Part One Fundamental Accounting 1
Chapter 1 An Introduction to Accounting 1
1.1 The Nature of Accounting 1
1.2 The History and Development ofAccounting 3
1.3 Users of Accounting Information 4
1.4 Accounting Profession 5
1.5 Financial Accounting and Managerial Accounting 6
1.5.1 Managerial accounting 6
1.5.2 Financial accounting 7
1.5.3 Managerial accounting versus financial accounting 7
1.6 Ethics and Accounting 8
1.6.1 Ethics in Business 8
1.6.2 Ethics in Your Future Career 9
Summary of Learning Objectives 10
Accounting Vocabulary 11
Notes to the Tlext 12
Reading Material 14
Assignment Material 14
Chapter 2 The Accounting Equation and the Account 16
2.1 Types ofBusiness Organizations 16
2.2 The Accounting Equation 17
2.3 The Effects of Business Transactions on the Accounting Equation 18
2.4 The Account 23
2.4.1 The T Account 23
2.4.2 Management's Use of Accounts 24
2.4.3 The Ledger 24
2.4.4 Types of Commonly Used Accounts 25
2.4.5 Titles of Accounts 27
Summary of Learning Objectives 28
Accounting Vocabulary 29
Notes to the Text 30
Reading Material 32
Assignment Material 32
Chapter 3 Recording Business Transactions 36
3.1 Double-Entry Bookkeeping 36
3.2 Recording Business Transaction 39
3.2.1 Recording Transactions in Journals 39
3.2.2 Posting from the Journal to the Ledger 41
3.3 Illustrative Problem 42
3.4 The Trial Balance 44
Summary of Learning Objectives 46
Accounting Vocabulary 46
Notes to the Text 47
Reading Material 48
Assignment Material 49
Chapter 4 Basic Financial Statements 55
4.1 Financial Statements 55
4.1.1 The Balance Sheet 55
4.1.2 The Income Statement 56
4.1.3 The Statement of Owner's Equity 57
4.1.4 The Statement of Changes in Financial Position 58
4.1.5 Relationship of the Financial Statements 59
4.2 The Balance Sheet 61
4.2.1 Classification of Assets and Liabilities 61
4.2.2 Formats of Balance Sheet 62
4.2.3 Current Ratio and Debt Ratio 65
4.3 The Income Statement 66
4.3.1 Formats of Income Statement 66
4.3.2 Gross Margin Percentage and Inventory Turnover 69
Summary of Learning Objectives 71
Accounting Vocabulary 72
Notes to the Text 73
Reading Material 75
Assignment Material 76
Chapter 5 The Measurement of Business Income 80
5.1 Business Income 80
5.2 Some Generally Accepted Accounting Principles 82
5.2.1 Accrual-Basis Accounting 82
5.2.2 The Accounting Period 83
5.2.3 Revenue Principle 84
5.2.4 Matching Principle 85
5.2.5 Time-Period Concept 85
5.3 Adjustments to the Accounts 86
5.4 Adiusted Trial Balance 96
5.5 Preparing the Financial Statements from the Adjusted Trial Balance 97
Summary of Learning Objectives 100
Accounting Vocabulary 101
Notes to the Text 102
Reading Material 104
Assignment Material 105
Chapter 6 Completing the Accounting Cycle(Ⅰ) 109
6.1 The Accounting Cycle 109
6.2 Preparation of the Work Sheet 110
6.2.1 The Accountant's Work Sheet 110
6.2.2 Steps in Preparing the Work Sheet 110
6.3 Uses of the Work Sheet 118
6.3.1 Preparing the Financial Statements 118
6.3.2 Recording the Adjusting Entries 120
6.4 Closing the Accounts 122
Summary of Learning Objectives 125
Accounting Vocabulary 126
Notes to the Text 127
Reading Material 128
Assignment Material 129
Chapter 7 Completing the Accounting Cycle(Ⅱ) 133
7.1 The Operation Cycle for a Merchandising Business 133
7.2 Accounting Record of the Operating Cycle 134
7.2.1 Purchase of Inventory 134
7.2.2 Purchase Discounts 135
7.2.3 Purchase Returns and Allowances 136
7.2.4 Transportation Costs 137
7.2.5 Sale of Inventory 138
7.2.6 Sales Discounts,Sales Returns and Allowances 139
7.2.7 Cost of Goods Sold 140
7.3 The Accounting Cycle for a Merchandising Business 143
7.3.1 The Adjusting and Closing Process for a Merchandising Business 143
7.3.2 Work Sheet of a Merchandising Business 143
7.3.3 Financial Statements of a Merchandising Business 146
7.3.4 Adjust and Close the Accounts of a Merchandising Business 149
Summary of Learning Objectives 150
Accounting Vocabulary 151
Notes to the Text 152
Reading Material 154
Assignment Material 155
Chapter 8 Ledgers and Journals 164
8.1 Ledgers 164
8.2 Journals 165
8.3 Special Journals 166
8.3.1 Sales Journal 166
8.3.2 Cash Receipts Journal 169
8.3.3 Purchase Journal 172
8.3.4 Cash Disbursements Journal 175
Summary of Learning Objectives 178
Accounting Vocabulary 179
Notes to the Text 180
Reading Materials 181
Assignment Material 183
Part Two Financial Accounting 187
Chapter 9 Cash and Internal Control 187
9.1 Definition of Internal Control 187
9.2 Basic Principle and Policies 188
9.3 Internal Cash Control 189
9.3.1 Individual Cash Accountability 189
9.3.2 Cash Recording 190
9.3.3 Cash Depositing 190
9.3.4 Reconciliation 191
9.3.5 Refunds and Voids 191
9.3.6 Safeguarding Cash 191
9.4 Internal Control over Merchandise Transactions 192
9.4.1 Control of Sales and Cash Receipts 193
9.4.2 Control of Purchases and Cash Disbursements 195
9.4.3 Control of Purchases Discounts 195
9.5 The Bank Account:a Control Device 196
9.5.1 Bank Statement 196
9.5.2 Bank Reconciliation 196
9.5.3 Preparation of Bank Reconciliation 200
9.5.4 Recording Entries from the Reconciliation 202
Summary of Learning Objectives 203
Accounting Vocabulary 205
Notes to the Text 206
Reading Materials 208
Assignment Material 209
Chapter 10 Accounts Receivable and Notes Receivable 212
10.1 Accounts Receivable and Notes Receivable 212
10.2 Accounting for Notes Receivable 214
10.3 Uncollectible Accounts Expenses 215
10.4 The Two Methods of Accounting for Bad Debts 217
10.4.1 Allowance Method 217
10.4.2 Direct Write-off Method of Accounting for Uncollectibles 221
Summary of Learning Objectives 221
Accounting Vocabulary 222
Notes to the Text 223
Reading Material 224
Assignment Material 225
Chapter 11 Accounting for Inventory 228
11.1 The Basic Concept of Inventory Accounting 228
11.2 Inventory Accounting System 229
11.3 Calculating the Cost of Inventory 231
11.3.1 Inventory Costing Method 231
11.3.2 Comparing Inventory Costing Methods 234
11.4 Valuation of Inventory at Other than Cost 235
11.4.1 Valuation at Lower-of-Cost-or-Market 235
11.4.2 Valuation at Net Realizable Value 236
11.5 Estimating Inventory Cost 236
11.5.1 Retail Method of Inventory Costing 236
11.5.2 Gross Profit Method of Estimating Inventories 238
Summary of Learning Objectives 238
Accounting Vocabulary 240
Notes to the Text 241
Reading Material 242
Assignment Material 244
Chapter 12 Non-current Assets and Intangible Assets 248
12.1 Non-current Assets 248
12.2 Depreciation Methods 251
12.3 Disposal of Fixed Assets 255
12.4 Intangible Assets 257
12.5 Amortization of Intangible Assets 259
Summary of Learning Objectives 260
Accounting Vocabulary 261
Notes to the Text 262
Reading Material 263
Assignment Material 264
Chapter 13 Current Liabilities and Payroll Accounting 267
13.1 Current Liabilities 267
13.2 Accounts Payable 268
13.3 Notes Payable 269
13.4 Payroll Accounting 271
13.5 Internal Control Over Payroll 274
Summary of Learning Objectives 275
Accounting Vocabulary 276
Notes to the Text 277
Reading Material 278
Assignment Material 279
Chapter 14 Non-current Liabilities 282
14.1 Non-current Liabilities 282
14.2 Types of Bonds 283
14.3 Accounting for Issuing Bonds 284
14.4 Adjusting Entries for Interesting Expenses 288
14.5 Accouting for Redeeming Bonds 290
14.6 Convertible Bonds 291
Summary of Learning Objectives 292
Accounting Vocabulary 293
Notes to the Text 294
Reading Material 295
Assignment Material 296
Chapter 15 Shareholder's Equity 299
15.1 The Characteristics of a Corporation 299
15.2 Share Capital 300
15.3 Shareholder's Equity 301
15.4 Issuing Stock 301
15.4.1 Issuing Stock for Cash 301
15.4.2 Issuing Common Stock for Services or Non-cash Asset 303
15.4.3 Issuing Preferred Stock 304
15.5 Accounting for Dividends 305
15.6 Accounting for Income Taxes 306
15.7 Retained Earnings 307
Summary of Learning Objectives 310
Accounting Vocabulary 311
Notes to the Text 312
Reading Material 312
Assignment Material 314
Part Three Analysis of Accounting Information 318
Chapter 16 Preparing and Using the Financial Statements 318
16.1 Introduction to Financial Statements 318
16.1.1 Classified Financial Statements 319
16.1.2 Relationships among the Financial Statements 321
16.2 The Balance Sheet 322
16.2.1 Formats of the Balance Sheet 323
16.2.2 Elements of the Balance Sheet 324
16.2.3 Preparation of the Balance Sheet 327
16.3 The Income Statement 327
16.3.1 Formats of the Income Statement 328
16.3.2 Elements of the Income Statement 329
16.3.3 Preparation of the Income Statement 330
16.4 The Cash Flow Statement 330
16.4.1 Elements of the Cash Flow Statement 331
16.4.2 Formats of the Cash Flow Statement 332
16.4.3 Preparation of the Cash Flow Statement 333
Summary of Learning Objectives 334
Accounting Vocabulary 336
Notes to the Text 337
Reading Material 338
Assignment Material 339
Chapter 17 Financial Statement Analysis 342
17.1 An Introduction of Financial Statement Analysis 342
17.2 Percentage Analysis 345
17.2.1 Horizontal Analysis 345
17.2.2 Trend Analysis 346
17.2.3 Vertical Analysis 347
17.3 Ratio Analysis 347
17.3.1 Profitability Ratios 348
17.3.2 Liquidity Ratios 353
17.3.3 Financial Stability Ratios 357
Summary of Learning Objectives 360
Accounting Vocabulary 361
Notes to the Text 362
Reading Material 363
Assignment Material 364
Appendix 368
Appendix Ⅰ:How to Read Original English Textbook of Accounting 368
Appendix Ⅱ:Reference Versions for Reading Materials 371
Appendix Ⅲ:Answers to Assignment Material 385
Appendix Ⅳ:Recommended Websites of Accounting 421
Appendix Ⅴ:A List of Reference Book 422