Users of this Book.
Definition of Accounting.
Limitations of Accounting Information.
Audiences for Accounting Information.
Different Messages for Different Audiences.
Accounting in the World of Business.
Accounting in Nonprofit and Governmental Organizations.
Useful Nonaccounting Information.
Importance of Personal Motivations.
2. Accounting Framework: The Concept of Value.
How Is Owners’ Equity Created?
Valuing a Loan or Note.
Valuing Common Stock Securities.
Calculating Time-Adjusted Values.
Valuing Personal and Company Assets.
Choosing Among Valuation Methods.
Challenge of Alternative Valuation Methods.
Dominance of the Cost Value Method.
Appendix 2A: Interest Tables for Calculating Time-Adjusted Values (Present Worth).
3. Financial Position: The Balance Sheet.
Key Accounting Reports.
Features of the Balance Sheet.
More Accounting Definitions and Conventions.
4. Financial Performance: The Income Statement.
Definition of Revenue, Sales, and Expenses.
Recording Sales Transactions.
When Is Income Earned and When Are Expenses Incurred?
Example: Accounting for a Full Period.
5. Cash Flow Statement.
Why a Cash Flow Statement?
Sources and Uses of Cash.
Example: Metcalfe Company.
6. Principles, Rules, and Mechanics of Financial Accounting.
A Brief Review.
Role of the CPA Auditor.
How Good Are These Principles and Rules?
Income Taxes and Accounting Rules.
Chart of Accounts.
Three Key Elements of Accounting Systems.
7. Further Refinements in Valuation.
Prepaids and Accruals.
Reminder: Principle of Materiality.
Liabilities Created by Today’s Operations.
Accounting for Accounts Receivable.
Accounting for Inventory.
Accounting for Price-Level Changes.
Accounting for Currency Fluctuations.
Exceptions to the Accrual Concept and the Realization Principle.
8. Accounting for Long-Term Assets.
Valuing Fixed Assets.
Income Tax Considerations.
Accounting for Other Long-Term Assets.
9. What Can Financial Statements Tell Us?
Categories of Ratios.
Linkage Among Operating Ratios.
10. Accounting and Financial Markets.
Types of Securities.
Interpreting Investment Ratios.
Designing a Capital Structure.
Upside and Downside of Debt Leverage.
Introduction to the Cost of Capital.
11. Digging Deeper.
Framework for Financial Statement Analysis.
‘‘Cooking the Books’’.
12. Financial Markets and Capital Investment Decisions.
Concept of a ‘‘Hurdle Rate’’.
Weighted-Average Cost of Capital.
Some Everyday Applications of These Techniques.
Adjusting for Risk.
Adjusting for Inflation.
13. Analyzing Manufacturing Costs: Introduction to Cost Accounting.
What Questions? Why? For Whom?
Reminder: Product and Period Expenses.
Understanding the Cost of Goods Sold.
Challenge: Accounting for Indirect Costs.
Costing Joint Products and By-products.
Cost Accounting in Other Functions and Industries.
Appendix 13A: Variable and Full-Absorption Costing.
Appendix 13B: Standard Cost Accounting.
Exercises - Appendix 13A.
Exercises - Appendix 13B.
14. Analyzing Other Operating Costs and Decisions.
Examples of Operating Decisions.
Importance of Framing Alternatives.
Differential Cash Flows.
Recap of Fixed and Variable Costs.
Pervasiveness of Fixed Costs.
Challenges in Determining Differential Cash Flows.
Interrelationships Among Volume, Price, Cost, and Profit.
15. Budgeting and Forecasting.
Guidelines for Budgeting.
Recap of the Reasons to Budget.
Analyzing Performance: Budget Versus Actual.
Interpreting Variance Balances.
Human Behavior Considerations.
Other Types of Budgets.
Pro Forma Financial Statements.