Financial Accounting

Front Cover......Page 1
Title Page......Page 2
Copyright......Page 3
CONTENTS......Page 20
PART ONE: FINANCIAL REPORTING AND THE ACCOUNTING CYCLE......Page 34
1 ACCOUNTING INFORMATION: USERS AND USES......Page 36
What\'s the Purpose of Accounting?......Page 38
Who Uses Accounting Information......Page 42
Within What Kind of Environment Does Accounting Operate?......Page 46
So, Why Should I Study Accounting?......Page 53
End-of-Chapter Materials......Page 54
2 FINANCIAL STATEMENTS: AN OVERVIEW......Page 61
The Financial Statements......Page 63
Notes to the Financial Statements......Page 79
The External Audit......Page 80
Fundamental Concepts and Assumptions......Page 82
End-of-Chapter Materials......Page 84
3 THE MECHANICS OF ACCOUNTING......Page 108
How Can We Collect All This Information?......Page 109
How Do Transactions Affect the Accounting Equation?......Page 112
How Do We Record the Effects of Transactions?......Page 119
Posting Journal Entries and Preparing a Trial Balance......Page 130
Where Do Computers Fit In All This?......Page 137
End-of-Chapter Materials......Page 139
4 COMPLETING THE ACCOUNTING CYCLE......Page 162
Accrual Accounting......Page 163
Adjusting Entries......Page 168
Preparing Financial Statements......Page 176
Closing the Books......Page 181
A Summary of the Accounting Cycle......Page 184
End-of-Chapter Materials......Page 185
5 ENSURING THE INTEGRITY OF FINANCIAL INFORMATION......Page 218
The Types of Problems That Can Occur......Page 220
Safeguards Designed to Minimize Problems......Page 223
Reasons for Earnings Management......Page 228
The Sarbanes-Oxley Act......Page 234
The Role of Auditors in the Accounting Process......Page 235
The Securities and Exchange Commission......Page 240
End-of-Chapter Materials......Page 242
Comprehensive Problem 1–5......Page 253
PART TWO: OPERATING ACTIVITIES......Page 256
6 SELLING A PRODUCT OR A SERVICE......Page 257
Major Activities of a Business......Page 261
Recognizing Revenue......Page 263
Cash Collection......Page 267
Accounting for Credit Customers Who Don\'t Pay......Page 270
Assessing How Well Companies Manage Their Receivables......Page 277
Recording Warranty and Service Costs Associated with a Sale......Page 278
EXPANDED: material: Reconciling the Bank Account......Page 280
Foreign Currency Transactions......Page 283
End-of-Chapter Materials......Page 286
7 INVENTORY......Page 315
Inventory and Cost of Goods Sold......Page 318
Accounting for Inventory Purchases and Sales......Page 322
Counting Inventory and Calculating Cost of Goods Sold......Page 328
Inventory Cost Flow Assumptions......Page 330
Assessing How Well Companies Manage Their Inventories......Page 336
EXPANDED: material: Inventory Errors......Page 339
Complications of the Perpetual Method with LIFO and Average Cost......Page 342
Reporting Inventory at Amounts below Cost......Page 344
Method of Estimating Inventories......Page 346
End-of-Chapter Materials......Page 348
8 COMPLETING THE OPERATING CYCLE......Page 374
Employee Compensation......Page 377
Taxes......Page 384
Contingencies......Page 388
Capitalize versus Expense......Page 391
Summarizing Operations on an Income Statement......Page 393
End-of-Chapter Materials......Page 397
Comprehensive Problem 6–8......Page 417
PART THREE: INVESTING AND FINANCING ACTIVITIES......Page 420
9 INVESTMENTS IN PROPERTY, PLANT, AND EQUIPMENT AND IN INTANGIBLE ASSETS......Page 421
Nature of Long-Term Operating Assets......Page 424
Deciding Whether to Acquire a Long-Term Operating Asset......Page 425
Accounting for Acquisition of Property, Plant, and Equipment......Page 426
Calculating and Recording Depreciation Expense......Page 432
Repairing and Improving Property, Plant, and Equipment......Page 438
Recording Impairments of Asset Value......Page 440
Disposal of Property, Plant, and Equipment......Page 442
Accounting for Intangible Assets......Page 444
Measuring Property, Plant, and Equipment Efficiency......Page 449
EXPANDED: material: Accelerated Depreciation Methods......Page 450
Changes in Depreciation Estimates and Methods......Page 455
End-of-Chapter Materials......Page 456
10 LONG-TERM DEBT FINANCING......Page 486
Measuring Long-Term Liabilities......Page 488
Accounting for Long-Term Liabilities......Page 494
Accounting for Lease Obligations......Page 498
The Nature of Bonds......Page 501
Using Debt-Related Financial Ratios......Page 509
EXPANDED: material: Bonds Issued at a Discount or at a Premium......Page 511
End-of-Chapter Materials......Page 521
11 EQUITY FINANCING......Page 546
Raising Equity Financing......Page 549
Corporations and Corporate Stock......Page 551
Accounting for Stock......Page 554
Retained Earnings......Page 559
Other Equity Items......Page 564
End-of-Chapter Materials......Page 567
12 INVESTMENTS IN DEBT AND EQUITY SECURITIES......Page 592
Why Companies Invest in Other Companies......Page 594
Classifying a Security......Page 597
Accounting for Trading and Available-for-Sale Securities......Page 601
Accounting for Changes in the Value of Securities......Page 604
EXPANDED: material: Accounting for Held-to-Maturity Securities......Page 607
Accounting for Equity Investments Using the Equity Method......Page 613
Consolidated Financial Statements......Page 615
End-of-Chapter Materials......Page 618
Comprehensive Problem 9–12......Page 642
PART FOUR: OTHER DIMENSIONS OF FINANCIAL REPORTING......Page 644
13 THE STATEMENT OF CASH FLOWS......Page 646
What\'s the Purpose of a Statement of Cash Flows?......Page 648
What Information Is Reported in the Statement of Cash Flows?......Page 649
Preparing a Statement of Cash Flows—A Simple Example......Page 653
Analyzing the Other Primary Financial Statements to Prepare a Statement of Cash Flows......Page 656
Using Information from the Statement of Cash Flows to Make Decisions......Page 668
End-of-Chapter Materials......Page 670
14 INTRODUCTION TO FINANCIAL STATEMENT ANALYSIS......Page 700
The Need for Financial Statement Analysis......Page 702
Widely Used Financial Ratios......Page 704
Common-Size Financial Statements......Page 709
DuPont Framework......Page 712
More Efficiency Ratios......Page 715
More Leverage Ratios......Page 718
Cash Flow Ratios......Page 719
Potential Pitfalls......Page 722
End-of-Chapter Materials......Page 724
A: WAL-MART 2006 ANNUAL REPORT......Page 758
B: GLOSSARY......Page 790
C: CHECK FIGURES......Page 800
SUBJECT......Page 804
REAL WORLD COMPANY......Page 814