Financial Accounting, Global Edition

Financial Accounting, Global Edition

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Chapter 1 Business, Accounting, and You 1 Business, Accounting, and You 1 What Is a Business, and Why Study Accounting? 2 The Definition of a Business 2 The General Concept of Value 3 Business Owners and Other Stakeholders 4 The Goal of a Business 5 How Does a Business Operate? 5 Resources Needed to Start and Operate a Business 5 Operating the Business 5 The Cost of Money 6 How Are Businesses Organized? 6 The Types of Businesses 6 The Legal Forms of Businesses 7 What Is Accounting, and What Are the Key Accounting Principles and Concepts? 9 Generally Accepted Accounting Principles 9 International Financial Reporting Standards 10 The Business Entity Principle 10 The Reliability (Objectivity) Principle 10 The Cost Principle 10 Accounting Ethics: A Matter of Trust 10 What Is the Role of Accounting in a Business? 11 How Do You Recognize a Business Transaction? 12 Cash Accounting 12 Accrual Accounting 12 How Do You Measure a Business Transaction? 12 How Do You Record Business Transactions Using the Accounting Equation? 13 Transaction Analysis 14 Stockholdersa€™ Equity 14 How Do You Report Business Transactions Using Financial Statements? 20 The Income Statement 20 The Statement of Retained Earnings 22 The Balance Sheet 22 The Statement of Cash Flows 22 Relationships Among the Financial Statements 23 Accounting, Business, and Youa€”Putting It All Together 24 Summary 25 Accounting Practice 28 Apply Your Knowledge 49 Know Your Business 50 Chapter 2 Analyzing and Recording Business Transactions 53 Business, Accounting, and You 53 How Are Accounts Used to Keep Business Transactions Organized? 54 Organizing Accounts 54 Assets 55 Liabilities 55 Stockholdersa€™ Equity 55 What Is Double-Entry Accounting? 56 Normal Balance 58 How Are the General Journal and General Ledger Used to Keep Track of Business Transactions? 58 Transaction Analysis 60 Applying Transaction Analysis 60 Balancing the T-Accounts 67 How Is a Trial Balance Prepared, and What Is It Used For? 69 Correcting Errors 70 Preparation of Financial Statements 71 Summary 74 Accounting Practice 75 Apply Your Knowledge 99 Know Your Business 99 Chapter 3 Adjusting and Closing Entries 102 Business, Accounting, and You 102 How Does a Company Accurately Report Its Income? 104 Revenue Recognition and Matching Principles 104 What Is the Role of Adjusting Entries, and When Are They Prepared? 105 Accruing Revenues 106 Accruing Expenses 107 Adjusting Deferred Revenues 107 Adjusting Deferred Expenses 108 How Are Financial Statements Prepared from an Adjusted Trial Balance? 113 The Adjusted Trial Balance 113 Preparing the Financial Statements 115 How Does a Company Prepare for a New Accounting Period? 117 Completing the Accounting Cycle 117 The Three Closing Entries: Revenues, Expenses, and Dividends 118 Post-Closing Trial Balance 120 Summary of the Adjusting and Closing Processes 120 Summary 123 Accounting Practice 125 Apply Your Knowledge 154 Know Your Business 154 Comprehensive Problem 157 Chapter 4 Accounting for a Merchandising Business 159 Business, Accounting, and You 159 What Are the Relationships Among Manufacturers, Wholesalers, Retailers, and Customers? 160 How Do Periodic and Perpetual Inventory Systems Differ? 161 How Do You Account for the Purchase of Inventory? 162 Cash and Credit Purchases 162 Purchase Returns and Allowances 162 Purchase Discounts 163 How Do You Account for the Sale of Inventory? 164 Cash Sales 165 Credit Sales 165 Sales Returns and Allowances 166 Sales Returns 167 Sales Allowances 167 Sales Discounts 168 How Do You Account for Freight Charges and Other Selling Expenses? 169 Costs Related to the Receipt of Goods from Suppliers 170 Costs Related to Delivering Goods to Customers 171 Other Selling Costs 173 How Do You Prepare a Merchandisera€™s Financial Statements? 174 The Income Statement 174 The Statement of Retained Earnings 177 The Balance Sheet 177 Summary 180 Accounting Practice 183 Apply Your Knowledge 205 Know Your Business 205 Chapter 5 Inventory 208 Business, Accounting, and You 208 What Inventory Costing Methods Are Allowed? 209 Cost Flow Versus Physical Flow of Inventory 210 How Are the Four Inventory Costing Methods Applied? 212 Inventory Cost Flows 212 Specific-Identification Method 213 First-In, First-Out (FIFO) Method 214 Last-In, First-Out (LIFO) Method 215 Average Cost Method 216 Journalizing Inventory Transactions 217 What Effect Do the Different Costing Methods Have on Net Income? 218 What Else Determines How Inventory Is Valued? 220 How Is Inventory Reported on the Balance Sheet? 222 Inventory Shrinkage 222 How Do Inventory Errors Affect the Financial Statements? 223 Is It Possible to Estimate the Value of Inventory If the Inventory Is Accidentally Destroyed? 224 Summary 228 Accounting Practice 230 Apply Your Knowledge 252 Know Your Business 252 Comprehensive Problem 254 Chapter 6 The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics 256 Business, Accounting, and You 256 What Are the Rules that Govern Accounting? 257 Understandable 257 Relevant 258 Reliable 258 Generally Accepted Accounting Principles (GAAP) in the United States 258 Generally Accepted Accounting Principles Around the World: IFRS 259 Differences Between FASB and IFRS 259 What Is Internal Control? 261 Elements of an Internal Control System 261 What Is Fraud, and Who Commits It? 265 Management Fraud 265 Employee Embezzlement 265 The Factors Usually Present When Fraud Is Committed 266 What Is a Certified Public Accountant (CPA)? 268 Audits 268 Audit Opinions 269 What Are the Legal and Ethical Responsibilities of Accountants? 270 The Legal Responsibilities of Accountants 270 Ethical Responsibilities of Accountants 271 Summary 273 Accounting Practice 275 Apply Your Knowledge 282 Know Your Business 285 Chapter 7 Cash and Receivables 288 Business, Accounting, and You 288 What Are the Different Types of Sales? 289 Cash Sales 289 Credit Card Sales 290 Debit Card Sales 290 Credit/Debit Card Processing 290 Sales on Account 291 What Internal Control Procedures Should Be Used for Cash? 291 Internal Controls over Cash Receipts 291 Internal Control over Cash Payments 292 Purchase and Payment Process 293 The Bank Reconciliation 294 Preparing the Bank Reconciliation 294 Book Side of the Reconciliation 295 Online Banking 299 How Is Cash Reported on the Balance Sheet? 300 How Do You Account for Receivables? 300 Types of Receivables 300 Internal Control over Accounts Receivable 301 Accounting for Uncollectible Accounts Receivable 301 How Do You Account for Uncollectible Accounts? 301 The Direct Write-Off Method 301 Direct Write-Off Method: Recovery of Accounts Previously Written Off 302 The Allowance Method 303 Estimating the Amount of Uncollectible Accounts 303 Writing Off Uncollectible Accounts Under the Allowance Method 306 Allowance Method: Recovery of Accounts Previously Written Off 307 How Are Accounts Receivable Reported on the Balance Sheet? 308 How Do You Account for Notes Receivable? 309 Identifying the Maturity Date 309 Origination of Notes Receivable 310 Computing Interest on a Note 310 Accruing Interest Revenue 311 Summary 315 Accounting Practice 318 Apply Your Knowledge 344 Know Your Business 345 Appendix 7A 347 What Is a Petty Cash Fund? 347 Setting Up the Petty Cash Fund 347 Replenishing the Petty Cash Fund 348 Changing the Petty Cash Fund 349 Accounting Practice 350 Chapter 8 Long-Term and Other Assets 353 Business, Accounting, and You 353 What Are the Different Types of Long-Term Assets? 354 How Is the Cost of a Fixed Asset Calculated? 355 Land and Land Improvements 355 Buildings 356 Machinery and Equipment 356 Furniture and Fixtures 357 Lump-Sum (Basket) Purchase of Assets 357 How Are Fixed Assets Depreciated? 358 Measuring Depreciation 359 Depreciation Methods 360 Comparing Depreciation Methods 364 Partial Year Depreciation 364 Changing the Useful Life of a Depreciable Asset 365 Using Fully Depreciated Assets 366 How Are Costs of Repairing Fixed Assets Recorded? 367 Ordinary Repairs 367 Extraordinary Repairs 367 Betterments 368 What Happens When a Fixed Asset Is Disposed? 368 How Do You Account for Intangible Assets? 371 Specific Intangibles 371 Accounting for Research and Development Costs 373 How Are Natural Resources Accounted For? 373 What Are Other Assets? 374 How Are Long-Term Assets Reported on the Balance Sheet? 375 Summary 377 Accounting Practice 380 Apply Your Knowledge 400 Know Your Business 401 Chapter 9 Current Liabilities and Long-Term Debt 404 Business, Accounting, and You 404 What Are the Differences Among Known, Estimated, and Contingent Liabilities? 405 How Do You Account for Current Liabilities of a Known Amount? 406 Accounts Payable 406 Notes Payable 406 Sales Tax Payable 408 Accrued Expenses (Accrued Liabilities) 408 Unearned Revenues 408 Current Portion of Long-Term Debt 409 How Do You Account for Current Liabilities of an Uncertain Amount? 409 Estimated Warranty Liability 409 How Do You Account for a Contingent Liability? 410 How Do You Account for Long-Term Debt? 411 Notes Payable 411 Bonds Payable 413 Lease Liabilities 419 How Are Liabilities Reported on the Balance Sheet? 421 Summary 425 Accounting Practice 428 Apply Your Knowledge 448 Know Your Business 449 Appendix 9A: (Located online at www.pearsonhighered/kemp) 9A-1 Chapter 10 Corporations: Paid-In Capital and Retained Earnings 452 Business, Accounting, and You 452 How Are Corporations Organized? 453 What Makes Up the Stockholdersa€™ Equity of a Corporation? 455 Stockholdersa€™ Rights 455 Classes of Stock 455 Par Value, Stated Value, and No-Par Stock 456 How Is the Issuance of Stock Recorded? 456 Issuing Common Stock 457 Issuing Preferred Stock 458 How Are Cash Dividends Accounted For? 458 Dividend Dates 459 Declaring and Paying Dividends 459 Dividing Dividends Between Preferred and Common Shareholders 460 Dividends on Cumulative and Noncumulative Preferred Stock 461 How Are Stock Dividends and Stock Splits Accounted For? 462 Stock Dividends 462 Recording Stock Dividends 463 Stock Splits 465 Stock Dividends and Stock Splits Compared 467 How Is Treasury Stock Accounted For? 467 Treasury Stock Basics 467 Purchase of Treasury Stock 468 Sale of Treasury Stock 468 How Is Stockholdersa€™ Equity Reported on the Balance Sheet? 471 Summary 473 Accounting Practice 475 Apply Your Knowledge 502 Know Your Business 502 Chapter 11 The Statement of Cash Flows 505 Business, Accounting, and You 505 What Is the Statement of Cash Flows? 507 How Does a Business Create a Statement of Cash Flows? 508 The Logic of How the Statement of Cash Flows Is Prepared 509 Sources and Uses of Cash: Categorizing Changes as Operating, Investing, or Financing 509 Statement of Cash Flows: Two Formats 511 How Is the Statement of Cash Flows Prepared Using the Indirect Method? 512 Cash Flows from Operating Activities 514 Cash Flows from Investing Activities 516 Cash Flows from Financing Activities 518 Net Change in Cash and Cash Balances 520 Noncash Investing and Financing Activities 520 How Is the Statement of Cash Flows Prepared Using the Direct Method? 523 Cash Flows from Operating Activities 524 Summary 530 Accounting Practice 531 Apply Your Knowledge 559 Know Your Business 560 Comprehensive Problem 562 Chapter 12 Financial Statement Analysis 565 Business, Accounting, and You 565 What Is Financial Analysis? 566 Step One: Understand a Businessa€™s Model and Strategy 567 Step Two: Understand the Environment in Which a Business Operates 567 Step Three: Analyze the Content of the Financial Statements and Other Information, Making Adjustments If Desired 568 Step Four: Analyze the Businessa€™s Operations 568 Step Five: Use the Financial Analysis to Make Decisions 569 What Measures Does Someone Use to Analyze the Performance of a Business? 569 The Techniques of Financial Analysis 570 Vertical Analysis 572 Horizontal Analysis 573 Trend Percentages 575 Question 1: Is the Business a Going Concern? 575 An Example: Tucker Enterprises, Inc. 576 Question 2: How Is the Business Earning a Net Income or Loss? 577 An Example: Tucker Enterprises, Inc. 579 Question 3: Where Is the Business Getting Its Money, and Can It Pay Its Debt Obligations? 580 An Example: Tucker Enterprises, Inc. 580 Question 4: How Is the Business Investing Its Money, and Is It Using Its Assets Efficiently? 581 An Example: Tucker Enterprises, Inc. 582 Question 5: Is the Business Generating Enough Net Income to Reward the Stockholders for the Use of Their Money? 583 An Example: Tucker Enterprises, Inc. 584 How Do You Put Everything Together to Make Decisions? 586 Seeing the Impact of Decisions 588 What Are Red Flags in Financial Statement Analysis? 588 Summary 591 Accounting Practice 593 Apply Your Knowledge 618 Know Your Business 619 Appendix A Columbia Sportswear Company 2012 Annual Report to Shareholders 621 Appendix B Time Value of Moneya€”Future and Present Value Concepts 689 Future Value 689 Future-Value Tables 690 Future Value of an Annuity 691 Present Value 692 Present-Value Tables 693 Present Value of an Annuity 693 Accounting Practice 695 Company Index 697 Glindex 705 Credits 723Chapter 1 Business, Accounting, and You 1 Business, Accounting, and You 1 What Is a Business, and Why Study Accounting? 2 The Definition of a Business 2 The General Concept of Value 3 Business Owners and Other Stakeholders 4 The Goal of a ...

Title:Financial Accounting, Global Edition
Author: Robert Kemp, Jeffrey Waybright
Publisher:Pearson Higher Ed - 2015-01-23

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