analysis
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4.2
Understanding the Effects Caused by Common Transactions
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4.3
Double-Entry Bookkeeping
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4.4
Recording Transactions Using Journal Entries
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4.5
Connecting the Journal to the Ledger
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4.6
End-of-Chapter Exercises
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5
Why Is Financial Information Adjusted Prior to the Production of Financial Statements?
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5.1
The Need for Adjusting Entries
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5.2
Preparing Various Adjusting Entries
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5.3
Preparation of Financial Statements
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5.4
End-of-Chapter Exercises
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6
Why Should Decision Makers Trust Financial Statements?
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6.1
The Need for the Securities and Exchange Commission
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6.2
The Role of the Independent Auditor in Financial Reporting
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6.3
Performing an Audit
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6.4
The Need for Internal Control
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6.5
The Purpose and Content of an Independent Auditor’s Report
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6.6
End-of-Chapter Exercises
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7
In Financial Reporting, What Information Is Conveyed about Receivables?
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7.1
Accounts Receivable and Net Realizable Value
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7.2
Accounting for Uncollectible Accounts
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7.3
The Problem with Estimations
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7.4
The Actual Estimation of Uncollectible Accounts
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7.5
Reporting Foreign Currency Balances
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7.6
A Company’s Vital Signs—Accounts Receivable
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7.7
End-of-Chapter Exercises
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8
How Does a Company Gather Information about Its Inventory?
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8.1
Determining and Reporting the Cost of Inventory
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8.2
Perpetual and Periodic Inventory Systems
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8.3
The Calculation of Cost of Goods Sold
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8.4
Reporting Inventory at Lower of Cost or Net Realizable Value
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8.5
Determining Inventory on Hand
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8.6
End-of-Chapter Exercises
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9
Why Does a Company Need a Cost Flow Assumption in Reporting Inventory?
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9.1
The Necessity of Adopting a Cost Flow Assumption
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9.2
The Selection of a Cost Flow Assumption for Reporting Purposes
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9.3
Problems with Applying LIFO
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9.4
Merging Periodic and Perpetual Inventory Systems with a Cost Flow Assumption
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9.5
Applying LIFO and Averaging to Determine Reported Inventory Balances
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9.6
Analyzing Reported Inventory Figures
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9.7
End-of-Chapter Exercises
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10
In a Set of Financial Statements, What Information Is Conveyed about Property and Equipment?
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10.1
The Reporting of Property and Equipment
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10.2
Determining Historical Cost and Depreciation Expense
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10.3
Recording Depreciation Expense for a Partial Year
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10.4
Alternative Depreciation Patterns and the Recording of a Wasting Asset
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10.5
Recording Asset Exchanges and Expenditures That Affect Older Assets
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10.6
Reporting Land Improvements and Impairments in the Value of Property and Equipment
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10.7
End-of-Chapter Exercises
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11
In a Set of Financial Statements, What Information Is Conveyed about Intangible Assets?
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11.1
Identifying and Accounting for Intangible Assets
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11.2
Balance Sheet Reporting of Intangible Assets
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11.3
Recognizing Intangible Assets Owned by a Subsidiary
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11.4
Accounting for Research and Development
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11.5
Acquiring an Asset with Future Cash Payments
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11.6
End-of-Chapter Exercises
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12
In a Set of Financial Statements, What Information Is Conveyed about Investments?
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12.1
Accounting for Investments in Equity Securities
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12.2
Accounting for Investments in Debt Securities
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12.3
Accounting for Investments by Means of the Equity Method
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12.4
Reporting Consolidated Financial Statements
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12.5
End-of-Chapter Exercises
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13
In a Set of Financial Statements, What Information Is Conveyed about Current and Contingent Liabilities?
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13.1
The Basic Reporting of Liabilities
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13.2
Reporting Current Liabilities Such as Gift Cards
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13.3
Accounting for Contingencies
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13.4
Accounting for Product Warranties
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13.5
End-of-Chapter Exercises
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14
In a Set of Financial Statements, What Information Is Conveyed about Noncurrent Liabilities Such as Bonds?
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14.1
Debt Financing
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14.2
Issuance of Notes and Bonds
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14.3
Accounting for Zero-Coupon Bonds
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14.4
Pricing and Reporting Term Bonds
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14.5
Issuing and Accounting for Serial Bonds
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14.6
Bonds with Other Than Annual Interest Payments
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14.7
End-of-Chapter Exercises
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15
In a Set of Financial Statements, What Information Is Conveyed about Other Noncurrent Liabilities?
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15.1
Accounting for Leases
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15.2
Operating Leases versus Finance Leases
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15.3
Recognition of Deferred Income Taxes
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15.4
Reporting Postretirement Benefits
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15.5
End-of-Chapter Exercises
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16
In a Set of Financial Statements, What Information Is Conveyed about Shareholders’ Equity?
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16.1
Selecting a Legal Form for a Business
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16.2
The Issuance of Common Stock
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16.3
Issuing and Accounting for Preferred Stock and Treasury Stock
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16.4
The Issuance of Cash and Stock Dividends
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16.5
The Computation of Earnings per Share
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16.6
End-of-Chapter Exercises
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17
In a Set of Financial Statements, What Information Is Conveyed by the Statement of Cash Flows?
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17.1
The Structure of a Statement of Cash Flows
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17.2
Cash Flows from Operating Activities: The Direct Method
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17.3
Cash Flows from Operating Activities: The Indirect Method
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17.4
Cash Flows from Investing and Financing Activities
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17.5
Appendix: Comprehensive Illustration—Statement of Cash Flows
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17.6
End-of-Chapter Exercises
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A
Present Value Tables
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B
Summary of Ratios and Financial Indicators
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B.1
Chapter 1
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B.2
Chapter 3
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B.3
Chapter 7
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B.4
Chapter 9
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B.5
Chapter 10
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B.6
Chapter 12
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B.7
Chapter 16
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B.8
Chapter 13
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