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PDF Ebook Accounting Demystified

Submitted by antoq on Sat, 07/18/2009 - 08:44

The success or failure of a business is measured in dollars. And dollars are recorded and reported using accounting. Accounting is truly the language of business. No matter what your role may be, if you are involved in business, you can benefit from learning accounting. That’s what this book is all about—taking the subject and making it understandable and accessible.

This book makes an excellent companion to any standard text, or it can be used as a stand-alone volume. It is designed to present the subject in a straightforward, approachable manner. Financial accounting is an incremental process. What you learn in earlier chapters is used in later ones. There are no shortcuts to learning financial accounting, but at the same time, if it is taught clearly, it is not difficult.

Financial accounting involves all the steps from the original entries in the accounting records to the preparation of financial statements. There are other types of accounting as well, such as managerial accounting, cost accounting, and tax accounting, to name a few. These other types of accounting are covered in other books. The end user of financial accounting is the public; therefore, financial accounting has a lot of rules. These rules are necessary to make the information presented in the financial statements consistent and understandable. In contrast, in managerial accounting, which is used by the managers of a business to improve the business’s operations, efficiency, and profitability, there are relatively few rules. Instead, it primarily consists of techniques that have proved themselves over time.

The organization of this book is intended to present the material in the order in which it needs to be understood. Therefore, we start with the end product of financial accounting, the financial statements, then jump back to the first step in the accounting process, making journal entries. This may seem out of order, but it follows the way accounting is best understood and learned rather than following the chronology of how accounting is done.

You cannot be a good accountant if you are not a good bookkeeper. Bookkeeping is considered a lower-level profession than accounting, and this perception is accurate because accountants possess skills that bookkeepers do not. However, the first step in learning accounting is to learn bookkeeping. What makes it accounting and not simply bookkeeping is going beyond just recording the entries into such areas as preparing the financial statements, analyzing the statements, and making necessary adjusting entries at the end of the accounting period.

A last thing to keep in mind when reading this book and looking at the examples and descriptions is that how things are presented and how they are arranged are highly variable in practice. Companies and managers adapt forms, schedules, and statements to meet their own needs (within the existing rules). Except as specifically prescribed by accounting guidance, there is an abundance of flexibility. A nimble mind will come in handy in trying to reconcile what is described in this book with what you may see in the real world. Sometimes these will be the same and sometimes there will be minor differences in presentation, but even given that variability, it should not be hard to take what you learn from this book and relate it directly to real-world situations.

Contents
Acknowledgments
Chapter 1
Introduction
Chapter 2 Financial Statements

    Income Statement
    Statement of Retained Earnings
    Balance Sheet
    Summary

Chapter 3 The Accounting Process

    Journalize
    The Accounting Equation
    Post
    Trial Balance
    Finding Errors
    Rest of the Process
    Summary

Chapter 4 Making the Entries

    Analogies to Personal Life
    Some Examples
    Summary

Chapter 5 Assets
Chapter 6 Cash

    Petty Cash
    Bank Reconciliation

Chapter 7 Accounts Receivable

    Control Account/Subsidiary Ledger
    Bad Debts
    Direct Write-Off Method
    Allowance Method

Chapter 8 Inventory

    Specific Identification
    First-In, First-Out
    Last-In, First-Out
    Weighted Average
    Things to Keep in Mind

Chapter 9 Prepaid Expenses
Chapter 10 Other Receivables

    Loan Term
    Interest
    Entries

Chapter 11 Fixed Assets Land

    Land Improvements
    Leasehold Improvements
    Buildings
    Equipment and Machinery
    Furniture
    Fixtures
    Vehicles
    Depreciation
    Straight-Line Depreciation
    Declining-Balance Depreciation
    Partial-Year Depreciation
    Retirement
    Asset Sale

Chapter 12 Intangible Assets
Chapter 13 Liabilities

    Unearned Revenue
    Accrued Expenses

Chapter 14 Accounts Payable
Chapter 15 Other Payables

    Interest Payable
    Rent Payable
    Taxes Payable
    Salaries Payable
    Payroll Taxes Payable

Chapter 16 Stockholders’ Equity

    Types of Stock
    Common Stock
    Recording the Issuance
    Treasury Stock
    Dividends

Chapter 17 Merchandising Companies

    Perpetual Inventory System
    Periodic Inventory System
    Discounts for Early Payment
    Side-by-Side Comparison of the Periodic and
    Perpetual Systems

Chapter 18 Adjusting and Closing Entries

    Payroll Accrual
    Reversing Entries
    Interest Expense
    Unearned Revenue
    Prepaid Expenses
    Closing Entry

Chapter 19 Specialized Journals

    Cash Receipts Journal
    Cash Disbursements Journal
    Purchases Journal
    Sales Journal
    Payroll Journal

Chapter 20 Statement of Cash Flows

    Direct Method
    Indirect Method

Chapter 21 Ratio Analysis

    Horizontal and Vertical Analysis
    Ratio Analysis
    Liquidity Ratios
    Efficiency Ratios
    Profitability Ratios
    Summary

Glossary
Index

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PDF Ebook Accounting Demystified

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