CHAPTER 1 INTRODUCTION TO FINANCIAL ACCOUNTING
1.1 SCOPE AND PURPOSE OF FINANCIAL ACCOUNTING 14
1.2 OTHER BRANCHES OF ACCOUNTING 16
1.3 TYPES OF BUSINESS ENTITY 17
1.4 BUSINESS ACTIVITIES 18
1.5 UNDERLYING CONCEPTS OF FINANCIAL ACCOUNTING 19
1.6 THE ACCOUNTING EQUATION 22
* Multiple Choice Questions / 27
* Exercises / 30


CHAPTER 2 FINANCIAL STATEMENTS
2.1 INTRODUCTION 40
2.2 CASH BASIS VERSUS ACCRUAL BASIS OF ACCOUNTING 43
2.3 INCOME STATEMENT 44
2.4 STATEMENT OF FINANCIAL POSITION 46
2.5 CLASSIFIED FINANCIAL STATEMENTS 48
* Multiple Choice Questions / 55
* Exercises / 58


CHAPTER 3 RECORDING TRANSACTIONS
3.1 INTRODUCTION 68
3.2 ACCOUNTING CYCLE 69
3.3 ACCOUNTS 69
3.4 TWO ACCOUNTING BOOKS: JOURNAL AND LEDGER 71
3.5 CHART OF ACCOUNTS 73
3.6 ENTERING DEBITS AND CREDITS IN THE ACCOUNTS 74
3.7 TRIAL BALANCE 83
3.8 PREPARATION OF FINANCIAL STATEMENTS 84
* Multiple Choice Questions / 86
* Exercises / 89


CHAPTER 4 ADJUSTING AND CLOSING ENTRIES
4.1 INTRODUCTION 100
4.2 PREPAID EXPENSES 102
4.3 UNEARNED REVENUES 104
4.4 ACCRUED EXPENSES 105
4.5 ACCRUED REVENUES 106
4.6 DEPRECIATION 107
4.7 CLOSING ENTRIES 108
4.8 POST-CLOSING TRIAL BALANCE 112
* Multiple Choice Questions / 113
* Exercises / 116


CHAPTER 5 PREPARATION OF FINANCIAL STATEMENTS
5.1 INTRODUCTION 126
5.2 WORKSHEET FOR A SERVICE FIRM 127
5.3 PREPARATION OF FINANCIAL STATEMENTS 132
5.4 AFTER THE FINANCIAL STATEMENTS ARE PREPARED 134
* Multiple Choice Questions / 136
* Exercises / 139


CHAPTER 6 ACCOUNTING FOR MERCHANDISING FIRMS
6.1 INTRODUCTION 148
6.2 ACCOUNTING FOR MERCHANDISE SALES 149
6.3 ACCOUNTING FOR MERCHANDISE PURCHASES 152
6.4 COST OF GOODS SOLD 154
6.5 CONDENSED INCOME STATEMENT 156
6.6 WORKSHEET FOR MERCHANDISING FIRMS 157
6.7 FINANCIAL STATEMENTS FOR MERCHANDISING FIRMS 160
* Multiple Choice Questions / 163
* Exercises / 166


CHAPTER 7 CASH AND FINANCIAL ASSETS
7.1 INTRODUCTION 172
7.2 CASH 173
7.3 CONTROL OF CASH 174
7.4 BANK RECONCILIATION 175
7.5 CASH SHORT AND OVER 179
7.6 FINANCIAL ASSETS 180
* Multiple Choice Questions / 184
* Exercises / 188


CHAPTER 8 INVENTORIES
8.1 INTRODUCTION 196
8.2 DETERMINING THE OWNERSHIP OF GOODS 197
8.3 PERPETUAL AND PERIODIC INVENTORY SYSTEMS 198
8.4 COST-BASED INVENTORY VALUATION METHODS 201
8.5 OTHER INVENTORY VALUATION METHODS 205
* Multiple Choice Questions / 210
* Exercises / 214


CHAPTER 9 RECEIVABLES AND PAYABLES
9.1 TYPES OF RECEIVABLES 222
9.2 RECOGNITION AND VALUATION OF ACCOUNTS RECEIVABLE 223
9.3 METHODS OF COMPUTING PROVISION FOR UNCOLLECTIBLE ACCOUNTS 226
9.4 WRITING OFF CUSTOMERS’ ACCOUNTS 229
9.5 RECOVERY OF WRITTEN-OFF RECEIVABLES 230
9.6 PROMISSORY NOTES 231
9.7 DISCOUNTING A NOTE RECEIVABLE 232
9.8 NOTES PAYABLE 236
* Multiple Choice Questions / 239
* Exercises / 242


CHAPTER 10 PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS
10.1 PROPERTY, PLANT, AND EQUIPMENT 250
10.2 MEASUREMENT AFTER INITIAL RECOGNITION 251
10.3 DEPRECIATION 252
10.4 DISPOSAL OF PROPERTY, PLANT, AND EQUIPMENT 258
10.5 IMPAIRMENT 264
10.6 INTANGIBLE ASSETS 264
10.7 ACCOUNTING FOR INTANGIBLE ASSETS 267
* Multiple Choice Questions / 269
* Exercises / 272


CHAPTER 11 LIABILITIES
11.1 INTRODUCTION 282
11.2 CURRENT LIABILITIES 283
11.3 NONCURRENT LIABILITIES 284
11.4 BONDS PAYABLE 285
11.5 BONDS ISSUED BETWEEN INTEREST DATES 290
11.6 REDEMPTION OF BONDS 292
11.7 PROVISION AND CONTINGENT LIABILITIES 293
* Multiple Choice Questions / 295
* Exercises / 298


CHAPTER 12 SHAREHOLDERS’ EQUITY
12.1 INTRODUCTION 306
12.2 TERMINOLOGY 307
12.3 TYPES OF SHARES 308
12.4 SHAREHOLDERS’ EQUITY 309
12.5 ISSUANCE OF SHARES 310
12.6 TREASURY SHARES 313
12.7 DIVIDENDS 315
12.8 SHARE SPLIT 319
12.9 RETAINED EARNINGS 320
* Multiple Choice Questions / 322
* Exercises / 325


CHAPTER 13 STATEMENT OF CASH FLOWS
13.1 PURPOSE OF THE STATEMENT OF CASH FLOWS 336
13.2 CASH FLOWS BY ACTIVITIES 337
13.3 TYPES OF CASH INFLOWS AND OUTFLOWS 338
13.4 METHODS FOR PREPARING THE STATEMENT
OF CASH FLOWS 342
13.5 THE DIRECT METHOD 344
13.6 THE INDIRECT METHOD 349
13.7 INTERPRETING INFORMATION IN THE STATEMENT
OF CASH FLOWS 357
* Multiple Choice Questions / 360
* Exercises / 363


CHAPTER 14 REVENUE RECOGNITION
14.1 INTRODUCTION 374
14.2 FIVE STEPS TO REVENUE RECOGNITION 375
14.3 PERFORMANCE OBLIGATIONS 377
14.4 TIMING OF REVENUE RECOGNITION:
A POINT IN TIME OR OVER TIME RECOGNITION 378
14.5 ALLOCATION OF TRANSACTION PRICE TO PERFORMANCE OBLIGATIONS 380
14.6 RECOGNIZE REVENUE AS EACH PERFORMANCE
OBLIGATION IS SATISFIED 382
14.7 VARIABLE CONSIDERATIONS 384
14.8 ESTIMATION OF STANDALONE SELLING PRICES 386
14.9 SPECIAL ISSUES IN REVENUE RECOGNITION 387
14.10 REVENUE FROM LONG-TERM CONTRACTS 391
* Multiple Choice Questions / 396
* Exercises / 401

INDEX 409