Summary

This new edition of the easiest-to-use beginner's guide to accounting features a free online component that works in tandem with essential chapters on balance sheets, income statements, statements of cash flow, double-entry accounting, and more. It has also been fully updated and revised for 2010, with information on accounting standards and methods key to business today, a chapter on avoiding fraud, and quick answers to top questions. With jargon-free instruction, simple organization, plentiful examples, and real-life scenarios not found in other accounting guides,Accounting for Non-Accountantsis the easiest way for beginning accountants to quickly get up to speed on the basics. Now with free Web-based tests and practice problems for every chapter

Author Biography

Wayne A. Label, CPA, MBA, PhD, is a certified public accountant in the State of Taxas. He has caught at several universities in the United States and abroad. He has published three books on accounting and over thirty articles in professional journals.

Acknowledgements	p. xi
Introduction	p. xiii
Introducing Accounting and Financial Statements	p. 1
• What Is Accounting?
• Who Uses Accounting Information?
• Financial Statements
• How Different Business Entities Present Accounting Information
Generally Accepted Accounting Principles	p. 11
• Who Are the SEC, AICPA, FASB, and IASB?
• Generally Accepted Accounting Principles (GAAP)
The Balance Sheet and Its Components	p. 25
• Understanding the Balance Sheet
• The Accounting Equation
• The Components of the Balance Sheet
• The Transactions Behind the Balance Sheet
The Income Statement	p. 45
• Understanding the Income Statement
• The Income Statement Illustrated
• Transactions That Affect the Income Statement
Preparing and Using a Statement of Cash Flows	p. 65
• What Is a Statement of Cash Flows?
• Cash and Cash Equivalents
• The Statement of Cash Flows Illustrated
The Corporation	p. 75
• The Corporation Defined
• What Is Capital Stock?
• Dividends and Splits
• Incorporating Solana Beach Bicycle Company
• What Is Treasury Stock?
Double-Entry Accounting	p. 97
• The General Journal
• The General Ledger
• Adjusting Journal Entries
• Closing Journal Entries
Using Financial Statements for Short-Term Analysis	p. 125
• Using Short-Term Ratios
• Current and Quick Ratios
• Working Capital
• Composition of Assets
Using Financial Statements for Long-Term Analysis	p. 137
• Quality of Earnings
• Rate of Return on Investment
• Sales-Based Ratios or Percentages
• Earnings Data
• Long-Term Debt Position
• Dividend Data
• Footnotes
Budgeting for Your Business	p. 149
• What Is a Budget?
• Planning and Control
• Advantages of Budgeting
• The Master Budget
• Sales Budget
• Capital Budget
• Budgeted Income Statement
• The Cash Budget
Audits and Auditors	p. 159
• What Is an Audit?
• Types of Auditors
• The Standard Audit Opinion Illustrated
• The Parts of the Report
• Other Types of Audit Reports
• Why Audits Are Useful to You
• Other Services Provided by Auditors
Fraud and Ethics	p. 175
• Fraud Defined
• What Causes Fraud
• How Fraud is Committed
• Ethics
Internet for Accountants	p. 183
Frequently Asked Questions	p. 189
Financial Statements-The Coca-Cola Company	p. 195
Index	p. 211
About The Author	p. 226
Table of Contents provided by Ingram. All Rights Reserved.

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Excerpts

Excerpt from Chapter OneWhat Is Accounting?The purpose of accounting is to provide information that will help you make correct financial decisions. The accountant's job is to provide the information needed to run a business as efficiently as possible while maximizing profits and keeping costs low. Quick Tip Finding an Accountant: Hiring a professional and ethical accountant to aid in your business operations can be critical to the success of your company.Meet with a few accountants before making a final choice so that you know your options and can select one whose experience and work style will be best suited to your needs and the needs of your business. Local chapters of your state societies of CPAs offer referral services that can help with this.Accounting plays a role in businesses of all sizes. Your kids' lemonade stand, a one-person business, and a multinational corporation all use the same basic accounting principles. Accounting is legislated; it affects your taxes; even the president plays a role in how accounting affects you.Accounting is the language of business. It is the process of recording, classifying, and summarizing economic events through certain documents or financial statements. Like any other language, accounting has its own terms and rules. To understand how to interpret and use the information accounting provides, you must first understand this language. Understanding the basic concepts of accounting is essential to success in business.Different types of information furnished by accountants are shown in figure 1.1 on the next page.Figure 1.1: Types of Information Provided by Accountants• Information prepared exclusively by people within a company (managers, employees, or owners) for their own use. • Financial information required by various government agencies such as the Internal Revenue Service (IRS), Securities and Exchange Commission (SEC), and the Federal Trade Commission (FTC). • General information about companies provided to people outside the firm such as investors, creditors, and labor unions.Accounting and BookkeepingBookkeeping procedures and bookkeepers record and keep track of the business transactions that are later used to generate financial statements. Most bookkeeping procedures have been systematized, and, in many cases, can be handled by computer programs. Bookkeeping is a very important part of the accounting process, but it is just the beginning. There is currently no certification required to become a bookkeeper in the United States.Accounting is the process of preparing and analyzing financial statements based on the transactions recorded through the bookkeeping process. Accountants are usually professionals who have completed at least a bachelor's degree in accounting, and often have passed a professional examination, like the Certified Public Accountant Examination, the Certified Management Accountant Examination, or the Certified Fraud Auditor Examination.Accounting goes beyond bookkeeping and the recording of economic information to include the summarizing and reporting of this information in a way that is meant to drive decision making within a business. Who Uses Accounting Information?In the world of business, accounting plays an important role to aid in making critical decisions. The more complex the decision, the more detailed the information must be. Individuals and companies need different kinds of information to make their business decisions. Let's start with you as an individual. Why would you be interested in accounting? Accounting knowledge can help you with investing in the stock market, applying for a home loan, evaluating a potential job, balancing a checkbook, and starting a personal savings plan, among other things.Managers within a business also use accounting information daily to make decisions, although most of these managers are not accountants. Some of the decisions they might make for which they will use accounting information are illustrated in figure 1.2Figure 1.2: Areas in Which Managers Use Accounting Information• Marketing (Which line of goods should the company emphasize?) • Production (Should the company produce its goods in the United States or open a new plant in Mexico?) • Research and Development (How much money should be set aside for new product development?) • Sales (Should the company expand the advertising budget and take money away from some other part of the marketing budget?) Without the proper accounting information these types of decisions would be very difficult, if not impossible, to make.Bankers continually use accounting information. They are in the business of taking care of your money and making money with your money, so they absolutely must make good decisions. Accounting is fundamental to their decision-making process. Figure 1.3 looks at some of the decisions bankers make using accounting information.Figure 1.3: Areas in Which Bankers Use Accounting Information• Granting loans to individuals and companies • Investing clients' money • Setting interest rates • Meeting federal regulations for protecting your money Government agencies such as the Internal Revenue Service (IRS), the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and the Bureau of Alcohol, Tobacco, and Firearms (ATF) base their regulation enforcement and compliance on the accounting information they receive.Accountability in Accounting A business's financial statements can also be of great interest to other members of the local or national community. Labor groups might be interested in what impact management's financial decisions have on their unions and other employees. Local communities have an interest in how a business's financial decisions (for example, layoffs or plant closings) will impact their citizens. As the economy becomes more complex, so do the transactions within a business, and the process of reporting them to various users and making them understandable becomes more complex as well. A solid knowledge of accounting is helpful to individuals, managers, and business owners who are making their decisions based on the information accounting documents provide.Financial StatementsAccountants supply information to people both inside and outside the firm by issuing formal reports that are called financial statements. The financial statements are usually issued at least once a year. In many cases they are issued quarterly or more often where necessary. A set of rules, called Generally Accepted Accounting Principles (GAAP), govern the preparation of the financial statements. Generally Accepted Accounting Principles has been defined as a set of objectives, conventions, and principles to govern the preparation and presentation of financial statements. These rules can be found in volumes of documents issued by the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), the Internal Revenue Service (IRS), the Securities and Exchange Commission (SEC), and other regulatory bodies. In chapter 2 we look at some of the overriding principles of accounting as they apply to all businesses and individuals.