Mastering Financial Accounting Essentials The Critical Nuts and Bolts

by McCrary, Stuart A.

• ISBN13: 9780470393321
• ISBN10: 0470393327
• Edition: 1st
• Format: Hardcover
• Copyright: 2009-11-02
• Publisher: Wiley

Summary

The essential guide to financial accountingIn today's financial world, you must know how to read and interpret financial reports/statements in order to effectively serve investors, creditors, and tax authorities. This is especially true in light of recent accounting scandals.Mastering Accounting Essentials is an important guide for those who need to understand the language and law of this discipline in order to talk to accountants and clients in an intellectual manner. Part One of the book uses an extended scenario to present the basics of financial accounting. Along the way, you'll become familiar with inventory valuation methods as well as the timing of erosion of productive assets. Part Two focuses on financial statements and shows you how internal managers calculate ratios and trends to evaluate business efficiency. Here, you'll also discover how bankers review statements to determine solvency. Through theory and real-world examples provides a solid grounding in financial accounting Other titles by McCrary: How to Create and Manage a Hedge Fund and Hedge Fund Course Covers the essential elements of this field, from double-entry book keeping to LIFO, FIFO, and straight line depreciationMastering Accounting Essentials offers a hands-on approach to accounting that will allow you to gain a solid understanding of this discipline.

Author Biography

Stuart A. McCrary is a Principal at Chicago Partners, a division of Navigant Consulting, Inc. He is a trader and portfolio manager who specializes in traditional and alternative investments, quantitative valuation, risk management, and financial software. Prior to joining Chicago Partners, McCrary was president of Frontier Asset Management, managing a market-neural hedge fund. He also held positions with Fenchurch Capital Management as a senior option trader and CS First Boston as vice president and market maker of over-the-counter options. Prior to that, McCrary was a vice president with the Securities Groups and a portfolio manager with Comerica Bank. McCrary has published two previous books with Wiley: How to Creat and Manage a Hedge Fund and Hedge Fund Course.

Table of Contents

Preface	p. xi
Acknowledgments	p. xiii
Creating Ledger Accounting	p. 1
Count Everything	p. 4
The Beginnings of Double-Entry Accounting	p. 5
Double-Entry Recording of Business Transactions	p. 7
Handling Debits and Credits	p. 7
Keeping Track of Data	p. 9
A Mathematical Description of Double-Entry Conventions	p. 10
Handling Income Items	p. 11
Determining Profit in the Simple Accounting Model	p. 11
Permanent Accounts Overview	p. 11
Temporary Accounts Overview	p. 12
Conclusion	p. 12
Questions	p. 13
Accounting Conventions	p. 15
Reasons Accountants Develop Conventions	p. 15
Accounting Cycle	p. 16
Classification	p. 16
Comparability	p. 16
Conservatism	p. 16
Double-Entry	p. 17
Full Disclosure	p. 17
Focus on Addition	p. 18
Generally Accepted Accounting Principles (GAAP)	p. 18
Going-Concern Value	p. 19
Journal Entry	p. 19
Matching	p. 20
Materiality	p. 20
Recognition	p. 20
Understandability	p. 21
Usefulness	p. 21
Valuation	p. 21
Verifiability	p. 22
Conclusion	p. 22
Questions	p. 23
Balance Sheet	p. 25
Balance Sheet Contains Permanent Accounts	p. 25
Time Line of Cash Flows	p. 25
Types of Balance Sheet Accounts	p. 27
Presenting the Classified Balance Sheet	p. 35
Conclusion	p. 36
Question	p. 37
Adding an Income Statement	p. 39
Temporary Accounts	p. 39
Using Temporary Accounts	p. 40
Types of Transactions Involving Temporary Accounts	p. 42
Income Accounts	p. 44
Single-Step Income Statement	p. 46
Multistep Income Statement	p. 46
Conclusion	p. 47
Questions	p. 49
Timing and Accrual Accounting	p. 51
Journaling Accounting Transactions	p. 51
Cash Basis Accounting	p. 51
Accrual Basis Accounting	p. 52
Conclusion	p. 62
Questions	p. 63
The Statement of Cash Flows	p. 67
Importance of Cash	p. 67
An Intuitive Way to Track Cash	p. 68
Standard Accounting Categories on the Statement of Cash Flows	p. 68
Using the Indirect Method to Document Changes in the Cash Position	p. 70
Using the Direct Method to Document Changes in the Cash Position	p. 72
Producing a Statement of Cash Flows Using the Indirect Method	p. 76
Producing a Statement of Cash Flows Using the Direct Method	p. 78
Conclusion	p. 80
Questions	p. 81
Ensuring Integrity	p. 83
Internal Controls and Procedures	p. 83
Independent Auditing	p. 84
The Role of the User of Financial Statements	p. 85
Conclusion	p. 86
Questions	p. 87
Financial Statement Analysis	p. 89
Restating Accounting Results	p. 89
Ratio Analysis	p. 89
Trend Analysis	p. 96
Industry Analysis	p. 97
Conclusion	p. 98
Questions	p. 99
Collected Questions	p. 101
Answers	p. 105
About the Author	p. 149
Index	p. 151
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