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From the first edition of this textbook and through the years since, we have benefited greatly from feedback provided by numerous instructors and students of accounting principles courses throughout the country.We offer our thanks to those many people for their criticism, constructive suggestions, and innovative ideas.We are indebted to the following people for their contributions to the most recent editions of the book.
all about Y U * The “All About You” feature promotes financial literacy These full-page boxes will get students thinking and talking about how accounting impacts their personal lives Students are more likely to understand the accounting concept being made within the textbook when accounting material is linked to a familiar topic Each All About You box presents a highinterest issue related to the chapter topic, offers facts about it, poses a situation for students to think about, and offers brief opposing answers as a starting place for further discussion As a feedback mechanism, the authors’ comments and opinions about the situation appear at the end of the chapter In addition, an “All About You” Activity, located in the Broadening Your Perspective section near the end of the assignment material, offers further opportunity to explore aspects of the topic in a homework assignment CHAPTER Accounting in Action Ethics: Managing Personal Financial Reporting (p 25) Compares filing for financial aid to corporate financial reporting Presents facts about student debt loads Asks whether students should present a negative financial picture to increase the chance of receiving financial aid quick guide CHAPTER 10 Plant Assets, Natural Resources, and Intangible Assets Buying a Wreck of Your Own (p 460) Presents information about costs of new versus used cars Asks whether students could improve their economic well-being by buying a used car CHAPTER 11 Current Liabilities and Payroll Accounting Your Boss Wants to Know If You Jogged Today (p 506) Discusses ways to contain costs of health-care spending Asks students to consider whose responsibility it is to maintain healthy lifestyles to control health-care costs CHAPTER 14 Corporations: Dividends, Retained Earnings, and Income Reporting Corporations Have Governance Structures— Do You? (p 624) Discusses codes of ethics in business and at college Presents facts about abuse of workplace codes of ethics and responses of stockholders Asks students for opinions on whether schools’ codes of ethics serve a useful purpose CHAPTER The Recording Process CHAPTER 20 Job Order Cost Accounting Your Personal Annual Report (p 72) Minding Your Own Business (p 906) Focuses on how small business owners calculate product costs Presents facts about sole proprietorships and franchises Poses a start-up business idea and asks students to evaluate the cost of labor input Likens a student’s résumé to a company’s annual report Asks students to consider whether firing Radio Shack’s CEO for résumé falsehoods was warranted CHAPTER Completing the Accounting Cycle Your Personal Balance Sheet (p 169) Walks students through identification of personal assets and personal liabilities Presents facts about Americans’ wealth and attitudes toward saving versus spending Asks if college is a good time to prepare a personal balance sheet CHAPTER 22 Cost-Volume-Profit A Hybrid Dilemma (p 995) Explores the cost tradeoffs of hybrid vehicles Asks students to evaluate the pros and cons of buying a hybrid vehicle CHAPTER 23 Budgetary Planning CHAPTER Inventories Avoiding Personal Financial Disaster (p 1038) Employee Theft—An Inside Job (p 268) Explores personal budgets for college students Asks students to look at a budgeting calculator and consider whether student loans should be considered a source of income Discusses the problem of inventory theft and how companies keep it in check Asks students’ opinions on the use of video cameras to reduce theft CHAPTER 26 Incremental Analysis and Capital Budgeting CHAPTER Internal Control and Cash Protecting Yourself from Identity Theft (p 373) Likens corporate internal controls to individuals’ efforts to protect themselves from identity thieves Presents facts about how thieves use stolen data Asks students about the safety of storing personal financial data on computers What Is a Degree Worth? (p 1176) Presents facts about cost of college, and benefits of college education Asks students to consider the value of a college education CHAPTER Accounting for Receivables Should You Be Carrying Plastic? (p 416) Discusses the need for individuals to evaluate their credit positions as thoughtfully as companies Presents facts about college-student debt and Americans’ use of credit cards Asks whether students should cut up their credit cards PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark th Edition Accounting Principles PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark ACKNOWLEDGMENTS From the first edition of this textbook and through the years since, we have benefited greatly from feedback provided by numerous instructors and students of accounting principles courses throughout the country We offer our thanks to those many people for their criticism, constructive suggestions, and innovative ideas We are indebted to the following people for their contributions to the most recent editions of the book Reviewers and Focus Group Participants for the Ninth Edition John Ahmad, Northern Virginia Community College— Annandale; Colin Battle, Broward Community College; Beverly Beatty, Anne Arundel Community College; Jaswinder Bhangal, Chabot College; Leroy Bugger, Edison Community College; Ann Cardozo, Broward Community College; Kimberly Charland, Kansas State University; Lisa Cole, Johnson County Community College Tony Dellarte, Luzerne Community College; Pam Donahue, Northern Essex Community College; Dora Estes, Volunteer State Community College; Mary Falkey, Prince Georges Community College; Lori Grady, Bucks County Community College; Joyce Griffin, Kansas City Community College; Lester Hall, Danville Community College; Becky Hancock, El Paso Community College; Audrey Hunter, Broward Community College Naomi Karolinski, Monroe Community College; Kenneth Koerber, Bucks County Community College; Sandra Lang, McKendree College; Cathy Xanthaky Larsen, Middlesex Community College; David Laurel, South Texas Community College; Suneel Maheshwari, Marshall University; Lori Major, Luzerne County Community College; Jim Martin, University of Montevallo Yvonne Phang, Borough of Manhattan Community College; Mike Prockton, Finger Lakes Community College; Richard Sarkisian, Camden Community College; Beth Secrest, Walsh University; Lois Slutsky, Broward Community College; Shafi Ullah, Broward Community College; Patricia Walczack, Lansing Community College; Kenton Walker, University of Wyoming; Patricia Wall, Middle Tennessee State University Reviewers and Focus Group Participants for Recent Editions Sylvia Allen, Los Angeles Valley College; Matt Anderson, Michigan State University; Alan Applebaum, Broward Community College; Juanita Ardovany, Los Angeles Valley College; Yvonne Baker, Cincinnati State Tech Community College; Peter Battelle, University of Vermont; Jim Benedum, Milwaukee Area Technical College; Bernard Bieg, Bucks County College; Michael Blackett, National American University; Barry Bomboy, J Sargeant Reynolds Community College; Kent D Bowen, Butler County Community College; David Boyd, Arkansas State University; Greg Brookins, Santa Monica College; Kurt H Buerger, Angelo State University; Leon Button, Scottsdale Community College Steve Carlson, University of North Dakota; Fatma Cebenoyan, Hunter College; Trudy Chiaravelli, Lansing Community College; Shifei Chung, Rowan University; Siu Chung, Los Angeles Valley College; Kenneth Couvillion, San Joaquin Delta College; Alan B Czyzewski, Indiana State University; Thomas Davies, University of South Dakota; Peggy DeJong, Kirkwood Community College; John Delaney, Augustana College; Kevin Dooley, Kapi’olani Community College; Edmond Douville, Indiana University Northwest; Pamela Druger, Augustana College; Russell Dunn, Broward Community College; John Eagan, Erie Community College; Richard Ellison, Middlesex Community College Raymond Gardner, Ocean County College; Richard Ghio, San Joaquin Delta College; Amy Haas, Kingsborough Community College, CUNY; Jeannie Harrington, Middle Tennessee State University; Bonnie Harrison, College of Southern Maryland; William Harvey, Henry Ford Community College; Michelle Heard, Metropolitan Community College; Ruth Henderson, Union Community College; Ed Hess, Butler County Community College; Kathy Hill, Leeward Community College; Patty Holmes, Des Moines Area Community College; Zach Holmes, Oakland Community College; Paul Holt, Texas A&M-Kingsville; Audrey Hunter, Broward Community College; Verne Ingram, Red Rocks Community College Joanne Johnson, Caldwell Community College; Anil Khatri, Bowie State University; Shirley Kleiner, Johnson County Community College; Jo Koehn, Central Missouri State University; Ken Koerber, Bucks County Community College; Adriana Kulakowski, Mynderse Academy; Robert Laycock, Montgomery College; Natasha Librizzi, Madison Area Technical College; William P Lovell, Cayuga Community College; Melanie Mackey, Ocean County College; Jerry Martens, Community College of Aurora; Maureen McBeth, College of DuPage; Francis McCloskey, Community College of Philadelphia; Chris McNamara, Finger Lakes Community College; Edwin Mah, University of Maryland, University College; Thomas Marsh, Northern Virginia Community College—Annandale; Shea Mears, Des Moines Area Community College; Pam Meyer, University of Louisiana—Lafayette; Cathy Montesarchio, Broward Community College Robin Nelson, Community College of Southern Nevada; Joseph M Nicassio, Westmoreland County Community College; Michael O’Neill, Seattle Central Community College; Mike Palma, Gwinnett Tech; George Palz, Erie Community College; Michael Papke, Kellogg Community College; Ruth Parks, Kellogg Community College; Al Partington, Los Angeles Pierce College; Jennifer Patty, Des Moines Area Community College; Jan Pitera, Broome Community College; Laura M Prosser, Black Hills State University; Bill Rencher, Seminole Community College; Jenny Resnick, Santa Monica College; Renee Rigoni, Monroe Community College; Kathie Rogers, SUNY Suffolk; Al Ruggiero, SUNY Suffolk; Jill Russell, Camden County College Roger Sands, Milwaukee Area Technical College; Marcia Sandvold, Des Moines Area Community College; Kent Schneider, East Tennessee State University; Karen Searle, Paul J Shinal, Cayuga Community College; Kevin Sinclair, xii PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark Acknowledgments Lehigh University; Alice Sineath, Forsyth Tech Community College; Leon Singleton, Santa Monica College; Michael S Skaff, College of the Sequoias; Jeff Slater, North Shore Community College; Lois Slutsky, Broward Community College; Dan Small, J Sargeant Reynolds Community College; Lee Smart, Southwest Tennessee Community College; James Smith, Ivy Tech State College; Carol Springer, Georgia State University; Jeff Spoelman, Grand Rapids Community College; Norman Sunderman, Angelo State University Donald Terpstra, Jefferson; Community College; Lynda Thompson, Massasoit Community College; Sue Van Boven, Paradise Valley Community College; Christian Widmer, Tidewater Community College; Wanda Wong, Chabot College; Pat Walczak, Lansing Community College; Carol N Welsh, Rowan University; Idalene Williams, Metropolitan Community College; Gloria Worthy, Southwest Tennessee Community College Thanks also to “perpetual reviewers” Robert Benjamin, Taylor University; Charles Malone, Tammy Wend, and Carol Wysocki, all of Columbia Basin College; and William Gregg of Montgomery College We appreciate their continuing interest in the book and their regular contributions of ideas to improve it Special Thanks Our thanks also go to the following for their work on the Ninth Edition: Melanie Yon, for preparing end-of-chapter content for WileyPLUS; Sheila Viel, University of WisconsinMilwaukee, for production of interactive chapter reviews and demonstration problems; Richard Campbell, Rio Grande College, for WileyPLUS Accounting Tutors and video material; Naomi Karolinski, Monroe Community College, for General Ledger Software review; Sally Nelson, for General Ledger Software review; Chris Tomas, for General Ledger Software review Thanks, too, to the following for their authorship of supplements: Linda Batiste, Baton Rouge Community College, Test Bank; Mel Coe, DeVry Institute of Technology, Atlanta, Peachtree Workbook; Joan Cook, Milwaukee Area Technical College, Heritage Home Furniture Practice Set; Larry Falcetto, Emporia State University, Test Bank, Instructor’s Manual, Campus Cycle Practice Set; Mark Gleason, Metropolitan State University, Algorithmic Computerized Test Bank; Larry Falcetto, Emporia State University, Test Bank, Lori Grady, Bucks County Community College, Web Quizzes; Coby Harmon, University of California, Santa Barbara, PowerPoint presentations; Marilyn Hunt, M.A., C.P.A., Problem-Solving Survival Guide; Douglas W Kieso, Aurora University, Study Guide; Jill Misuraca, Central Connecticut State University, Web Quizzes; Yvonne Phang, Borough of Manhattan Community College, WileyPLUS Web Quizzes Rex A Schildhouse, San Diego Community College—Miramar, Peachtree Workbook, Excel Workbook and Templates, and QuickBooks Tutorials; Dick Wasson, Southwestern College, Excel Working Papers, Working Papers, and Test Bank We also thank those who have ensured the accuracy of our supplements: LuAnn Bean, Florida Institute of Technology; Jack Borke, University of Wisconsin—Platteville; xiii Robert Derstine, Villanova University; Terry Elliott, Morehead State University; James Emig, Villanova University; Larry Falcetto, Emporia State University; Anthony Falgiani, Western Illinois University; Jennifer Laudermilch, PricewaterhouseCoopers; Kevin McNelis, New Mexico State University; Richard Merryman, Jefferson Community College, State University of New York; Barbara Muller, Arizona State University; Yvonne Phang, Borough of Manhattan Community College; John Plouffe, California State University—Los Angeles; Renee Rigoni, Monroe Community College; Rex Schildhouse, San Diego Community College–Miramar; Alice Sineath, Forsyth Tech Community College; Teresa Speck, St Mary’s University; Lynn Stallworth, Appalachian State University; Sheila Viel, University of Wisconsin—Milwaukee; Dick Wasson, Southwestern College; Bernie Weinrich, Lindenwood University In addition, special recognition goes to Karen Huffman, Palomar College, for her assessment of the text’s pedagogy and her suggestions on how to increase its helpfulness to students; to Gary R., Morrison, Wayne State University, for his review of the instructional design; and to Nancy Galli, Palomar College, for her work on learning styles Finally, special thanks to Wayne Higley, Buena Vista University, for his technical proofing Our thanks to the publishing “pros” who contribute to our efforts to publish high-quality products that benefit both teachers and students: Ann Torbert, development editor; Ed Brislin, project editor; Brian Kamins, associate editor; Allie Morris, media editor; Katie Fraser, editorial assistant; Valerie Vargas, senior production editor; Maddy Lesure, textbook designer; Dorothy Sinclair, managing editor; Pam Kennedy, director of production and manufacturing; Ann Berlin, VP of higher education production and manufacturing; Elle Wagner, photo editor; Sandra Rigby, illustration editor; Suzanne Ingrao of Ingrao Associates, project manager; Karyn Morrison, permissions editor; Jane Shifflet of Aptara Inc., product manager at Aptara Inc.; and Amanda Grant, project manager at Elm Street Publishing Services They provided innumerable services that helped this project take shape We also appreciate the exemplary support and professional commitment given us by Chris DeJohn, associate publisher, and the enthusiasm and ideas that Julia Flohr, senior marketing manager, brings to the project Finally, our thanks for the support provided by the management of John Wiley & Sons, Inc.—Joe Heider, Vice President of Product and e-Business Development; Bonnie Lieberman, Senior Vice President of the College Division; and Will Pesce, President and Chief Executive Officer of John Wiley & Sons, Inc We thank PepsiCo, Inc for permitting us the use of their 2007 annual reports for our specimen financial statements and accompanying notes We will appreciate suggestions and comments from users—instructors and students alike You can send your thought to us via email at AccountingAuthors@yahoo.com Jerry J Weygandt, Madison, Wisconsin Paul D Kimmel, Milwaukee, Wisconsin Donald E Kieso, DeKalb, Illinois PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark Accounting in Action Chapter STUDY OBJECTIVES After studying this chapter, you should be able to: Explain what accounting is Identify the users and uses of accounting Understand why ethics is a fundamental business concept Explain generally accepted accounting principles and the cost principle Explain the monetary unit assumption and the economic entity assumption State the accounting equation, and define its components Analyze the effects of business transactions on the accounting equation Understand the four financial statements and how they are The Navigator prepared ✓ ✓ The Navigator Scan Study Objectives ■ Read Feature Story ■ Read Preview ■ Read text and answer DO IT! p 10 ■ p 13 ■ p 19 ■ p 24 ■ Work Comprehensive DO IT! ■ Review Summary of Study Objectives ■ Answer Self-Study Questions ■ Complete Assignments ■ The Navigator is a learning system designed to prompt you to use the learning aids in the chapter and set priorities as you study Study Objectives give you a framework for learning the specific concepts covered in the chapter Feature Story KNOWING THE NUMBERS Consider this quote from Harold Geneen, the former chairman of IT&T: “To be good at your business, you have to know the numbers—cold.” Success in any business comes back to the numbers You will rely on them to make decisions, and managers will use them to evaluate your performance That is true whether your job involves marketing, production, management, or information systems In business, accounting and financial statements are the means for communicating the numbers If you don’t know how to read financial statements, you can’t really know your business When Jack Stack and 11 other managers purchased Springfield ReManufacturing Corporation (SRC) (www.srcreman.com) for 10 cents a share, it was a failing PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark division of International Harvester Stack had 119 employees who were counting on him for their livelihood, and he knew that the company was on the verge of financial failure Stack decided that the company’s only chance of survival was to encourage every employee to think like a businessperson and to act like an owner To accomplish this, all employees at SRC took basic accounting courses and participated in weekly reviews of the company’s financial statements SRC survived, and eventually thrived To this day, every employee (now numbering more than 1,000) undergoes this same training Many other companies have adopted this approach, which is called “openbook management.” Even in companies that not practice open-book management, employers generally assume that managers in all areas of the company are “financially literate.” Taking this course will go a long way to making you financially literate In this book you will learn how to read and prepare financial statements, and how to use basic tools to evaluate financial results Appendixes A and B provide real financial statements of two well-known companies, PepsiCo, Inc and The Coca-Cola Company Throughout this textbook we attempt to increase your familiarity with financial reporting by providing numerous references, questions, and exercises that encourage you to explore these financial statements ✓ The Feature Story helps you picture how the chapter topic relates to the real world of accounting and business You will find references to the story throughout the chapter The Navigator Inside Chapter 1… • How Will Accounting Help Me? (p 11) • What Do General Mills, Walt Disney, and Dunkin’ Donuts Have in Common? (p 23) “Inside Chapter x” lists boxes in the chapter that should be of special interest to you • All About You: Ethics: Managing Personal Financial Reporting (p 25) PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark Preview of Chapter The opening story about Springfield ReManufacturing Corporation highlights the importance of having good financial information to make effective business decisions Whatever one’s pursuits or occupation, the need for financial information is inescapable You cannot earn a living, spend money, buy on credit, make an investment, or pay taxes without receiving, using, or dispensing financial information Good decision making depends on good information The purpose of this chapter is to show you that accounting is the system used to provide useful financial information The content and organization of Chapter are as follows Accounting in Action What Is Accounting? • Three activities • Who uses accounting data The Building Blocks of Accounting The Basic Accounting Equation Using the Accounting Equation • Ethics in financial reporting • Generally accepted accounting principles • Assumptions • Assets • Liabilities • Owner’s equity • Transaction analysis • Summary of transactions Financial Statements • Income statement • Owner’s equity statement • Balance sheet • Statement of cash flows ✓ The Navigator The Preview describes and outlines the major topics and subtopics you will see in the chapter WHAT IS ACCOUNTING? Why is accounting so popular? What consistently ranks as one of the top career opportunities in business? What frequently rates among the most Explain what accounting is popular majors on campus? What was the undergraduate degree chosen by Nike founder Phil Knight, Home Depot co-founder Arthur Blank, former acting director of the Federal Bureau of Investigation (FBI) Thomas Pickard, and numerous members of Congress? Accounting.1 Why did these people choose accounting? They wanted to understand what was happening financially to their organizations Accounting is the financial information system that provides these insights In short, to understand your organization, you have to know the numbers Accounting consists of three basic activities—it identifies, records, and communicates the economic events of an organization to interested users Let’s take a closer look at these three activities STUDY OBJECTIVE Three Activities To identify economic events, a company selects the economic events relevant to its business Examples of economic events are the sale of snack chips by PepsiCo, providing of telephone services by AT&T, and payment of wages by Ford Motor Company The appendix to this chapter describes job opportunities for accounting majors and explains why accounting is such a popular major PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark What Is Accounting? Once a company like PepsiCo identifies economic events, it records those events in order to provide a history of its financial activities Recording consists of keeping a systematic, chronological diary of events, measured in dollars and cents In recording, PepsiCo also classifies and summarizes economic events Finally, PepsiCo communicates the collected information to interested users by means of accounting reports The most common of these reports are called financial statements To make the reported financial information meaningful, Kellogg reports the recorded data in a standardized way It accumulates information resulting from similar transactions For example, PepsiCo accumulates all sales transactions over a certain period of time and reports the data as one amount in the company’s financial statements Such data are said to be reported in the aggregate By presenting the recorded data in the aggregate, the accounting process simplifies a multitude of transactions and makes a series of activities understandable and meaningful A vital element in communicating economic events is the accountant’s ability to analyze and interpret the reported information Analysis involves use of ratios, percentages, graphs, and charts to highlight significant financial trends and relationships Interpretation involves explaining the uses, meaning, and limitations of reported data Appendix A of this textbook shows the financial statements of PepsiCo, Inc.; Appendix B illustrates the financial statements of The Coca-Cola Company We refer to these statements at various places throughout the text At this point, they probably strike you as complex and confusing By the end of this course, you’ll be surprised at your ability to understand, analyze, and interpret them Illustration 1-1 summarizes the activities of the accounting process Illustration 1-1 The activities of the accounting process Communication Identification Recording Prepare accounting reports Select economic events (transactions) Record, classify, and summarize IAeppoortrt KIA NOK l RRe nuuaal A An Analyze and interpret for users You should understand that the accounting process includes the bookkeeping function Bookkeeping usually involves only the recording of economic events It is therefore just one part of the accounting process In total, accounting involves the entire process of identifying, recording, and communicating economic events.2 Essential terms are printed in blue when they first appear, and are defined in the end-of-chapter glossary The origins of accounting are generally attributed to the work of Luca Pacioli, an Italian Renaissance mathematician Pacioli was a close friend and tutor to Leonardo da Vinci and a contemporary of Christopher Columbus In his 1494 text Summa de Arithmetica, Geometria, Proportione et Proportionalite, Pacioli described a system to ensure that financial information was recorded efficiently and accurately PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark Chapter Accounting in Action Who Uses Accounting Data STUDY OBJECTIVE Identify the users and uses of accounting The information that a user of financial information needs depends upon the kinds of decisions the user makes There are two broad groups of users of financial information: internal users and external users INTERNAL USERS Internal users of accounting information are those individuals inside a company who plan, organize, and run the business These include marketing managers, production supervisors, finance directors, and company officers In running a business, internal users must answer many important questions, as shown in Illustration 1-2 Illustration 1-2 Questions asked by internal users playlist itunes L H.C.B Brien's In Pepper's Sgt Comes My Ship Cowboy? When Do Wia Gonna What is A Life All I Want MENU Stockholder Finance Is cash sufficient to pay dividends to Microsoft stockholders? ST ST RIK E Marketing What price for an Apple iPod will maximize the company's net income? ON RIK E r fai es Un ctic a r P Snack ack ck k ch cchi chips hi h Human Resources Can we afford to give General Motors employees pay raises this year? Beve Beverages ev eve e ve errage rag age a ge g Management Which PepsiCo product line is the most profitable? Should any product lines be eliminated? To answer these and other questions, internal users need detailed information on a timely basis Managerial accounting provides internal reports to help users make decisions about their companies Examples are financial comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for the next year EXTERNAL USERS External users are individuals and organizations outside a company who want financial information about the company The two most common types of external users are investors and creditors Investors (owners) use accounting information to make decisions to buy, hold, or sell ownership shares of a company Creditors (such as suppliers and bankers) use accounting information to evaluate the risks of granting credit or lending money Illustration 1-3 shows some questions that investors and creditors may ask PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark RAPID REVIEW Using the Information in the Financial Statements Ratio Formula Purpose or Use Liquidity Ratios Current assets ᎏᎏᎏ Current liabilities Measures short-term debt-paying ability Acid-test (quick) ratio Cash ϩ Short-term investments ϩ Receivables (net) ᎏᎏᎏᎏᎏᎏ Current liabilities Measures immediate short-term liquidity Receivables turnover Net credit sales ᎏᎏᎏ Average net receivables Current ratio Inventory turnover Cost of goods sold ᎏᎏᎏ Average inventory Measures liquidity of receivables Measures liquidity of inventory Profitability Ratios Profit margin Net income ᎏᎏ Net sales Measures net income generated by each dollar of sales Asset turnover Net sales ᎏ Averageᎏ assets Measures how efficiently assets are used to generate sales Return on assets Net income ᎏ ᎏ ᎏ Average assets Measures overall profitability of assets Return on common stockholders’ equity Net income Ϫ Preferred dividends ᎏᎏᎏᎏᎏᎏ Average common stockholders’ equity Earnings per share (EPS) Net income Ϫ Preferred dividends ᎏᎏᎏᎏᎏᎏ Weighted average common shares outstanding 10 Price-earnings (P-E) ratio Market price per share of stock ᎏᎏᎏᎏ Earnings per share 11 Payout ratio Measures profitability of owners’ investment Measures net income earned on each share of common stock Measures ratio of the market price per share to earnings per share Cash dividends ᎏᎏ Net income Measures percentage of earnings distributed in the form of cash dividends Total debt ᎏᎏ Total assets Measures percentage of total assets provided by creditors Income before income taxes and interest expense ᎏᎏᎏᎏᎏᎏ Interest expense Measures ability to meet interest payments as they come due Cash provided by operating activities Ϫ Capital expenditures Ϫ Cash dividends Measures the amount of cash generated during the current year that is available for the payment of additional dividends or for expansion Solvency Ratios 12 Debt to total assets ratio 13 Times interest earned 14 Free cash flow EP-6 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark P H O T O C R E D I T S Chapter Page Jeff Greenberg/PhotoEdit Page 11 Brent Holland/iStockphoto Page 23 iStockphoto Chapter Page 49 NBAE/Getty Images Page 58 Mike Stewart/Corbis Sygma Page 70 PhotoDisc, Inc./Getty Images Chapter Page 94 Witte Thomas E/Gamma Presse, Inc Page 98 Kevin Winter/Getty Images, Inc Page 106 iStockphoto Chapter Page 145 Brian Bahr/Getty Images, Inc Page 157 Alex Slobodkin/iStockphoto Page 162 Christian Lagereek/iStockphoto Page 164 Lowell Sannes/iStockphoto Page 165 Denis Vorob'yev/iStockphoto Page 166 Nikki Ward/iStockphoto Page 167 Vladislav Gurfinkel/iStockphoto Page 168 iStockphoto Chapter 14 Page 607 Tim Boyle/Bloomberg News/Landov LLC Page 611 Tomasz Resiak/iStockphoto Page 615 PhotoDisc, Inc./Getty Images Page 617 Arpad Benedek/iStockphoto Chapter 15 Page 643 Corporation of London/HIP/The Image Works Page 656 Greg Nicholas/iStockphoto Page 660 Corbis Stock Market Chapter 16 Page 694 Warner Bros./Legendary Pictures/The Kobal Collection/The Picture Desk Chapter 17 Page 730 Rudi Von Briel/PhotoEdit Page 735 Darren McCollester/Getty Images News and Sport Services Page 749 PhotoDisc, Inc./Getty Images Chapter 18 Chapter Page 199 Stone/Getty Images, Inc Page 203 Marco Coda/iStockphoto Page 210 iStockphoto Chapter Page 249 Pathaithai Chungyam/iStockphoto Page 251 Bjorn Kindler/iStockphoto Page 262 PhotoDisc, Inc./Getty Images Page 262 Scott Olson/Getty Images Chapter Page 791 AFP PHOTO/Nicholas ROBERTS/NewsCom Page 794 iStockphoto Page 794 iStockphoto Page 808 Royalty-Free/Corbis Images Page 814 Martina Misar/iStockphoto Chapter 19 Page 843 Alamy Images Page 846 Peter Kramer/Getty Images, Inc Page 860 Octavio Campos/ iStockphoto Page 301 Henry Chaplin/iStockphoto Page 304 Sean Locke/iStockphoto Page 307 Andrejs Zavadskis/ iStockphoto Chapter 20 Chapter Chapter 21 Chapter Chapter 22 Chapter 10 Chapter 23 Page 1017 ©2000 Artville, Inc Page 1020 iStockphoto Page 1034 Popperfoto/Alamy Images Page 345 Valerie Loiseleux/iStockphoto Page 356 Terence John/Retna Page 397 Charles Orrico/SUPERSTOCK Page 406 Joe Polillio/Getty Images, Inc Page 408 Michael Braun/iStockphoto Page 437 David Trood/Getty Images, Inc Page 441 iStockphoto Page 456 Andy Lions/Photonica/Getty Images, Inc Page 459 Linda Steward/iStockphoto Page 887 PhotoDisc, Inc./Getty Images Page 890 iStockphoto Page 905 Marcin Balcerzak/iStockphoto Page 929 Kevin Foy/Alamy Page 935 iStockphoto Page 940 Yoshikazu Tsuno/Getty Images, Inc Page 975 Tad Denson/iStockphoto Page 988 Digital Vision/Getty Images Page 991 Yael/Retna Chapter 24 Page 1061 ©EyeWire Page 1074 Digital Vision/Getty Images, Inc Page 1083 Sandy Jones/iStockphoto Chapter 11 Page 485 Cary Westfall/iStockphoto Page 492 Steve Diblee/iStockphoto Page 498 Catherine dee Auvil/iStockphoto Chapter 12 Page 527 Charles Taylor/iStockphoto Page 530 Malcolm Romain/iStockphoto Page 533 PhotoDisc/Getty Images, Inc Chapter 25 Page 1109 Luria Digital Productions/Taxi/Getty Images Page 1115 Hywit Dimyadi/iStockphoto Page 1126 PhotoDisc, Inc./Getty Images Chapter 26 Page 1155 Royalty-Free/Corbis Images Page 1170 Rebecca Ellis/iStockphoto Chapter 13 Page 569 David Young-Wolf/PhotoEdit Page 576 Brandon Laufenberg/iStockphoto Page 584 Norm Betts/Bloomberg News/Landov LLC PC-1 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark C O M PA N Y I N D E X A ABC, 456 About.com, 906 Ace Hardware, 276 Adelphia, Advanced Micro Devices, 575, 931 Aggasiz Construction Company, 351 AIG, Alcoa (Aluminum Company of America), 597 Allied Signal, 860 Altria, 483 Aluminum Company of America (Alcoa), 597 American Airlines, 104, 488, 846, 982, 992, 1124 American Cancer Society, 570 American Exploration Company, 482 American Express, 407, 485 American Standard, 801 American Van Lines, 1065 America Online (AOL), 483, 695, 697 Anaheim Angels, 703 Anchor Glass Container Corporation, 882 AOL, see America Online AOL Time Warner, Inc., 697 Apple Computer, 6, 454, 808 Aptara Corp., 850 AT&T, 4, 703, 846, 977 Automatic Data Processing, 72 Avis, 437, 703 B Babies “R” Us, 703 BankAmerica, 624 Bank of America, 11, 995 Bank One Corporation, 70 Bausch & Lomb, 92 Ben & Jerry’s Homemade, Inc., 928–930, 934 Berkshire Hathaway, 482, 615 Best Buy, 9, 106, 143, 245, 251 Beverly Hills Fan Company, 1194 Bill & Melinda Gates Foundation, 570 Black & Decker, 492 Boeing Capital Corporation, 441, 483, 847 Boeing Company, 608, 804, 1159 Boise Cascade, 446 BP, 262 Breyer, 482 Bristol-Myers Squibb, 816–817 Budget (car rentals), 437 C Cadbury-Schweppes, Campbell Soup Company, 445, 801, 846, 1154–1156, 1166, 1195 Capital Cities/ABC, Inc., 703 Cargill Inc., 571 Carlin Corporation, 691 Caterpillar Inc., 248–250, 261, 438, 490, 491, 570, 935, 946 Cendant Corp., 624, 703 Center Ice Consultants, 931 Centerstone Health, 352, 353 Century 21, 703 Chase, 70, 1125 Chevron, 446 Chicago Tribune, 1124 Chiquita Brands International, 860, 884 Circuit City, 245 Cisco Systems, 157, 414, 483, 816, 1074 Citibank, 420 Citigroup, 10 CKE, 482 The Coca-Cola Company, 3, 9, 43–44, 89, 140, 194, 243–244, 296, 391, 432–433, 481–483, 523, 603, 638–639, 690–691, 726, 786, 838, 850, 860, 930–931, 1012–1013, 1156, B1–B2 Coldwell Banker, 703 Colossal Healthcare, 350 Compaq Computer, 842–844, 858 Computer Associates International, Inc., 108, 1105 ConAgra Foods, 215 Consolidated Edison, 804 Consumers Packaging Inc., 883 Continental Bank, 441 Cooper Tire & Rubber Company, 165 Costco Wholesale Corp., 494, 735 Craig Consumer Electronics, 253 Crane Company, 586 Crocs, Inc., D Daimler, 850 DaimlerChrysler Corporation, 653 Dairy Queen, 482 Davison Carecenters Inc., 719 Dell Computer Corp., 60, 251, 704, 843, 844, 846, 847, 849, 853, 859, 946 Dell Financial Services, 441 Deloitte & Touche, 44, 564 Delta Airlines, 96, 451, 1124 Denny’s, 906 Dick’s Sporting Goods, 852 Digital Equipment, 843, 858 The Disney Company, 7, 703, 889 Disneyland, 703 Disney World, 703 Dow Chemical, 931 Duke Energy Co., 977, 1061, 1062, 1065, 1077 Dunkin’ Donuts Inc., 23, 906 DuPont, 646, 647, 931 E Eastman Kodak Company, 372, 732 Eli Lily, 348 Enron Corp., 7, 29, 624, 817, 847 Ernst & Young, 564 ESPN, 456, 483, 703 Ethan Allen, 1162 Excelsior Inn, 355 ExxonMobil Corporation, 10, 262, 483, 582, 889, 930, 931 F FedEx, 846 Fidelity Investments, 49, 50, 860 First Bank, 407 FlightServe, 988, 1014 Florida Citrus Company, 812 Ford Motor Company, 4, 11, 201, 262–263, 568–572, 582, 850, 945, 957, 982, 995, 1077, 1162 G Ganong Bros Ltd., 1013 GE, see General Electric General Dynamics, 839 General Electric (GE), 7, 209, 348, 482, 483, 497, 570, 697, 947 General Mills, 5, 23, 445, 789, 930 General Motors (GM), 6, 7, 10, 198, 421, 510, 574, 744, 789, 816, 821, 846, 889–890, 947, 1159, 1162 Gillette Company, 703, 728 Glassmaster Co., 1150–1151 Global Crossing, 847 GM, see General Motors Goldman Sachs, 11 Google, 11, 29, 570, 576, 995 Gulf Oil, 574 H Hanes Company, 512, 714 Harley-Davidson, 946 HealthSouth, Hendredon Furniture, 407 Hershey Foods Corp., 608 Hertz Car Rental, 437, 657, 1002 Hewlett-Packard (HP), 843, 846, 849, 947, 1124, 1159 Hilton Hotels Corporation, 441, 860, 977 Home Depot, 4, 251, 276, 440 Honda, 995 Howard Johnson, 703 HP, see Hewlett-Packard H&R Block, 931 I IBM, 457, 570, 574n.2, 593, 847, 889 Ice Rink Events, 931 ID Edwards, 304 Imaginarium, 703 Intel, 570, 931, 945 InterContinental, 441 International Harvester, International Outsourcing Services, LLC, 55 Intuit Inc., 301, 303 IT&T, J J.C Penney Company, Inc., 399, 424, 735, 792–794, 799, 800, 802–808 Jiffy Lube, 931 John Deere Capital Corporation, 441 Jostens, Inc., 1124 J.P Morgan Leasing, 441 K Kaiser Permanente, 931 Kellogg Company, 4, 5, 12, 29, 588, 659, 889, 930, 937, 939–945, 982 Kids “R” Us, 703 Kinko’s Print Shop, 957 Kmart Stores, 200, 793, 804, 811, 1193–1194 Kohl’s Corporation, 735 KPMG, 564, 847 Kraft Foods, 55, 697 Kroger Co., 201–202, 516, 804 I-1 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark I-2 Company Index L Ledgers, 58–61 Leslie Fay Cos., 297 Lockheed Martin Corporation, 157, 617 Louis Vuitton, 846 Lucent Technologies, 624, 847 M McCabe Co., 801 McDonald’s Corporation, 9, 454, 467, 482, 570, 608, 655, 775, 1110 McDonnell Douglas, 847 McKesson Corporation, 200, 297 Macy’s, 1077 Madison Square Garden, 1024 Manville Corp., 492 Marco Chemical Corp., 604–605 Marcus Corporation, 167 Marriott Hotels, 441, 445, 977, 1065 Massachusetts General Hospital, 976 MasterCard, 407 Mayo Clinic, 931 Merrill Lynch, 11 Microsoft Corporation, 6, 10, 209, 438, 454, 483, 582, 730–731, 749, 821, 845, 940, 973 Mighty Ducks, 703 Minnesota Mining and Manufacturing Company (3M), 422, 516 Mod Fashions Corporation, 352 Moody’s Investment Service, 691 Morgan Stanley, 707 Morrow Snowboards, Inc., 203, 246 Motorola, 814, 847 N NationsBank, 624 NBC, 483 Network Computing Devices Inc., 1056–1057 New York Times, 1124 Nike Inc., 4, 577, 608–609, 614, 799, 847, 977 Nissan Motors, 850 Nordstrom, Inc., 168, 408, 438, 826–827 Nortel Networks, 406, 808 North American Van Lines, 577 Northrop Grumman, 905 Northwest Airlines, 992 O Office Depot, 200 Omnicom, 931 Oracle Corporation, 304, 749 Owens-Illinois, Inc., 459 P PACE Membership Warehouse, 811 Papa John’s Pizza, 906 Parlex Corporation, 924–925 PayLess Drug Stores Northwest, 811 PepsiCo Inc., 3, 6, 43, 55, 77, 88–89, 97, 124, 140, 177, 193–194, 228, 243–244, 262, 279, 295–296, 377, 391, 421, 432–433, 468, 480–481, 522–523, 555, 570, 576, 586, 593, 603, 605, 628, 638–639, 678, 690–691, 715, 726, 768, 786, 793, 822, 837–838, 931, A1–A34 Phillip Morris, 483, 697 Pilgrim’s Pride, 215 Pizza Hut, 482 Positively-You.com, 1016–1018, 1020 Pratt and Whitney, 859 PricewaterhouseCoopers, 564 The Procter & Gamble Company, 167, 458, 459, 483, 577, 703, 728, 814, 852, 1074 Prudential Real Estate, 11 Q Quad Graphics, 889 Quaker Oats, 262, 957 Qualcomm, 574 R Radio Shack, 72, 92 Ramada Inn, 703 Razor & Tie Music, 526–528 Reebok, 577, 584, 977 Rent-A-Wreck, 437–440, 445, 454, 456, 460, 482 Republic Carloading, 162, 196 Rhino Foods, Inc., 144–146 Robert Half and Co., 30 Royal Dutch/Shell, 262, 453, 931 S Safeway, 349, 804 Sage Software, 303 Salvation Army, 570 SAM’s CLUB, 266 Sanford, 1108–1110 SAP AG, 304 Sara Lee, 850 Sarbanes-Oxley Act (2002), 848 Schering-Plough, 847–848 Sears, Roebuck and Company, 199, 399 Shell, 456 Siebel Systems, 1084 Smucker’s, 945 Southwest Airlines, 96, 104, 438, 976 Sports Illustrated, 488 Springfield Remanufacturing Corporation (SRC), 2–4 Starbucks, 29 Startheregoplaces.com, 30 Stephanie’s Gourmet Coffee and More, 344–346, 349, 352, 354 Subway, 11 Superior Industries International, Inc., 1162 T Taco Bell, 456, 482, 906 Target Corporation, 200, 251, 364, 469, 735, 834 TCBY Yogurt, 906 Tektronix Inc., 617–618 Texaco Oil Company, 421 3M, see Minnesota Mining and Manufacturing Company Tiffany & Co., 804 Timberland, 995 Time Warner, Inc., 7, 166, 483, 582, 694–697, 701–703 Toyota, 995 Toys “R” Us, Inc., 703 Toysrus.com, 703 Trek, 11 True Value Hardware, 251 Turner Broadcasting, 697, 701–703 Twentieth Century Fox, 98 U U-Haul, 980 Unilever, 1125 Union Pacific Resources Group Inc., 1167 United Airlines, 7, 104, 976, 1124, 1126, 1152 United States Steel Corp., 982 United Stationers, 200 U.S Trust, 95 USAir, 653 US Bancorp Equipment Finance, 441 USX Corp., 653, 930 V Van Meter Industrial, Inc., 606–607 Ventas Software, 72 Visa, 407, 408, 420, 422, 424, 431 W Walgreens, 200 Wall Street Journal, 576 Wal-Mart Stores, Inc., 10, 198–200, 203–205, 251, 252, 266–267, 276, 298, 364, 438, 570, 647, 735, 804, 834, 860, 1125 Walt Disney Company, 621, 931 Walt Disney Productions, 23, 96, 483 Warner Brothers, 931, 957 Waste Management Company, 70 Welch Company, 860 Wendy’s, 438, 482 Western States Fire Apparatus, Inc., 886–889, 898 Weyerhaeuser Co., 812 Whirlpool, 801 Whitehall-Robins, 396–397, 404 Willard & Shullman Group Ltd., 1020 WorldCom, Inc., 7, 29, 95, 449, 624, 737, 817, 847 X Xerox, 95, 847 XM Satellite Radio Holdings, 1029 Y Yahoo! Inc., 164–165, 493, 513, 731, 749 Yale Express, 162, 196 Young & Rubicam, 931 Yum Brands, 482 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark SUBJECT INDEX A ABC, see Activity-based costing Absorption costing, 998 Accelerated-depreciation method, 447 Accounts, 50–54 chart of, 60–61 correct titles for, 56 permanent, 152–153 standard form of, 69 temporary, 152–153 Accounts payable, 12 as current liabilities, 486 for statement of cash flows, 756 transaction analysis for, 18 Accounts payable (creditors’) subsidiary ledger, 305 Accounts receivable, 398–409 disposing of, 406–408 recognizing, 399 for statement of cash flows, 755 valuing, 400–406 Accounts receivable (customers’) subsidiary ledger, 305 Accounts receivable turnover ratio, 414 Accounting, 4–11 accrual- vs cash-basis, 97 activities of, 4–5 assumptions in, 9–10 career opportunities in, 29–30 cost, 888–890 ethics in, 7–8 financial, 845 generally accepted accounting principles, 8–9 managerial, 29–30 See also Managerial accounting payroll, 494–505 responsibility, see Responsibility accounting users of accounting data, 6–7 Accounting cycle, 159–162, 534 See also specific steps in cycle Accounting equation, see Basic accounting equation Accounting information, in budgeting process, 1018–1019 Accounting reports, See also Financial statements Accounting systems (accounting information systems), 302–322 cash payments journal, 317–319 cash receipts journal, 311–315 computerized, 302–305 general ledger, 302–303 manual, 305 purchases journal, 315–317 sales journal, 309–311 special journals, 308–321 subsidiary ledgers, 305–307 Accruals, 99–100 adjusting entries for, 107–112 expenses, 100, 108–111 liabilities, 486 revenues, 100, 107–108 Accrual-basis accounting, 97 Accumulated depreciation, 165 Acid-test ratio, 801–802 Activity base, 897, 898 Activity-based costing (ABC), 859–860, 948–949, 953–955 Activity index (CVP), 976 Additions and improvements, 449 Adjustable interest rates, 655 Adjusted trial balance, 114–118, 149–150, 226 Adjusting entries, 99–113 in accounting cycle, 211–212 for accruals, 107–112 for deferrals, 100–107, 119–122 journalizing and posting, 112–113 for merchandising companies, 211–214 prior period, 618 types of, 99–100 on worksheet, 147–149, 225–226 from worksheets, 150, 152 Admission of partners, 546–550 Affiliated company, 702 Agents, of corporations, 571 Aggregated data, Aging schedule, 404–405 Aging the accounts receivable, 404 Allowances: purchase, 206 sales, 209 Allowance method, 401–406 Alternative accounting methods, 816 American Stock Exchange, 577 Amortization, 454–455 effective-interest method, 669–672 straight-line, 673–675 Analysis of information, Annual rate of return, 1167–1168 Annual reports: of The Coca-Cola Company, B1–B2 of PepsiCo, Inc., A1–A34 Annuities, present value of, 665–666, C5–C7, D2–D3 Appel, Jennifer, 533 Arm’s-length transactions, 398 Articles of co-partnership, 532 Articles of incorporation, 573 Assets: in accounting equation, 11–12 capital leases, 657–658 on classified balance sheet, 162–166 current, 164 depreciation of, 102–104 in double-entry system, 52 fixed, 165 intangible, 165–166, 454–459 natural resources, 453–454 of partnerships, 529 property, plant, and equipment, see Plant assets Asset turnover ratio, 459, 804 Assumptions in accounting, 9–10 Auditing, 29 Auditors, internal, 355 Audit trail, 304 Authorized stock, 575 Available-for-sale securities, 705, 707 Average collection period, 414–415, 802 Average-cost method, 258–259, 272–273 B Background checks, 355 Bad debts, see Uncollectible accounts Balanced scorecard, 860, 1124–1126 Balanced Scorecard Institute, 1151 Balance sheet, 20–23 budget, 1034–1035 classified, 162–168 effect of cost flow methods on, 261 and errors in inventory accounting, 265 horizontal analysis of, 794–795 investments on, 708–710 merchandising and manufacturing costs on, 855–856 for partnerships, 537–538 personal, 169 recovery of bad debts on, 402 stockholders’ equity section of, 587–589 transfer to worksheet, 226 unpaid notes payable on, 655 vertical analysis of, 797, 798 write-off of bad debts on, 402 Balsam, Craig, 526, 528 Banks, 364–372 for internal control, 364 reconciling bank account, 367–372 statements from, 365–367 writing checks, 365 Bank reconciliations, 364 See also Reconciling bank accounts Bankruptcy law, 643 Bank service charge, 366, 371 Bank statements, 365–367 Barnum, P.T., Basic accounting equation, 11–20 assets and liabilities in, 11–12 owner’s equity in, 11–13 in transaction analysis, 14–19 Batch jobs, 888, 889 Bauer, Angela, 351 Bearer bonds, 646 Best-efforts contracts, 576n.3 Blank, Arthur, Bonds, 644–654 converting into common stock, 653–654 discount/premium on, 649–650 issued for credit, 745 issuing, 646–652 market value of, 648 present value of, 663–668, C7–C9 recording transactions with, 698–699 redeeming, 653 trading, 646–647 types of, 645–646 Bonds payable, 756, 764 Bond amortization, 669–672 effective interest method, 669–672 straight-line, 673–675 Bond indentures, 646 Bonding of employees, 355 Bond interest expense, 651 Bond issues, 646–652 at a discount, 650–651 at face value, 649 at a premium, 651–652 procedures for, 646 I-3 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark I-4 Subject Index Bonuses: on admission of a partner, 548–550 as fringe benefits, 495 on withdrawal of a partner, 551–552 Bookkeeping, Book (carrying) value, 104, 442, 446, 650 Borick, Steve, 1162 Bowline, Lyle, 1016 Break-even analysis, 986–989 Break-even point, 986 Budgets, 1018 continuous 12-month, 1019 flexible, 1065–1072 standards vs., 1111 static, 1063–1065 Budgetary control, 1062–1072 flexible budgets, 1065–1072 static budgets, 1063–1065 Budgetary planning, 1018–1040 accounting information in, 1018–1019 budget balance sheet, 1034–1035 budget income statement, 1029–1031 cash budget, 1031–1034 direct labor budget, 1027–1028 direct materials budget, 1025–1027 financial budgets, 1031–1036 foundation for, 1019 and human behavior, 1020–1021 length of budget period, 1019 and long-range planning, 1021–1022 manufacturing overhead budget, 1028–1029 master budget, 1022–1023 for merchandisers, 1036–1037 in non-manufacturing companies, 1036–1037 for not-for-profit organizations, 1037 personal, 1038 process for, 1020 production budget, 1024–1025 sales and administrative expense budget, 1029 sales budget, 1023–1024 for service enterprises, 1037 Budgetary slack, 1021 Budget balance sheet, 1034–1035 Budget committee, 1020 Budget income statement, 1029–1031 Budget period, length of, 1019 Budget reports, 1062, 1065, 1070–1072 Buffett, Warren, 615, 790–792 Buildings, 440, 755 Burden, 850 Business documents, 55, 208 Business opportunities, 906 Business transactions, 14 See also Transaction analysis in double-entry system, 51–54 in partnerships, 534 purchasing, 203–208 sales, 208–211 By-laws of corporations, 573 C Calendar years, 96–97 Callable bonds, 646 Capital: corporate acquisition of, 571 owner’s, 13 working, 491 Capital budgeting, 1166–1175 annual rate of return, 1167–1168 cash payback, 1168–1169 discounted cash flow, 1170–1175 evaluation process in, 1167 Capital deficiency (partnership liquidation), 542–544 Capital expenditures, 449 Capital leases, 657–658 Capital ratios, for partnerships, 536 Capital stock, 587 Careers in accounting, 29–30 Car ownership, 460 Carrying value, see Book value Carrying (book) value method, 654 Cash, 372 fraud and, 357 net change in, 745–746 reporting, 372 for statement of cash flows, 757 Cash-basis accounting, 97 Cash bonuses, 495 Cash budget, 1031–1034 Cash controls, 357–364 Cash disbursements, internal controls for, 360–364 Cash discounts, 399 Cash dividends, 608–612 Cash equivalents, 372 Cash flows See also Statement of cash flows ability to generate, 732 classification of, 733–734 free, 748–749 Cash management, 1034 Cash payback, 1168–1169 Cash payments: in direct method, 760–762 schedule of, 540–542 Cash payments (cash disbursements) journal, 317–319 Cash purchases, transaction analysis for, 15–17 Cash (net) realizable value, 401, 411 Cash receipts: in direct method, 760 internal controls for, 357–360 transaction analysis for, 18 Cash receipts journal, 311–315 Cash register tapes, 208 Cash withdrawals, transaction analysis for, 18–19 Castle, Ted, 144, 145 CEO (chief executive officer), 572 Certified public accountants (CPAs), 29 Changes in accounting principle, 814 Channel stuffing, 816–817 Charter, corporate, 573 Chart of accounts, 60–61 Checks: altered, 351 for payroll, 500 writing, 365 Check register, 361 Chenfield, Cliff, 526, 528 Chief executive officer (CEO), 572 China, 165, 530 Claims, fictitious, 350 Classified balance sheet, 162–168 investments on, 710–711 for merchandising companies, 214, 217–218 Closely held corporations, 570 See also Privately held corporations Closing entries: in accounting cycle, 212 for merchandising companies, 212 for partnerships, 534–535 posting, 155–156 preparing, 153–155 Closing the books, 152–159 post-closing trial balance, 157–159 posting closing entries, 155–156 preparing closing entries, 153–155 with virtual closes, 157 CM (credit memorandum), 367 Code of ethics, 624, 848 Collaboration, 1074 Collusion, 356 Commercial substance (exchanges), 464 Common-size analysis, 797 See also Vertical analysis Common stock, 574, 579–582 allocating cash dividends to, 610–611 converting bonds into, 653–654 earnings per share for, 622 no-par value, 580 par value, 579–580 for services or noncash assets, 580–581 for statement of cash flows, 756, 764 Communication, 5, 348 Competitive environment, 858 Components, make-or-buy decisions for, 1159–1160 Compound entries, 57 Compound interest, C2, D2 Comprehensive income, 710, 814–815 Computerized accounting systems, 302–305 Computer-system tampering, 304 Conservatism, 263 Consigned goods, ownership of, 253 Consistency principle, 262 Consolidated financial statements, 702–703 Construction of buildings, 440 Consumerism, 198 Contingent liabilities, 491–494 Continuous 12-month budgets, 1019 Contra accounts: for assets, 103–104 for bonds at a discount, 650 for revenue, 209, 210 for stockholders’ equity, 583 Contractual interest rate, 646, 649 Contributed capital, 587 See also Paid-in capital Contribution margin per unit (CVP analysis), 985, 987, 990, 1166 Contribution margin ratio (CVP analysis), 985–987, 990 Control, internal, see Internal control Control accounts, 305–306, 893 Control environment, 348 Controllability of items, 1071 Controllable margin, 1079, 1082 Controllable revenues/costs, 1074 Controllable variance (overhead), 1121, 1133–1134 Controllers, 572 Controlling interest, 702 Convertible bonds, 646, 653–654 Co-ownership of property, 529 Copyrights, 455 Corporate capital, 577–578 Corporations, 10, 570–579 characteristics of, 571–573 corporate capital, 577–578 forming, 573–574 owner’s equity accounts in, 168 ownership rights of stockholders, 574–575 reasons for investing, 696–697 stock issues, 575–577 See also Stock subchapter S, 530 Correcting entries, 160–162, 370 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark Subject Index Cost(s): in computation of depreciation, 443 controllable vs noncontrollable, 1074 of copyrights, 455 depreciable, 444 factory labor, 892, 895–896 fixed, see Fixed costs freight, 205, 223 in incremental analysis, 1158 inventoriable, 851 labor, 850, 892, 895–896, 932–934 line, 449 in managerial accounting, 849 manufacturing, see Manufacturing costs material, 932–934 materials, 850, 892, 894–895 mixed, 980–982 in noncash transactions, 581 non-recurring, 814 opportunity, 1160–1161 organization, 574 of patents, 455 period, 851–852 for plant assets, 439–442 product, 850–852 research and development, 457–458 standard, see Standard costs unit production, 942 variable, 977, 1028, 1068 warranty, 492 Cost accounting systems, 888–890 Cost behavior analysis, 976–983 Cost centers, 1077, 1078 Cost drivers, 948 Cost flows: in merchandising companies, 201–203 in process vs job order cost systems, 932 Cost flow assumptions/methods: average-cost, 258–259 effects of, 260–261 first-in, first-out, 255–257 in inventory costing, 255–263 last-in, first-out, 257–258 in perpetual inventory systems, 271–274 Costing, inventory, 254–263 consistency principle in, 262 cost flow assumptions, 255–262 lower-of-cost-or-market, 262–263 specific identification method, 254–255 Cost method: for stock investments, 700 for treasury stock, 582–583 Cost of goods manufactured, 852–854 Cost of goods manufactured schedule, 854 Cost of goods purchased, 852 Cost of goods sold, 200–202, 221–222, 901 Cost principle (historical cost principle), 9, 439 Cost reconciliation schedule, 943 Cost-volume-profit (CVP) analysis, 983–997 break-even analysis, 986–989 and changes in business environment, 992–993 CVP income statement, 984–986, 993–994 margin of safety, 991 target net income, 989–991 Cost-volume-profit (CVP) graph, 988–991 Cost-volume-profit (CVP) relationships, 976–983 cost behavior analysis, 976–983 fixed costs, 977–978 identifying cost types in, 982–983 mixed costs, 980–982 relevant range in, 978–980 variable costs, 977 Coupon bonds, 646 Covenants, 660 CPAs (certified public accountants), 29 Credits, 51–54, 68 Credit agreements, 399 Credit balance, 51 Credit cards, 407–408, 416, 485 Crediting accounts, 51 Credit losses, 400 Credit memorandum (CM), 367 Creditors, 12 Creditors’ subsidiary ledger, 305 Credit purchases, 15–17, 315–316 Credit terms, 206 Cross-footing a journal, 314 Cumulative dividends, 587 Current assets, 164, 740–742 Current liabilities, 486–491 bond interest payable, 649 on classified balance sheet, 166–167 current maturities of long-term debt, 489 leases, 658 noncash, 740–743 notes payable, 486–487 order of listing, 490 sales taxes payable, 487–488 statement presentation and analysis, 490–491 unearned revenues, 488–489 Current ratio, 491, 800–801 Current replacement cost, 263 Customers, as external users, Customers’ subsidiary ledger, 305 Cutoff rate, 1168 CVP analysis, see Cost-volume-profit analysis CVP graph, see Cost-volume-profit graph CVP income statement, 984–986, 993–994 CVP relationships, see Cost-volume-profit relationships D Days in inventory, 267, 803 Debenture bonds, 646 Debits, 51–54, 68 Debit balance, 51 Debiting accounts, 51 Debit memorandum (DM), 366, 367 Debt covenants, 660 Debt investments, 698–699 Debtors’ prison, 642–643 Debt to total assets ratio, 659, 807–808 Decentralized companies, 1073 Decisions, social impact of, 160 See also Management decision-making Declaration date (cash dividends), 609 Declining-balance depreciation, 446–448 Deferrals, 99–100 adjusting entries for, 100–107, 119–122 alternative treatment of, 119–122 basic relationships for, 122 Defined-benefit plans, 510 Defined-contribution plans, 510 Depletion (natural resources), 453 Depreciable cost, 444 Depreciation: accumulated, 165 adjusting entries for, 102–104 computing, 443 declining-balance method, 446–448 in direct method, 762 I-5 and income taxes, 443 of plant assets, 442–449 recognizing, 443 revising estimates of, 448–449 for statement of cash flows, 756 straight-line method, 444–445, 447–448 units-of-activity method, 445–448 Depreciation expense, 739–740 Depreciation schedule, 444–445 Differential analysis, 1167 See also Incremental analysis Direct fixed costs, 1078–1079 Direct labor, 850 Direct labor budget, 1027–1028 Direct labor price standard, 1113 Direct labor quantity, 1113 Direct labor variances, 1119–1121 Direct materials, 850 Direct materials budget, 1025–1027 Direct materials price standard, 1112–1113 Direct materials quantity standard, 1113–1114 Direct materials variances, 1116–1119 Direct method (statement of cash flows), 737, 758–764 investing and financing activities, 763–764 net change in cash, 764 operating activities, 759–763 Direct write-off method, 400–401 Disbursements, 347, 360–364 Disbursements journal, 317–319 Disclosure, of contingent liabilities, 493 Discontinued operations, 811–812 Discounts: bond, 649–651, 669–671, 673–674 cash, 399 purchase, 206–207 sales, 210 Discounted cash flow method, 1170–1175 Discounting, time value of money and, C7 Discount period, 206–207 Discount rate, 1171 Dishonored notes, 412–413 Disposal: of accounts receivable, 406–408 of notes receivable, 412–413 of plant assets, 450–453 of treasury stock, 584–585 Divestments, owner’s drawings as, 19 Dividends, 608–614 ability to pay, 733 cash, 608–612 on preferred stock, 586–587 stock, 612–614 from stock investments, 700, 702 Dividends in arrears, 587 DM, see Debit memorandum Documentation procedures, 352 Dollar signs, use of, 70 Donnelly, Bobbi Jean, 354 Dot-coms, 94 Double-declining-balance method, 446–447 Double-entry system, 51–54 Double taxation, 573 Drawings (by owners), 13, 19, 52–53 Dual posting, 320 Duties: rotating, 355 segregation of, 350–351 E Earnings, quality of, 815–817 Earnings per share (EPS), 622, 806 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark I-6 Subject Index Earnings statement, 22 See also Income statement Earning power, 811 Economic entity assumption, 9–10 Edmondson, David, 72, 92 Education, worth of, 1176 Effective-interest amortization, 669–672 Electronic funds transfers (EFTs), 371 Electronic spreadsheets, 146 See also Worksheets Employee compensation, see Payroll accounting Employee earnings record, 498–499 Employee theft, 268 Employer payroll taxes, 501–503 The End of Work (Jeremy Rifkin), 198 Enterprise resource planning (ERP) systems, 304 Envelope budgeting, 1106 EPS, see Earnings per share Equal Employment Opportunity Act, 1110 Equipment: cost of, 440–441 retaining vs replacing, 1163–1164 for statement of cash flows, 755–756, 763 Equity method (stock investments), 701 Equivalent units, 936–939, 941 ERP (enterprise resource planning) systems, 304 Errors, 49 in bank accounts, 368 correcting entries for, 160–162 inventory, 263–265 irregularities vs., 69 in trial balances, 70 Estimating: depreciation, 448–449 inventories, 274–277 uncollectible accounts, 401–405 Ethics issues: appearance of liquidity, 166 arm’s-length transactions, 398 artificial increasing cash flow, 737 available-for-sale securities, 707 backdating sales, 108 changes in accounting principle, 814 comparing cash from operations to net income, 733 computer-system tampering, 304 credit agreements, 399 discounted future cash flows, 1171 documentation control, 895 and economic entity assumption, employee theft, 347 errors in statements, 161 expectations for EPS, 622 financial aid applications, 25 in financial reporting, 7–8, 209 fraudulent disbursements, 347 fraudulent documents, 55 inventory fraud, 264 inventory overstatement, 253 lease accounting, 658 length of workday, 905 in managerial accounting, 847–849 manipulating current ratio/cash balance, 800 meeting standards, 1112 minimizing debt reported, 646 motivating employees, 495 non-owner managers, 572 overstating market value, 707 partnership agreements, 532 partnership liquidations, 539 in personal financial reporting, 25 petty cash funds, 364 purchase price allocation, 442 in recording transactions, 70 salad oil company fraud, 252 social impact of decisions, 160 software for fraud control, 304 specific identification method, 255 standards of conduct for management accountants, E1–E2 telecommunications to remote areas, 858 temporary employees, 859 treasury stock purchase, 583 unrealistic budgets, 1021 Eurich, Beecher, 929 Europe, accounting in, 51 European Union, Evaluation of companies, 748–750 See also Financial statement analysis Exchange of plant assets, 464–465 Expenses: accrued, 100, 108–111 in double-entry system, 53–54 owner’s equity decrease from, 13 payroll, 500 prepaid, 100–104, 119–121, 755 recognizing, 97–98 on single-step income statement, 217 transaction analysis for, 17 Expense reports, fraudulent, 354 External transactions, 14 External users, 6–7 Extraordinary items, 712–814 F Face value: of bonds, 646, 649, 664–665 of notes, 411 Factors, 407 Factory labor costs, 892 Factory overhead, 850 FAFSA (Free Application for Federal Student Aid), 25 Fairbanks, Lawrence, 351 Fair Labor Standards Act, 1110 Fair value, 704–705 FASB, see Financial Accounting Standards Board FBI (Federal Bureau of Investigation), 30 Federal Insurance Contribution Act (FICA), 496 Federal Trade Commission, Federal unemployment taxes, 501, 502 Federal Unemployment Tax Act (FUTA), 502 Fees, 494 FICA (Federal Insurance Contribution Act), 496 FICA taxes, 495–496, 501, 502 FIFO, see First-in, first-out Financial accounting, managerial accounting vs., 845 Financial Accounting Standards Board (FASB), 8, Financial budgets, 1022, 1031–1036 Financial calculators, D1–D3 Financial literacy, Financials (Oracle), 304 Financial statement analysis, 792–818 changes in accounting principle, 814 comprehensive income, 814–815 earning power, 811 horizontal, 793–797 irregular items, 811–815 need for, 792–793 quality of earnings, 815–817 ratio, 799–809 vertical, 797–799 Financial statements, 5, 20–27 See also individual statements from adjusted trial balance, 115–117 balance sheet, 20–23 consolidated, 702–703 current liabilities on, 490–491 depreciation on, 103–104 effect of cost flow methods on, 260–261 income statement, 20–22 intangible assets on, 458–459 inventories on, 265–267 investments on, 704–712 long-term liabilities on, 658–660 manufacturing costs in, 852–857 for merchandising companies, 214–219 monthly, 893 natural resources on, 458 owner’s equity statement, 20–22 partners’ capital statement, 537 for partnerships, 537–538 plant assets on, 458–459 receivables on, 414–415 statement of cash flows, 20, 21, 23–24 stockholders’ equity on, 587–589, 620–623 time periods for, 96 from worksheets, 150, 151 Financing activities, 733–734, 744–745, 763–764 Finished goods inventory, 250, 900–901 First-in, first-out (FIFO), 255–257, 261, 262, 271, 816 First-in, still here (FISH), 257 Fiscal year, 96–97 FISH (first-in, still here), 257 Fixed assets, 165, 438 See also Plant assets Fixed costs: in CVP, 977–978 in flexible budget, 1068 in manufacturing overhead budget, 1028 for profit centers, 1078–1079 static budget reports for, 1065 Fixed interest rates, 655 Fixed ratios (income), 535–537 Flexible budgets, 1065–1072 case study of, 1068–1070 developing, 1067–1068 and management by exception, 1071–1072 uses of, 1065–1067 Flexible budget reports, 1070–1072 FOB (free on board), 205 FOB destination, 205, 252 FOB shipping point, 205, 252 Footing a journal, 314 Ford, Henry, 568–569 Forensic accounting, 30 For-profit corporations, 570 401(k) plans, 510 Franchises, 456, 906 Fraud, 346–348, 847 altered checks, 351 cash as susceptible to, 357 fake expense reports, 354 fake invoices, 351 fictitious claims, 350 and forensic accounting, 30 in hotel housekeeping, 355 inventory, 264 involving payroll, 504–505 reimbursement requests, 352 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark Subject Index by salad oil company, 252 sales commissions, 352 software controls for, 304 Fraud triangle, 346–347 Free Application for Federal Student Aid (FAFSA), 25 Free cash flow, 748–749 Free on board (FOB), 205 Freight costs, 205, 223 Freight-in, 223 Fringe benefits, 502, 506, 509–511 See also Payroll accounting Frugali, Maureen, 350 Full costing, 998 Full disclosure principle, 493, 734 FUTA (Federal Unemployment Tax Act), 502 G GAAP, see Generally accepted accounting principles Gains, 451–452, 539, 705, 709–710, 812 Geneen, Harold, General journal, 55–57 adjusting entries in, 112–113 closing entries in, 153, 155 effects of special journals on, 320–321 posting to ledger from, 59–60 General ledger, 58–61 chart of accounts in, 60–61 control account in, 305–306 and post-closing trial balance, 157–159 posting to, 59–60, 309–310 standard form of account in, 69 General ledger accounting systems, 302–303 Generally accepted accounting principles (GAAP), 8–9 for allowance method, 401 and inventory writedowns, 263 and quality of earnings, 815, 816 for revenue/expense recognition, 98 General partners, 531 Gift cards, accounting for, 106 Goods in transit, ownership of, 252–253 Goodwill, 165, 454, 456–457 Government accounting careers, 30 Governmental budgets, 1037 Graham, Benjamin, 791 Great Plains Accounting (software), 341 Gross earnings, 495 Gross profit, 214–215 Gross profit method, 275–276 H Health insurance, 506, 510–511 Held-to-maturity securities, 705 High-low method (CVP), 980–982 Honored notes, 412 Horizontal analysis, 793–797 Human behavior: budgetary planning and, 1020–1021 and performance evaluation, 1083–1084 Human resource controls, 355 Hurdle rate, 1168 Hybrid vehicles, 995 I IASB (International Accounting Standards Board), Ideal standards, 1112 Identification of economic events, 4–5 Identity theft, 373 iGAAP, IMA, see Institute of Management Accountants IMA Statement of Ethical Professional Practice, 848 Imprest system, 362 Improper recognition, 816–817 Inc Magazine, 906 Incentives, creating, 847–848 Income from operations, 215–216 Income ratios, 535–536, 540 Income statement, 20–22 budget, 1029–1031 CVP, 984–986, 993–994 effect of cost flow methods on, 260–261 and errors in inventory accounting, 263–264 horizontal analysis of, 795–796 merchandising and manufacturing costs in, 852–855 for merchandising companies, 214–217 multiple-step, 214–217 stockholders’ equity on, 621–623 transfer to worksheet, 226 variances on, 1123 vertical analysis of, 797–790 Income taxes: on corporation income statements, 621–622 for corporations, 573 and depreciation, 443 payroll deductions for, 495–497 Income taxes payable, 742, 756 Incremental analysis, 1156–1166 for accepting an order at a special price, 1158–1159 for allocating limited resources, 1165–1166 for eliminating unprofitable segments, 1164–1165 for making vs buying, 1159–1162 management decision-making process in, 1156–1158 for retaining vs replacing equipment, 1163–1164 for selling vs processing further, 1162–1163 types of decisions involving, 1158 Indefinite life, 454 Independent contractors, 494 Indirect fixed costs, 1079 Indirect labor, 850 Indirect manufacturing costs, 850 Indirect materials, 850 Indirect method (statement of cash flows), 737–748 investing and financing activities, 744–745 net change in cash, 745–747 operating activities, 739–744 worksheet for, 752–757 Industry averages (norms), 793 Information, for internal control, 348 Institute of Management Accountants (IMA), 848, 883, 925 Insurance: adjusting entries for, 102 health, 506, 510–511 Intangible assets, 454–459 accounting for, 454–457 on classified balance sheet, 165–166 and research and development costs, 457–458 statement presentation and analysis of, 458–459 Intercompany comparisons, 793 Interest, 109, C1–C2 accrued, 109–110 on bonds, 645, 698 I-7 on buildings, 440 compound, C2 on notes receivable, 411 to partners, 536–537 on partners’ capital, 536 simple, C1–C2 Interest coverage, 808 Interest payments (annuities), 665–666 Interest rates: for bonds, 646, 649 for mortgages, 655 shopping for, 656 Internal auditors, 355 Internal control, 346–372 with accounting software, 304 components of, 348 and fraud, 346–348 limitations of, 356 over cash, 357–364 for payroll, 504–505 principles of, 349–355 by using banks, 364–372 Internal rate of return (IRR) method, 1173–1174 Internal Revenue Service (IRS), 7, 30, 448, 504, 523 Internal transactions, 14 Internal users, International Accounting Standards Board (IASB), Interpretation of information, Intracompany comparisons, 793 Inventoriable costs, 851 Inventory(-ies), 250–267 cost flow methods, 271–274 costing, 254–263 determining quantities, 251–253 errors in accounting for, 263–265 estimating, 274–277 in financial statements, 265–267 for manufacturing companies, 250, 855–856 for merchandising companies, 855–856 periodic system for, 202, 203 perpetual system for, 201–203, 271–274 for statement of cash flows, 755 Inventory turnover, 266, 267, 802–803 Investing activities: cash flows from, 733, 734 direct method for, 763–764 indirect method for, 744–745 noncash, 734 Investment centers, 1077, 1080–1083 Investment portfolio, 699 Investments, 696–712 on classified balance sheet, 164–165 debt investments, 698–699 by owner, 13–15 in partnerships, 547–550 reasons for making, 696–697 short-term, 708–709 stock investments, 699–704 valuing and reporting, 704–712 Invoices: fake, 351 purchase, 203–204 sales, 208 Irregular items, 811–815 Irregularities, 69 IRR method, see Internal rate of return method IRS, see Internal Revenue Service PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark I-8 Subject Index J JIT inventory, see Just-in-time inventory JIT processing, see Just-in-time processing Job cost data, reporting, 903–905 Job cost sheet, 893, 894 Job order cost flow, 890–903 accumulating manufacturing costs, 890–893 assigning costs to cost of goods sold, 901 assigning costs to finished goods, 900–901 assigning manufacturing costs to work in process, 893–900 Job order costing, 888–908 cost accounting systems, 888–890 job order cost flow, 890–903 reporting job cost data, 903– 905 Job order cost systems, 888–889, 931 process cost systems vs., 931–933 standard cost accounting system with, 1130–1132 Johnson, Matthew, 808 Journalizing, 56 adjusting entries, 112–113, 152 for bonds, 647 cash payments transactions, 317–319 cash receipts transactions, 312–314 closing entries, 153–155 credit purchases, 315–316 credit sales, 309 illustration of, 67–68 special journals for, 308 with standard cost accounting system, 1130–1132 Journals, 55–57 See also General journal cash payments (disbursements), 317–319 cash receipts, 311–315 cross-footing, 314 footing, 314 posting to, see Posting purchases, 315–317 sales, 309–311 simple and compound entries in, 57 special, see Special journals Just-in-time (JIT) inventory, 251, 859 Just-in-time (JIT) processing, 946–947 K Knight, Phil, L Labor costs, 850, 892, 895–896, 932–934 Labor unions, as external users, Labor variances: direct, 1119–1121 price, 1120–1121 quantity, 1119–1121 total, 1119 Land, 439, 442, 755, 763 Land improvements, 439–440 Last-in, first-out (LIFO), 257–258, 261, 262, 272, 816 Last-in, still here (LISH), 256 LCM, see Lower-of-cost-or-market method Leases, 656–658 Leasing, 441 Ledgers See also General ledger; Subsidiary ledgers proving, 311, 315 with standard cost accounting system, 1132 Leveraging, 805 Liabilities (financial): in accounting equation, 11–12 accrued, 108 on classified balance sheet, 162–163, 166–167 contingent, 491–494 current, 166–167, 486–491 in double-entry system, 52 long-term, 167 See also Long-term liabilities payroll, 500 Liability (legal), in partnerships, 529–530 Licenses, 456 Life insurance benefits, 510–511 Life of a corporation, 571–572 LIFO, see Last-in, first-out LIFO conformity rule, 261 Limited liability, 10, 529–530, 571 Limited liability companies (LLCs), 530, 531 Limited liability partnerships (LLPs), 530, 531 Limited life, 454 Limited partners, 531 Limited partnerships (Ltd., LP), 529–531 Line costs, 449 Liquidating dividends, 608 Liquidation: of partnerships, 538–544 of preferred stocks, 587 Liquidity, 166, 167 defined, 490 listing current liabilities in order of, 490 of receivables, 414 short-term creditor interest in, 792 Liquidity ratios, 800–803 LISH (last-in, still here), 256 LLCs, see Limited liability companies LLPs, see Limited liability partnerships Long-range planning, budgetary planning and, 1021–1022 Long-term debt, 489, C7–C9 Long-term debt due within one year, 489 Long-term investments, 164–165, 709 Long-term liabilities, 644–662 bonds, 644–654 on classified balance sheet, 167 on financial statements, 658–660 leases, 656–658 notes payable, long-term, 654–656 Losses: from discontinued operations, 812 on disposal of plant assets, 451, 452 realized, 539, 709–710 on sale of equipment, 740 unrealized, 705, 709–710 Lower-of-cost-or-market method (LCM), 262–263 Lowry, Ellen, 355 LP, see Limited partnerships Ltd., see Limited partnerships M Machine time used, 934 MACRS (Modified Accelerated Cost Recovery System), 448 Mail receipts, cash, 359–360 Make-or-buy decisions, 1159–1160 Maker (promissory notes), 409 Management accountants, ethical conduct for, E1–E2 Management accounting, see Managerial accounting Management by exception, 1071–1072 Management consulting, 29 Management decision-making: for accepting an order at a special price, 1158–1159 for allocating limited resources, 1165–1166 for eliminating unprofitable segments, 1164–1165 financial and nonfinancial information in, 1157 incremental analysis for, 1156–1158 for making vs buying, 1159–1162 process for, 1156–1158 for retaining vs replacing equipment, 1163–1164 for selling vs processing further, 1162–1163 Management of corporations, 572 Managers, functions of, 846–847 Managerial accounting, 29–30, 844–864 activities in, 844 business ethics in, 847–849 cost concepts in, 849 financial accounting vs., 845 managers’ functions in, 846–847 manufacturing costs, 849–850, 852–857 practices of, 858–860 product vs period costs, 851–852 service-industry trends, 858 Mann, Bruce, 643 Manual accounting systems, 305 Manufacturing companies, 849 classifying inventory in, 250 process cost systems for, 930–931 units-of-activity depreciation for, 445 Manufacturing costs, 849–850 See also Job order cost flow; Process cost system accumulating, 890–893 assigning, to work in process, 893–900 in financial statements, 852 in income statement, 852–855 in job order cost system, 932 journal entries for, 933–934 in process cost system, 932–936 Manufacturing overhead, 850, 892–893, 896–899 under activity-based costing, 953–954 journal entries for, 933, 934 process vs job order cost systems for, 932 under- or overapplied, 904–905 Manufacturing overhead budget, 1028–1029 Manufacturing overhead variance, 1121–1122 Margin of safety, 991 Margin of safety ratio (CVP), 991 Marketable securities, 708–709 Market interest rate, 649 Market value, 9, 104 of bonds, 648 of stock, 576 Marshall, John, 570 Master budget, 1022–1023 Matching principle, 97–98 Materials, sell-vs.-processing further decisions for, 1162–1163 Materials costs, 850, 892, 894–895 journal entries for, 933, 934 process vs job order cost systems for, 932 Materials variances: direct, 1116–1119 price, 1118 quantity, 1118 Materiality, 449–450, 1071 Materiality principle, 450 Maturity date: for bonds, 653 for notes receivable, 410 Medicare deductions, 496 Members (LLCs), 530 Merchandise purchases budget, 1036–1037 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark Subject Index Merchandising companies, 200–220, 849 adjusting entries for, 211–214 budgetary planning for, 1036–1037 closing entries for, 212 cost of goods in, 853, 855, 856 flow of costs in, 201–203 forms of financial statements for, 214–219 operating cycles in, 201 periodic inventory system for, 221–224 recording purchases of merchandise, 203–208 recording sales of merchandise, 208–211 worksheet for, 225–226 Merchandising profit, 215 Minimum rate of return, 1168 Mintenko, Stephanie, 344–345 Mixed costs, in CVP, 980–982 Modified Accelerated Cost Recovery System (MACRS), 448 Monday Night Football, 456 Monetary unit assumption, Monitoring, for internal control, 348 Morris, Robert, 643 Mortgages, 655 Mortgage bonds, 645 Motion Picture Association of America, 1083 Moving-average method, 272–273 Multiple-step income statement, 214–217 Murdock, Wilbert, 484–486 Mutual agency, in partnerships, 528–529 N NASDAQ, 577 “National income,” 498 Natural resources, 453–454, 458 Net annual cash flow, 1168–1169, 1171–1173 Net cash from operating activities, net income vs., 735 Net change in cash: direct method, 764 indirect method, 745–746 Net income, 22 converting from accrual to cash basis, 737, 739–744, 759–763 on multiple-step income statement, 215 net cash from operating activities vs., 735 for partnerships, 529, 534–537 on worksheet, 150 Net losses, 22 closing entry for, 616–617 for partnerships, 529, 534–537 on worksheet, 150 Net pay, 497–498 Net present value (NPV) method, 1171–1173 Net (cash) realizable value, 401 Net sales, 215 Net 30, 206 Net worth, 169 New York Stock Exchange (NYSE), 576, 577 No capital deficiency (partnership liquidation), 539–542 Nominal accounts, 152 See also Temporary accounts Noncash activities, 734 Noncash current assets, changes to, 740–742 Noncash current liabilities, changes to, 740–743 Noncontrollable revenues/costs, 1074 Non-manufacturing companies, budgetary planning for, 1036–1037 Nonoperating activities, on multiple-step income statement, 215–217 Non-recurring charges, 814 No-par value stocks, 577, 580 Normal balances, in double-entry system, 52 Normal capacity, 1114 Normal range, see Relevant range Normal standards, 1112 Notes payable, 12 as current liabilities, 486–487 long-term, 654–656 present value of, C7–C9 Notes receivable, 398, 409–413 computing interest on, 411 disposing of, 412–413 maturity date for, 410 recognizing, 411 valuing, 411–412 Not-for-profit corporations/organizations, 570, 1037, 1110 Not sufficient funds (NSF) checks, 367, 371 NYSE, see New York Stock Exchange O Obsolescence, 443 Off-balance-sheet financing, 658 O’Leary, George, 72 Olympic Games, 1034 Open-book management, Operating activities, 217 cash flows from, 733, 734 direct method, 759–763 indirect method, 733, 735, 739–744 Operating budgets, 1022 Operating cycles, 164, 201 Operating expenses, on multiple-step income statement, 215 Operating leases, 657 Operations costing, 945 Opportunity cost, 1160–1161 Order of magnitude, for current liabilities, 490 Ordinary repairs, 449 Organization costs, 574 Orr, Mike, 1109 Other expenses and losses, for merchandising companies, 216 Other receivables, 398 Other revenues and gains, for merchandising companies, 216 Overbilling, 905 Overhead: under activity-based costing, 953–954 journal entries for, 933, 934 manufacturing, 850, 892–893, 896–899, 904–905 process vs job order cost systems for, 932 standard predetermined, 1114 Overhead variances, 1133–1134 controllable, 1121, 1133–1134 manufacturing, 1121–1122 total, 1121 volume, 1121, 1134 Over-the-counter cash receipts, 357–359 Over-the-counter stock trades, 577 Owner’s capital, 13, 52–53 Owner’s equity See also Corporate capital in accounting equation, 11–13 on classified balance sheet, 162, 163, 167–168 decreases in, 13 in double-entry system, 52–54 increases in, 12–13 Owner’s equity statement, 20–22 Ownership of goods, 252–253 Ownership rights: in corporations, 570, 571 preemptive, 574 of stockholders, 574–575 I-9 P Pacioli, Luca, 5n.2 Paid absences, 509 Paid-in capital, 578, 587, 608 Paid-in capital in excess of par value, 580 Paper (phantom) profit, 261 Parent company, 702 Participative budgeting, 1020–1021 Partners, 531 admission of, 546–550 withdrawal of, 550–552 Partners’ capital statement, 537 Partnerships, 10, 528–553 admission/withdrawal of partners, 546–552 advantages and disadvantages of, 530–532 characteristics of, 528–529 dividing net income/net loss, 534–537 financial statements for, 537–538 forming, 533–534 liquidation of, 538–544 owner’s equity account in, 167–168 partnership agreements, 532 types of, 529–530 Partnership agreements, 532 Partnership dissolution, 529 Partnership liquidation, 538–544 capital deficiency, 542–544 no capital deficiency, 539–542 realization for, 539 Par value, 577, 579–580 Patents, 455 Payee (promissory notes), 409 Payment date (cash dividends), 610 Payout ratio, 807 Payroll accounting, 494–505 determining payroll, 495–498 employer payroll taxes, 501–503 filing/remitting payroll taxes, 503–504 internal control for, 504–505 recording payroll, 498–501 Payroll deductions, 495–497 Payroll processing centers, 500 Payroll register, 499–500 Payroll taxes, 501–504 Payroll tax expense, 502 PCAOB (Public Company Accounting Oversight Board), 348 Peachtree, 302, 303 Pensions, 510 P/E (price/earnings) ratio, 622n.3 Percentage of receivables basis (uncollectibles), 403–405 Percentage of sales basis (uncollectibles), 403–404 Performance evaluation, 1083–1084 Period costs, 851–852 Periodic inventory systems, 202, 203, 221–224, 251 Periodicity assumption, 96 See also Time period assumption Permanent accounts, 152–153, 158 Perpetual inventory systems, 201–203 in cost accounting systems, 888 cost flow methods in, 271–274 determining quantities in, 251 entries for periodic system vs., 224 merchandising entries with, 212–213 Petty cash fund controls, 362–364 Pfeiffer, Eckhard, 842, 843 Phantom profit, 261 Physical controls, 352, 353 Physical inventory, 251–252 Physical unit flow, 941 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark I-10 Subject Index Physical units, 941 Pickard, Thomas, Plant and equipment, 438 See also Plant assets Plant assets, 438–453 buildings, 440 depreciation of, 442–449 determining cost of, 439–442 disposal of, 450–453 equipment, 440–441 exchange of, 464–465 expenditures during useful life of, 449–450 land, 439 land improvements, 439–440 statement presentation and analysis of, 458–459 Post-closing trial balance, 157–159 Posting, 59–60 of adjusting entries, 112–113, 152 cash payments journal, 319 cash receipts journal, 314 closing entries, 155–156 of closing entries, 153, 155–156 of correcting entries, 161 dual, 320 illustration of, 67–68 purchases journal, 316–317 sales journal, 309–311 special journals for, 308 Post-retirement benefits, 510–511 Practical range, see Relevant range Preferred stock, 586–587, 610–611, 805 Premium: on bonds, 649–652, 671–672, 674–675 on stock, 580 Prenumbering documents, 352 Prepaid expenses (prepayments), 100 adjusting entries for, 100–104 alternative treatment of, 119–121 for statement of cash flows, 755 Present value, 648 of an annuity, 665–666, C5–C7, D2–D3 and bond pricing, 663–668 of bonds, 648 of face value, 664–665 of interest payments (annuities), 665–666 of leases, 658 of long-term notes/bonds, C7–C9 of a single amount, C3–C5 time periods in computing, 667 using financial calculator for, D1–D2 variables in, C3 Present value of factors, C4 Price/earnings (P/E) ratio, 622n.3, 806–807 Price variances: labor, 1120–1121 materials, 1118 Prior period adjustments, 618 Private accounting, 29–30 See also Managerial accounting Privately held corporations, 570–571 Process cost flow, 933 Process cost system, 889–890, 930–951 and activity-based costing, 948–949 assigning manufacturing costs, 933–936 equivalent units, 936–939 example of, 940–945 job order cost systems vs., 931–933 and just-in-time processing, 946–947 process cost flow, 933 uses of, 930–931 Products, sell-vs.-processing further decisions for, 1162–1163 Product costs, 850–852 Production budget, 1024–1025 Production cost report, 939, 943–944 Product warranties, 492–493 Profitability, creditor interest in, 792 Profitability ratios, 803–807 Profit and loss statement, 22 See also Income statement Profit centers, 1077–1080 Profit margin, 803–804 Pro forma income, 816 Promissory notes, 409, 410 See also Notes receivable Property, plant, and equipment, 165, 438 See also Plant assets Proprietorships, 10, 167 Proving ledgers, 311, 315 Public accounting, 29 Public Company Accounting Oversight Board (PCAOB), 348 Publicly held corporations, 570 Pull approach to manufacturing, 947 Purchases: of buildings, 440 of merchandise, recording, 203–208 recording, 222–223 transaction analysis for, 15–16 Purchases journal, 315–317 Purchase allowances, 206, 223 Purchase discounts, 206–207, 223 Purchase invoice, 203–204 Purchase of an interest (partnerships), 546–547 Purchase returns, 206, 223 Push approach to manufacturing, 946 Q Quality of earnings, 815–817 Quantity variances: labor, 1119–1121 materials, 1118 Quarterly tax reports, 504 QuickBooks®, 301–303 Quick ratio, 801 See also Acid-test ratio R Radio frequency identification (RFID) technology, 251 Ratio analysis, 793, 799–809 liquidity ratios, 800–803 profitability ratios, 803–807 solvency ratios, 807–808 Raw materials, 250, 850 Raw materials costs, 892, 894–895 R&D costs, see Research and development costs Real accounts, 152 See also Permanent accounts Real estate taxes payable, 12 Realized gain/loss, 709–710 Reasonable assurance concept, 356 Receivables, 398–418 accounts receivable, 398–409 on financial statements, 414–415 notes receivable, 409–413 types of, 398 Receivables turnover, 802 Reconciling bank accounts, 367–372 electronic funds transfers, 371 entries form, 370–371 illustration of, 369–370 procedure for, 368 Reconciling items, for statement of cash flows, 755–757 Record date (cash dividends), 609–610 Recording process, 50–74, 223 accounts in, 50–54 activities in, for contingent liabilities, 492–493 debits and credits in, 51–54 for employer payroll taxes, 502–503 illustrated, 61–68 for payroll, 498–501 with periodic inventory system, 222–224 for purchases of merchandise, 203–208 for sales of merchandise, 208–211 for special and general journals, 320 steps in, 55–61 trial balance in, 68–71 Record-keeping, segregation of physical custody and, 351, 357 Redeeming bonds, 653 Registered bonds, 646 Regular partnerships, 529 Regulations, government, 1110 for corporations, 573 as standards, 1110 See also Standard costs Regulatory agencies, Reimbursement requests, fraud involving, 352 Relevance of figures, Relevant range, 978–980, 1068 Reliability of figures, Repairs, ordinary, 449 Republic of Debtors (Bruce Mann), 643 Repurchase of shares, 584 Required rate of return, 1171 Research and development (R&D) costs, 457–458 Residual claims, 574 Residual equity, 12 See also Owner’s equity Resource allocation decisions, 1165–1166 Responsibility, establishment of, 349 Responsibility accounting, 1072–1084 controllable vs noncontrollable revenues/ costs, 1074 responsibility centers, 1077–1084 responsibility reporting system, 1074–1077 Responsibility centers, 1077–1084 Responsibility reporting system, 1074–1077 Résumés, 72 Retailers, 200 Retail inventory method, 276–277 Retained earnings, 578, 616–619 payment of cash dividends from, 608 prior period adjustments, 618 restrictions on, 617–618 for statement of cash flows, 756, 764 Retained earnings statement, 619, 796–797 Retirement of plant assets, 450–451 Returns: purchase, 206 sales, 209–210 Return on assets, 804–805 Return on common stockholders’ equity, 621, 805 Return on investment (ROI), 1080–1083, 1125, 1126 Revenues, 13 accrued, 100, 107–108 controllable vs noncontrollable, 1074 in double-entry system, 53–54 recognizing, 97–98 on single-step income statement, 217 from stock investments, 702 unearned, see Unearned revenues Revenue expenditures, 449 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark Subject Index Revenue recognition principle, 97–98 Reversing entries, 160, 162, 173–175 RFID technology, 251 Rifkin, Jeremy, 198 Risk assessment, 348 Risk levels of activities, 356 Rodriquez, Josephine, 355 ROI, see Return on investment Rolling Stones, 991 Rowlings, J.K., 454 S Safe cash payments schedule, 540 See also Schedule of cash payments Salaries, 494, 495 See also Payroll accounting accrued, 110–111 to partners, 536–537 Sales: of bonds, 698–699 credit card, 407–408 of equipment, loss on, 740 of merchandise, recording, 208–211 of notes receivable, 413 of plant assets, 451–452 of receivables, 407 recording, 223–224 of stocks, 701 Sales and administrative expense budget, 1029 Sales budget, 1023–1024 Sales commissions, fraud involving, 352 Sales discounts, 210, 224 Sales forecasts, 1020, 1024 Sales invoices, 208 Sales journal, 309–311 Sales returns and allowances, 209–210, 223 Sales revenue (sales), 200 Sales taxes payable, 12, 487–488 Salvage value, 443, 446 SAP, 304 Sarbanes-Oxley Act (2002), 8, 29, 30, 70, 92, 101, 304, 348, 356, 624 Sarbox, see Sarbanes-Oxley Act (2002) Schedule of cash payments, 540–542 Scott, Susan, 886 SEC, see Securities and Exchange Commission Secured bonds, 645 Securities: available-for-sale, 705, 707 held-to-maturity, 705 marketable, 708–709 trading, 705–706, 708–709 Securities Acts (1933, 1934), 767 Securities and Exchange Commission (SEC), 7–9, 30, 707, 728, 767 Segments, in responsibility accounting, 1073 Segregation of duties, 350–351 Serial bonds, 646 Service companies: budgetary planning for, 1037 industry trends for, 201 job order costing in, 898 operating cycles for, 201 process vs job order cost systems for, 931 Shares, sale of, 10 Shareholders’ equity, 577 See also Corporate capital Short-term investments, 708–709 Short-term paper, 708 Simple entries, 57 Simple interest, C1–C2 Single-step income statement, 217 Sinking fund bonds, 645 Social Security, 510 Social Security taxes, 496 Software: for customization, 304 entry-level, 303 for fraud control, 304 for internal control, 304 network compatibility of, 304 Sole proprietorships, 906 Solvency, creditor interest in, 792 Solvency ratios, 807–808 SOX, see Sarbanes-Oxley Act (2002) Special journals, 308–321 cash payments, 317–319 cash receipts, 311–315 effects on general journal, 320–321 purchases, 315–317 sales, 309–311 Special order-price decisions, 1158–1159 Specific identification method (inventory), 265–255 Stack, Jack, 2, Standards See also Standard costs budgets vs., 1111 government, 1110 ideal vs normal, 1112 Standard costs, 1110–1124 analyzing variances from, 1116–1122 need for, 1110–1111 reporting variances from, 1122–1124 setting, 1112–1115 Standard cost accounting system, 1130–1132 Standard hours, 1121 Standard predetermined overhead, 1114 Star Wars (film), 98 State income taxes, 497 Statement of cash flows, 20, 21, 23–24, 732–751 classification of cash flows, 733–734 company evaluation based on, 748–750 direct method for, 737, 758–764 format of, 735–736 indirect method for, 737–748 preparation of, 736–748 significant noncash activities, 734 usefulness of, 732–733 worksheet for, 752–757 Statement of earnings, 500 Statement of operations, 22 See also Income statement State unemployment taxes, 501, 502 Static budgets, 1063–1065 Static budget reports, 1065 Stocks, 575–577 authorized, 575 capital, 587 common, 574, 579–582 direct issues, 575 indirect issues, 575–576 issued for credit, 745 market value of, 576 no-par value, 577 par value of, 577 preferred, 586–587 treasury, 582–586 Stock certificates, 575 Stock dividends, 612–614 Stockholders: limited liability of, 571 ownership rights of, 574–575 Stockholders’ equity, 168, 577 See also Corporate capital on balance sheet, 587–589 I-11 contra account for, 583 effect of dividends on, 614 on financial statements, 620–623 Stock investments, 699–704 Stock option plans, 495 Stock splits, 614–615 Straight-line amortization, 673–675 Straight-line depreciation, 444–445, 447–448 Su, Vivi, 396–397 Subchapter S corporations, 530 Subsidiary (affiliated) company, 702 Subsidiary ledgers, 305–307 job cost sheets as, 893, 894 posting from cash receipts journal to, 314 posting from purchases journal to, 316 Summa de Arithmetica, Geometria, Proportione et Proportionalite (Luca Pacioli), 5n.2 Summary entries, 892 Supplies, adjusting entries for, 101–102 “Surplus,” use of term, 588 T Tabular summaries, 51 T accounts, 50, 51 Take-home pay, 497 See also Net pay Target net income, 989–991 Taxes: as accounting area, 29 on corporations, 573 and depreciation, 443 on dividends, 611 double taxation, 573 effect of cost flow methods on, 260, 261 on employers, 501–503 FICA, 495–496 income, see Income taxes national, 498 for partnerships, 528 payroll, 495–497, 501–504 sales taxes payable, 487–488 and time period divisions, 96 Tax Freedom Day, 498 Taxing authorities, Temporary accounts, 152–153, 159 Term bonds, 646 Three-column form of account, 59 Tilton, Glenn, 1126 Time periods, C7 Time period assumption, 96–99 Times interest earned, 808 Times interest earned ratio, 659 Time value of money, 648, C1–C9 interest, C1–C2 present value of an annuity, C5–C7 present value of a single amount, C3–C5 present value of long-term notes/bonds, C7–C9 present value variables, C3 time periods and discounting, C7 Total labor variance, 1119 Total materials variance, 1116–1117 Total overhead variance, 1121 Total quality management (TQM), 859 Total standard cost per unit, 1114–1115 TQM (total quality management), 859 Trademarks, 455–456 Tradenames, 455–456 Trade receivables, 398 See also Accounts receivable; Notes Receivable Trading bonds, 646 Trading on the equity, 805 Trading securities, 705–706, 708–709 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark I-12 Subject Index Transaction analysis, 14–19, 66 See also Business transactions Transportation-in, 223 Transposition error, 70 Treasurers of corporations, 572 Treasury stock, 582–586 Trend analysis, 793 See also Horizontal analysis Trial balances, 68–71 adjusted, 114–118 limitations of, 69 outdated information in, 99 post-closing, 157–159 on worksheet, 147–148, 225 Trustees (bonds), 646 Turner, Ted, 695 U Uncollectible accounts, 400–406 allowance method, 401–406 direct write-off method, 400–401 Underwriting, 576 Unearned revenues, 100 adjusting entries for, 104–106 alternative treatment of, 119–122 as current liabilities, 488–489 Unemployment taxes, 501, 502 Uniform Partnership Act, 547 U.S Olympic Committee, 72 Unit production costs, 942 Units-of-activity depreciation, 445–448 Units-of-production method, see Units-ofactivity depreciation Unlimited liability, 529–531 Unprofitable segment elimination decisions, 1164–1165 Unrealized gains/losses, 705, 709–710 Unsecured bonds, 646 Useful life, 443, 449–450 Users of accounting data, 6–7 V Vacations, required, 355 Valuation: of accounts receivable, 400–406 cost allocation vs., 442 of investments, 704–706 of notes receivable, 411–412 Value chain, 858–859 Variable costs: in CVP, 977 in flexible budget, 1068 in manufacturing overhead budget, 1028 Variable costing, 998–1001 Variances from standards, 1116–1124 direct labor variances, 1119–1121 direct materials variances, 1116–1119 manufacturing overhead variance, 1121–1122 overhead, 1133–1134 reporting, 1122–1124 Venture capital firms, 530 Verification, independent, 353–355 Vertical analysis, 793, 797–799 Virtual closes, 157 Voucher register, 361 Voucher system controls, 360–361 W Wages, 494, 495 See also Payroll accounting Wages payable, 12 Wage and Tax Statement (Form W-2), 504 Warranties, product, 492–493 Wear and tear, 443 Weighted average method, 937–938 Weighted average unit cost, 258 West, Paul and Laura, 300–301 Wholesalers, 200 Withdrawal of partners, 550–552 Working capital, 491 Working capital ratio, 801 Work in process, 250, 893–900 Work in process inventory, 853 Worksheets, 146–152 for merchandising companies, 225–226 preparing adjusting entries from, 150, 152 preparing financial statements from, 150, 151 for statement of cash flows, 752–757 steps in preparing, 146–150 World economy, 858 Y Years, fiscal, 96–97 Year-end, 23 Year-end balance, 904 Z Zero-interest bonds, 648 PDF Watermark Remover DEMO : Purchase from www.PDFWatermarkRemover.com to remove the watermark ... in assets an increase in assets and an increase in owner’s equity an increase in assets and an increase in liabilities a decrease in assets and a decrease in owner’s equity a decrease in assets... basic accounting equation: a increase assets and decrease owner’s equity b increase assets and increase owner’s equity c increase assets and increase liabilities d increase liabilities and increase... regarding scholarships and loans is available at www.finaid.org/ You might find especially interesting the section that discusses how to maximize your chances of obtaining financial aid at www.finaid.org/fafsa/maximize.phtml