Chapter 1 Decision Makers and the Financial Statements 1
1.1 Understanding Decision Makers 3
1.2 The Accounting System and Financial Statements 6
1.3 The Balance Sheet 8
1.4 The Income Statement 11
1.5 Statement of Cash Flows 14
1.6 Financial Notes 17
Structure of the chapter 18
Reading material 18
Key items 19
Quiz 19
Review questions 21
Chapter 2 Conceptual Framework and Accounting Cycle 23
2.1 The Conceptual Framework 25
2.2 Nature of Business Transactions 28
2.3 Accounts 29
2.4 Principles of Transaction Analysis 32
2.5 The Accounting Cycle 34
2.6 Analytical Tool:The Journal Entry 36
Structure of the chapter 38
Reading material 38
Key items 40
Quiz 40
Review questions 43
Chapter 3 Business Cycle and Income Statement 45
3.1 Business Cycle 47
3.2 Elements on the Income Statement 49
3.3 Cash Basis Accounting 51
3.4 Accrual Accounting 52
3.5 The Matching Principle 54
3.6 Expanded Transaction Analysis Model 55
3.7 How are Financial Statements Prepared? 56
Structure of the chapter 58
Reading material 58
Key items 59
Quiz 59
Review questions 63
Chapter 4 Revenue,Receivables and Cash 65
4.1 Accounting for Sales Revenue 67
4.2 Measuring and Reporting Receivables 70
4.3 Accounting for Bad Debts 71
4.4 Receivables Turnover 75
4.5 Cash and Cash Equivalents 77
Structure of the chapter 80
Reading material 80
Key items 81
Quiz 81
Review questions 84
Chapter 5 Cost of Goods Sold and Inventories 85
5.1 Understanding the Business 88
5.2 Understanding Inventory 88
5.3 Inventory Costing Methods 91
5.4 Inventory Turnover 98
5.5 Internal Control of Inventory 99
5.6 Purchase Returns and Allowances,and Purchase Discounts 100
Structure of the chapter 102
Reading material 102
Key items 103
Quiz 103
Review questions 107
Chapter 6 Long-lived Assets 109
6.1 Classifying Long-lived Assets 112
6.2 Fixed Asset Turnover 114
6.3 Measuring and Recording Acquisition Cost 115
6.4 Repairs,Maintenance,and Additions 116
6.5 Depreciation 117
6.6 Disposal of Property,Plant,and Equipment 124
6.7 Natural Resources 127
6.8 Intangible Assets 128
Structure of the chapter 131
Reading material 131
Key items 132
Quiz 132
Review questions 134
Chapter 7 Bonds and Equity Investments 135
7.1 Types of Investments 138
7.2 Accounting Methods 139
7.3 Debt Held-to-maturity:Amortized Cost Method 141
7.4 Passive Investments:The Market Value Method 143
7.5 Investments for Significant Influence:Equity Method 146
7.6 Controlling Interests:Mergers and Acquisitions 148
7.7 Key Ratio Analysis 149
Structure of the chapter 151
Reading material 151
Key items 152
Quiz 152
Review questions 155
Chapter 8 Liabilities 157
8.1 Liabilities Defined and Classified 160
8.2 Current Liabilities 161
8.3 Long-term Liabilities 164
Structure of the chapter 167
Reading material 167
Key items 168
Quiz 168
Review questions 170
Chapter 9 Statement of Cash Flows 171
9.1 Classifications of the Statement of Cash Flows 174
9.2 Cash Flows from Operating Activities 175
9.3 Cash Flows from Investing and Financing Activities 177
9.4 Additional Cash Flow Disclosures and Key Indicators 178
Structure of the chapter 180
Reading material 180
Key items 182
Quiz 182
Review questions 184
Chapter 10 Financial Statement Analysis 185
10.1 Financial Statement Analysis 187
10.2 Ratio and Percentage Analysis 189
10.3 Market Tests 193
Structure of the chapter 195
Reading material 195
Key items 197
Quiz 197
Review questions 200
Chapter 11 Auditing and Internal Control 201
11.1 The Role of Auditing 204
11.2 Fundamental Concepts in Conducting a Financial Statement Audit 205
11.3 Audit Reporting 207
11.4 Internal Control 209
11.5 Elements of Internal Control 210
Structure of the chapter 221
Reading material 221
Key items 222
Quiz 222
Review questions 224
Chapter 12 Principle of Corporate Finance 225
12.1 What is Corporate Finance 228
12.2 The Firm and the Financial Markets 230
12.3 Future Value 233
12.4 Present Value 235
12.5 Net Present Value 236
12.6 Simplifications 237
12.7 What Is a Firm Worth? 241
12.8 Common Stock 241
12.9 Long-term Debt 245
12.10 Summary and Conclusions 249
Structure of the chapter 250
Reading material 250
Key items 252
Quiz 252
Review questions 256
Mock Exam Paper 259
Answers 271
References 319
Index of Key Items 323