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Tables of Contents for Fundamental Accounting Principles
Chapter/Section Title
Page #
Page Count
Preface
v
Accounting in the Information Age
2
32
Information Age
4
3
Influence of Accounting
4
1
Business and Investment
4
2
Focus on Accounting
6
1
Setting Accounting Rules
7
1
Accounting and Technology
7
1
Forms of Organization
7
3
Business Organization
8
1
Nonbusiness Organization
9
1
Activities in Organizations
10
1
Planning
10
1
Financing
10
1
Investing
10
1
Operating
11
1
Financial Statements
11
2
Balance Sheet
12
1
Income Statement
12
1
Statement of Changes in Owner's Equity
12
1
Statement of Cash Flows
12
1
Users of Accounting Information
13
3
External Information Users
13
1
Internal Information Users
14
2
Ethics and Social Responsibility
16
2
Understanding Ethics
16
1
Social Responsibility
17
1
Opportunities in Practice
18
3
Financial Accounting
18
1
Managerial Accounting
19
1
Tax Accounting
19
1
Accounting Specialization
19
1
Accounting-Related Opportunities
20
1
Using the Information---Return on Investment
21
13
Financial Statements and Business Transactions
34
44
Communicating with Financial Statements
36
5
Previewing Financial Statements
36
4
Financial Statements and Organizational Form
40
1
Generally Accepted Accounting Principles
41
5
Financial Reporting Environment
41
1
Setting Accounting Principles
42
1
International Accounting Principles
43
1
Principles of Accounting
43
3
Transactions and the Accounting Equation
46
6
Transaction Analysis---Part I
46
3
Transaction Analysis---Part II
49
2
Summary of Transactions
51
1
Financial Statements
52
4
Income Statement
52
1
Statement of Changes in Owner's Equity
53
1
Balance Sheet
53
1
Statement of Cash Flows
53
3
Using the Information---Return on Equity
56
22
Analyzing and Recording Transactions
78
46
Transactions and Documents
80
1
Transactions and Events
80
1
Source Documents
80
1
Accounts and Double-Entry Accounting
81
7
The Account
81
1
Asset Accounts
82
1
Liability Accounts
83
1
Equity Accounts
84
1
Ledger and Chart of Accounts
85
1
Debits and Credits
86
1
Double-Entry Accounting
87
1
Processing Transactions
88
4
Journalizing Transactions
89
1
Balance Column Accounts
89
1
Posting Journal Entries
90
2
Analyzing Transactions
92
5
Accounting Equation Analysis
96
1
Financial Statement Links
97
1
Trial Balance
97
4
Preparing a Trial Balance
97
1
Using a Trial Balance
97
1
Searching for Errors
98
2
Correcting Errors
100
1
Presentation Issues
100
1
Using the Information---Debt Ratio
101
23
Accrual Accounting and Financial Statements
124
44
Timing and Reporting
126
3
The Accounting Period
126
1
Purpose of Adjusting
127
1
Recognizing Revenues and Expenses
127
1
Accrual Basis versus Cash Basis
128
1
Adjusting Accounts
129
11
Framework for Adjustments
129
1
Adjusting Prepaid Expenses
130
1
Adjusting for Depreciation
131
2
Adjusting Unearned Revenues
133
1
Adjusting Accrued Expenses
134
2
Adjusting Accrued Revenues
136
1
Links to Financial Statements
137
1
Adjusted Trial Balance
138
1
Accrual Reversals in Future Periods
138
2
Preparing Financial Statements
140
2
Using the Information---Profit Margin
142
2
Appendix 4A Alternative Accounting for Prepaids
144
24
Completing the Accounting Cycle
168
44
Closing Process
170
4
Temporary and Permanent Accounts
170
1
Recording Closing Entries
170
4
Post-Closing Trial Balance
174
1
Work Sheet as a Tool
174
8
Benefits of a Work Sheet
176
1
Using a Work Sheet
176
4
Statement of Cash Flows
180
1
Reviewing the Accounting Cycle
181
1
Classified Balance Sheet
182
3
Classification Structure
182
1
Classification Categories
183
2
Using the Information---Current Ratio
185
3
Appendix 5A Reversing Entries
188
24
Accounting for Merchandising Activities
212
48
Merchandising Activities
214
3
Reporting Financial Performance
214
1
Reporting Financial Condition
215
1
Operating Cycle
215
1
Inventory Systems
216
1
Merchandise Purchases
217
6
Trade Discounts
218
1
Purchase Discounts
218
1
Managing Discounts
219
1
Purchase Returns and Allowances
220
1
Discounts and Returns
221
1
Transportation Costs
221
1
Transfer of Ownership
221
1
Recording Purchases Information
222
1
Merchandise Sales
223
3
Sales Transactions
223
1
Sales Discounts
224
1
Sales Returns and Allowances
225
1
Additional Merchandising Issues
226
4
Cost and Price Adjustments
226
1
Adjusting Entries
227
1
Closing Entries
228
1
Merchandising Cost Flows
229
1
Merchandising Cost Accounts
229
1
Income Statement Formats
230
2
Multiple-Step Income Statement
230
1
Single-Step Income Statement
230
1
Merchandising Cash Flows
231
1
Using the Information---Acid-Test and Gross Margin
232
5
Appendix 6A Comparing Periodic and Perpetual Inventory Systems
237
23
Merchandise Inventories and Cost of Sales
260
40
Assigning Costs to Inventory
262
4
Specific Identification
263
1
First-In, First-Out
264
1
Last-In, First-Out
265
1
Weighted Average
265
1
Inventory Costing and Technology
265
1
Inventory Analysis and Effects
266
4
Financial Reporting
266
1
Tax Reporting
267
1
Consistency in Reporting
268
1
Errors in Reporting Inventory
268
2
Inventory Items and Costs
270
3
Items in Merchandise Inventory
270
1
Costs of Merchandise Inventory
271
1
Physical Count of Merchandise Inventory
271
1
Subsidiary Inventory Records
272
1
Other Inventory Valuations
273
4
Lower of Cost or Market
273
1
Retail Inventory Method
274
1
Gross Profit Method
275
2
Using the Information---Inventory Turnover and Days' Sales in Inventory
277
6
Appendix 7A Assigning Costs to Inventory---Periodic System
283
17
Accounting Information Systems
300
52
Fundamental System Principles
302
1
Control Principle
302
1
Relevance Principle
302
1
Compatibility Principle
302
1
Flexibility Principle
302
1
Cost-Benefit Principle
303
1
Components of Accounting Systems
303
2
Source Documents
303
1
Input Devices
303
1
Information Processor
304
1
Information Storage
304
1
Output Devices
304
1
Special Journals in Accounting
305
11
Basics of Special Journals
305
1
Subsidiary Ledgers
306
1
Sales Journal
307
4
Cash Receipts Journal
311
2
Purchases Journal
313
2
Cash Disbursements Journal
315
1
General Journal Transactions
316
1
Technology-Based Accounting Systems
316
3
Computer Technology in Accounting
317
1
Data Processing in Accounting
317
1
Computer Networks in Accounting
318
1
Enterprise Resource Planning Software
318
1
Using the Information---Business Segments
319
5
Appendix 8A Special Journals under a Periodic System
324
28
Cash and Internal Control
352
42
Internal Control
354
4
Purpose of Internal Control
354
1
Principles of Internal Control
354
2
Technology and Internal Control
356
1
Limitations of Internal Control
357
1
Control of Cash
358
8
Cash, Cash Equivalents, and Liquidity
358
1
Control of Cash Receipts
359
2
Control of Cash Disbursements
361
5
Banking Activities as Controls
366
7
Basic Bank Services
366
1
Electronic Funds Transfer
367
1
Bank Statement
367
2
Bank Reconciliation
369
4
Using the Information---Days' Sales Uncollected
373
2
Appendix 9A Document Flow in a Voucher System
375
19
Receivables and Short-Term Investments
394
42
Accounts Receivable
396
11
Recognizing Accounts Receivable
396
3
Valuing Accounts Receivable
399
1
Direct Write-Off Method
400
1
Allowance Method
401
2
Estimating Bad Debts Expense
403
4
Installment Accounts Receivable
407
1
Notes Receivable
407
4
Computations for Notes
408
1
Receipt of a Note
409
1
Honoring and Dishonoring a Note
409
1
End-of-Period Interest Adjustment
410
1
Converting Receivables to Cash before Maturity
411
2
Selling Accounts Receivable
411
1
Pledging Accounts Receivable
411
1
Discounting Notes Receivable
411
2
Short-Term Investments
413
3
Accounting for Short-Term Investments
413
1
Valuing and Reporting Short-Term Investments
414
2
Using the Information---Accounts Receivable Turnover
416
20
Plant Assets, Natural Resources, and Intangibles
436
44
Section 1---Plant Assets
438
1
Cost of Plant Assets
439
2
Land
439
1
Land Improvements
440
1
Buildings
440
1
Machinery and Equipment
440
1
Lump-Sum Purchase
440
1
Depreciation
441
8
Factors in Computing Depreciation
441
1
Depreciation Methods
442
5
Partial Year Depreciation
447
1
Revising Depreciation
447
1
Reporting Depreciation
448
1
Revenue and Capital Expenditures
449
1
Ordinary Repairs
449
1
Betterments and Extraordinary Repairs
450
1
Disposals of Plant Assets
450
4
Discarding Plant Assets
451
1
Selling Plant Assets
451
1
Exchanging Plant Assets
452
2
Section 2---Natural Resources
454
1
Acquisition and Depletion
454
1
Plant Assets Used in Extracting Resources
455
1
Section 3---Intangible Assets
455
4
Accounting for Intangible Assets
455
1
Patents
456
1
Copyrights
456
1
Leaseholds
456
1
Leasehold Improvements
457
1
Franchises and Licenses
457
1
Goodwill
457
2
Trademarks and Trade Names
459
1
Cash Flow Impacts of Long-Term Assets
459
1
Using the Information---Total Asset Turnover
459
21
Current Liabilities
480
46
Characteristics of Liabilities
482
2
Defining Liabilities
482
1
Classifying Liabilities
482
1
Uncertainty in Liabilities
483
1
Known (Determinable) Liabilities
484
8
Accounts Payable
484
1
Sales Taxes Payable
484
1
Unearned Revenues
484
1
Short-Term Notes Payable
485
4
Payroll Liabilities
489
3
Estimated Liabilities
492
4
Health and Pension Benefits
492
1
Vacation Pay
493
1
Bonus Plans
493
1
Warranty Liabilities
493
1
Income Tax Liabilities
494
1
Deferred Income Tax Liabilities
495
1
Contingent Liabilities
496
1
Accounting for Contingent Liabilities
496
1
Reasonably Possible Contingent Liabilities
496
1
Long-Term Liabilities
497
1
Known Long-Term Liabilities
497
1
Estimated Long-Term Liabilities
498
1
Contingent Long-Term Liabilities
498
1
Using the Information---Times Interest Earned
498
4
Appendix 12A Payroll Reports, Records, and Procedures
502
24
Partnerships
526
28
Partnership Form of Organization
528
3
Characteristics of Partnerships
528
1
Organizations with Partnership Characteristics
529
1
Choosing a Business Form
530
1
Basic Partnership Accounting
531
4
Organizing a Partnership
531
1
Dividing Income or Loss
532
2
Partnership Financial Statements
534
1
Admission and Withdrawal of Partners
535
3
Admission of a Partner
535
1
Withdrawal of a Partner
536
2
Death of Partner
538
1
Liquidation of a Partnership
538
2
No Capital Deficiency
538
1
Capital Deficiency
539
1
Using the Information---Partner Return on Equity
540
14
Equity Transactions and Corporate Reporting
554
60
Corporate Form of Organization
556
2
Characteristics of Corporations
556
1
Organizing and Managing a Corporation
557
1
Stock of a Corporation
558
4
Basics of Capital Stock
559
3
Common Stock
562
2
Issuing Par Value Stock
562
1
Issuing No-Par Value Stock
563
1
Issuing Stated Value Stock
563
1
Issuing Stock for Noncash Assets
563
1
Preferred Stock
564
4
Issuing Preferred Stock
565
1
Dividend Preference
565
2
Convertible Preferred Stock
567
1
Callable Preferred Stock
567
1
Motivation for Preferred Stock
567
1
Dividends
568
5
Cash Dividends
568
2
Stock Dividends
570
2
Stock Splits
572
1
Treasury Stock
573
3
Purchasing Treasury Stock
573
1
Reissuing Treasury Stock
574
1
Retiring Stock
575
1
Reporting Income Information
576
5
Continuing Operations
576
1
Discontinued Segments
576
1
Extraordinary Items
576
2
Changes in Accounting Principles
578
1
Earnings per Share
579
2
Stock Options
581
1
Retained Earnings
581
2
Restricted Retained Earnings
582
1
Appropriated Retained Earnings
582
1
Prior Period Adjustments
582
1
Changes in Accounting Estimates
583
1
Statement of Changes in Stockholders' Equity
583
1
Using the Information---Book Value per Share, Dividend Yield, and Price-Earnings Ratio
583
31
Long-Term Liabilities
614
46
Basics of Bonds
616
3
Bond Financing
616
1
Types of Bonds
617
1
Bond Trading
618
1
Bond-Issuing Procedures
619
1
Bond Issuances
619
11
Issuing Bonds at Par
619
1
Bond Discount or Premium
620
1
Issuing Bonds at a Discount
621
1
Amortizing a Bond Discount
621
3
Issuing Bonds at a Premium
624
1
Amortizing a Bond Premium
625
2
Issuing Bonds between Interest Dates
627
1
Accruing Bond Interest Expense
628
1
Bond Pricing
629
1
Bond Retirement
630
1
Bond Retirement at Maturity
630
1
Bond Retirement before Maturity
630
1
Bond Retirement by Conversion
631
1
Long-Term Notes Payable
631
7
Interest-Bearing Notes
632
1
Noninterest-Bearing Notes
633
1
Installment Notes
634
3
Mortgage Notes
637
1
Using the Information---Pledged Assets to Secured Liabilities
638
3
Appendix 15A Present Values of Bonds and Notes
641
3
Appendix 15B Leases and Pensions
644
16
Long-Term Investments and International Transactions
660
30
Classifying Investments
662
1
Short-Term versus Long-Term Investments
662
1
Classes of Long-Term Investments
662
1
Long-Term Investments in Securities
663
1
Held-to-Maturity Securities
663
6
Available-for-Sale Securities
664
2
Investment in Equity Securities with Significant Influence
666
2
Investment in Equity Securities with Controlling Influence
668
1
Accounting Summary for Investments in Securities
669
1
Investments in International Operations
669
2
Exchange Rates between Currencies
669
1
Sales and Purchases Listed in a Foreign Currency
670
1
Consolidated Statements with International Subsidiaries
671
1
Comprehensive Income
671
1
Using the Information---Components of Return on Total Assets
672
18
Reporting and Analyzing Cash Flows
690
50
Basics of Cash Flow Reporting
692
7
Purpose of the Statement of Cash Flows
692
1
Importance of Cash Flows
692
1
Measuring Cash Flows
693
1
Classifying Cash Flows
693
1
Noncash Investing and Financing
694
2
Format of the Statement of Cash Flows
696
1
Preparing the Statement of Cash Flows
696
3
Cash Flows from Operating
699
13
Reporting Operating Cash Flows
699
2
Direct Method of Reporting
701
5
Indirect Method of Reporting
706
6
Cash Flows from Investing
712
2
Analysis of Noncurrent Assets
712
1
Analysis of Other Assets
713
1
Cash Flows from Financing
714
2
Analysis of Noncurrent Liabilities
714
1
Analysis of Equity
715
1
Proving Cash Balances
716
1
Using the Information---Cash Flow Analysis
716
5
Appendix 17A Spreadsheet Preparation of the Statement of Cash Flows
721
19
Analysis of Financial Statements
740
44
Basics of Analysis
742
3
Purpose of Analysis
742
1
Building Blocks of Analysis
742
1
Information for Analysis
743
1
Standards for Comparison
744
1
Tools for Analysis
744
1
Horizontal Analysis
745
4
Comparative Statements
745
3
Trend Analysis
748
1
Vertical Analysis
749
5
Common-Size Statements
750
1
Common-Size Graphics
750
4
Ratio Analysis
754
10
Liquidity and Efficiency
754
4
Solvency
758
2
Profitability
760
1
Market Prospects
761
1
Summary of Ratios
762
2
Using the Information---Analysis Reporting
764
20
Managerial Accounting Concepts and Principles
784
42
Introduction to Managerial Accounting
786
5
Purpose of Managerial Accounting
786
1
Nature of Managerial Accounting
787
2
Decision-Making Focus
789
1
Increased Relevance of Managerial Accounting
789
2
Cost Accounting Concepts
791
3
Classification by Behavior
791
1
Classification by Traceability
791
1
Classification by Controllability
792
1
Classification by Relevance
792
1
Classification by Function
792
1
Identifying Cost Classification
793
1
Cost Concepts for Service Companies
794
1
Reporting Manufacturing Activities
794
8
Manufacturer's Balance Sheet
794
2
Manufacturer's Income Statement
796
3
Flow of Manufacturing Activities
799
1
Manufacturing Statement
800
2
Using the Information---Unit Contribution Margin
802
24
Job Order Cost Accounting
826
38
The Inventory System and Accounting for Costs
828
1
General Accounting System
828
1
Cost Accounting System
828
1
Job Order Cost Accounting
828
11
Job Order Manufacturing
828
2
Job Order Cost Sheet
830
1
Materials Cost Flows and Documents
831
2
Labor Cost Flows and Documents
833
2
Overhead Cost Flows and Documents
835
1
Summary of Manufacturing Cost Flows
836
3
Adjusting Overapplied and Underapplied Overhead
839
1
Underapplied Overhead
840
1
Overapplied Overhead
840
1
Using the Information---Pricing for Services
840
Appendix 20A* General Accounting System for Manufacturing Activities
Process Cost Accounting
864
2
Process Operations
866
1
Comparing Job Order and Process Operations
866
3
Organization of Process Operations
867
1
GenX Company---An Illustration
867
2
Process Cost Accounting
869
4
Direct and Indirect Costs
869
1
Accounting for Materials Costs
870
1
Accounting for Labor Costs
871
1
Accounting for Factory Overhead
871
2
Equivalent Units of Production
873
1
Accounting for Goods in Process
873
1
Differences between Equivalent Units for Materials and for Labor and Overhead
874
1
Accounting for First (Grinding) Department
874
7
Physical Flow of Units
875
1
Equivalent Units of Production
875
2
Cost per Equivalent Unit
877
1
Cost Reconciliation
877
1
Process Cost Summary
878
1
Transfers between Departments
879
2
Accounting for Second (Mixing) Department
881
2
Equivalent Units of Production
881
2
Process Cost Summary
883
1
Transfers to Finished Goods Inventory and Cost of Goods Sold
883
2
Summary of Cost Flows
884
1
Lean Business Model and Process Operations
884
1
Using the Information---Hybrid Costing System
885
21
Cost Allocation and Performance Measurement
906
40
Overhead Cost Allocation Methods
908
5
Two-Stage Cost Allocation
908
1
Activity-Based Costing
909
4
Departmental Accounting
913
2
Motivation for Departmentalization
913
1
Departmental Evaluation
914
1
Departmental Reporting and Analysis
914
1
Departmental Expense Allocation
915
6
Direct and Indirect Expenses
915
1
Allocation of Indirect Expenses
916
1
Departmental Income Statements
917
3
Departmental Contribution to Overhead
920
1
Responsibility Accounting
921
5
Controllable versus Direct Costs
922
1
Responsibility Accounting System
922
2
Joint Costs
924
2
Using the Information---Return on Total Assets by Investment Centers
926
20
Cost-Volume-Profit Analysis
946
32
Identifying Cost Behavior
948
3
Fixed Costs
948
1
Variable Costs
949
1
Mixed Costs
949
1
Step-Wise Costs
949
1
Curvilinear Costs
950
1
Measuring Cost Behavior
951
2
Scatter Diagrams
951
1
High-Low Method
952
1
Least-Squares Regression
952
1
Comparing Cost Estimation Methods
953
1
Break-Even Analysis
953
4
Computing Break-Even Point
953
2
Preparing a Cost-Volume-Profit Chart
955
1
Assumptions of Cost-Volume-Profit Analysis
956
1
Applying Cost-Volume-Profit Analysis
957
5
Computing Income from Sales and Costs
957
1
Computing Sales for a Target Income
958
1
Computing the Margin of Safety
959
1
Sensitivity Analysis
959
1
Computing Multiproduct Break-Even Point
960
2
Using the Information---Operating Leverage
962
16
Master Budgets and Planning
978
38
Budgeting Process
980
1
Analysis and Future Focus
980
1
Basis for Evaluation
980
1
Employee Motivation
980
1
Coordination of Activities
981
1
Communication of Plans
981
1
Budget Administration
981
3
Budget Committee
981
1
Budget Reporting
982
1
Budget Timing
983
1
Master Budget
984
10
Master Budget Components
984
2
Operating Budgets
986
3
Capital Expenditures Budget
989
1
Financial Budgets
990
4
Using the Information---Activity-Based Budgeting
994
5
Appendix 24A Production and Manufacturing Budgets
999
17
Flexible Budgets and Standard Costs
1016
44
Section 1---Flexible Budgets
1018
1
Budgetary Process
1018
2
Budgetary Control and Reporting
1018
1
Fixed Budget Performance Report
1018
1
Budget Reports for Evaluation
1019
1
Flexible Budget Reports
1020
3
Purpose of Flexible Budgets
1020
1
Preparing Flexible Budgets
1020
2
Flexible Budget Performance Report
1022
1
Section 2---Standard Costs
1023
1
Materials and Labor Standards
1023
1
Identifying Standard Costs
1023
1
Setting Standard Costs
1024
1
Cost Variances
1024
4
Cost Variance Analysis
1025
1
Computing Cost Variances
1025
1
Materials and Labor Variances
1026
2
Overhead Standards and Variances
1028
6
Setting Overhead Standards
1028
2
Overhead Cost Variance Analysis
1030
1
Computing Overhead Cost Variances
1031
3
Extending Standard Costs
1034
2
Standard Costs for Control
1034
1
Standard Costs for Services
1034
1
Standard Cost Accounting System
1034
2
Using the Information---Sales Variances
1036
24
Capital Budgeting and Managerial Decisions
1060
2
Section 1---Capital Budgeting
1062
1
Methods Not Using Time Value of Money
1062
4
Payback Period
1062
3
Accounting Rate of Return
1065
1
Methods Using Time Value of Money
1066
6
Net Present Value
1066
3
Internal Rate of Return
1069
2
Comparing Capital Budgeting Methods
1071
1
Section 2---Managerial Decisions
1072
1
Decisions and Information
1072
1
Decision Making
1072
1
Relevant Costs
1072
1
Managerial Decision Tasks
1073
7
Additional Business
1073
2
Make or Buy
1075
1
Scrap or Rework
1075
1
Sell or Process
1076
1
Selecting Sales Mix
1077
1
Eliminating a Segment
1078
1
Qualitative Decision Factors
1079
1
Using the Information---Break-Even Time
1080
Appendix A Financial Statement Information
1
1
Nike
2
9
Reebok
11
4
Gap
15
Appendix B Present and Future Values
1
1
Credits
1
1
Index
1
1
Chart of Accounts
1