This document provides definitions and explanations of key accounting concepts and terms:
1. It defines the accounting equation as Assets = Liabilities + Owner's Equity and explains T accounts.
2. It lists the three main financial statements - the income statement, balance sheet, and statement of cash flows - and provides brief descriptions of each.
3. It also explains the accounting cycle, types of adjusting entries, closing entries, special journals, shipping terms, bank reconciliation format, and various ratios and leverage calculations used in accounting.
This document provides information on management accounting and cash flow statements. It defines management accounting as the presentation and analysis of business information for internal management decision making. It then defines a cash flow statement as a financial statement showing the changes in cash and cash equivalents resulting from operating, investing, and financing activities. The objectives of the cash flow statement are to present the inflows and outflows of cash over a period and to help evaluate a company's liquidity, dividend-paying capacity, and reasons for changes in cash balances. Advantages include assessing liquidity and profitability, determining optimal cash balances, and aiding capital budgeting decisions.
Internal check regarding cash receipts and cash paymentAnand Saran
Internal check is an accounting procedure that divides duties so that no single individual can carry out all stages of a transaction. This helps prevent errors and fraud. The document outlines procedures for controlling cash receipts and payments, including having separate cashiers, issuing pre-numbered receipts, daily bank deposits, reconciling bank statements, and requiring authorized signatures on checks. It emphasizes dividing duties, timely recording, safeguarding assets, and oversight as key parts of internal checks.
This document provides an overview of key concepts in accounting. It begins by listing the learning objectives, which include explaining what accounting is, identifying users and uses of accounting, understanding ethics and GAAP, and analyzing how business transactions affect the accounting equation. It then defines accounting as identifying, recording, and communicating the economic events of an organization. The three main activities are identifying, measuring, and communicating financial information. It discusses the users of accounting data, both internal and external. It emphasizes the importance of ethics in financial reporting. It also introduces the accounting equation, defines its components, and provides examples of how business transactions affect the equation. Finally, it briefly introduces the four main financial statements and GAAP.
This document contains an assignment classification table that organizes questions, exercises, problems, and cases from Chapter 4 of the textbook by topic and learning objective. The table breaks down the chapter material into nine topics: income measurement concepts, computation of net income, single-step and multiple-step income statements, extraordinary items and accounting changes, retained earnings statements, intraperiod tax allocation, comprehensive income, and discontinued operations. It further categorizes the material by the learning objectives for each section. The document concludes with an assignment characteristics table that provides details on the level of difficulty, required time, and description of assigned questions.
This document discusses accounting in the public sector. It covers topics such as financial reporting, managing revenue and expenditures, accounting standards, and accounting systems. Specifically, it discusses:
- The content of financial reporting in the public sector, which provides information about the present condition, past financial performance, and future tendencies.
- The accounting model, which shows assets, liabilities, and equity over time and how revenue, expenses, and cash flows impact these categories.
- The main accounting standards used in public sector accounting, including national standards like GAAP and international standards like IPSAS.
- The key difference between cash accounting, which recognizes events based on cash transactions, and accrual accounting, which recognizes events
This document discusses cash management for business organizations. It covers controlling cash levels, controlling cash inflows and outflows, and optimally investing excess cash. Tools for cash planning include net cash forecasts and cash budgets. Cash budgets in particular are important for evaluating financial performance, setting dividend policies, and planning by indicating cash surpluses or deficiencies. Controlling cash outflows is also discussed. Overall the document provides an overview of key aspects of effective cash management for organizations.
Audit of the Payroll and Personnel Cycle _ Accounting & AudtingCarl Hebeler
This document discusses the audit of the payroll and personnel cycle. It identifies key accounts and transactions such as wages payable, payroll taxes payable, and cash. It describes the related business functions, documents, and internal controls. It provides guidance on assessing risks, testing controls, and performing substantive tests of transactions and account balances. These include analytical procedures to identify potential misstatements, as well as detailed tests of liability and expense accounts to ensure accurate cutoff and balances. The overall goal is to obtain sufficient evidence that payroll and personnel accounts are fairly stated in accordance with GAAP.
The document defines what a journal is and describes the different types of accounts. It then provides more details about each type:
- A journal is a book of original entry where transactions are first recorded before being posted to ledgers. It defines three types of accounts: personal, real, and nominal.
- Personal accounts record transactions with individuals or entities. Real accounts relate to assets. Nominal accounts relate to income/expenses and increase/decrease equity.
- The document outlines rules for debit and credit entries. Assets and expenses are increased by debits, and liabilities/equity/revenues are increased by credits. Total debits must equal total credits for each transaction.
This document provides information on management accounting and cash flow statements. It defines management accounting as the presentation and analysis of business information for internal management decision making. It then defines a cash flow statement as a financial statement showing the changes in cash and cash equivalents resulting from operating, investing, and financing activities. The objectives of the cash flow statement are to present the inflows and outflows of cash over a period and to help evaluate a company's liquidity, dividend-paying capacity, and reasons for changes in cash balances. Advantages include assessing liquidity and profitability, determining optimal cash balances, and aiding capital budgeting decisions.
Internal check regarding cash receipts and cash paymentAnand Saran
Internal check is an accounting procedure that divides duties so that no single individual can carry out all stages of a transaction. This helps prevent errors and fraud. The document outlines procedures for controlling cash receipts and payments, including having separate cashiers, issuing pre-numbered receipts, daily bank deposits, reconciling bank statements, and requiring authorized signatures on checks. It emphasizes dividing duties, timely recording, safeguarding assets, and oversight as key parts of internal checks.
This document provides an overview of key concepts in accounting. It begins by listing the learning objectives, which include explaining what accounting is, identifying users and uses of accounting, understanding ethics and GAAP, and analyzing how business transactions affect the accounting equation. It then defines accounting as identifying, recording, and communicating the economic events of an organization. The three main activities are identifying, measuring, and communicating financial information. It discusses the users of accounting data, both internal and external. It emphasizes the importance of ethics in financial reporting. It also introduces the accounting equation, defines its components, and provides examples of how business transactions affect the equation. Finally, it briefly introduces the four main financial statements and GAAP.
This document contains an assignment classification table that organizes questions, exercises, problems, and cases from Chapter 4 of the textbook by topic and learning objective. The table breaks down the chapter material into nine topics: income measurement concepts, computation of net income, single-step and multiple-step income statements, extraordinary items and accounting changes, retained earnings statements, intraperiod tax allocation, comprehensive income, and discontinued operations. It further categorizes the material by the learning objectives for each section. The document concludes with an assignment characteristics table that provides details on the level of difficulty, required time, and description of assigned questions.
This document discusses accounting in the public sector. It covers topics such as financial reporting, managing revenue and expenditures, accounting standards, and accounting systems. Specifically, it discusses:
- The content of financial reporting in the public sector, which provides information about the present condition, past financial performance, and future tendencies.
- The accounting model, which shows assets, liabilities, and equity over time and how revenue, expenses, and cash flows impact these categories.
- The main accounting standards used in public sector accounting, including national standards like GAAP and international standards like IPSAS.
- The key difference between cash accounting, which recognizes events based on cash transactions, and accrual accounting, which recognizes events
This document discusses cash management for business organizations. It covers controlling cash levels, controlling cash inflows and outflows, and optimally investing excess cash. Tools for cash planning include net cash forecasts and cash budgets. Cash budgets in particular are important for evaluating financial performance, setting dividend policies, and planning by indicating cash surpluses or deficiencies. Controlling cash outflows is also discussed. Overall the document provides an overview of key aspects of effective cash management for organizations.
Audit of the Payroll and Personnel Cycle _ Accounting & AudtingCarl Hebeler
This document discusses the audit of the payroll and personnel cycle. It identifies key accounts and transactions such as wages payable, payroll taxes payable, and cash. It describes the related business functions, documents, and internal controls. It provides guidance on assessing risks, testing controls, and performing substantive tests of transactions and account balances. These include analytical procedures to identify potential misstatements, as well as detailed tests of liability and expense accounts to ensure accurate cutoff and balances. The overall goal is to obtain sufficient evidence that payroll and personnel accounts are fairly stated in accordance with GAAP.
The document defines what a journal is and describes the different types of accounts. It then provides more details about each type:
- A journal is a book of original entry where transactions are first recorded before being posted to ledgers. It defines three types of accounts: personal, real, and nominal.
- Personal accounts record transactions with individuals or entities. Real accounts relate to assets. Nominal accounts relate to income/expenses and increase/decrease equity.
- The document outlines rules for debit and credit entries. Assets and expenses are increased by debits, and liabilities/equity/revenues are increased by credits. Total debits must equal total credits for each transaction.
Trial balance its error and its rectification
The document discusses trial balances, errors that may occur in trial balances, and how to rectify those errors. It defines a trial balance and explains its objectives. It describes the different types of errors that can occur, including errors of omission, commission, principle, compensating errors, original entry, and complete reversal of entries. It explains how errors are disclosed or not disclosed by the trial balance. Finally, it provides examples of each type of error and the correcting journal entries to rectify the errors.
This document discusses liquidity ratios, which analyze a company's ability to pay off short-term debts. It defines the current ratio and acid test ratio, and provides formulas to calculate them using data from a company's balance sheet. The current ratio compares a company's current assets to its current liabilities, with a desirable ratio of 1.5-2.0. The acid test ratio is a more stringent measure that excludes inventory from current assets, since it may not be quickly converted to cash. An example calculation shows one company's current ratio is healthy but its acid test ratio indicates it may be experiencing a liquidity crisis.
This document discusses various types and purposes of financial statement analysis. It describes external analysis conducted by outsiders without access to internal records, and internal analysis by executives with access to internal records. Horizontal analysis compares financial data over several years, while vertical analysis examines the relationship between items in one year's statements. The objectives of financial statement analysis are to understand a firm's profitability and financial position. Ratio analysis is identified as the most common analysis technique.
The document discusses various topics related to reporting and analyzing receivables:
1. It identifies the different types of receivables as accounts receivable, notes receivable, and other receivables.
2. It explains how accounts receivable are recognized in accounts through journal entries and discusses methods for valuing and accounting for bad debts, including the allowance and direct write-off methods.
3. It describes how notes receivable are recorded through journal entries, including recognizing, valuing, and disposing of notes receivable.
The accounting cycle summarizes the process of recording accounting transactions from occurrence through to financial statements. It begins with journal entries to record transactions, followed by posting to ledger accounts. An adjusted trial balance is prepared after adjusting entries. Financial statements are then prepared, followed by closing entries and a post-closing trial balance. The accounting cycle ensures all transactions are recorded, summarized and reported accurately.
Acquisition and Disposition of Property, Plant, and Equipmentreskino1
Identify property, plant, and equipment and its related costs.
Discuss the accounting problems associated with interest capitalization.
Explain accounting issues related to acquiring and valuing plant assets.
Describe the accounting treatment for costs subsequent to acquisition.
Describe the accounting treatment for the disposal of property, plant, and equipment.
Credit management involves qualifying customers for credit, monitoring payments, collecting outstanding invoices, and resolving disputes. It begins with assessing customer creditworthiness by evaluating financial condition and setting credit limits. Several factors are considered such as financial condition, credit score, and current obligations. Competent credit management also protects customers from excessive debt. After establishing limits, accurate invoices must be sent with reasonable payment periods to allow for review and resolution of any issues. Efficient credit management benefits all parties by providing assurance that invoices will be paid and allowing customers to build strong credit references.
accounting for branches and Combined FS(2)_(0).pptxJaafar47
This document discusses accounting for branches and divisions of a business entity. It defines branches and divisions as separate economic units from the home office, but not separate legal entities. Branches carry out sales and collections at a distance from the home office. Divisions have more autonomy than branches. The document outlines different accounting systems and ledger accounts used by branches and the home office to record transactions between them. It provides an example to illustrate the journal entries and combined financial statements for a home office and its branch.
The document discusses various methods for valuing common stock, including dividend discount models, residual income models, and price ratio models. It provides examples and formulas for the basic dividend discount model, two-stage dividend growth model, and constant growth dividend discount model. It also discusses approaches for estimating growth rates, such as using historical averages, industry averages, and sustainable growth rates. The examples show how to apply the models to value stocks and estimate what a fair price would be based on expected future dividends and appropriate discount rates.
This document discusses various topics related to receivables accounting including types of receivables, recognizing and valuing accounts receivable, methods for accounting for bad debts, notes receivable, statement presentation of receivables, managing receivables, and analyzing receivables. It provides examples and explanations of key receivables accounting concepts and calculations.
1) Branch accounting involves keeping separate accounts for each branch location of a company to provide transparency into each branch's transactions, cash flows, financial position, and performance.
2) There are two main types of branches - dependent branches, which have their accounts maintained by headquarters, and independent branches, which maintain their own separate double-entry bookkeeping systems.
3) Independent branches are treated as separate accounting units, recording their own transactions, preparing trial balances, and forwarding these to headquarters to incorporate into consolidated financial statements for the whole company.
Cash management is important for working capital management. There are four motives for holding cash: transaction, precautionary, speculative, and compensating. The objectives of cash management are to meet payment schedules and minimize idle cash balances. Cash needs depend on the synchronization of cash inflows and outflows. Forecasting cash flows helps anticipate surplus or deficit periods to avoid issues like late payments or idle surplus cash. Cash can be forecast over different time periods using receipts/disbursements or adjusted net income approaches.
1. Float refers to the difference between a firm's cash balance in its records and its bank balance, which occurs when checks or deposits are in the process of clearing.
2. There are two main types of float - negative float from uncollected receipts, and positive float from outstanding checks. Negative float is undesirable as it represents unavailable funds.
3. Managing float involves speeding up collection of receipts to reduce negative float through methods like lockboxes, and delaying payments to benefit from positive float through controlled disbursement accounts.
Capital structure refers to how a corporation finances its assets through a combination of equity, debt, or securities. A firm's capital structure composition includes liabilities like debt and equity shares. Equity shares make shareholders owners but do not burden the company, while debt provides tax advantages but requires regular payments. An optimal capital structure considers advantages and disadvantages of different sources to maximize utilization of resources.
This presentation contains slides on the topic financial management where I have discussed about the meaning of financial management, various financial decisions involved in it like the capital budgeting, capital structure, working capital management, dividend decision. I hope these slides would be beneficial in understanding the basics of finance in a better way.Capital budgeting is the investment decision ,capital structure is related to financing,working capital is more about liquidity and dividend decision is concerned with the shareholders.
The document discusses different types of cheques including:
1. Bearer cheques which can be encashed by anyone carrying the cheque without identification. Order cheques can only be encashed by the payee named on the cheque.
2. Crossed cheques can only be deposited into a bank account and not cashed. Open cheques can be cashed or deposited.
3. Post-dated and stale cheques have time restrictions on when they can be encashed. Traveler's cheques do not expire.
Cash and marketable securities managementNikhil Soares
Cash management and marketable securities are key areas of working capital management. Cash is held for transactional, precautionary and speculative motives to meet routine payments and unexpected needs. The objectives of cash management are to meet payment schedules while minimizing idle cash balances. Factors determining cash needs include synchronizing cash inflows and outflows, costs of shortfalls, and excess cash balances. Marketable securities alternatives that provide liquidity include treasury bills, commercial paper, certificates of deposit, bankers' acceptances, money market funds and intercorporate deposits.
This document provides definitions and explanations of key accounting concepts and terms. It discusses accounting as a system to record and communicate financial information. Key topics covered include the accounting equation, double-entry bookkeeping system, types of accounts, accounting cycle, journals, ledgers, debits and credits, balancing accounts, and more.
This document provides an overview of key concepts related to a company's balance sheet. It discusses how business activities affect balance sheet accounts, how companies keep track of balances, and common account titles that appear on the balance and income statements. The document also covers the accounting equation, analyzing transactions, preparing journal entries, and using T-accounts to track balances over time.
This document provides an overview of accounting concepts, principles, and the accounting cycle. It discusses key topics such as [1] the purpose of accounting and accounting information systems, [2] the basic accounting model involving journal entries, ledgers, and trial balances, and [3] financial statements including the income statement, balance sheet, and statement of cash flows. It also covers [4] adjusting entries, worksheets, and closing entries to prepare the adjusted trial balance and financial statements at the end of each accounting period.
Trial balance its error and its rectification
The document discusses trial balances, errors that may occur in trial balances, and how to rectify those errors. It defines a trial balance and explains its objectives. It describes the different types of errors that can occur, including errors of omission, commission, principle, compensating errors, original entry, and complete reversal of entries. It explains how errors are disclosed or not disclosed by the trial balance. Finally, it provides examples of each type of error and the correcting journal entries to rectify the errors.
This document discusses liquidity ratios, which analyze a company's ability to pay off short-term debts. It defines the current ratio and acid test ratio, and provides formulas to calculate them using data from a company's balance sheet. The current ratio compares a company's current assets to its current liabilities, with a desirable ratio of 1.5-2.0. The acid test ratio is a more stringent measure that excludes inventory from current assets, since it may not be quickly converted to cash. An example calculation shows one company's current ratio is healthy but its acid test ratio indicates it may be experiencing a liquidity crisis.
This document discusses various types and purposes of financial statement analysis. It describes external analysis conducted by outsiders without access to internal records, and internal analysis by executives with access to internal records. Horizontal analysis compares financial data over several years, while vertical analysis examines the relationship between items in one year's statements. The objectives of financial statement analysis are to understand a firm's profitability and financial position. Ratio analysis is identified as the most common analysis technique.
The document discusses various topics related to reporting and analyzing receivables:
1. It identifies the different types of receivables as accounts receivable, notes receivable, and other receivables.
2. It explains how accounts receivable are recognized in accounts through journal entries and discusses methods for valuing and accounting for bad debts, including the allowance and direct write-off methods.
3. It describes how notes receivable are recorded through journal entries, including recognizing, valuing, and disposing of notes receivable.
The accounting cycle summarizes the process of recording accounting transactions from occurrence through to financial statements. It begins with journal entries to record transactions, followed by posting to ledger accounts. An adjusted trial balance is prepared after adjusting entries. Financial statements are then prepared, followed by closing entries and a post-closing trial balance. The accounting cycle ensures all transactions are recorded, summarized and reported accurately.
Acquisition and Disposition of Property, Plant, and Equipmentreskino1
Identify property, plant, and equipment and its related costs.
Discuss the accounting problems associated with interest capitalization.
Explain accounting issues related to acquiring and valuing plant assets.
Describe the accounting treatment for costs subsequent to acquisition.
Describe the accounting treatment for the disposal of property, plant, and equipment.
Credit management involves qualifying customers for credit, monitoring payments, collecting outstanding invoices, and resolving disputes. It begins with assessing customer creditworthiness by evaluating financial condition and setting credit limits. Several factors are considered such as financial condition, credit score, and current obligations. Competent credit management also protects customers from excessive debt. After establishing limits, accurate invoices must be sent with reasonable payment periods to allow for review and resolution of any issues. Efficient credit management benefits all parties by providing assurance that invoices will be paid and allowing customers to build strong credit references.
accounting for branches and Combined FS(2)_(0).pptxJaafar47
This document discusses accounting for branches and divisions of a business entity. It defines branches and divisions as separate economic units from the home office, but not separate legal entities. Branches carry out sales and collections at a distance from the home office. Divisions have more autonomy than branches. The document outlines different accounting systems and ledger accounts used by branches and the home office to record transactions between them. It provides an example to illustrate the journal entries and combined financial statements for a home office and its branch.
The document discusses various methods for valuing common stock, including dividend discount models, residual income models, and price ratio models. It provides examples and formulas for the basic dividend discount model, two-stage dividend growth model, and constant growth dividend discount model. It also discusses approaches for estimating growth rates, such as using historical averages, industry averages, and sustainable growth rates. The examples show how to apply the models to value stocks and estimate what a fair price would be based on expected future dividends and appropriate discount rates.
This document discusses various topics related to receivables accounting including types of receivables, recognizing and valuing accounts receivable, methods for accounting for bad debts, notes receivable, statement presentation of receivables, managing receivables, and analyzing receivables. It provides examples and explanations of key receivables accounting concepts and calculations.
1) Branch accounting involves keeping separate accounts for each branch location of a company to provide transparency into each branch's transactions, cash flows, financial position, and performance.
2) There are two main types of branches - dependent branches, which have their accounts maintained by headquarters, and independent branches, which maintain their own separate double-entry bookkeeping systems.
3) Independent branches are treated as separate accounting units, recording their own transactions, preparing trial balances, and forwarding these to headquarters to incorporate into consolidated financial statements for the whole company.
Cash management is important for working capital management. There are four motives for holding cash: transaction, precautionary, speculative, and compensating. The objectives of cash management are to meet payment schedules and minimize idle cash balances. Cash needs depend on the synchronization of cash inflows and outflows. Forecasting cash flows helps anticipate surplus or deficit periods to avoid issues like late payments or idle surplus cash. Cash can be forecast over different time periods using receipts/disbursements or adjusted net income approaches.
1. Float refers to the difference between a firm's cash balance in its records and its bank balance, which occurs when checks or deposits are in the process of clearing.
2. There are two main types of float - negative float from uncollected receipts, and positive float from outstanding checks. Negative float is undesirable as it represents unavailable funds.
3. Managing float involves speeding up collection of receipts to reduce negative float through methods like lockboxes, and delaying payments to benefit from positive float through controlled disbursement accounts.
Capital structure refers to how a corporation finances its assets through a combination of equity, debt, or securities. A firm's capital structure composition includes liabilities like debt and equity shares. Equity shares make shareholders owners but do not burden the company, while debt provides tax advantages but requires regular payments. An optimal capital structure considers advantages and disadvantages of different sources to maximize utilization of resources.
This presentation contains slides on the topic financial management where I have discussed about the meaning of financial management, various financial decisions involved in it like the capital budgeting, capital structure, working capital management, dividend decision. I hope these slides would be beneficial in understanding the basics of finance in a better way.Capital budgeting is the investment decision ,capital structure is related to financing,working capital is more about liquidity and dividend decision is concerned with the shareholders.
The document discusses different types of cheques including:
1. Bearer cheques which can be encashed by anyone carrying the cheque without identification. Order cheques can only be encashed by the payee named on the cheque.
2. Crossed cheques can only be deposited into a bank account and not cashed. Open cheques can be cashed or deposited.
3. Post-dated and stale cheques have time restrictions on when they can be encashed. Traveler's cheques do not expire.
Cash and marketable securities managementNikhil Soares
Cash management and marketable securities are key areas of working capital management. Cash is held for transactional, precautionary and speculative motives to meet routine payments and unexpected needs. The objectives of cash management are to meet payment schedules while minimizing idle cash balances. Factors determining cash needs include synchronizing cash inflows and outflows, costs of shortfalls, and excess cash balances. Marketable securities alternatives that provide liquidity include treasury bills, commercial paper, certificates of deposit, bankers' acceptances, money market funds and intercorporate deposits.
This document provides definitions and explanations of key accounting concepts and terms. It discusses accounting as a system to record and communicate financial information. Key topics covered include the accounting equation, double-entry bookkeeping system, types of accounts, accounting cycle, journals, ledgers, debits and credits, balancing accounts, and more.
This document provides an overview of key concepts related to a company's balance sheet. It discusses how business activities affect balance sheet accounts, how companies keep track of balances, and common account titles that appear on the balance and income statements. The document also covers the accounting equation, analyzing transactions, preparing journal entries, and using T-accounts to track balances over time.
This document provides an overview of accounting concepts, principles, and the accounting cycle. It discusses key topics such as [1] the purpose of accounting and accounting information systems, [2] the basic accounting model involving journal entries, ledgers, and trial balances, and [3] financial statements including the income statement, balance sheet, and statement of cash flows. It also covers [4] adjusting entries, worksheets, and closing entries to prepare the adjusted trial balance and financial statements at the end of each accounting period.
This document contains an outline for an accounting 101 final exam with 65 multiple choice questions covering topics such as the Sarbanes-Oxley Act of 2002, accounting principles, forms of business organizations, the accounting equation, financial statements, adjusting entries, accounting cycle steps, stockholders' equity calculations, inventory methods, bank reconciliations, and more. It provides examples and definitions for many of the concepts that may be tested.
The document discusses key concepts related to accrual accounting including revenue and expense recognition, adjustments such as deferred revenue, accrued liabilities, and accrued assets. It provides examples to illustrate adjusting entries for prepaid expenses, deferred revenue, accrued liabilities for wages and interest, and accrued assets for rent. The steps in the accounting cycle and use of worksheets are also summarized.
The document discusses key concepts about the statement of cash flows including its purpose, content, and preparation. It explains that the statement of cash flows classifies cash flows into three categories: operating, investing, and financing activities. It also discusses how to prepare the statement of cash flows using either the direct or indirect method and how to calculate cash flows for each category by analyzing changes to related balance sheet accounts between periods. The document emphasizes that the statement of cash flows provides useful information about a company's cash generation and cash needs.
The document discusses accounting periods and the accrual basis of accounting. It covers key concepts such as:
- The time period assumption, which states that a business's economic life can be divided into artificial time periods like months or years.
- The difference between accrual-basis accounting, which records revenues when earned and expenses when incurred, and cash-basis accounting.
- The revenue recognition principle, which states that revenue should be recognized in the period it is earned.
- The expense recognition principle, which matches expenses with revenues in the period efforts are made to generate those revenues.
- The four major types of adjusting entries: prepaid expenses, unearned revenues, accrued revenues, and
The document provides important information on various accounting topics:
1. It discusses the founders and sub-fields of accounting, accounting assumptions, accounting policies, and characteristics of financial statements.
2. Key areas of accounting such as bookkeeping, financial accounting, management accounting, and cost accounting are explained.
3. The characteristics and treatment of different types of expenditures like revenue, capital, and deferred revenue are summarized.
4. Concepts related to companies like types of companies, shares, debentures, redemption of shares, dividends, and accounting standards are covered at a high level.
Financial management and policy chapter 6WINNERbd.it
This document provides an overview of financial statement analysis. It discusses the three main financial statements - the balance sheet, income statement, and statement of cash flows. It then presents a framework for analyzing a company's financial needs, financial condition/profitability, and business risk. The document explains various types of ratios used in financial analysis including liquidity, leverage, coverage, and activity ratios. Examples are given of calculating and comparing ratios for a company to industry averages. Trend analyses are also demonstrated.
Accounting - Lesson 5 : Transactions That Affect Revenue, Expenses and Withdr...Elearningpower
This course covers the complete accounting cycle and is designed for those
who are interested in working in the areas of bookkeeping, clerical
accounting, finance or general office work or are looking to review their
accounting knowledge.Our accounting course teaches principles of
accounting, which are consistent across the globe. Even though there may
be minor differences in accounting principles in different countries, the core
accounting principles are the same.
The document discusses the steps for closing entries and the accounting cycle. It provides instructions for making closing entries to accounts with credit balances by debiting income statement credit balances and crediting income summary. It also provides instructions for accounts with debit balances by crediting account balances in the income statement debit column and debiting income summary. Finally, it discusses reversing entries to undo temporary accounts like interest receivable/payable and income tax payable, and outlines the full accounting cycle.
The document discusses key financial concepts such as balance sheets, income statements, assets, liabilities, working capital, and depreciation. It explains that a balance sheet records a business's assets and liabilities on a given date, and must always balance. It also discusses how to interpret balance sheets and income statements to analyze a business's short-term and long-term financial positions. Key metrics like working capital, depreciation, and different types of profit are defined. The document aims to explain how to analyze and use financial data for decision making and performance evaluation.
The document discusses how to analyze balance sheets and income statements to understand a business's financial objectives and performance, examining assets, liabilities, revenues, expenses, profits, and using financial data for comparisons over time and between businesses. It also notes some strengths and limitations of relying solely on financial statements to judge a business.
The document discusses the accounting process and key concepts in accounting such as double entry system, accounts, debits and credits.
It begins by explaining that accounting is the process of identifying, measuring, recording, classifying, summarizing, analyzing, interpreting and communicating financial transactions and events. It then discusses the key advantages of using a double entry system.
It goes on to explain the concept of accounts, how they are classified into personal, real and nominal accounts. It also discusses how debits and credits are determined based on whether there is an increase or decrease in asset, liability and capital accounts. The document concludes by outlining the various steps in the accounting process from journal entries to final accounts.
The document provides an introduction and overview of accounting principles and the accounting process. It discusses key concepts such as:
- What accounting is and its basic features
- The double-entry system of accounting and rules for debit and credit entries
- The basic steps in the accounting process including recording transactions, classifying, summarizing, and interpreting reports
- Key accounting documents like vouchers, journals, ledgers, and trial balances
- How basic financial reports like the income statement and balance sheet are prepared
The summary outlines the essential high-level information about accounting fundamentals and the accounting cycle contained within the document.
The document provides an introduction to analyzing basic financial statements, including the cash flow statement, income statement, and balance sheet. It outlines the key components and metrics of each statement and discusses how to interpret various elements to analyze a company's profitability, liquidity, debt obligations, and overall financial health. The document is meant to serve as an overview for understanding and using financial statements to evaluate a business.
Accounting involves recording business transactions and providing financial information to both internal and external parties. It follows generally accepted accounting principles (GAAP) and involves an accounting cycle of recording, classifying, summarizing, and reporting transactions. The accounting process results in financial statements such as the balance sheet, income statement, statement of cash flows, and statement of retained earnings that are used by managers, investors, creditors, and other stakeholders to understand the company's financial position and performance.
The document summarizes the key components and purpose of a cash flow statement. It discusses that a cash flow statement provides information about cash inflows and outflows from operating, investing, and financing activities over a period of time. It also describes how to prepare a cash flow statement using both the direct and indirect method and the differences between the two. The objectives, limitations, and distinction between a cash flow statement and funds flow statement are also outlined.
This document discusses the preparation of financial statements. It explains that financial statements are prepared to provide meaningful information to various stakeholders, including internal users like owners and managers, and external users like government and prospective owners. The document distinguishes between capital and revenue items, which is important for correctly preparing the trading and profit and loss account and balance sheet. Financial statements include the trading and profit and loss account, which shows profit or loss, and the balance sheet, which shows assets, liabilities, and capital.
This document discusses key concepts related to working capital management, including:
1. Working capital refers to a company's current assets and current liabilities. It represents the funds available to cover day-to-day operations.
2. There are two concepts of working capital - quantitative (total current assets) and qualitative (current assets minus current liabilities).
3. Proper management of working capital is important for business success as it allows companies to take advantage of opportunities and deal with challenges. Both too much and too little working capital can impair profitability.
4. Key aspects of working capital management include determining optimal current asset levels, financing strategies, and understanding the relationships between current assets and liabilities.
The document discusses managerial communication and information technology. It begins by outlining the learning objectives which are to explain barriers to effective communication, contrast organizational communication flows, describe developments in IT, and discuss how IT affects organizations. It then defines communication and the interpersonal communication process. It describes elements like messages, encoding, channels, decoding, and feedback. It also discusses methods of communicating, evaluating methods, barriers to communication, and how to overcome barriers. It contrasts formal, informal, upward, downward, and diagonal communication flows. It then describes organizational networks and the grapevine. Finally, it discusses the effects of technologies like email, instant messaging, voice mail, and wireless capabilities on organizational communication.
This chapter discusses the foundations of individual behavior in organizational settings. It begins by defining organizational behavior and outlining the learning objectives which focus on attitudes, personality, perception, motivation, and group behavior. It then discusses the importance of understanding individual behavior for managers to explain, predict, and influence employee actions. Key topics covered include the components of attitudes, job satisfaction and involvement, personality traits like the Myers-Briggs Type Indicator and Big Five model, emotional intelligence, attribution theory, and shortcuts used in perception like stereotyping.
The document discusses controlling organizational performance through measuring and monitoring. It defines organizational performance and explains why measuring it is important for better asset management, customer value, reputation, and knowledge. It describes common performance measures like productivity, effectiveness, and industry rankings. It also outlines tools for monitoring performance, including financial controls like budgets and ratios, information controls through management systems, the balanced scorecard approach, and benchmarking best practices. Finally, it discusses the manager's role in helping the organization achieve high performance through tasks like designing performance systems and moving employees from ideas to action.
The document discusses operations management and value chain management. It defines operations management as transforming inputs into outputs through a transformation process. Value chain management aims to create the highest value for customers by managing the entire sequence of activities from raw materials to finished goods. The key requirements for successful value chain management include coordination and collaboration among partners, technology investment, flexible organizational processes, and a culture of sharing and trust. Benefits include improved customer service, costs savings, and quality, while obstacles can include organizational barriers and lack of trust between partners.
This document discusses control and the control process. It defines control as monitoring activities to ensure goals are accomplished as planned and correcting deviations. The control process has three steps: measuring performance, comparing to standards, and taking action. There are three types of control: feedforward, concurrent, and feedback. Qualities of effective control include being accurate, timely, and focusing on exceptions. Contemporary issues that affect control are workplace privacy, employee theft, and violence.
This document discusses theories and strategies for motivating employees. It begins by defining motivation and describing early theories like Maslow's hierarchy of needs and McGregor's Theory X and Y. Contemporary theories covered include McClelland's three needs theory, goal-setting theory, reinforcement theory, equity theory, and expectancy theory. The document also discusses designing motivating jobs through job characteristics and enrichment. Current issues addressed are motivating a diverse workforce, pay-for-performance, and motivating different types of workers. The document concludes with integrating motivation theories and suggestions for applying motivation strategies in practice.
The document discusses groups and teams in organizations. It defines groups and differentiates between formal and informal groups. It describes the five stages of group development: forming, storming, norming, performing, and adjourning. Key concepts discussed include roles, norms, status, group size, cohesiveness, and conflict management. Decision making in groups is examined along with techniques to improve group decisions. Characteristics of effective teams are defined and different types of teams are described. Developing and managing effective teams and the interpersonal skills needed are also summarized.
This document discusses managing change and innovation in organizations. It begins by outlining learning objectives about different views of change, resistance to change, and stimulating innovation. It then defines change and discusses external and internal forces for change. It describes Lewin's three-step model of the change process and contrasts the "calm waters" and "white-water rapids" metaphors for change. It also outlines three categories of change: structure, technology, and people. The document provides techniques for initiating change and reducing resistance to change. It discusses contemporary issues like changing organizational culture, quality improvement programs, process reengineering, and handling employee stress. It ends by differentiating between creativity and innovation and describing how organizations can stimulate and nurture
This document provides an overview of key concepts in human resource management (HRM). It discusses the strategic importance of HRM and describes the HRM process, including human resource planning, recruitment, selection, orientation, training, performance management, compensation, and career development. Current issues affecting HRM such as managing workforce diversity, sexual harassment, and work-life balance are also examined. The document aims to explain core HRM functions and how they help organizations select competent employees and sustain high performance.
The document discusses organizational structure and design. It defines key elements of organizational structure like departmentalization, chain of command, and centralization. It also differentiates mechanistic and organic organizational designs. Contingency factors that influence design are described like strategy, size, technology, and environmental uncertainty. Common traditional designs like simple, functional and divisional structures are outlined along with contemporary designs using team-based approaches.
The document describes various planning tools and techniques used by managers. It discusses methods for assessing the external environment, such as environmental scanning, forecasting, and benchmarking. Techniques for allocating resources internally include budgets, Gantt and load charts for scheduling, linear programming, and breakeven analysis. Contemporary tools covered are project management, using a team approach led by a project manager, and scenario planning to reduce uncertainty by considering potential future situations.
This document discusses planning and goal setting for organizations. It defines planning as defining goals, strategy, and plans to coordinate work. Goals provide direction and standards for control. Plans outline how goals will be met. Well-designed goals are written, measurable, timed, challenging but attainable. Planning approaches include traditional top-down and inclusive participation. Effective planning considers contingencies like uncertainty and commitments, and balances specificity with flexibility for dynamic environments.
This document outlines the key concepts in managerial decision making including:
1) The 8-step decision making process involves identifying problems, criteria, alternatives, selecting an alternative, implementing, and evaluating.
2) Decisions can be rational, bounded rational, or intuitive based on the manager.
3) Problems are either well-structured requiring programmed decisions or poorly structured requiring non-programmed decisions.
4) Decisions are made under conditions of certainty, risk, or uncertainty.
This document summarizes key concepts around social responsibility and managerial ethics. It discusses classical and socioeconomic views of social responsibility, as well as differences between social obligation, responsiveness, and responsibility. It also outlines factors that influence ethical behavior, like individual characteristics and organizational culture. Overall, the document provides an overview of perspectives on a company's role in society and improving ethical standards within organizations.
This chapter discusses managing organizations globally. It explains that national borders are less relevant as organizations expand globally, which presents opportunities but also challenges. Managers must understand different perspectives on global business such as parochial, ethnocentric, polycentric and geocentric views. Regional trade alliances like the EU, NAFTA and ASEAN are also discussed. The stages of going global from exporting to foreign subsidiaries are outlined. Managing across different legal, economic and cultural environments is examined, including how culture can be analyzed using four dimensions. The challenges of global assignments are also reviewed.
This chapter discusses how organizational culture and environment constrain managers' discretion and decision-making. It defines organizational culture as shared beliefs and meanings that influence how employees act. Culture is shaped by seven dimensions and can be strong or weak. Employees learn the culture through stories, rituals, symbols and language. The chapter also defines the general and specific organizational environment and how factors like regulations, competitors and stakeholders affect managers. Managers must assess environmental uncertainty and manage relationships with critical stakeholders.
This document summarizes the evolution of management theories from pre-20th century to modern approaches. It discusses early contributors like Adam Smith and the Industrial Revolution. Major 20th century developments included scientific management by Taylor, administrative theories by Fayol and Weber, quantitative approaches, and organizational behavior studies like Hawthorne. Current trends addressed include globalization, diversity, entrepreneurship, e-business, innovation, quality management, learning organizations, and workplace spirituality.
This document introduces management concepts and provides an overview of key topics that will be covered in an introductory management class. It defines management as coordinating work activities to achieve organizational goals efficiently and effectively. Managers perform functions like planning, organizing, leading and controlling. They also take on roles such as interpersonal, informational and decisional. The document explores what managers do from different perspectives and explains the importance of studying management concepts.
This document discusses leadership theories and models. It begins by defining leadership and distinguishing between managers and leaders. It then covers early trait and behavioral leadership theories, including the Ohio State, University of Iowa, and University of Michigan studies. Contingency theories like Fiedler's model and the path-goal model are described next, along with how they incorporate situational factors. Transformational and charismatic leadership approaches are also covered. The document concludes by discussing topics like gender differences in leadership styles, empowerment, and how leadership may vary across cultures.
[To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
This presentation is a curated compilation of PowerPoint diagrams and templates designed to illustrate 20 different digital transformation frameworks and models. These frameworks are based on recent industry trends and best practices, ensuring that the content remains relevant and up-to-date.
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These materials are perfect for enhancing your business or classroom presentations, offering visual aids to supplement your insights. Please note that while comprehensive, these slides are intended as supplementary resources and may not be complete for standalone instructional purposes.
Frameworks/Models included:
Microsoft’s Digital Transformation Framework
McKinsey’s Ten Guiding Principles of Digital Transformation
Forrester’s Digital Transformation Framework
IDC’s Digital Transformation MaturityScape
MIT’s Digital Transformation Framework
Gartner’s Digital Transformation Framework
Accenture’s Digital Strategy & Enterprise Frameworks
Deloitte’s Digital Industrial Transformation Framework
Capgemini’s Digital Transformation Framework
PwC’s Digital Transformation Framework
Cisco’s Digital Transformation Framework
Cognizant’s Digital Transformation Framework
DXC Technology’s Digital Transformation Framework
The BCG Strategy Palette
McKinsey’s Digital Transformation Framework
Digital Transformation Compass
Four Levels of Digital Maturity
Design Thinking Framework
Business Model Canvas
Customer Journey Map
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This PowerPoint compilation offers a comprehensive overview of 20 leading innovation management frameworks and methodologies, selected for their broad applicability across various industries and organizational contexts. These frameworks are valuable resources for a wide range of users, including business professionals, educators, and consultants.
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1. Stanford’s Design Thinking
2. IDEO’s Human-Centered Design
3. Strategyzer’s Business Model Innovation
4. Lean Startup Methodology
5. Agile Innovation Framework
6. Doblin’s Ten Types of Innovation
7. McKinsey’s Three Horizons of Growth
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13. The Double Diamond
14. Lean Six Sigma DMAIC
15. TRIZ Problem-Solving Framework
16. Edward de Bono’s Six Thinking Hats
17. Stage-Gate Model
18. Toyota’s Six Steps of Kaizen
19. Microsoft’s Digital Transformation Framework
20. Design for Six Sigma (DFSS)
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1. 66124_endsheets_front.qxd 11/12/03 9:20 PM Page B
The Basics
1. Accounting Equation: STATEMENT OF OWNER’S EQUITY
Assets = Liabilities + Owner’s Equity A summary of the changes in the owner’s equity of a business en-
tity that have occurred during a specific period of time, such as a
2. T Account: month or a year.
Account Title BALANCE SHEET
A list of the assets, liabilities, and owner’s equity of a business en-
Left Side Right Side tity as of a specific date, usually at the close of the last day of a
debit credit month or a year.
STATEMENT OF CASH FLOWS
A summary of the cash receipts and cash payments of a business
entity for a specific period of time, such as a month or a year.
3. Rules of Debit and Credit:
Balance Sheet Accounts 6. Accounting Cycle:
1. Analyze and record transactions in journal.
ASSETS LIABILITIES 2. Post transactions to ledger.
Asset Accounts Liability Accounts 3. Prepare trial balance, assemble adjustment data, and complete
optional work sheet.
Debit Credit Debit Credit
4. Prepare financial statements.
for for for for 5. Journalize and post adjusting entries.
increases decreases decreases increases 6. Journalize and post closing entries.
7. Prepare post-closing trial balance.
OWNER’S EQUITY 7. Types of Adjusting Entries:
Owner’s Equity Accounts 1. Deferred expense (prepaid expense)
Debit Credit 2. Deferred revenue (unearned revenue)
3. Accrued expense (accrued liability)
for for 4. Accrued revenue (accrued asset)
decreases increases 5. Depreciation expense
Each entry will always affect both a balance sheet and an income state-
Income Statement Accounts ment account.
Debit for Credit for 8. Closing Entries:
decreases in owner’s equity increases in owner’s equity 1. Transfer revenue account balances to Income Summary.
Expense Accounts Revenue Accounts 2. Transfer expense account balances to Income Summary.
3. Transfer Income Summary balance to Capital.
Debit Credit Debit Credit 4. Transfer drawing account balance to Capital.
for for for for
increases decreases decreases increases
9. Special Journals:
Providing services
on account → recorded in
→ Revenue (sales) journal
Normal Balance Receipt of cash from
any source → recorded in
→ Cash receipts journal
4. To Analyze a Transaction: Purchase of items
on account → recorded in
→ Purchases journal
1. Determine whether an asset, a liability, owner’s equity, revenue,
Payments of cash for
or expense account is affected by the transaction.
any purpose → recorded in
→ Cash payments journal
2. For each account affected by the transaction, determine whether
the account increases or decreases.
3. Determine whether each increase or decrease should be re-
10. Shipping Terms:
corded as a debit or a credit. FOB Shipping Point FOB Destination
Ownership (title)
5. Financial Statements: passes to buyer when
merchandise is.................... delivered to delivered to
INCOME STATEMENT freight carrier buyer
A summary of the revenue and the expenses of a business entity Transportation costs
for a specific period of time, such as a month or a year. are paid by .......................... buyer seller
2. 66124_endsheets_front.qxd 11/12/03 9:20 PM Page C
11. Format for Bank Reconciliation: 16. Contribution Margin Ratio = Sales – Variable Costs
Sales
Cash balance according to bank statement ...................... $xxx
Add: Additions by depositor not on bank
statement .......................................................... $xx 17. Break-Even Sales (Units) = Fixed Costs
Bank errors ............................................................. xx xx Unit Contribution Margin
$xxx
Deduct: Deductions by depositor not on bank 18. Sales (Units) = Fixed Costs + Target Profit
statement .......................................................... $xx
Bank errors ............................................................. xx xx Unit Contribution Margin
Adjusted balance.................................................................. $xxx
19. Margin of Safety = Sales – Sales at Break-Even Point
Cash balance according to depositor’s records ............... $xxx Sales
Add: Additions by bank not recorded by depositor.. $xx
Depositor errors..................................................... xx xx
$xxx 20. Operating Leverage = Contribution Margin
Deduct: Deductions by bank not recorded Income from Operations
by depositor ..................................................... $xx
Depositor errors..................................................... xx xx 21. Variances
Adjusted balance.................................................................. $xxx
Direct Materials = Actual Price per Unit – × Actual Quantity
Price Variance Standard Price Used
12. Inventory Costing Methods:
1. First-in, First-out (fifo) Direct Materials = Actual Quantity Used – × Standard Price
2. Last-in, First-out (lifo) Quantity Variance Standard Quantity per Unit
3. Average Cost
Direct Labor = Actual Rate per Hour – × Actual Hours
Rate Variance Standard Rate Worked
13. Interest Computations:
Interest = Face Amount (or Principal) × Rate × Time Direct Labor = Actual Hours Worked – × Standard Rate
Time Variance Standard Hours per Hour
14. Methods of Determining Annual Depreciation: Variable Factory Actual Budgeted Factory
Overhead Controllable = Factory – Overhead for
Variance Overhead Amount Produced
STRAIGHT-LINE: Cost – Estimated Residual Value
Estimated Life Fixed Factory Budgeted Factory Applied
DECLINING-BALANCE: Rate* × Book Value at Beginning of Overhead Volume = Overhead for – Factory
Period Variance Amount Produced Overhead
*Rate is commonly twice the straight-line
rate (1 ÷ Estimated Life). 22. Rate of Return on Income from Operations
=
Investment (ROI) Invested Assets
Alternative ROI Computation:
15. Cash Provided by Operations on Statement of Cash
Income from Operations Sales
Flows (indirect method): ROI = ×
Sales Invested Assets
Net income, per income statement ................................ $xx
Add: Depreciation of fixed assets ............................ $xx 23. Capital Investment Analysis Methods:
Amortization of bond payable discount
and intangible assets .................................. xx 1. Methods That Ignore Present Values:
Decreases in current assets (receivables, A. Average Rate of Return Method
inventories, prepaid expenses)................. xx B. Cash Payback Method
Increases in current liabilities (accounts 2. Methods That Use Present Values:
and notes payable, accrued liabilities) .... xx A. Net Present Value Method
Losses on disposal of assets and retirement B. Internal Rate of Return Method
of debt .......................................................... xx xx
Deduct: Amortization of bond payable premium...... $xx 24. Average Rate Estimated Average Annual Income
=
Increases in current assets (receivables, of Return Average Investment
inventories, prepaid expenses)................. xx
Decreases in current liabilities (accounts 25. Present Value Index = Total Present Value of Net Cash Flow
and notes payable, accrued liabilities) .... xx Amount to Be Invested
Gains on disposal of assets and retirement
of debt .......................................................... xx xx 26. Present Value Factor Amount to Be Invested
=
Net cash flow from operating activities.................... $xx for an Annuity of $1 Equal Annual Net Cash Flows
3. 66124_frontmatter.qxd 11/13/03 2:41 PM Page i
ACCOUNTING 21e
CARL S. WARREN
Professor Emeritus of Accounting
University of Georgia, Athens
JAMES M. REEVE
Professor of Accounting
University of Tennessee, Knoxville
PHILIP E. FESS
Professor Emeritus of Accounting
University of Illinois, Champaign-Urbana
4. 66124_frontmatter.qxd 11/13/03 2:42 PM Page ii
Accounting 21e
Carl S. Warren, James M. Reeve, Philip E. Fess
VP/Editorial Director: Media Technology Editor: Sr. Design Project Manager:
Jack W. Calhoun Jim Rice Michael H. Stratton
VP/Editor-in-Chief: Media Developmental Editor: Internal and Cover Designer:
George Werthman Sally Nieman Michael H. Stratton
Publisher: Media Production Editors: Cover Illustration:
Rob Dewey Robin Browning, Kelly Reid Matsu
Executive Editor: Manufacturing Coordinator: Preface Designer:
Sharon Oblinger Doug Wilke Kathy Heming
Sr. Developmental Editor: Production House: Photography Manager:
Ken Martin Litten Editing and Production, Inc. Deanna Ettinger
Marketing Manager: Compositor: Photo Researcher:
Keith Chassé GGS Information Services, Inc. Terri Miller
Sr. Production Editor: Printer:
Deanna Quinn Quebecor World
Versailles, KY
COPYRIGHT (c) 2005 ALL RIGHTS RESERVED. For permission to use material from this
by South-Western, part of the Thomson text or product, contact us by
Corporation. South-Western, Thomson, No part of this work covered by the copy- Tel (800) 730-2214
and the Thomson logo are trademarks right hereon may be reproduced or used Fax (800) 730-2215
used herein under license. in any form or by any means—graphic, http://www.thomsonrights.com
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Printed in the United States of America copying, recording, taping, Web distribu- For more information
1 2 3 4 5 06 05 04 03 tion or information storage and retrieval contact South-Western,
systems—without the written permission of 5191 Natorp Boulevard,
ISBN: 0-324-18800-5 (Accounting, 21e) the publisher. Mason, Ohio 45040.
ISBN: 0-324-22501-6 (International Edition, Or you can visit our Internet site at:
21e) http://www.swlearning.com
ISBN: 0-324-20366-7 (Chapters 1–11, 21e)
ISBN: 0-324-20367-5 (Chapters 12–25,
21e)
Library of Congress
Control Number:
2003114842
5. 66124_frontmatter.qxd 11/19/03 4:24 PM Page iii
the author team
Carl S. Warren
Dr. Carl S. Warren is Professor Emeritus of Accounting at the University of Georgia,
Athens. He has also taught at the University of Iowa, Michigan State University,
and the University of Chicago. He received his doctorate degree (Ph.D.) from
Michigan State University and his undergraduate (B.B.A.) and masters (M.A.)
degrees from the University of Iowa. Dr. Warren’s primary teaching focus is on
principles of accounting and auditing. He enjoys interacting and learning from
colleagues on how to improve student learning and understanding of accounting.
His outside interests include writing short stories, novels, oil painting, handball,
golf, skiing, backpacking, and fly-fishing.
James M. Reeve
Dr. James M. Reeve is the William and Sara Clark Professor of Accounting and
Business at the University of Tennessee, Knoxville. He teaches and coordinates
the Principles of Accounting course at the University of Tennessee. Dr. Reeve
received his Ph.D. from Oklahoma State University in 1980. In addition to his
teaching experience, he brings to this text a wealth of experience consulting on
managerial accounting issues with numerous companies, including Procter &
Gamble, Hershey Foods, Coca-Cola, Sony, and Boeing. Dr. Reeve’s interests out-
side the classroom and business world revolve around reading and issues of faith.
Philip E. Fess—40 Years Of Contributions
The 21st edition marks the 40th year of Phil Fess' contribution to this fami-
ly of texts. Phil first co-authored the 9th edition of Accounting Principles
with Rollie Niswonger, his mentor when he was a student at Miami
University. Phil and Rollie worked closely together on six editions as they
continued to improve accounting education through listening carefully to
users of the texts and authoring thoughtfully. During his tenure as the
Arthur Andersen & Co. Alumni Professor of Accountancy at the University of
Illinois, Champaign-Urbana, Phil’s creativity, innovative ideas, and clear,
concise writing style enabled Accounting to retain its position as the leading
accounting principles textbook of all time. This new edition still reflects
Phil’s attention to detail and his unique ability to make textbooks user-
friendly. Phil’s continuing legacy is the millions of students who, through
using the texts, have gained a strong understanding of and appreciation for
accounting and its usefulness.
6. 66124_preface_iv-xxxi.qxd 11/19/03 5:23 PM Page iv
iv Preface
Even as the undisputed leaders in accounting
textbook innovation, we faced a daunting challenge with
the 21st edition.Yet once again, we are proud to present
the world’s best tool for teaching accounting, designed
and engineered based on the solid foundation of our
past success.
Accounting, 21e presents, as always, the most
comprehensive content in the market with strikingly
clear organization and breakthrough pedagogy. Together
with this solid textbook foundation, our leading-edge
technology will guide your students toward success in
the business world yet to unfold.
We invite you to experience this superior package of
text and technology and see how well they perform together.
7. 66124_preface_iv-xxxi.qxd 11/19/03 5:23 PM Page v
Preface v
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21e will remai rporated.
we profile in n the text of ch
the text have oice for other
grown and ch reas
them. We’ve in
tegrated our w anged over tim ons as well. The companies
on the marke ork with some e, and so has
t today. A lo of the most po our coverage
guided Accou ng list of dist werful and effe of
nting through inguished auth ctive technolo
our part in th the better par ors, editors, an gy
e evolution of t of the past d reviewers ha
this great trad century. We ar s
ition. e proud to ta
Back in 1929, ke
author James
this text has McKinsey coul
enjoyed or th d not have im
authors, we ap at his original agined the succ
preciate the re vision would ess and influen
refine it to mee sponsibility of remain intact ce
t the changing protecting this . As the curr
many colleag needs of stud vision, while ent
ues who have ents and instru continuing to
helped to mak ctors. We sinc
e it happen. erely thank ou
r
T he teaching of accounting is no longer designed to train professional accountants
“ only. With the growing complexity of business and the constantly increasing difficulty
of the problems of management, it has become essential that everyone who aspires to
a position of responsibility should have a knowledge of the fundamental principles
of accounting.
” — James O. McKinsey, Author, first edition, 1929
8. 66124_preface_iv-xxxi.qxd 11/19/03 5:24 PM Page vi
vi Preface
Based squarely on the success of yesterday, Accounting, 21e boldly leads
the way into the accounting challenges of tomorrow with innovative learning
systems that bring accounting principles and practices to life. Reflecting
more realistically than ever the way business operates today, this edition
integrates learning options designed to extend the classroom beyond its
walls into the unlimited world of the Internet.
You are the best judge of which supplements will best suit your class. For
this reason, we’ve engineered the following content-rich and pedagogically
sound course-management technologies so that you can tailor them to
meet the needs of your curriculum or a particular class.
These breakthrough technologies serve two important purposes: First, they
help make sure your students receive the pedagogical benefits that come
with completing homework assignments. Second, they give you more time to
devote to other classroom activities.
W ebTutor ™ Advantage on W ebCT ™ with Personal Trainer 3.0
™
W ebTutor Advantage on Blackboar d ™ with Personal Trainer 3.0
™ ™
WebTutor Advantage provides you with the most robust and pedagogically
advanced content for either the WebCT or Blackboard course
management platform. Now you can enliven your course with inter-
active reinforcement for students as well as powerful instructor tools.With
this newest version, the students’ content comprehension is assessed after
which they are referred to specific content features in WebTutor Advantage
or the text to address areas in which they need additional help. Elements of
WebTutor Advantage include:
NEW Video Cases
Students get a taste of accounting in action by
viewing these lively two- to five-minute segments.
Each video covers a key accounting concept
as it is played out in a real-world company or
situation. Accompanying pedagogy includes a
summary of each video, a short description
about what the student should look for when
watching, and some suggested critical-thinking
questions for them to answer at the end.
Chapter Introductory Videos
Students begin each chapter with a brief but
engaging Flash introduction to the chapter
objectives.
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Preface vii
e-Lectures
Because reinforcement is essential to concept
retention, each chapter includes two or
three Flash presentations that review the
chapter’s major topics. The presentations
are in a visual lecture format with audio that
covers one or two key chapter concepts.
Illustrative Problems
These step-by-step Flash presentations
review the Illustrative Problems and their
solutions from each chapter.
Accounting Cycle Review
With this tool, students get a firm grasp on the key concepts of the
accounting cycle by applying what they’ve learned to realistic situations
and problems. Found only in Chapter 4.
NEW Exercise Demos
These demos allow students to review explanations of two
to three representative exercises from each chapter in a
step-by-step visual format with audio.
Quizzes
Students make great strides with continuous reinforcement.
Now they can select from a variety of intriguing options:
• RE-ACT Quiz Ten to fifteen multiple-choice and true-false
questions cover key concepts in the chapter. Students are
directed to specific resources for additional study related to
their incorrect answers.
• Achievement Tests Similar to those found in the test bank, these tests
provide additional opportunities for students to study and quiz themselves
in multiple choice, true-false, and matching test formats.
• Multiple-Choice, True-False, and Matching Quizzes These quizzes
are comprised of the questions provided in the study guide. Using
WebTutor Advantage, students can answer them, have them graded, and
submit the results directly to their instructor.
QuizBowl
Popular with students, this engaging game allows
them to review key accounting concepts.
Crossword Puzzles
This captivating and rewarding option encourages
students to go over key chapter terms.
Spanish Dictionary
This timely resource defines common accounting terms in Spanish.
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viii Preface
Personal Trainer 3.0
Specifically designed to ease the time-consuming
task of grading homework, Personal Trainer lets
students complete their assigned homework from
the text or practice on unassigned homework
online. The results are instantaneously entered into
a gradebook.
With annotated spreadsheets and full-blown gradebook functionality, the
greatly enhanced Personal Trainer 3.0 provides an unprecedented real-time,
guided, self-correcting, learning reinforcement system outside the classroom.
Use this resource as an integrated solution for your distance learning or
traditional course.
• Enhanced Questions Personal Trainer 3.0 now includes all exercises
and problems. Students can get help entering their answers in the proper
format and run a spell check on their answers. On selected questions,
they can call up additional, similar questions for extra practice. Optional
algorithmic questions will also be included.
• Enhanced Instructor Capabilities The flexible gradebook can display
and download any combination of student work, chapters, or activities.
Capture grades on demand or set a particular time for grades to be
automatically captured. Tag questions as “required” or “excluded,” so
students can only access the questions you want them to complete.
• Enhanced Hints Students can get up to three hints per activity.
These hints can be PowerPoint slides, video clips, images, and more.
And instructors can add a hint of their own!
• Enhanced Look-and-Feel Fast,
reliable, dependable, and even
easier to use, Personal Trainer 3.0
sports a fresh, new graphic
design.
Personal Trainer is included in
WebTutor Advantage, or it can
be purchased separately online.
11. 66124_preface_iv-xxxi.qxd 11/19/03 5:24 PM Page ix
Preface ix
Xtra!
Available as an optional, free bundle with every new textbook, Xtra! gives
students FREE access to the following online learning tools:
• e-Lectures Brief e-Lectures review more difficult concepts
from the chapter.
• Topical Quizzes Quizzes measure a student’s “test readiness”
on the concepts in the chapter.
• Multiple Choice Quizzes Additional quizzes help students
review chapter concepts and prepare for exams. Feedback on
their answers gives page references so they know where to
look up the questions they’ve missed!
• Crosswords The Crossword Puzzles are a fun way students
can review their understanding of key terms and concepts.
P.A.S.S.
Our best-selling computerized accounting software, by Dale Klooster and
Warren Allen, Power Accounting System Software (formerly General
Ledger Software) shows students the effects that accounting entries have
on financial statements. Solving end-of-chapter problems, the continuing
problem, comprehensive problems, and practice sets with P.A.S.S. helps make
learning relevant and interesting.
• Problem Checker This
feature enables students to
see if their entries are
correct.
• Real Business Forms
This feature provides
students with experience
creating invoices and
doing payroll.
• Charts, Graphs, and
Ratios Allows students
to analyze financial data,
including expense distri-
bution, top customers,
sales, budgets, most Each problem that
profitable items, and can be completed
relevant ratios. with P.A.S.S. is
marked with this
P.A.S.S. icon in the text.
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x Preface
Pr oduct Suppor t W eb Site — h t t p : / / w a r r e n . s w l e a r n i n g . c o m
The Warren/Reeve/Fess Web site provides a variety of free instructor and
student resources.There you’ll find text-specific content and other related
resources organized by chapter and topic.
The free Product Support Web
site includes the highly stimu-
lating Interactive Study Center,
which provides students with
a wide variety of materials for
extra studying and review.
• Key Points All key points
are pulled from the end of
each chapter in the text so
that students can review
them online.
• e-Lectures Because reinforcement is essential to concept retention,
each chapter includes a Flash presentation that reviews each chapter’s
major topics.
• Review Problem The Illustrative Problems found in each chapter are
presented in a step-by-step fashion, helping students understand how
the solutions to each were reached.
• FAQs Students can review these Frequently Asked Questions in accounting
and learn more about many of the key topics in each chapter.
• Internet Applications These activities from the text allow students to
apply chapter concepts and improve their online research skills.
• Quizzes Interactive quizzes in both True-False and Multiple Choice
formats provide students with immediate feedback after they submit
their answers.
Instructor Resources available to download from the secure instructor’s
area include the Instructor’s Manual, Solutions Manual, PowerPoint
Presentations, Spreadsheet Template Solutions, Instructor’s Guide to Online
Resources, and Technology Demos.
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Preface xi
Dancin Music Continuing Pr oblem
Here’s a great opportunity for students to practice what they’ve learned as
they study each step of the accounting cycle. Dancin’ Music, an imaginary
and entrepreneurial company, provides a contemporary example of keen
interest to students.As they follow Dancin’ Music, they examine its transac-
tions and see the effect of those transactions on its financial statements.
They can use the P.A.S.S. software with this problem as well.
In Chapter 1, students analyze the effects of Dancin Music’s first
month’s transactions on the accounting equation.
C ontinuing Problem
Shannon Burns enjoys listening to all types of music and owns countless CDs and
tapes. Over the years, Shannon has gained a local reputation for knowledge of
music from classical to rap and the ability to put together sets of recordings that
appeal to all ages.
During the last several months, Shannon served as a guest disc jockey on a local
radio station. In addition, Shannon has entertained at several friends’ parties as the
host deejay.
On April 1, 2006, Shannon established a proprietorship known as Dancin Music.
Using an extensive collection of CDs and tapes, Shannon will serve as a disc jockey
2. Net income: $530 on a fee basis for weddings, college parties, and other events. During April, Shan-
non entered into the following transactions:
In Chapter 2, students review debits and credits by journalizing Dancin Music’s second month’s
transactions.
C ontinuing Problem
The transactions completed by Dancin Music during April 2006 were described at
the end of Chapter 1. The following transactions were completed during May, the
second month of the business’s operations:
May 1. Shannon Burns made an additional investment in Dancin Music by de-
positing $3,000 in Dancin Music’s checking account.
1. Instead of continuing to share office space with a local real estate agency,
Shannon decided to rent office space near a local music store. Paid rent
for May, $1,600.
1. Paid a premium of $3,360 for a comprehensive insurance policy covering
4. Total of Debit Column: liability, theft, and fire. The policy covers a two-year period.
$31,760 2. Received $1,200 on account.
In Chapter 3, students review the adjusting process for Dancin Music.
C ontinuing Problem
The trial balance that you prepared for Dancin Music at the end of Chapter 2 should
appear as follows:
Dancin Music
Trial Balance
May 31, 2006
Cash . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,330
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,760
Supplies . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 920
Prepaid Insurance . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,360
3. Total of Debit Column: Office Equipment . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
$33,190 Accounts Payable . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,750
In Chapter 4, building on what they’ve learned in Chapters 1, 2, and 3, students complete the
accounting cycle for Dancin Music, including preparing the financial statements.
C ontinuing Problem
The unadjusted trial balance of Dancin Music as of May 31, 2006, along with the
adjustment data for the two months ended May 31, 2006, are shown in Chapter 3.
Instructions
1. Prepare a ten-column work sheet.
2. Prepare an income statement, a statement of owner’s equity, and a balance sheet.
(Note: Shannon Burns made investments in Dancin Music on April 1 and May 1,
2006.)
3. Journalize and post the closing entries. The income summary account is #33 in
the ledger of Dancin Music. Indicate closed accounts by inserting a line in both
2. Net income: $2,550 Balance columns opposite the closing entry.
4. Prepare a post-closing trial balance.
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xii Preface
Accounting, 21e speaks to anyone in an introductory
Opens with a section that defines
1
“business” and describes common types
accounting course, because 80% of those students
Chapter
of businesses and their strategies, value will not be accounting majors. For this reason,
chains, and stakeholders. It also includes Accounting, 21e concentrates intentionally on the
a section on business ethics. business of business—how accounting contributes
to effective management while emphasizing the most
important accounting procedures.
Begins with a discussion of the
accounting cycle. Then it introduces Chapter 1 –
4
Introduction to Accounting and Business
the worksheet as an optional tool for
Chapter
collecting accounting data from a
company’s records. Some of the
end-of-chapter materials identify the
worksheet as an optional requirement. Chapter 2 – Analyzing Transactions
Chapter 3 – The Matching Concept and the
5
Includes an illustration of the revenue
Adjusting Process
Chapter
and collection cycle in a computerized
accounting system using QuickBooks.
Chapter 4 – Completing the Accounting Cycle
Introduces merchandising with an income
statement that shows the effects of
6
purchases on the cost of goods sold. Sales
Chapter 5 –
Chapter
transactions are illustrated next, Accounting Systems and Internal Controls
followed by purchases transactions and
the special topics of transportation costs,
sales taxes, and trade discounts.
Chapter 6 – Accounting for Merchandising Businesses
Introduces the concept of inventory
cost flows without reference to the Chapter 7 – Cash
9
perpetual or periodic systems. The
Chapter
journal entries in a perpetual system
are presented alongside the inventory
subsidiary ledger to illustrate the Chapter 8 – Receivables
FIFO and LIFO flow of costs.
Chapter 9 – Inventories
Includes a discussion of classifying the
10
costs of fixed assets and accounting for
donated assets. It continues with sections
Chapter
on stages of acquiring fixed assets and Chapter 10 – Fixed Assets and Intangible Assets
the impairment of goodwill.
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Preface xiii
Chapter
Chapter 11 – Current Liabilities Includes a section on reporting the
current portion of long-term debt and
an expanded discussion of 401K plans.
11
Chapter 12 – Corporations: Organization, Capital Stock
Transactions, and Dividends
Chapter
Discusses organization costs as
Chapter 13 – Accounting for Partnerships and Limited expenses. The chapter also includes
Liability Corporations a comprehensive illustration of
reporting stockholders’ equity.
12
Chapter 14 – Income Taxes, Unusual Income Items,
and Investments in Stocks
Chapter
Describes and illustrates the accounting
Chapter 15 – Bonds Payable and Investments treatment of equity transactions for
in Bonds partnerships and limited liability
corporations. It includes a discussion
13
of the lifecycle of a business.
Chapter 16 – Statement of Cash Flows
Chapter 17 – Financial Statement Analysis
Includes the reporting of fixed asset
impairments and restructuring charges.
Chapter
The section on comprehensive income
Chapter 18 – Introduction to Managerial Accounting examines a statement of comprehensive
and Job Order Cost Systems income and an illustration of reporting
accumulated other comprehensive income
14
in the stockholders’ equity
Chapter 19 – Process Cost Systems section of the balance sheet.
Chapter 20 – Cost Behavior and
Cost-Volume-Profit Analysis
Chapter
An appendix at the end of the chapter
describes and illustrates the average cost
Chapter 21 – Budgeting method in a process costing system.
19
Chapter 22 – Performance Evaluation Using
Variances from Standard Costs
Chapter
Includes a new section on the computation
of factory overhead variances as they
Chapter 23 – Performance Evaluation for relate to the factory overhead account.
22
Decentralized Operations
Chapter 24 – Differential Analysis and Product Pricing
Chapter 25 – Capital Investment Analysis
16. 66124_preface_iv-xxxi.qxd 11/19/03 5:25 PM Page xiv
xiv Preface
t ica l Thin k s
Cri ing and Ana lysi
As you’d expect from the leader in pedagogical innovation, the colorful and
dynamic Accounting, 21e text visually highlights conceptual segments
designed to help students make the connection between accounting and
business. In addition, new box features found in each chapter make the
content come to life.
• Financial Analysis and Interpretation To help students understand
the information in financial statements and how that information is
used, this feature describes an important element of financial analysis at
the end of each financial chapter.
• Special Activities Students need to develop analytical abilities, not just
memorize rules.These end-of-chapter activities focus on understanding
and solving pertinent business and ethical issues. Some are presented as
conversations in which students can “observe” and “participate” when
they respond to the issue being discussed.
WHAT DO YOU THINK?
• “What Do You Think?” These exercises and activities encourage students
to speculate about the real-world effects of newly learned material.
• “What’s Wrong With This?” These innovative exercises challenge students
to analyze and discover problems or errors in a financial statement,
WHAT’S WRONG WITH THIS?
report, or management decision.
• Technology-Assisted Learning System Combined with WebTutor
Advantage elements such as illustrative problems, quizzes, and
Accounting Cycle Review, students continue to hone and reinforce
INTERNET
their critical-thinking skills.
e o f Te c h n
Us ology
Internet Activities
These activities acquaint students with the ever-expanding accounting-
related areas of the Web.
Web References
Real World Notes and end-of-chapter activities encourage students to engage
in real business research.
Technology-Assisted Learning
Teaching and learning solutions are provided in an interactive TM
learning environment. The learning system consists of
three elements: WebTutor™ Advantage (on WebCT™ and
Blackboard®), Personal Trainer 3.0, and the product Web site.
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Preface xv
I have 30,000 restau-
a l Wo r l d A p
Re
rants in 121 coun-
pl ication s tries, with about
13,000 in the United
NEW Who Am I? States. I serve more than 45 mil-
lion people each day and employ
Presenting a set of intriguing clues about a real company, from The Motley 1.5 million. Moscow’s Pushkin
Fool®, this intriguing feature challenges students to identify the Square sports one of my busiest
company. They can check their decision against the answer provided later stores. Fortune Magazine named
me No. 1 for social responsibility.
in the chapter. I’m busy cutting fat from my offer-
ings. I use more than three million
pounds of potatoes per day. My
New Tastes Menu is Made for You.
My spokesman’s shoes are size
10 Chapter 1 • Introduction to Accounting and Business
NEW Integrity 14 1/2 and he helps sick kids. More
INTEGRITY IN BUSINESS in Business
DOING THE RIGHT THING
Real-life, business situations provide students with
Time Magazine named three women as “Persons of the
Year 2002.” Each of these not-so-ordinary women had
countant, informed WorldCom’s Board of Directors of
phony accounting that allowed WorldCom to cover up
an opportunity to consider ethical issues that they
the courage, determination, and integrity to do the right
thing. Each risked their personal careers to expose short-
over $3 billion in losses and forced WorldCom into bank-
ruptcy. Coleen Rowley, an FBI staff attornery, wrote a
may encounter in the business world.
comings in their organizations. Sherron Watkins, an Enron memo to FBI Director Robert Mueller, exposing how the
vice-president, wrote a letter to Enron’s chairman, Kenneth Bureau brushed off her pleas to investigate Zacarias
Lay, warning him of improper accounting that eventually Moussaoui, who was indicted as a co-conspirator in the
led to Enron’s collapse Cynthia Cooper an internal ac September 11 terrorist attacks
SPOTLIGHT ON STRATEGY
NEW Spotlight on Strategy boxes WHAT’S NEXT FOR AMAZON?
Amazon.com built its online business strategy on of- tive of their prices and have refused to make Amazon.com
These stimulating, real-business scenarios introduce fering books at significant discounts that traditional chains
couldn’t match. Over the years, Amazon has expanded its
an authorized dealer. As Lauren Levitan, a noted financial
analyst, recently said, “It’s hard to be the low-cost retailer.
students to the effects and importance of strategic online offerings to include DVDs, toys, electronics, and
even kitchen appliances. But can its low-cost, discount
You have to execute flawlessly on a very consistent basis.
Most people who try a low-price strategy fail.” This risk of
strategy continue to work across a variety of products? failing at the low-cost strategy was validated by Kmart’s
thinking and its impact on accounting. Some have their doubts. The electronics business has lower filing for bankruptcy protection in 2002 because of its in-
margins and more competition than books. For example, ability to compete with Wal-Mart’s low prices.
Dell Computers is already an established low-cost
provider of personal computers and software. In addition, Source: Saul Hansell, “A Profitable Amazon Looks to Do an Encore,”
l t i f t h S t Th N Y k Ti J 26 2002
NEW Financial Reporting
FINANCIAL REPORTING AND DISCLOSURE
and Disclosure or Managerial
UNEARNED REVENUE Disclosure and Analysis
M icrosoft Corporation develops, manufactures, li- passes and the support services are provided to customers.
censes, and supports a wide range of computer software Thus, it is necessary to make an adjusting entry each year These boxes that feature actual com-
products, including Windows XP®, Windows NT®, Word®, to transfer unearned revenue to revenue.
Excel®, and the Xbox®. When Microsoft sells its products,
it incurs an obligation to support its software with tech-
The excerpts below from Microsoft’s 2002 financial
statements describe its accounting for unearned revenue.
panies take students through the
nical support and periodic updates. As a result, not all the
revenue from selling software is earned on the date of
Microsoft further indicated that, of the $7,743 million of
unearned revenue at June 30, 2002, it expected to recog- rigors of the reporting and analysis
sale. Instead, some of the revenue is unearned. That is, nize $5,917 million during the next year and $1,826 mil-
the portion of revenue related to support services, such
as updates and technical support, is earned only as time
lion in future years. skills they will need in business.
Real World Notes
With these notes, students get a close-up look at how accounting operates in
the marketplace. The following companies are among those highlighted
in the margin of the text.
• ATT • J.C. Penney Co. Sears, Roebuck and Co. sells
• Campbell Soup Co. • Hewlett Packard extended warranty contracts with
terms between 12 and 36 months.
• Mercedes-Benz • Delta Air Lines The receipts from sales of these
• UPS • General Electric contracts are reported as unearned
revenue (deferred revenue) on
• Gillette • Ford Motor Co. Sears’ balance sheet. Revenue is
• Coca-Cola Enterprises Inc. recorded as the contracts expire.
18. 66124_preface_iv-xxxi.qxd 11/19/03 5:27 PM Page xvi
xvi Preface
Points of Interest
These attention-getting margin notes offer
insight into subjects of high interest to
students, such as careers and current events, The tuition you pay at the begin-
ning of each term is an example
which helps keep accounting concepts of a deferred expense to you, as
relevant. a student.
Real World Exercises
Selected exercises and most special activities are based on real-world data
to provide students with practice in working with real company data.
derstand a
Un nd R evi ew
Questions Answers
Students check whether they understand If NetSolutions’ adjustment for
what they’ve just read, using these activi- unearned rent had incorrectly been
ties in the margin of the text. made for $180 instead of $120,
what would have been the effect
on the financial statements?
Revenues would have been over-
stated by $60; net income would
Relevant Chapter Openers
The beginning of each chapter
connects the student’s own
experiences to the chapter’s
topic. This tangible link is a
great motivator.
New Design
A lively, colorful, and
interesting design invites
students to read the
text. Colorful, clear, and
relevant infographics help
clarify difficult concepts
in a visual presentation.
19. 66124_preface_iv-xxxi.qxd 11/19/03 5:27 PM Page xvii
Preface xvii
Continuing Case Study
A fictitious dot.com company, NetSolutions, is followed throughout
Chapters 1–6 as the example company to demonstrate a variety of transactions.
19 Utilities Expense 4 5 0 00 19
20 Miscellaneous Expense 2 7 5 00 20
21 Cash 3 6 5 0 00 21
22 Paid expenses. 22
Summaries
Regardless of the number of accounts, the sum of the debits is always equal
Within each chapter, these
The sum of the debits
to the sum of the credits in a journal entry. This equality of debits and cred- synopses draw special attention
its for each transaction is built into the accounting equation: Assets ϭ Liabil-
must always equal the ities ϩ Owner’s Equity. It is also because of this double equality that the to important points and help
system is known as double-entry accounting.
sum of the credits. On November 30, NetSolutions recorded the amount of supplies used in
clarify difficult concepts.
the operations during the month (transaction g). This transaction increases an
Business Transactions
In Chapters 1 and 2,students are introduced to the dynamics of business trans-
actions through non-business events to which they can easily relate.
Transaction f When you pay your monthly credit card bill, you decrease the cash
in your checking account and also decrease the amount you owe to the credit card
company. Likewise, when NetSolutions pays $950 to creditors during the month, it
reduces both assets and liabilities, as shown below.
Assets ؍ Liabilities ؉ Owner’s Equity
Accounts Chris Clark,
Self-Examination Questions
Five multiple-choice questions, with answers at the end of the chapter,
help students review and retain chapter concepts.