As we release the 3rd edition a Korean·English translation/iii
As we write this book/vii

1. Business Activities and Financial Statements
Section 1 Business enterprises and business activities 2
Section 2 Business activities and accounting system 9
Section 3 Preparing and disclosing financial statements 17

2. Nature of Financial Statements
Section 1 Statement of financial position 32
Section 2 Comprehensive income statement 47
Section 3 Statement of cash flows 64
Section 4 Statement of changes in equity 69
Section 5 Basic assumption and limitations of financial statements 72

3. Recording Transactions and Preparation of Financial Statements
―Cash Transactions
Section 1 Transactions and bookkeeping 84
Section 2 Recording transactions under the double-entry bookkeeping system
87
Section 3 Accounting cycle (cash) 102
4. Accrual Basis and Preparation of Financial Statements
Section 1 Measurement of income: Accrual basis and cash basis 140
Section 2 Recognition of revenue and expense under the accrual basis
145
Section 3 Adjusting journal entries 151
Section 4 Accounting cycle (accrual) 166 Contents
Contents


5. Comprehensive Illustration of Preparing and Using Financial
Statements
Section 1 A comprehensive illustration of preparing financial statements
190
Section 2 A comprehensive illustration of using financial statements 224

Case Financial Statements of Daehan Department Store
I. Financial statements 250
II. Footnotes 254

6. Operating Activities―Sales and Trade Receivables
Section 1 Sales and trade receivables 270
Section 2 Trade receivables and bad debts 272
Section 3 Trade receivables and cash flows 285
Section 4 Related financial ratios 290

7. Operating Activities―Cost of Goods Sold, Inventory, and Trade Payables

Section 1 Cost of goods sold, inventory, and trade payables 306
Section 2 Recording cost of goods sold 308
Section 3 Correction of inventory errors 316
Section 4 Inventory valuation methods 326
Section 5 Estimating cost of ending merchandise inventory 333
Section 6 Inventory shortage loss and valuation loss 338
Section 7 Cost of goods sold and cash flows 342
Section 8 Related financial ratios 346

8. Investing Activities―Non-current Assets
Section 1 Acquisition cost of tangible assets 367
Section 2 Depreciation methods 371
Section 3 Depreciation expense and cash flows 379
Section 4 Capital expenditures and revenue expenditures 380
Section 5 Disposal of tangible assets 382
Section 6 Impairment of tangible assets 387
Section 7 Related financial ratios 391

9. Financing Activities―Liabilities
Section 1 Financial liabilities and non-financial liabilities 412
Section 2 Borrowings 414
Section 3 Bonds payable 418
Section 4 Provisions 443
Section 5 Related financial ratios 448
10. Financing Activities－Equity
Section 1 Issuance of stock 470
Section 2 Dividends 473
Section 3 Treasury stock 477
Section 4 Statement of changes in equity 481
Section 5 Related financial ratios 486

11. Statement of Cash Flows
Section 1 Key issues 510
Section 2 Cash flows from operating activities 517
Section 3 Cash flows from investing and financing activities 525
Section 4 Non-cash transactions 528
Section 5 A comprehensive illustration of preparing a statement of cash flows
529
Section 6 Related financial ratios 552

Appendix 1 Special Issues
Section 1 Other comprehensive income and net income 580
Section 2 Accounting for fair value through other comprehensive income financial assets 582
Section 3 Accounting for revaluation of tangible assets 588
Section 4 Equity method and consolidated financial statements 596

Appendix 2 Key Financial Ratios
I. Evaluating profitability 610
II. Evaluating growth 610
Ⅲ. Evaluating activity 611
Ⅳ. Evaluating safety (financial) 611
Ⅴ. Price multiples 612

Translation of terms and index (English-Korean)/613