Need Milk? Forms of Business Organization Users and Uses of Financial Information

Internal Users
External Users
Ethics in Financial Reporting

Business Activities

Financing Activities
Investing Activities
Operating Activities

Communicating with Users

Statement of Earnings
Statement of Retained Earnings
Balance Sheet
Cash Flow Statement
Interrelationships of Statements

A Quick Look at Loblaw’s Financial Statements

Statement of Earnings
Statement of Retained Earnings
Balance Sheet
Cash Flow Statement
Other Elements of an Annual Report

Assumptions and Principles in Financial Reporting Assumptions
Principles

Chapter 2—A Further Look at Financial Statements Just Fooling Around? Section 1 Objectives of Financial Reporting Characteristics of Useful Information

Understandability
Relevance
Reliability
Comparability

Constraints in Accounting

Cost-Benefit
Materiality

Section 2 The Financial Statements Revisited The Classified Balance Sheet

Current Assets
Long-Term Investments
Property, Plant, and Equipment
Intangible Assets
Current Liabilities
Long-Term Liabilities
Shareholders’ Equity

Using the Financial Statements

Ratio Analysis
Using the Statement of Earnings
Using the Statement of Retained Earnings
Using the Classified Balance Sheet
Using the Cash Flow Statement

Chapter 3—The Accounting Information System Accidents Happen Accounting Information System Accounting Transactions

Analysing Transactions
Summary of Transactions

The Account

Debits and Credits
Debit and Credit Procedures
Expansion of the Basic Equation

Steps in the Recording Process

The Journal
The Ledger
Chart of Accounts
Posting

The Recording Process Illustrated Summary Illustration of Journalizing and Posting The Trial Balance Limitations of a Trial Balance

Chapter 4—Accrual Accounting Concepts Swapping Quarters Timing Issues

Revenue Recognition Principle
Matching Principle
Accrual Versus Cash Basis of Accounting

The Basics of Adjusting Entries

Types of Adjusting Entries
Adjusting Entries for Prepayments
Adjusting Entries for Accruals
Summary of Basic Relationships
Sierra Corporation Illustration

The Adjusted Trial Balance and Financial Statements

Preparing the Adjusted Trial Balance
Preparing Financial Statements

Closing the Books

Preparing Closing Entries
Preparing a Post-Closing Trial Balance

Summary of the Accounting Cycle

Chapter 5—Merchandising Operations Who Doesn’t Shop at Wal-Mart? Merchandising Operations

Operating Cycles
Inventory Systems

Recording Purchases of Merchandise

Sales Taxes
Freight Costs
Purchase Returns and Allowances
Purchase Discounts
Summary of Purchase Transactions

Recording Sales of Merchandise

Sales Returns and Allowances
Sales Discounts
Summary of Sales Transactions

Statement of Earnings Presentation

Sales Revenues
Gross Profit
Operating Expenses
Non-operating Activities

Evaluating Profitability

Gross Profit Margin
Profit Margin

Appendix 5A Periodic Inventory System

Chapter 6—Reporting and Analysing Inventory How Many Dump Trucks Did You Want? Inventory Basics Classifying Inventory
Determining Inventory Quantities Classifying Inventory move Recording Merchandise Transactions
Recording Purchases of Merchandise
Recording Sales of Merchandise
Comparison of Entries—Perpetual vs. Periodic
Cost of Goods Sold
Statement of Earnings Presentation

Inventory Costing

Specific Identification
Cost Flow Assumptions
Financial Statement Effects of Cost Flow Assumptions
Using Inventory Cost Flow Methods Consistently

Inventory Errors Statement of Earnings Effects
Balance Sheet Effects Valuing Inventory at the Lower of Cost and Market Analysis of Inventory Inventory Turnover Appendix 6A—Inventory Cost Flow Assumptions in Perpetual Inventory Systems

Chapter 7—Internal Control and Cash Counting Out the Money Internal Control

Principles of Internal Control
Limitations of Internal Control

Cash Controls

Internal Control over Cash Receipts
Internal Control over Cash Disbursements
Use of a Bank

Reporting Cash

Cash Equivalents
Restricted Cash

Managing and Monitoring Cash

Basic Principles of Cash Management
Cash Budgeting

Chapter 8—Reporting and Analysing Receivables A Dose of Careful Management Keeps Receivables Healthy Types of Receivables Accounts Receivable

Recognizing Accounts Receivable
Valuing Accounts Receivable

Notes Receivable

Calculating Interest
Recognizing Notes Receivable
Valuing Notes Receivable
Disposing of Notes Receivable

Statement Presentation of Receivables Managing Receivables

Extending Credit
Establishing a Payment Period
Monitoring Collections
Evaluating Liquidity of Receivables
Accelerating Cash Receipts

Chapter 9—Reporting and Analysing Long-Lived Assets Tumult in the Skies Tangible Assets

Determining the Cost of Property, Plant, and Equipment
Amortization
Expenditures During Useful Life
Disposals of Property, Plant, and Equipment

Intangible Assets

Accounting for Intangible Assets
Types of Intangible Assets

Statement Presentation of Long-Lived Assets Balance Sheet Presentation
Cash Flow Statement Presentation Analysing Assets

Return on Assets
Asset Turnover
Profit Margin Revisited

Appendix 9A—Calculation of Amortization Using Other Methods

Chapter 10—Reporting and Analysing Liabilities Borrowing Money to Make Money Current Liabilities

Operating Line of Credit
Notes Payable
Sales Taxes
Property Taxes
Payroll
Current Maturities of Long-Term Debt

Long-Term Liabilities

Bonds Payable
Notes Payable

Financial Statement Presentation and Analysis

Balance Sheet Presentation
Cash Flow Statement Presentation
Analysis

Appendix 10A—Straight-Line Amortization Appendix 10B—Effective-Interest Amortization

Chapter 11—Reporting and Analysing Shareholders' Equity Race You to the Corner The Corporate Form of Organization

Characteristics of a Corporation
Forming a Corporation
Shareholder Rights
Share Issue Consideration

Common Shares

Accounting for Common Share Issues

Preferred Shares

Dividend Preferences
Liquidation Preference
Other Preferences

Dividends

Cash Dividends
Stock Dividends
Stock Splits
Comparison of Effects

Retained Earnings Retained Earnings Restrictions Financial Statement Presentation of Shareholders’ Equity Balance Sheet Presentation
Cash Flow Statement Presentation Measuring Corporate Performance

Dividend Record
Earnings Performance
Debt versus Equity Decision

Chapter 12—Reporting and Analysing Investments Birth of a Giant Why Corporations Invest Accounting for Debt Investments

Recording Acquisition of Bonds
Recording Bond Interest
Recording Sale of Bonds
Recording for Investor and Investee

Accounting for Equity Investments

Holdings of Less Than 20%
Holdings of Between 20% and 50%
Holdings of More Than 50%

Short- and Long-Term Investments

Short-Term Investments
Long-Term Investments

Valuating and Reporting of Investments

Short-Term Investments
Long-Term Investments
Evaluating Investment Portfolio Performance

Performance Financial Statement Presentation

Chapter 13—Cash Flow Statement I’ve Got $10 Billion Dollars Burning a Hole in My Pocket Reporting of Cash Flows

Purpose of the Cash Flow Statement
Definition of Cash
Classification of Cash Flows
Significant Noncash Activities
Format of the Cash Flow Statement
The Product Life Cycle
Usefulness of the Cash Flow Statement
Preparing the Cash Flow Statement

Section 1 Indirect Method First Year of Operations-2003
Second Year of Operations-2004 Section 2 Direct Method

First Year of Operations-2003
Second Year of Operations-2004

Using Cash Flows to Evaluate a Company

Free Cash Flow

Chapter 14—Performance Measurement Brewery Produces Sparkling Report Sustainable Earnings

Irregular Items-Statement of Earnings
Irregular Items-Statement of Retained Earnings

Comparative Analysis

Horizontal Analysis
Vertical Analysis

Ratio Analysis

Liquidity Ratios
Solvency Ratios
Profitability Ratios

Quality of Earnings

Alternative Accounting Principles
Pro Forma Earnings
Improper Recognition

Appendix 14A Comprehensive Illustration of Ratio Analysis APPENDIX A Specimen Financial Statements: Loblaw Companies Limited A-1 APPENDIX B Specimen Financial Statements: Sobeys Inc. B-1