Contents
Introduction to Financial Statements
Forms of Business Organization
Users and Uses of Financial Information
Interrelationships of Statements
Other Elements of an Annual Report
A Further Look at Financial Statements
Property, Plant, and Equipment
Using the Financial Statements
Using the Statement of Stockholders’ Equity
Using a Classified Balance Sheet
The Standard-Setting Environment
Qualities of Useful Information
Assumptions in Financial Reporting
Principles in Financial Reporting
The Accounting Information System
The Accounting Information System
Stockholders’ Equity Relationships
Steps in the Recording Process
The Recording Process Illustrated
Summary Illustration of Journalizing and Posting
Limitations of a Trial Balance
The Revenue Recognition Principle
The Expense Recognition Principle
Accrual versus Cash Basis of Accounting
The Basics of Adjusting Entries
Adjusting Entries for Deferrals
Adjusting Entries for Accruals
Summary of Basic Relationships
The Adjusted Trial Balance and Financial Statements
Preparing the Adjusted Trial Balance
Preparing Financial Statements
Preparing a Post-Closing Trial Balance
Summary of the Accounting Cycle
APPENDIX 4A: Adjusting Entries in an Automated World—Using a Worksheet
Merchandising Operations and the Multiple-Step Income Statement
Recording Purchases of Merchandise
Purchase Returns and Allowances
Summary of Purchasing Transactions
Recording Sales of Merchandise
Determining Cost of Goods Sold Under a Periodic System
APPENDIX 5A: Periodic Inventory System
Recording Merchandise Transactions
Recording Purchases of Merchandise
Recording Sales of Merchandise
Comparison of Entries—Perpetual vs. Periodic
Reporting and Analyzing Inventory
“Where Is That Spare Bulldozer Blade?”
Classifying and Determining Inventory
Determining Inventory Quantities
Financial Statement and Tax Effects of Cost Flow Methods
Using Inventory Cost Flow Methods Consistently
Analysts' Adjustments for LIFO Reserve
APPENDIX 6A: Inventory Cost Flow Methods in Perpetual Inventory Systems
Fraud, Internal Control, and Cash
Minding the Money in Moose Jaw
Principles of Internal Control Activities
Limitations of Internal Control
Control Features: Use of a Bank
Basic Principles of Cash Management
APPENDIX 7A: Operation of the Petty Cash Fund
Establishing the Petty Cash Fund
Making Payments from Petty Cash
Replenishing the Petty Cash Fund
Reporting and Analyzing Receivables
Recognizing Accounts Receivable
Financial Statement Presentation of Receivables
Evaluating Liquidity of Receivables
Reporting and Analyzing Long-Lived Assets
Determining the Cost of Plant Assets
Factors in Computing Depreciation
Revising Periodic Depreciation
Expenditures During Useful Life
Accounting for Intangible Assets
Financial Statement Presentation of Long-Lived Assets
APPENDIX 9A: Calculation of Depreciation Using Other Methods
Reporting and Analyzing Liabilities
Current Maturities of Long-Term Debt
Payroll and Payroll Taxes Payable
Determining the Market Price of Bonds
Accounting for Bond Redemptions
Redeeming Bonds before Maturity
Financial Statement Presentation and Analysis
APPENDIX 10A: Straight-Line Amortization
APPENDIX 10B: Effective-Interest Amortization
APPENDIX 10C: Accounting for Long-Term Notes Payable
Reporting and Analyzing Stockholders' Equity
Oh Well, I Guess I'll Get Rich
The Corporate Form of Organization
Characteristics of a Corporation
Accounting for Issues of Common Stock
Retained Earnings Restrictions
Financial Statement Presentation of Stockholders' Equity
Measuring Corporate Performance
APPENDIX 11A: Entries for Stock Dividends
The Statement of Cash Flows: Usefulness and Format
Usefulness of the Statement of Cash Flows
Significant Noncash Activities
Format of the Statement of Cash Flows
Preparing the Statement of Cash Flows
Preparation of the Statement of Cash Flows—Indirect Method
Summary of Conversion to Net Cash Provided by Operating Activities—Indirect Methods
Step 2: Investing and Financing Activities
Using Cash Flows to Evaluate a Company
Assessing Liquidity and Solvency Using Cash Flows
APPENDIX 12A: Statement of Cash Flows—Direct Method
Step 2: Investing and Financing Activities
APPENDIX 12B: Statement of Cash Flows—T-Account Approach
Financial Analysis: The Big Picture
Changes in Accounting Principle
Alternative Accounting Methods
APPENDIX 13A: Comprehensive Illustration of Ratio Analysis
Specimen Financial Statements: Tootsie Roll Industries, Inc.
Management Discussion and Analysis
Financial Statements and Accompanying Notes
Specimen Financial Statements: The Hershey Company
Specimen Financial Statements: Zetar plc
Future Value of a Single Amount
Present Value of a Single Amount
Computing the Present Value of a Long-Term Note or Bond
Useful Applications of the Financial Calculator
Reporting and Analyzing Investments
Accounting for Debt Investments
Recording Acquisition of Bonds
Accounting for Stock Investments
Valuing and Reporting Investments
Presentation of Realized and Unrealized Gain or Loss
Statement of Cash Flows Presentation