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Financial Accounting, Third Edition
360Textbook: Contents

Chapter 1: Introduction to accounting

1.1 The role of accounting information

  • What is accounting?
  • Users of accounting information
  • Financial accounting and management accounting

1.2 The regulatory environment

  • Generally accepted accounting principles (GAAP)
  • Financial Accounting Standards Board (FASB)
  • Securities and Exchange Commission (SEC)
  • International Accounting Standards Board (IASB)
  • General principles of accounting

1.3 Business structures

  • Introduction to business structures
  • Income tax and business structures
  • Summary of business structures

1.4 The accounting equation

  • The accounting equation
  • Assets
  • Liabilities
  • Equity
  • The expanded accounting equation
  • Capital
  • Withdrawals
  • Revenues
  • Expenses

1.5 Transaction analysis using the accounting equation

  • Transaction analysis
  • Steps in transaction analysis
  • Recording transactions using the accounting equation
  • A. Cash investment by owner
  • B. Purchased an asset with cash
  • C. Purchased an asset on credit
  • D. Paid for an asset purchased on credit
  • E. Received loan
  • F. Performed services for cash
  • G. Performed services on credit
  • H. Received cash from Accounts Receivable
  • I. Paid expense with cash
  • J. Owner withdraws cash from business
  • K. Non business transaction
  • Summary of transactions A to K introduced in this chapter

1.6 Introduction to financial statements

  • Financial statements
  • General points to note about financial statements
  • Income statement
  • Statement of changes in owner's equity
  • Balance sheet
  • Statement of cash flows
  • Relation between the financial statements

Chapter 2: Analyzing transactions

2.1 Introducing the accounting cycle

  • The accounting cycle
  • Source documents
  • The account
  • Asset accounts
  • Liability accounts
  • Equity accounts
  • Revenue accounts
  • Expense accounts
  • Chart of accounts

2.2 Introducing debits and credits

  • Debits, credits and T-accounts
  • Running balance account
  • Comparison of account formats
  • Double-entry accounting
  • General rules of debits and credits
  • Extension of the general rules
  • The normal balance of an account

2.3 General journal and general ledger

  • Journalizing transactions
  • The general journal
  • Posting to the general ledger
  • Posting entries using the running balance account format
  • Posting entries using the T-account format

2.4 An illustration of transaction analysis

  • An illustration of transaction analysis
  • A. Cash investment by owner
  • B. Purchased an asset with cash
  • C. Purchased an asset on credit
  • D. Paid for an asset purchased on credit
  • E. Received loan
  • F. Performed services for cash
  • G. Performed services on credit
  • H. Received cash from Accounts Receivable
  • I. Paid expense with cash
  • J. Owner withdraws cash from business
  • K. Non business transaction
  • L. Prepaid expense
  • M. Repayment of loan
  • N. Unearned revenue
  • O. Compound journal entry - Performed services for cash and credit
  • Summary of an illustration of transaction analysis

2.5 Trial balance

  • Trial balance
  • Preparing a trial balance
  • Identifying trial balance errors
    • Error type 1: Missing account
    • Error type 2: Incorrect debit/credit column used
    • Error type 3: Transposition or slide errors
  • Correcting errors
  • Journalizing correcting entries
  • Limitations of the trial balance
  • Preparing the financial statements from the trial balance

Chapter 3: Adjusting the accounts

3.1 Timing and reporting

  • The accounting period
  • Time period principle
  • Cash basis versus accrual basis
  • Recognizing revenues and expenses

3.2 Introduction to adjusting entries

  • Adjusting entries
  • Types of adjustments
  • Adjusting entries and the accounting cycle

3.3 Recording adjusting entries

  • Background information for adjusting entries
  • Prepaid expenses (Deferred expenses)
  • Depreciation
  • Unearned revenues
  • Accrued expenses
  • Accrued revenues
  • Summary of adjusting entries

3.4 The adjusted trial balance and financial statements

  • Adjusted trial balance
  • Preparing the financial statements from the adjusted trial balance

Appendix 3A: An alternative method of recording deferrals

  • Recording prepaid expenses in an expense account
  • Recording unearned revenues in a revenue account

Chapter 4: Completing the accounting cycle

4.1 The accounting worksheet

  • Accounting worksheet
  • Benefits of using a worksheet
  • Preparing a worksheet
  • Financial statements prepared from the worksheet
  • The purpose of using a worksheet

4.2 Classified balance sheet

  • Classified balance sheet

4.3 Closing entries

  • Closing the accounts
  • Temporary and permanent accounts
  • Recording closing entries
  • Summary of closing entries

4.4 Post-closing trial balance

  • Post-closing trial balance

4.5 Summary of the accounting cycle

  • Summary of the accounting cycle

4.6 The accounting cycle for partnerships and corporations

  • Completing the accounting cycle of a partnership
  • Completing the accounting cycle of a corporation

Appendix 4A: Reversing entries

  • Reversing entries
  • Illustration of reversing entries
  • The purpose of reversing entries

Chapter 5: Accounting for merchandising operations

5.1 Merchandising operations

  • Merchandising operations
  • The operating cycle of a merchandiser
  • Perpetual and periodic inventory systems

5.2 Recording purchases of merchandise (Perpetual inventory system)

  • Background information
  • Invoice
  • Purchase of merchandise for cash
  • Purchase of merchandise on credit
  • Purchase returns and allowances
  • Trade discounts on purchases
  • Purchase discounts
  • Transportation costs

5.3 Recording sales of merchandise (Perpetual inventory system)

  • Sale of merchandise on credit
  • Sales returns and allowances
  • Trade discounts on sales
  • Sales discounts
  • Sales taxes

5.4 Completing the accounting cycle of a merchandiser

  • Adjusting entries
  • Financial statements of a merchandiser
  • Closing entries of a merchandiser

5.5 The financial statements of a merchandiser

  • Multiple-step income statement
  • Single-step income statement
  • Classified balance sheet

Appendix 5A: Periodic inventory system

  • Periodic inventory system
  • Inventory transactions: periodic vs perpetual
  • Adjusting entries: periodic vs perpetual
  • Closing entries: periodic vs perpetual
  • The cost of goods sold under the periodic inventory system
  • Financial statements under the periodic inventory system

Appendix 5B: The accounting worksheet for merchandisers

  • Worksheet - (perpetual inventory)
  • Worksheet - (periodic inventory)

Chapter 6: Inventories

6.1 Inventory fundamentals

  • Defining inventory
  • Identifying inventory
  • Determining inventory costs

6.2 Inventory costing methods (perpetual inventory system)

  • Inventory costing methods
  • An illustration of inventory cost flow methods - perpetual inventory system
  • Specific identification - perpetual inventory system
  • First-in, first-out (FIFO) - perpetual inventory system
  • Last-in, first-out (LIFO) - perpetual inventory system
  • Moving average - perpetual inventory system
  • Comparison of inventory costing methods
  • Selecting an inventory costing method
  • Characteristics of each inventory costing method

6.3 Recording returns of merchandise using inventory cards (perpetual inventory system)

  • Recording purchase returns into inventory cards - perpetual inventory
  • Recording sales returns into inventory cards - perpetual inventory
  • An illustration of returns using inventory cards - perpetual inventory

6.4 Valuing inventory at other than cost

  • Lower of cost or market
  • Calculating the ending balance of inventory using the LCM rule
  • Journalizing the adjusting entry to record inventory at LCM
  • Inventory errors and their effects on the financial statements

Appendix 6A: Inventory costing methods (Periodic inventory system)

  • An illustration of inventory cost flow methods - Periodic inventory system
  • Specific identification - periodic inventory system
  • First-in, first-out (FIFO) - periodic inventory system
  • Last-in, first-out (LIFO) - periodic inventory system
  • Weighted average - periodic inventory system

Chapter 7: Special journals and subsidiary ledgers

7.1 Introduction to special journals and subsidiary ledgers

  • Special journals
  • Control accounts and subsidiary ledgers

7.2 Sales cycle: the sales journal and cash receipts journal

  • Sales journal - perpetual inventory system
  • Sales journal - periodic inventory system
  • Cash receipts journal - perpetual inventory system
  • Cash receipts journal - periodic inventory system
  • Schedule of accounts receivable

7.3 Purchases cycle: the purchases journal and cash payments journal

  • Purchases journal - perpetual inventory system
  • Multi-purpose purchases journal
  • Purchases journal - periodic inventory system
  • Cash payments journal - perpetual inventory system
  • Cash payments journal - periodic inventory system
  • Schedule of accounts payable

7.4 Using the general journal with special journals and subsidiary ledgers

  • How special journals affect the general journal

Addendum: Bank Reconciliation

  • Bank statement
  • Bank reconciliation
  • An illustration of a bank reconciliation
  • The bank reconciliation process

Glossary