Accounting Principles: A Business Perspective

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Accounting Principles: A Business Perspective Course Outline


Concepts Covered:

  • The accounting environment
  • Accounting defined
  • Financial accounting versus managerial accounting
  • Development of financial accounting standards
  • Ethical behavior of accountants

Accounting and its use in business decisions

Concepts Covered:

  • Forms of business organizations
  • Types of activities performed by business organizations
  • Financial statements of business organizations
  • The financial accounting process
  • Analyzing and using the financial results—the equity ratio

Recording business transactions

Concepts Covered:

  • The account and rules of debit and credit
  • The accounting cycle
  • The journal
  • The ledger
  • The accounting process in operation

Adjustments for financial reporting

Concepts Covered:

  • Cash versus accrual basis accounting
  • Classes and types of adjusting entries
  • Adjustments for deferred items
  • Adjustments for accrued items

Completing the accounting cycle

Concepts Covered:

  • The accounting cycle summarized
  • The work sheet
  • Preparing financial statements from the work sheet
  • Journalizing adjusting entries
  • The closing process
  • Accounting systems: From manual to computerized
  • A classified balance sheet
  • Analyzing and using the financial results — the current ratio

Accounting theory

Concepts Covered:

  • Traditional accounting theory
  • Other basic conceptsThe measurement process in accounting
  • The major principles
  • Modifying conventions (or constraints)
  • The financial accounting standards board’s conceptual framework project
  • Objectives of financial reporting
  • Qualitative characteristics
  • Recognition and measurement in financial statements

Merchandising transactions

Concepts Covered:

  • Introduction to inventories and the classified income statement
  • Two income statements compared— Service company and merchandising company
  • Sales revenues
  • Cost of goods sold
  • Classified income statement
  • Analyzing and using the financial results—Gross margin percentage

Measuring and reporting inventories

Concepts Covered:

  • Inventories and cost of goods sold
  • Determining inventory cost
  • Departures from cost basis of inventory measurement

Control of cash

Concepts Covered:

  • Internal control
  • Controlling cash
  • The bank checking account
  • Bank reconciliation
  • Petty cash funds
  • Analyzing and using the financial results—The quick ratio

Receivables and payables

Concepts Covered:

  • Accounts receivable
  • Current liabilities
  • Notes receivable and notes payable
  • Short-term financing through notes payable
  • Analyzing and using the financial results—Accounts receivable turnover and number of days’ sales in accounts receivable

Property, plant, and equipment

Concepts Covered:

  • Nature of plant assets
  • Initial recording of plant assets
  • Depreciation of plant assets
  • Subsequent expenditures (capital and revenue) on assets
  • Subsidiary records used to control plant assets
  • Analyzing and using the financial results—rate of return on operating assets

Plant asset disposals, natural resources, and intangible assets

Concepts Covered:

  • Disposal of plant assets
  • Intangible assets
  • Analyzing and using the financial results—total assets turnover

Stockholders' equity: classes of capital stock

Concepts Covered:

  • The corporation
  • Documents, books, and records relating to capital stock
  • Par value and no-par capital stock
  • Other values commonly associated with capital stock
  • Capital stock authorized and outstanding
  • Classes of capital stock
  • Types of preferred stock
  • Balance sheet presentation of stock
  • Stock issuances for cash
  • Capital stock issued for property or services
  • Balance sheet presentation of paid-in capital in excess of par (or stated) value—common or preferred
  • Analyzing and using the financial results—return on average common stockholders’ equity

Corporations: Paid-in capital, retained earnings, dividends, and treasury stock

Concepts Covered:

  • Paid-in (or contributed) capital
  • Retained earnings
  • Paid-in capital and retained earnings on the balance sheet
  • Retained earnings appropriations
  • Statement of retained earnings
  • Statement of stockholders’ equity
  • Treasury stock
  • Net income inclusions and exclusions
  • Analyzing and using the financial results—earnings per share and price-earnings ratio

Stock investments

Concepts Covered:

  • Cost and equity methods
  • Consolidated balance sheet at time of acquisition
  • Accounting for income, losses, and dividends of a subsidiary
  • Consolidated financial statements at a date after acquisition
  • Uses and limitations of consolidated statements
  • Analyzing and using the financial results—Dividend yield on common stock and payout ratios

Long-term financing: Bonds

Concepts Covered:

  • Bonds payable
  • Bond prices and interest rates
  • Analyzing and using the financial results—times interest earned ratio

Analysis using the statement of cash flows

Concepts Covered:

  • Purposes of the statement of cash flows
  • Uses of the statement of cash flows
  • Information in the statement of cash flows
  • Cash flows from operating activities
  • Steps in preparing statement of cash flows
  • Analysis of the statement of cash flows
  • Analyzing and using the financial results—cash flow per share of common stock, cash flow margin, and cash flow liquidity ratios

Analysis and interpretation of financial statements

Concepts Covered:

  • Objectives of financial statement analysis
  • Sources of information
  • Horizontal analysis and vertical analysis: an illustration
  • Trend percentages
  • Ratio analysis

Managerial accounting concepts/job costing

Concepts Covered:

  • Compare managerial accounting with financial accounting
  • Merchandiser and manufacturer accounting: differences in cost concepts
  • Financial reporting by manufacturing companies
  • The general cost accumulation model
  • Job costing
  • Predetermined overhead rates

Process: cost systems

Concepts Covered:

  • Nature of a process cost system
  • Process costing illustration
  • Process costing in service organizations

Using accounting for quality and cost management

Concepts Covered:

  • Importance of good accounting information
  • Quality and customer satisfaction measures
  • Just-in-time method
  • Activity-based costing and management
  • Methods used for activity-based costing
  • Impact of new production environment on cost drivers
  • Activity-based costing in marketing
  • Strategic use of activity-based management
  • Behavioral and implementation issues
  • Opportunities to improve activity-based costing in practice

Cost-volume-profit analysis

Concepts Covered:

  • Cost behavior patterns
  • Methods for analyzing costs
  • Cost-volume-profit (CVP) analysis
  • Finding the break-even point
  • Cost-volume-profit analysis illustrated
  • Assumptions made in cost-volume-profit analysis
  • Using computer spreadsheets for CVP analysis
  • Effect of automation on cost-volume-profit analysis

Short-term decision making: Differential analysis

Concepts Covered:

  • Contribution margin income statements
  • Differential analysis
  • Applications of differential analysis
  • Applying differential analysis to quality

Budgeting for planning and control

Concepts Covered:

  • The budget—for planning and control
  • The master budget illustrated
  • Budgeting in merchandising companies
  • Budgeting in service companies
  • Additional concepts related to budgeting

Control through standard costs

Concepts Covered:

  • Uses of standard costs
  • Advantages and disadvantages of using standard costs
  • Computing variances
  • Goods completed and sold
  • Investigating variances from standard
  • Disposing of variances from standard
  • Nonfinancial performance measures
  • Activity-based costing, standards, and variances

Responsibility accounting: segmental analysis

Concepts Covered:

  • Responsibility accounting
  • Responsibility reports
  • Responsibility centers
  • Transfer prices
  • Use of segmental analysis
  • Concepts used in segmental analysis
  • Investment center analysis
  • Economic value added and residual income
  • Segmental reporting in external financial statements

Capital budgeting:long-range planning

Concepts Covered:

  • Capital budgeting defined
  • Profitability index
  • Investments in working capital
  • The postaudit
  • Investing in high technology projects
  • Capital budgeting in not-for-profit organizations
  • Epilogues


About the book

Accounting Principles: A Business Perspective

Accounting Principles: A Business Perspective uses annual reports of real companies to illustrate many of the accounting concepts in use in business today. Gaining an understanding of accounting terminology and concepts, however, is not enough to ensure your success. You also need to be able to find information on the Internet, analyze various business situations, work effectively as a member of a team, and communicate your ideas clearly. This text was developed to help you develop these skills.

About the authors:

Senior Contributing Authors

Roger Hermanson, Georgia State University
James Edwards, University of Georgia
Michael Maher, University of California at Davis

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