Mastering Financial Accounting Essentials : The Critical Nuts and Bolts

by Stuart A. McCrary (Chicago Partners LLC)

• ISBN13: 9780470549551
• ISBN10: 0470549556
• Format: eBook
• Copyright: 2009-09-01
• Publisher: Wiley

Summary

Mastering Financial Accounting Essentials is a text for people who need to use accounting information in their everyday jobs. They need to be able to understand the language and the law 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. McCrary creates a new business from scratch. By the end of the scenario (and the end of Part 1), readers will have reinvented double-entry book keeping. Along the way, readers can delve as deeply as they wish to learn more about inventory valuation methods (for example, LIFO verse FIFO) and the timing of erosion of the productive assets (for example, straight line depreciation verses double declining balance). As before, McCrary will emphasize a general understanding of the process and the reports. Part Two will use financial statements. Using the extended scenario above, McCrary shows how internal managers calculate ratios and trends to evaluate business efficiency. McCrary shows how bankers will review the statements to determine solvency.

Table of Contents

Preface

Acknowledgments

Creating Ledger Accounting

Count Everything

The Beginnings of Double-Entry Accounting

Double-Entry Recording of Business Transactions

Handling Debits and Credits

Keeping Track of Data

A Mathematical Description of Double-Entry Conventions

Handling Income Items

Determining Profit in the Simple Accounting Model

Permanent Accounts Overview

Temporary Accounts Overview

Conclusion

Questions

Accounting Conventions

Reasons Accountants Develop Conventions

Accounting Cycle

Classification

Comparability

Conservatism

Double-Entry

Full Disclosure

Focus on Addition

Generally Accepted Accounting Principles (GAAP)

Going-Concern Value

Journal Entry

Matching

Materiality

Recognition

Understandability

Usefulness

Valuation

Verifiability

Conclusion

Questions

Balance Sheet

Balance Sheet Contains Permanent Accounts

Time Line of Cash Flows

Types of Balance Sheet Accounts

Presenting the Classified Balance Sheet

Conclusion

Question

Adding an Income Statement

Temporary Accounts

Using Temporary Accounts

Types of Transactions Involving Temporary Accounts

Income Accounts

Single-Step Income Statement

Multistep Income Statement

Conclusion

Questions

Timing and Accrual Accounting

Journaling Accounting Transactions

Cash Basis Accounting

Accrual Basis Accounting

Conclusion

Questions

The Statement of Cash Flows

Importance of Cash

An Intuitive Way to Track Cash

Standard Accounting Categories on the Statement of Cash Flows

Using the Indirect Method to Document Changes in the Cash Position

Using the Direct Method to Document Changes in the Cash Position

Producing a Statement of Cash Flows Using the IndirectMethod

Producing a Statement of Cash Flows Using the Direct Method

Conclusion

Questions

Ensuring Integrity

Internal Controls and Procedures

Independent Auditing

The Role of the User of Financial Statements

Conclusion

Questions

Financial Statement Analysis

Restating Accounting Results

Ratio Analysis

Trend Analysis

Industry Analysis

Conclusion

Questions

Collected Questions

Answers

About the Author

Index

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