Color-CodedAccounting Equation

This color-coded accounting equation is a tool you will use throughout your financial accounting course.Fully explained in You may find this helpful when preparing your Chapter I, this tool is so important that we have put it here for quick reference. You will seethesecolors throughout the chapterswhen we homework assignments. Each financial statementhas a unique color. presenta financial statement. Assets
Liabilities a i Contributed " Shareholders'Equity

*******l
$
Dividends

$ ;;;;#="
Cash
I

Retained Earnings
Expenses

fJ"".lHf* Equipment i;""ti5 p)ij;il

+2,000 +4,000

Revenues

+2,000 +4,000 -1,400 -5,000 +6,000 +5,000

2.
J.

-1,400

4.

+6,000 -20 + 5,000 = 4,000+ 2,000+ 4,680 Sheet I Balance of I Statement CashFlows

o.

-20 6,680

!Income Statement f

EquiW in of W Statement Changes Shareholders'

Red identifies an income statement.The transactionsthat affect the income statementwill have an amount in the red sectionon the accountingequationworksheet. Yellow identifies the statement of shareholders'equity. The transactionsthat affect shareholders'equity will have an amount in the yellow section. BIue identifies the balancesheet.Only the summary of the transactions-the ending balancesin each account-will be shown on the balancesheet. Green identifies the statement of cashflows. The cashinflows and outflows are all found in the cashcolumn of the accounting equation worksheet.Theseinflows and outflows are explained in the statementof cashflows.

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BriefContents
Taken lrom FinancialAccounting: A BusinessProcess Approach, Second Edition by Jane L. Reimers Preface xvii Chapter1 Chapter2 Chapter3 Business: What'slt All About? 1 of Qualities AccountingInformation 49 Accruals Timing ls Everything and Deferrals: in Accounting 97 Acquisitionand Useof Long-Term Operational Assets 153 The Purchase and Saleof Inventory 209 Accounting Shareholders' for Equity 383 Preparing of and Analyzingthe Statement Cash Flows 427 Firm UsingFinancial Statement Analysis Evaluate to Performance 475

Chapter4

Chapter5 Chapter8 Chapter9

Chapter10

Appendix A: StaplesFinancial Reports 541 Appendix B: The Mechanicsof an Accounting System 575 Glossary 621 lndex 527 Taken trom Managerial Accounting by Linda Smith Bamber,KarenWilken Braun,and Walter T. Harrison,Jr. Chapter2 Chapter6 Chapter7 Chapter8 Chapter9 Chapter10 BuildingBlocks Managerial of Accounting 45 CostBehavior 301 359 413 469

Cost-Volume-Profit Analysis Short-Term Business Decisions

Decisions the Time Valueof Money CapitalInvestment and Accounting The MasterBudgetand Responsibility 537

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Contents
Approach, Second Edition Taken from FinancialAccounting: A BusinessProcess by JaneL. Reimers Preface xvii

What'slt All About? 1 Chapter1 Business:

Purpose of and Organization a Business 2 What BusinessAbout? 3 ls All The Nature Business 0perations 3 of of 4 Ownership Structurea Business Sole Proprietorships 5 Partnenhips 6 Corporatlons 7 and Services 9 Business Activities and the Flowof Goods for Makingin Business 10 lnformation Needs Decision 1 ofthe Who Needs lnformation AboutTransactions Business?1 System13 Part Information Accounting Information:A oftheFirm's Statements 13 Overview the Financial of Balance Sheet14 18 lncome Statement It?;\i\tfl : trtr"k\l\lt iri Statement 9 1 The Difference the Sheet the between Balance and Income in Equity StatementChangesShareholders' 20 of Flows 21 StatementCash of 24 Statements Flow lnformation theFinancial of and RealCompany Financial Statements 24 Business Risk, and Ethics 27 Control, Problerns Suntmary 29 o Chapter Sunimary Pcints 2S . Chapter . Answers Y0UR 31 " Financial ItJtlN Key lerms 30 t0 Questions 48 " lnternet Thinking Problems Statement Analysis 46 . Critical Dlsney Exercise: (orporation48

Chapter 2

Qualitiesof Accounting Information 49 Information Decision for Making50 Information 51 Accounting Characteristics of
What Makes Information Useful?51 Relevant1 5 Reliable 51 Comparable 51 Consistent 52 Financial Reporting 52 Assumptions Principles and Underlying Elements the Financial of Statements 53 of 54 Transactions Second forthe Month Business Assets59 Liabilities 61 Shareholders' 61 Equity

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CONTENTS

61 in Financial Statements Measurement Recognition and 61 Assets Measuring 62 Revenue Expenses Recognizing and f,,f14JS ilt&$l* fi? Accruals and Deferrals 64 64 AccrualBasisAccounting BasisAccounting 65 BasisVersusAccrual Cash lssues65 and Periods Cutoff Accounting Information 66 Accrual Accounting and How lnvestors-Owners Creditors-Use Provide67 Statements Financial the to AnExamplelllustrate Information 70 Statements obiectivesFinancial of lt PuttingAllTogether-the 72 Financial Statements Real Company RatioAnalysis 74 ApplyingYour Knowledge: Business Risk,Control,and Ethics 74 75 and Internal Controls-Definition Objectives 75 Statements lssues Related Financial to Internal Control Soecial 75 Preventive Controls l\lfrvd5 f;l-Asft ?6 76 Detective Controls 76 Controls Corrective Problems 77 ' Summary Points 76 ' Chapter Summary Chapter 80 I Financial TURN t0 Terms 80 r Answers YOUR Key Questions Exercise: 96 . Internet Thinking Problems Analysis. {ritical Statement Money Merck Si6 and MSN

Timingls Everything and Deferrals: 3 Chapter Accruals in Accounting 97

Income 98 Measuring Accruals 100 1 Expense Interest Revenue 00 and for Accruals Interest 102 Revenues Expenses and for Accruals Other Deferrals 104 105 to Related Revenue Defenals 1 Revenue05 Unearned 105 Certificates Gift 107 to Related ExPenses Defenals 107 lnsurance rdfibtfs iltjqst4 'lli]f Rent 108 109 Supplies 110 E oui oment Statements 113 and Deferralson Financial Effectsof Accruals forMarch 113 Tom's Transactions Wear 117 Records Adiustments Accounting to the 1 Statements18 Preparing Financial the 120 Firms'Financial Statements on Accruals Defenals Real and RatioAnalysis 122 ApplyingYour Knowledge: 122 Working CaPital Ratio 123 Quick Risk,Control,and Ethics 124 Business 124 Records the and in Errors Recording Updating Accounting 125 Information Access Unauthorized to theAccounting Data ofAccounting 125 Loss Destruction or

CONTENTS

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Problerns176 o Summary Chapter Summary Points 125 . Chapter r Answers YOUR TURilI Key Terrus 128 t0 Questions128 . Prablems 151 . Thinking Financial Analysis150 . Criticai Statement Internet Exercise: Darden 152

Operational Chapter Acquisition 4 and Useof Long-Term Assets 153

AcquiringPlantAssets 154 FL&5t{ 1*5 1{[!S5 1 Types Long-Lived Tangible Intangible 55 Assets: and of Acquisition Costs 155 Basket Purchase Allocation156 and Depletion 158 Depreciation Tangible Assets: UsingLong-Term 159 Depreciation Straight-Line (Units-of-Production) Depreciation 162 Activity Depreciation 164 Declining Balance Depletion 166 Amortization 167 UsingIntangibleAssets: 167 Copyrights Patents158 Trademarks 168 Franchises 168 Goodwill168 Research Development 169 and Costs Changes after the Purchase the Asset 159 of Asset lmoairment 169 Life 170 or lts Expenditures to lmprove Asset Extend Useful an Value 170 Revising Life Salvage EstimatesUseful and of Assets 171 SellingLong-Term Assetson the Financial Presentation Long-Term of Statements 173 Reporting Long-Term Assets173 Preparing for Wear 173 StatementsTom's ApplyingYourKnowledge-Ratio Analysis 176 Return Assets 176 on 179 AssetTurnoverRatio Business Risk,Control, and Ethics 180 t\ili#5 ilt,Asf't 1{$* Problems 181 o Sumrnary Summary Clrapter Points 181 e Chapter 185 r tinancial TURN Key Terms 185 ' Answers Y0UR t0 Questions Thinking Probiems206 i Internet Staternent Analysis 205 . Critical 4 Exercise: Buy 2A7 . Appendix 708 Eest

Chapter The Purchase Saleof Inventory 209 5 and

Acquiring Merchandise 210 and Selling AnOperating Cycle 210 Acquiring forSale 210 Merchandise Acquisition Process Inventory for 211 RecordingPurchases 212 Inventory? 212 Who theFreight to Obtain Pays Costs 214 Purchase and Returns Allowances Purchase Discounts 214 forQuality Mowers215 Lawn Summary of Purchases

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CONTENTS

216 SellingMerchandise 216 Sales Process Sales Recording 217 217 and 5ales Returns Allowances Terms217 and DiscountsShipping Sales and for Lawn Summary of PurchasesSales Quality Mowers218 Sales Taxes218 PeriodicRecordKeeping 219 Versus Inventory:Perpetual Recording Perpetual Periodic and Inventory Systems219 Differences between InventoryCost FlowAssumptions 220 221 Soecificldentification cost 221 Weighted Average (FlF0) 223 Method First-Out First-ln, (LIFO)223 Method First-Out Last-ln, Affect 226 Statements How lnventory Flow Cost Assumptions theFinancial Different Flow in Reported Inventory Cost Goods Under and of Sold Cost Differences 226 AssumPtions 230 About Cost Assumptions Conclusions Inventory Flow of and lncome EffectsLlF0 FlF0 231 Tax an Cost Method?232 How Firms Do Choose lnventory Flow Weat 233 to Applying lnventoryAssumptions Tom's in Complications ValuingInventory:Lower-of-Cost'or-Market Rule 238 Analysis 238 Statement Financial Profit Ratio 238 Gross Ratio InventoryTurnover 241 $iilHtr$ fltA$i.{ [*l Business Risk,Control,and Ethics 242 Problems244 . Points 244 r Chapter Summary Chapter Summary TURN to Key Terms 247 r Answers YOUR Questions247 . f,inancial Thinking Prablems 272 . Internet Anaiysis270 . Critical Statement . Appendix 276 58 54 txercise: GAP 272 ' Appendix 274

for Equity 383 8 Chapter Accounting Shareholders'

Equityin a Corporationof Components Shareholders' ContributedCapital 384 lssued, 384 Stock-Authorized, andoutstanding Stock 385 Common Preferred Stock 387 Dividends 388 Cash t0 389 Dates lmpoftant Related Dividends Date Declaration 389 Date Record389 of Payment 390 Date between Common Prefened and Shareholders 390 of Dividends Distribution Payment 390 of AnExampleDividend Treasury Stock 391 Own 391 Do Buy Why Firms Their Stocks? for 392 Accounting thePurchase Stock 393 Treasury Selling

CONTENTS

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?4*W5 YL4^5H 3*3 Treasury Reporting Stock 394 and StockSplits 394 Stock Dividends Dividends 394 Stock Stock Splits 395 Retained Earnings 396 Tom's Wear lssuesNew Stock 397 RatioAnalysis 401 ApplyingYourKnowledge: Return Equity 401 on Earnings Share 401 Per Business Risk,Control,and Ethics 402 Risks Faced Owners 402 by 403 Public Private? or rufrwb FLASi"i4*3 Problems 404 | Poirlts 404 r Chapter Summary summary Chapter 406 . Financial t0 TU Key Terms 406 ' Answers Y0UR RNQuestions Problems 425 r Internet 423 . Ctitical Thinking Statement Analysis Hershey Foods Corporation425 Exercise:

Chapter Preparing Analyzing Statement the 9 and of CashFlows 427

Thelmportance the Statement Cash of Flows 428 of FsirpJ$ iltA$t'l 4;s and the TwoMethods Preparing Presenting Statement of of Cash Flows 429 Basis Accounting 431 Accrual Accounting Versus Cash Method 432 of Flows: Direct Preparing Statement Cash the Method 435 Flows: lndirect Preparing Statement Cash the of Activities 436 from Investing Financing and Cash Methods 437 Summary Direct Indirect of and Analysis 438 Financial Statement Applying YourKnowledge: andEthics 441 Business Control, Risk, {\irw% rffi$l"4 441 Problems 442 r Summary Points442 ' Chnpter Summary Chapter 446 . Financial TURN Key Terms445 . AnswersY0UR t0 Questions Thinking Probiems 473 . Internet Analysis 47* . Critical Statement Exercise: (nrp. 473 Camival

to Chapter 10 UsingFinancial Analysis Evaluate Firm Statement Performance 475

A Closerlook at the IncomeStatement 476 476 DiscontinuedOperations Extraordinary 477 ltems f'If'!ry5 fll-A$fi &;'# Reporting Taxes479 Information 479 Horizontal and VerticalAnalysis Financial of 479 HorizontalAnalysis Vertical Analysis 480 RatioAnalysis 480 A Review Ratios480 ofAll Market lndicator Ratios481 l,iil1-tr-S fLAr?"t r1{'}

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CO NT E NT S 484 UnderstandingRatios Ratio Using Analysis484 Financial StatementAnalysis-More than Numbers 485 Business Risk,Conttol,and Ethics 489 Problems 490 s Points 490 ' Chapter Summary Summary {hapter TURN ta Key Ternrs 493 r Answers YOUR Questions493 t Exercise: John's Papa 519 r Intemet Problems CriticalThinking 10t 523 10A 521 | Appendix lnternational 520 . Aonendix Appendix A: Staples Financial Reports 541 575

Appendix B: The Mechanics of an Accounting System

Glossary 621 lndex 627 Taken from ManagerialAccounting Jr. WilkenBraun, and WalterT. Harrison, Karen by LindaSmithBamber, Accounting 45 of Blocks Managerial 2 Chapter Building Chapter 5 7 Chapter 8 Chapter Chapter 9 10 Chapter CostBehavior 301 Analysis 359 Cost-Volume-Profit Decisions 413 Business Short-Term Decisions the TimeValueof Money 469 and Investment Capital Accounting 537 The MasterBudgetand Responsibility