Introduction to Accounting: An Integrated Approach

Title
Contents
PART ONE INTRODUCTION: BUSINESS OPERATING ACTIVITIES
	1 Accounting and Business
		Accounting: Who Needs It?
		Business Today
			Customer-Focused Operations
			Global Markets
			Manufacturing and Communication Advances
			E-Business
		Business and Accounting: Together Forever
			Ancient Babylonia
			Commerce in Old Italy
			Pacioli and the Method of Venice
			Advent of the Corporation
			The Stock Market Crash of 1929
			Return to the Present
		Generally Accepted Accounting Principles
			Statements of Financial Accounting Concepts
			International Accounting Standards
		Financial Statements
			Income Statement
			Statement of Owners’ (Shareholders’) Equity
			Statement of Cash Flows
			Balance Sheet (Statement of Financial Position)
			Report of the Independent Accountant (Auditor)
		Relationship of the Financial Statements
			Current Ratio
			Return on Sales Ratio
			Debt-to-Equity Ratio
			XBRL Filing
		Summary
		Key Terms
	2 Business Processes and Accounting Information
		Management Cycle
			Planning Phase
			Performing Phase
			Evaluating Phase
		Business Processes
			Business Organization and Strategy Process
			Operating Processes
			Capital Resources Process
			Performance Measurement and Management Process
		Balanced Scorecard Approach
			Financial Perspective
			Internal Perspective
			Customer Perspective
			Learning and Growth Perspective
		Internal Control
			Requiring Proper Authorization
			Separation of Duties
			Maintaining Adequate Documentation
			Physically Controlling Assets and Information
			Providing Independent Checks on Performance
		Applying Internal Control to Protect Cash
			Cash Receipts
			Cash Disbursements
		Bank Reconciliation
			Bank Statement
			Bank Reconciliation Process
		Summary
		Key Terms
	3 Operating Processes: Planning and Control
		Revenue Process
			Generate Sales
			Receive and Accept Orders
			Deliver Goods and/or Services
			Receive Payment from Customers
			Provide Customer Support
			Relationship of the Revenue Process and the Information System
		Expenditure Process
			Determine the Company’s Need for Goods
			Select Suppliers and Order Goods
			Receive Goods
			Pay Suppliers
			Relationship of the Expenditure Process and the Information System
		Conversion Process
			Schedule Production
			Obtain Direct Materials
			Use Labor and Other Manufacturing Resources to Make Products
			Store Finished Goods Until Sold
			Relationship between the Conversion Process and the Information System
		Cost and Revenue Behavior
			Behavior Patterns
			Relevant Range
			Activity Measures
			Fixed Costs and Revenues
			Variable Costs and Revenues
			Mixed Costs and Revenues
		Cost/Revenue Estimation Methods
			High/Low Method
			Linear Regression Analysis
		Summary
		Key Terms
PART TWO PLANNING: OPERATING ACTIVITIES
	4 Short-Term Decision Making
		Short-Term Decisions
		Cost-Volume-Profit Analysis
			Determining the Breakeven Point
			Determining the Target Profit Level
			Determining the Target Profit Level After Taxes
		Sensitivity Analysis
			Change in Selling Price
			Change in Variable Cost
			Change in Fixed Cost
			Change in Tax Rate
		Relevant Variable Analysis
			Sunk Costs Are Never Relevant
			Opportunity Costs Are Always Relevant
			Incremental Costs and Revenues May Be Relevant
			Identify the Alternative Actions
			Determine the Relevant Revenues, Costs, and Profit
			Choose the Best Alternative
		Special Order (Accept-or-Reject) Decision
		Outsourcing (Make-or-Buy) Decision
		Product Mix (Keep-or-Drop) Decision
		Another (More Difficult) Example
		Summary
		Key Terms
	5 Strategic Planning Regarding Operating Processes
		Revenue Process: Determining the Selling Price
			Customers: Customer Perspective
			Competitors: Learning and Growth Perspective
			Legal and Social Forces: Learning and Growth Perspective
			Cost: Internal Process Perspective
		Pricing Strategies
			Penetration Pricing
			Skimming Pricing
			Life-Cycle Pricing
			Target Pricing
		Conversion Process: Determining the Inventory Model
			Reasons to Maintain Inventory
			Reasons to Not Maintain Inventory
			Balancing Ordering and Carrying Costs
			Inventory Models
			Comparison of Inventory Models
		Expenditure Process: Determining the Employee Compensation Package
			Paid Compensation
			Health and Life Insurance
			Paid Leave
			Contingent Compensation: Bonuses
		Summary
		Key Terms
	6 Planning, the Balanced Scorecard, and Budgeting
		Budgeting and Goal Setting
			Planning
			Communication and Coordination
			Resource Allocation
			Evaluation and Control
			Time and Resource Requirements
			Adaptability of Departments and Segments
			Motivation and Behavior of Individuals
		Mandated versus Participatory Budgeting
			Mandated Budgeting
			Participatory Budgeting
		Incremental Budgeting versus Zero-Based Budgeting
			Incremental Budgeting
			Zero-Based Budgeting
		Master Budget
		Revenue Process Planning
			Balanced Scorecard Goals
			Sales Budget
			Cash Receipts Schedule
			Accounts Receivable Schedule
			Marketing and Distribution Budget
		Conversion Process Planning
			Balanced Scorecard Goals
			Production Budget
		Expenditure Process Planning
			Balanced Scorecard Goals
			Budgeting for Human Resources
			Administrative Budget
			Direct Labor and Manufacturing Overhead Budget
			Direct Materials Purchases Budget
			Cash Disbursements Schedule
			Accounts Payable Schedule
		Summary
		Key Terms
PART THREE RECORDING AND EVALUATING: OPERATING ACTIVITIES
	7 Accounting Information Systems
		Manual Accounting Systems
			Accounting Events
			Chart of Accounts
			Journalizing
			Posting
			Adjusting Entries
			Closing Entries
			Comprehensive Example
		Computer-Based Transaction Systems
		Database Systems
		Summary
		Key Terms
	8 Purchasing/Human Resources/Payment Process: Recording and Evaluating Expenditure Process Activities
		Expenditure Process
		Special Journals and Subsidiary Ledgers
			Special Journals
			Subsidiary Ledgers
		Inventory
			Perpetual versus Periodic Inventory Systems
			Gross versus Net Price Methods
			Reporting Inventory Purchase and Payment Events
		Human Resources
			Withholdings from Employees
			Employer Taxes
			Accounting Events in the Payroll Process
			Reporting Human Resource Events
		Other Expenditure Process Activities
			Cash Outflow before Expense (Assets Created)
			Expense before Cash Outflow (Liabilities Incurred)
			Expense Concurrent with Payment
			Reporting Other Expenditure Process Activities
		Financial Statements and the Expenditure Process
			Estimating Cash Paid for Inventory
			Estimating Cash Paid for Operating Expenses
		Internal Evaluation of Expenditure Process Events
		Summary
		Key Terms
	9 Recording and Evaluating Conversion Process Activities
		Manufacturing Inventories
		Recording Raw Material Activities
		Recording Labor Activities
		Recording Manufacturing Overhead Events
			Actual Manufacturing Overhead
			Applied Manufacturing Overhead
			Overhead Application Process Using ABC
			Over- and Underapplied Manufacturing Overhead
		Recording Finished Goods
		Reporting Conversion Process Events
		Internal Evaluation of Conversion Process Events
			Direct Labor Variance Analysis
			Direct Materials Variances
		Summary
		Key Terms
	10 Marketing/Sales/Collection/Customer Support Process: Recording and Evaluating Revenue Process Activities
		Revenue Recognition
			Revenue Recognized When Cash Collected
			Revenue Recognized before Cash Collected (Asset Created)
			Revenue Recognized after Cash Received (Liability Incurred)
			Sales Returns and Allowances
			Sales Discounts
		Cost of Goods Sold
			Specific Identification Method
			First-In, First-Out (FIFO) Method
			Last-In, First-Out (LIFO) Method
			Periodic Inventory System and Cost Flow Assumptions
			FIFO, LIFO, and GAPP External Reporting
		Estimating Uncollectible Credit Sales
			Proper Income Measurement
			Proper Asset Valuation
			Recording Estimated Uncollectible Accounts
			Recording Actual Uncollectible Accounts
		Reporting Revenue Process Events
			Estimating Cash Receipts from Customers
		Internal Evaluation of Revenue Process Events
			Revenue Variances
		Summary
		Key Terms
PART FOUR INTRODUCTION: CAPITAL RESOURCE PROCESS ACTIVITIES
	11 Time Value of Money
		Return
			Time Considerations
			Initial Investment Considerations
			Rate of Return
			Expected Rate of Return
		Risk
			Attitudes toward Risk
			Types of Risk
		Risk/Return Relationship
			Risk Premiums
			Risk/Return and Investors’ Money
		Time Value of Money
			Simple and Compound Interest
			Future Value of the Amount of $1
			Present Value of the Amount of $1
		Annuities
			Future Value of an Annuity
			Present Value of an Annuity
		More Practice with Time Value of Money Problems
			Step 1. Determine Whether the Problem Is an Annuity
			Step 2. Determine Whether the Problem Is Present or Future Value
			Step 3. Identify the Missing Element
			Step 4. Solve for the Missing Element
			More Time Value of Money Problems
		Summary
		Key Terms
		Appendix: Time Value of Money Tables
PART FIVE PLANNING: CAPITAL RESOURCE PROCESS ACTIVITIES
	12 Planning Investments: Capital Budgeting
		The Capital Budgeting Process
			Identifying Long-Term Investment Opportunities
			Tie to Business Organization and Strategy Process
			Selecting Appropriate Investments
		Net Present Value Analysis
			Assumptions of NPV
			Source of Cash Flows
			Uneven Cash Flows
			Income Taxes
			Tax Shield
			MACRS Depreciation
			Gains and Losses on Disposal of Assets
		Comprehensive Example
		Other Issues
			Human Judgment
			Uncertainty
			Qualitative/Ethical Factors
			Capital Expenditures and Budgeting
		Summary
		Key Terms
	13 Planning Equity Financing
		Tie to Business Organization and Strategy Process
		Debt versus Equity Financing
			Risk of Debt Financing
			Debt-to-Equity Ratio
			Times Interest Earned Ratio
			Reward of Debt Financing
			Return on Owners’ Equity Ratio
			Reward of Equity Financing
			Risk of Equity Financing
		Equity Financing
			Sole Proprietorships and Partnerships
			Corporations
		Planning for Partnership Equity
			Partnership Income Allocations
			Other Changes in Capital
		Planning Corporate Equity
			Common Stock
			Preferred Stock
			Return on Common Equity
			Stock Shares
			Stock Values
			Dividends
			Dividend Dates
			Stock Splits
			Corporate Equity Planning and Budgeting
		Summary
		Key Terms
	14 Planning Debt Financing
		Debt Financing
		Long-Term Debt Instruments
			Periodic Payment (Installment) Note
			Lump-Sum Payment (Noninterest-Bearing) Note
			Periodic Payment and Lump-Sum Note
		Comparison of the Three Types of Notes
		Sources of Debt Financing
			Nonpublic Funding
			Collateral
			Leases
			Public Funding: Bonds
		Comprehensive Example: Chapters 12 through 14
		Summary
		Key Terms
PART SIX RECORDING AND EVALUATING CAPITAL RESOURCE PROCESSES
	15 Recording and Evaluating Capital Resource Process Activities: Financing
		Review of Transaction-Based Accounting Systems
		Equity Financing Activities
			Contributions by Owners (Shareholders)
			Corporate Earnings
			Corporate Distributions
			Financial Statements and Owners’ Equity Activities
		Debt Financing Activities
			Installment Notes Payable
			Noninterest-Bearing Notes Payable
			Bonds Payable: Market Rate Greater Than the Face Rate
			Bonds Payable: Market Rate Less Than the Face Rate
			Bonds Payable: Market Rate Equal to the Face Rate
		Financial Statements and Financing Activities
		Internal Evaluation of Financing Activities
		Summary
		Key Terms
	16 Recording and Evaluating Capital Resource Process Activities: Investing
		Plant Assets
			Acquisition of PPE
			Use of PPE
			Depreciation
			Other PPE Usage Issues
		Disposal of PPE
			Discard PPE
			Sell PPE
			Exchange PPE
			Exchanges When No Gains and Losses Are Recorded
		Natural Resources
		Intangible Assets
		Reporting Investment Activities
		Internal Evaluation of Investment Activities
		Summary
		Key Terms
PART SEVEN EVALUATING: OPERATING AND CAPITAL RESOURCE PROCESSES
	17 Company Performance: Profitability
		Purpose of the Income Statement
		GAAP and Comprehensive Income
			What Are Earnings?
			What Are Other Changes in Equity?
		Earnings per Share
			Calculating Earnings per Share
			Calculating Diluted Earnings per Share
			Other Earnings per Share Disclosures
		Other Required Income Statement Disclosures
		Reporting Issues Concerning the Income Statement
			Historical Cost and Conservatism
			Cost Allocations
			Full-Absorption Costing
		Internal Profitability Reporting
			Variable and Throughput Costing Methods
			Product Line (Divisional) Income Reports
			Return on Investment for the Division
			Du Pont Method of Return on Investment
		Summary
		Key Terms
	18 Company Performance: Owners’ Equity and Financial Position
		Statement of Owners’ Equity
			Comprehensive Income
			Retained Earnings
			Other Disclosures
		Statement of Financial Position (Balance Sheet)
			What Is Financial Position?
			Why Is the Distinction between Current and Noncurrent Items Important?
			Balance Sheet Classifications
			Assets
			Liabilities and Owners’ (Shareholders’) Equity
		Internal Financial Position Reporting
		Summary
		Key Terms
	19 Company Performance: Cash Flows
		GAAP and the Statement of Cash Flows
			Purpose of the Statement of Cash Flows
			Sections of the Statement of Cash Flows
		Operating Activities: Cash Flows
			Brief Comparison of the Direct and Indirect Methods
			Calculation of Operating Cash Flows: Direct Method
			Calculation of Operating Cash Flows: Indirect Method
			Comparison of Direct and Indirect Methods
			Apple’s Operating Cash Flows
		Investing Activities: Cash Flows
			Calculating Investing Cash Flows
			Investing Cash Flows of Apple
		Financing Activities: Cash Flows
			Calculating Financing Cash Flows
			Financing Cash Flows of Apple
			Net Change in Cash
		Other Investing and Financing Activities
		Internal Evaluation of Cash Flows
		Summary
		Key Terms
	20 Company Performance: Comprehensive Evaluation
		External Stakeholders
			Creditors and Investors
			Society
			Trading in Capital Markets
			Information in Capital Markets
			Issues to Consider
			Role of Independent Auditor
		Annual Report Analysis
			Studying the Financial Statements
			Industry Analysis
			Statement Analyses
			Vertical Analysis
			Horizontal Analysis
			Ratio Analysis
		Other Information
			Management’s Letter to Shareholders
			Segment and Quarterly Data
			Auditor’s Report
		Summary
		Key Terms
APPENDIX Apple’s 2008 Financial Statements and Accompanying Notes
INDEX