Accounting (Chapters 1-13)

by Horngren, Charles T.; Harrison, Walter T.; Bamber, Linda S.; Robinson, Michael A.

• ISBN13: 9780131436329
• ISBN10: 0131436325
• Edition: 6th
• Format: Paperback
• Copyright: 2005-01-01
• Publisher: Prentice Hall

Summary

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Table of Contents

Accounting and the Business Environment	2	(40)
Vignette: Amazon.com	3	(1)
Accounting: The Language of Business	4	(2)
Decision Makers: The Users of Accounting Information	5	(1)
Financial Accounting and Management Accounting	5	(1)
Regulating Accounting	6	(2)
Governing Organizations	6	(1)
Ethics in Accounting and Business	6	(1)
Accounting.com: The New Economy: Pumping Up Revenue via Round-Trip Trades	7	(1)
Standards of Professional Conduct	7	(1)
Types of Business Organizations	8	(1)
Accounting Concepts and Principles	9	(1)
The Entity Concept	9	(1)
The Reliability (Objectivity) Principles	9	(1)
The Cost Principle	9	(1)
The Going-Concern Concept	10	(1)
The Stable-Monetary-Unit Concept	10	(1)
The Accounting Equation	10	(2)
Assets and Liabilities	10	(1)
Owner's Equity	11	(1)
Accounting for Business Transactions	12	(6)
Evaluating Business Transactions	18	(24)
The Financial Statements	18	(2)
Financial Statement Headings	20	(1)
Relationships Among the Financial Statements	20	(2)
Decision Guidelines	22	(1)
Excel Application Exercise	22	(1)
End-of-Chapter Summary Problem	23	(2)
Review and Assignment Material	25	(17)
Recording Business Transactions	42	(48)
Vignette: Frito-Lay	43	(1)
The Account, the Ledger, and the Journal	44	(3)
Assets	45	(1)
Liabilities	45	(1)
Owner's Equity	46	(1)
Double-Entry Accounting	47	(4)
The T-Account	47	(1)
Increases and Decreases in the Accounts	47	(3)
Recording Transactions in the Journal	50	(1)
Copying Information (Posting) from Journal to Ledger	51	(1)
The Flow of Accounting Data	51	(6)
Transaction Analysis, Journalizing, and Posting to the Accounts	52	(1)
Accounts After Posting	53	(1)
The Normal Balance of an Account	54	(1)
The Trial Balance	54	(1)
Mid-Chapter Summary Problem	55	(2)
Details of Journals and Ledgers	57	(3)
Posting from the Journal to the Ledger	59	(1)
The Four-Column Account: An Alternative to the T-Account	59	(1)
Chart of Accounts	59	(1)
Expanding the Accounting Equation: Revenues and Expenses	60	(1)
Expanded Problem Including Revenues and Expenses	61	(5)
Transaction Analysis, Journalizing, and Posting	62	(2)
Ledger Accounts After Posting	64	(1)
Trial Balance	64	(1)
Correcting Trial Balance Errors	65	(1)
Accounting.com: The Seven Trillion Dollar Mistake	65	(1)
Quick Decision Making	66	(24)
Decision Guidelines	66	(1)
Excel Application Exercise	67	(1)
End-of-Chapter Summary Problem	67	(3)
Review and Assignment Material	70	(20)
The Adjusting Process	90	(48)
Vignette: It's Just Lunch	91	(1)
Financial Statements and Adjusting Entries	92	(4)
Accrual versus Cash-Basis Accounting	92	(2)
The Accounting Period	94	(1)
The Revenue Principle	94	(1)
The Matching Principle	95	(1)
Accounting.com: Grossing Up the Revenue: Priceline.com	95	(1)
The Time-Period Concept	96	(1)
Adjusting the Accounts	96	(1)
Prepaids and Accruals	97	(11)
Prepaid Expenses	98	(2)
Depreciation	100	(2)
Accrued Expenses	102	(2)
Accrued Revenues	104	(1)
Unearned Revenues	104	(2)
Summary of the Adjusting Process	106	(2)
The Adjusted Trial Balance	108	(1)
The Financial Statements	109	(1)
Preparing the Statements	109	(1)
Relationships Among the Financial Statements	110	(1)
Ethical Issues in Accrual Accounting	110	(28)
Decision Guidelines	111	(1)
Excel Application Exercise	111	(1)
End-of-Chapter Summary Problem	112	(3)
Review and Assignment Material	115	(19)
Appendix to Chapter 3: Alternative Treatment of Prepaid Expenses and Unearned Revenues	134	(4)
Completing the Accounting Cycle	138	(44)
Vignette: Chicago Cubs	139	(1)
The Accounting Cycle	140	(1)
The Work Sheet	141	(5)
Mid-Chapter Summary Problem	145	(1)
Completing the Accounting Cycle	146	(6)
Preparing the Financial Statements	146	(1)
Recording the Adjusting Entries	146	(2)
Closing the Accounts	148	(3)
Postclosing Trial Balance	151	(1)
Classifying Assets and Liabilities	152	(2)
Assets	152	(1)
Liabilities	152	(1)
A Detailed Balance Sheet	153	(1)
Balance Sheet Forms	153	(1)
Accounting Ratios	154	(28)
Current Ratio	154	(1)
Debt Ratio	155	(1)
Accounting.com: Dell Computer Corp.: Where Customer Focus Equals Solid Financials	156	(1)
Managing Both the Current Ratio and the Debt Ratio	156	(1)
Decision Guidelines	157	(1)
Excel Application Exercise	158	(1)
End-of-Chapter Summary Problem	158	(3)
Review and Assignment Material	161	(17)
Appendix to Chapter 4: Reversing Entries: An Optional Step	178	(4)
Merchandising Operations	182	(64)
Vignette: Amazon.com	183	(2)
What Are Merchandising Operations?	185	(1)
The Operating Cycle of a Merchandising Business	185	(1)
Inventory Systems: Perpetual and Periodic	185	(1)
Integrated Inventory Systems	186	(1)
Accounting for Inventory in the Perpetual System	186	(10)
Purchase of Inventory	186	(4)
Sale of Inventory	190	(3)
Evaluating Profitability: Sales Revenue, Cost of Goods Sold, and Gross Profit	193	(1)
Accounting.com: Amazon.com: For E-Tailers Free Shipping Isn't Free, But It's Not a Cost, Either	194	(1)
Mid-Chapter Summary Problem	195	(1)
Adjusting and Closing the Accounts of a Merchandiser	196	(4)
Adjusting Inventory Based on a Physical Count	196	(2)
Preparing and Using the Work Sheet	198	(1)
Journalizing the Adjusting and Closing Entries	199	(1)
Preparing a Merchandiser's Financial Statements	200	(2)
Income Statement Formats: Multi-Step and Single-Step	202	(1)
Two Key Ratios for Decision Making	202	(44)
The Gross Profit Percentage	203	(1)
The Rate of Inventory Turnover	203	(2)
Decision Guidelines	205	(1)
Excel Application Exercise	206	(1)
End-of-Chapter Summary Problem	206	(5)
Review and Assignment Material	211	(21)
Appendix to Chapter 5: Accounting for Merchandise in a Periodic Inventory System	232	(12)
Comprehensive Problem for Chapters 1--5	244	(2)
Merchandise Inventory	246	(34)
Vignette: Columbia Sportswear Company	247	(2)
Inventory Costing Methods	249	(1)
Inventory Costing in a Perpetual System	250	(6)
First-In, First-Out (FIFO) Method	250	(2)
Last-In, First-Out (LIFO) Method	252	(1)
Average-Cost Method	253	(1)
Comparing FIFO, LIFO, and Average Cost	254	(1)
Mid-Chapter Summary Problem	254	(2)
Inventory Costing in a Periodic System	256	(2)
First-In, First-Out (FIFO) Method	257	(1)
Last-In, First-Out (LIFO) Method	257	(1)
Average-Cost Method	257	(1)
Accounting Principles and Inventories	258	(1)
Other Inventory Issues	259	(21)
Lower-of-Cost-or-Market Rule	259	(1)
Effects of Inventory Errors	259	(1)
Ethical Issues	260	(1)
Accounting.com: Online Category Managers: The New B2B Force Behind Those Huge E-Tailer Inventories	261	(1)
Estimating Inventory	262	(1)
Decision Guidelines	263	(1)
Excel Application Exercise	263	(1)
End-of-Chapter Summary Problem	264	(1)
Review and Assignment Material	265	(12)
Appendix to Chapter 6: Comparing the Perpetual and Periodic Inventory Systems	277	(3)
Accounting Information Systems	280	(42)
Vignette: PriceKubecka	281	(1)
Effective Accounting Information Systems	282	(1)
Features of Effective Systems	282	(1)
Components of a Computerized System	283	(1)
How Computerized and Manual Systems Work	283	(4)
Designing a System: The Chart of Accounts	284	(1)
Processing Transactions: Manual and Menu-Driven Systems	285	(1)
Enterprise Resource Planning (ERP) Systems	286	(1)
Accounting.com: Accounting Pioneers on the Virtual Frontier	286	(1)
Integrated Accounting Software: Spreadsheets	287	(1)
Special Journals	287	(10)
Special Journals in a Manual System	288	(1)
Using the Sales Journal	289	(2)
Using Documents as Journals	291	(1)
Using the Cash Receipts Journal	291	(2)
Using the Purchases Journal	293	(2)
Using the Cash Payments Journal	295	(2)
The Role of the General Journal	297	(25)
The Credit Memorandum---Recording Sales Returns and Allowances	297	(1)
The Debit Memorandum---Recording Purchase Returns and Allowances	298	(1)
Balancing the Ledgers	298	(1)
Blending Computers and Special Journals in an Accounting Information System	299	(1)
Decision Guidelines	299	(1)
Excel Application Exercise	300	(1)
End-of-Chapter Summary Problem	300	(2)
Review and Assignment Material	302	(17)
Comprehensive Problem for Chapters 1--7	319	(3)
Internal Control and Cash	322	(38)
Vignette: Merrill Lynch	323	(1)
Internal Control	324	(5)
An Effective Internal Control System	325	(2)
Accounting.com: WorldCom, Inc.: Internal Auditor's Heroism Is Silver Lining in Cloud of Scandal	327	(1)
Internal Controls for E-Commerce	328	(1)
The Limitations of Internal Control	329	(1)
The Bank Account as a Control Device	329	(7)
The Bank Reconciliation	330	(2)
Preparing the Bank Reconciliation	332	(2)
How Owners and Managers Use the Bank Reconciliation	334	(1)
Mid-Chapter Summary Problem	335	(1)
Internal Control over Cash Receipts	336	(2)
Internal Control over Cash Payments	338	(2)
Controls over Payment by Check	338	(1)
Controlling Petty Cash Payments	339	(1)
Reporting Cash on the Balance Sheet	340	(1)
Ethics and Accounting	340	(20)
Corporate and Professional Codes of Ethics	341	(1)
Ethical Issues in Accounting	341	(1)
Decision Guidelines	342	(1)
Excel Application Exercise	342	(1)
End-of-Chapter Summary Problem	343	(1)
Review and Assignment Material	344	(14)
Appendix to Chapter 8: The Voucher System	358	(2)
Receivables	360	(38)
Vignette: New York Jets and Oracle Corp.	361	(1)
Receivables: An Introduction	362	(3)
Types of Receivables	362	(1)
Establishing Internal Control over Collection of Receivables	363	(1)
Managing the Collection of Receivables: The Credit Department	364	(1)
Decision Guidelines	364	(1)
Accounting for Uncollectibles (Bad Debts)	365	(4)
The Allowance Method	365	(1)
Estimating Uncollectibles	365	(3)
Writing Off Uncollectible Accounts	368	(1)
The Direct Write-Off Method	368	(1)
Recovery of Accounts Previously Written Off	369	(1)
Credit-Card, Bankcard, and Debit-Card Sales	369	(3)
Credit-Card Sales	369	(1)
Bankcard Sales	370	(1)
Debit-Card Sales	370	(1)
Accounting.com: Merchant Beware: Credit Cards Boom with Online Sales . . . But So Does Fraud	371	(1)
Mid-Chapter Summary Problem	371	(1)
Notes Receivable: An Overview	372	(2)
Identifying Maturity Date	373	(1)
Computing Interest on a Note	373	(1)
Accounting for Notes Receivable	374	(3)
Recording Notes Receivable	374	(1)
Accruing Interest Revenue	375	(1)
Dishonored Notes Receivable	376	(1)
Reporting Receivables on the Balance Sheet	376	(1)
Computers and Accounts Receivable	376	(1)
Using Accounting Information for Decision Making	377	(21)
Acid-Test (or Quick) Ratio	377	(1)
Days' Sales in Receivables	378	(1)
Decision Guidelines	379	(1)
Excel Application Exercise	380	(1)
End-of-Chapter Summary Problem	380	(1)
Review and Assignment Material	381	(15)
Appendix to Chapter 9: Discounting a Note Receivable	396	(2)
Plant Assets and Intangibles	398	(36)
Vignette: American/Delta/United Airlines	399	(1)
Measuring the Cost of Plant Assets	400	(3)
Land and Land Improvements	400	(1)
Buildings	401	(1)
Machinery and Equipment	401	(1)
Furniture and Fixtures	402	(1)
A Lump-Sum (Basket) Purchase of Assets	402	(1)
Capital Expenditures	403	(1)
Measuring Plant Asset Depreciation	403	(7)
Causes of Depreciation	404	(1)
Measuring Depreciation	404	(1)
Depreciation Methods	404	(4)
Comparing Depreciation Methods	408	(1)
Mid-Chapter Summary Problem	409	(1)
Other Issues in Accounting for Plant Assets	410	(5)
Depreciation and Income Taxes	410	(1)
Depreciation for Partial Years	411	(1)
Changing the Useful Life of a Depreciable Asset	411	(1)
Using Fully Depreciated Assets	412	(1)
Disposing of a Plant Asset	412	(3)
Accounting for Natural Resources	415	(1)
Accounting for Intangible Assets	415	(3)
Specific Intangibles	416	(2)
Accounting.com: When Business Marriages Go Bust	418	(1)
Accounting for Research and Development Costs	418	(1)
Ethical Issues	418	(16)
Decision Guidelines	419	(1)
Excel Application Exercise	419	(1)
End-of-Chapter Summary Problem	420	(1)
Review and Assignment Material	421	(13)
Current Liabilities and Payroll	434	(34)
Vignette: General Motors	435	(1)
Current Liabilities of Known Amount	436	(3)
Accounts Payable	436	(1)
Short-Term Notes Payable	436	(1)
Sales Tax Payable	437	(1)
Accounting.com: A Taxing Dilemma: Sales Tax Liability and the Internet	438	(1)
Current Portion of Long-Term Debt	438	(1)
Accrued Expenses (Accrued Liabilities)	438	(1)
Unearned Revenues	439	(1)
Current Liabilities That Must Be Estimated	439	(3)
Estimated Warranty Payable	440	(1)
Contingent Liabilities	441	(1)
Decision Guidelines	441	(1)
Mid-Chapter Summary Problem	442	(1)
Accounting for Payroll	442	(4)
Gross Pay and Net Pay	443	(1)
Payroll Deductions	443	(1)
Employer Payroll Taxes	444	(1)
Payroll Entries	445	(1)
The Payroll System	446	(4)
Payroll Record	446	(1)
Payroll Checks	446	(1)
Earnings Record	447	(1)
Paying the Payroll	448	(1)
Internal Control over Payroll	449	(1)
Reporting Payroll Expense and Liabilities	450	(1)
Ethical Issues in Reporting Liabilities	450	(18)
Decision Guidelines	451	(1)
Excel Application Exercise	451	(1)
End-of-Chapter Summary Problem	452	(1)
Review and Assignment Material	453	(13)
Comprehensive Problem for Chapters 8--11	466	(2)
Partnerships	468	(36)
Vignette: Arthur Andersen LLP	469	(2)
Characteristics of a Partnership	471	(2)
The Written Agreement	471	(1)
Limited Life	471	(1)
Mutual Agency	471	(1)
Unlimited Liability	471	(1)
Co-Ownership of Property	472	(1)
No Partnership Income Taxes	472	(1)
Partners' Owner's Equity Accounts	472	(1)
Types of Partnerships	473	(1)
General Partnerships	473	(1)
Limited Partnerships	473	(1)
S Corporations	473	(1)
The Partnership Start-Up	474	(1)
Accounting.com: From Respected Partnership to Dead Duck: The Fall of Arthur Andersen	474	(1)
Sharing Profits and Losses, and Partner Drawings	475	(2)
Sharing Based on a Stated Fraction	476	(1)
Sharing Based on Capital Contributions and on Service	476	(1)
Partner Drawings of Cash and Other Assets	477	(1)
Admission of a Partner	477	(5)
Admission by Purchasing a Partner's Interest	478	(1)
Admission by Investing in the Partnership	478	(4)
Withdrawal of a Partner	482	(2)
Withdrawal at Book Value	483	(1)
Withdrawal at Less Than Book Value	483	(1)
Withdrawal at More Than Book Value	483	(1)
Death of a Partner	484	(1)
Liquidation of a Partnership	484	(2)
Sale of Noncash Assets at a Gain	485	(1)
Sale of Noncash Assets at a Loss	486	(1)
Partnership Financial Statements	486	(18)
Decision Guidelines	488	(1)
Excel Application Exercise	489	(1)
End-of-Chapter Summary Problem	489	(1)
Review and Assignment Material	490	(14)
Corporations: Paid-in Capital and the Balance Sheet	504
Vignette: IHOP	505	(1)
Corporations: An Overview	506	(3)
Characteristics of a Corporation	506	(1)
Organizing a Corporation	507	(1)
Capital Stock	508	(1)
Stockholders' Equity: The Basics	509	(3)
Paid-In Capital Comes from the Stockholders	509	(1)
Retained Earnings Come from Profitable Operations	509	(1)
Corporations May Pay Dividends to the Stockholders	510	(1)
Stockholders' Rights	510	(1)
Classes of Stock	511	(1)
Issuing Stock	512	(6)
Issuing Common Stock	512	(2)
Accounting.com: UPS Delivers the Dough at Record-Breaking IPO	514	(1)
Issuing Preferred Stock	515	(1)
Ethical Considerations	515	(1)
Review of Accounting for Paid-In Capital	516	(1)
Decision Guidelines	516	(1)
Mid-Chapter Summary Problem	517	(1)
Accounting for Cash Dividends	518	(2)
Dividend Dates	518	(1)
Dividends on Preferred and Common Stock	518	(1)
Dividends on Cumulative and Noncumulative Preferred Stock	519	(1)
Different Values of Stock	520	(1)
Market Value	520	(1)
Book Value	520	(1)
Evaluating Operations	521	(1)
Rate of Return on Total Assets	521	(1)
Rate of Return on Common Stockholders' Equity	522	(1)
Accounting for Income Taxes by Corporations	522
Decision Guidelines	523	(1)
Excel Application Exercise	524	(1)
End-of-Chapter Summary Problem	525	(1)
Review and Assignment Material	526
Appendix A: Amazon.com Annual Report	1	(1)
Appendix B: Charts of Accounts	1	(1)
Appendix C: Present Value and Future Value Tables	1	(1)
Appendix D: Check Figures	1	(1)
Glossary	1	(1)
Indexes	1