Financial Accounting for Managers

Provide future business professionals with a practical introduction to financial accounting without the use of debits and credits. With its unique focus on building students’ decision-making skills and emphasis on financial statements, Financial Accounting for Managers, 1st Edition meaningfully integrates data analytics and the importance of using accounting information in real-world decision-making. Engaging real-world industry examples  student understanding of accounting concepts and illustrate how these are relevant to their everyday lives and future careers in business and accounting.

1 Introduction to Financial Statements 1-1 Knowing the Numbers: Columbia Sportswear Company 1-1 1.1 Business Organization and Accounting Information Uses 1-2 Forms of Business Organization 1-3 Users and Uses of Financial Information 1-4 Data Analytics 1-6 Ethics in Financial Reporting 1-7 1.2 The Three Types of Business Activity 1-8 Financing Activities 1-9 Investing Activities 1-9 Operating Activities 1-10 1.3 The Four Financial Statements 1-11 Income Statement 1-12 Retained Earnings Statement 1-13 Balance Sheet 1-14 Statement of Cash Flows 1-16 ESG Reporting: Beyond the Four Financial Statements 1-17 Interrelationships of Statements 1-17 Elements of an Annual Report 1-20 Appendix 1A: Career Opportunities in Accounting 1-23 “Show Me the Money” 1-24 2 A Further Look at the Balance Sheet 2-1 Just Fooling Around?: The Motley Fool 2-2 2.1 The Classified Balance Sheet 2-2 Current Assets 2-4 Long-Term Investments 2-5 Property, Plant, and Equipment 2-5 Intangible Assets 2-5 Current Liabilities 2-7 Long-Term Liabilities 2-7 Stockholders’ Equity 2-7 2.2 Analyzing the Balance Sheet Using Ratios 2-8 Ratio Analysis 2-8 Using a Classified Balance Sheet 2-9 3 The Accounting Information System 3-1 Accidents Happen: MF Global Holdings Ltd 3-1 3.1 Financial Reporting Concepts 3-2 The Standard-Setting Environment 3-2 Qualities of Useful Information 3-4 Assumptions in Financial Reporting 3-5 Principles in Financial Reporting 3-6 Cost Constraint 3-6 3.2 Using the Accounting Equation to Analyze Transactions 3-8 Accounting Transactions 3-8 Analyzing Transactions 3-9 Summary of Transactions 3-16 Preparing Financial Statements 3-16 4 Accrual Accounting Concepts 4-1 Keeping Track of Groupons: Groupon 4-1 4.1 Accrual-Basis Accounting and Adjustments 4-2 The Revenue Recognition Principle 4-3 The Expense Recognition Principle 4-3 Accrual versus Cash Basis of Accounting 4-5 The Need for Adjustments 4-6 Types of Adjustments 4-6 4.2 Adjustments for Deferrals 4-8 Prepaid Expenses 4-8 Unearned Revenues 4-12 4.3 Adjustments for Accruals 4-15 Accrued Revenues 4-15 Accrued Expenses 4-16 Summary of Basic Relationships 4-19 4.4 Preparing Financial Statements 4-21 Preparing Financial Statements from the Adjusted Tabular Summary 4-21 Quality of Earnings 4-21 5 Fraud, Internal Control, and Cash 5-1 Minding the Money in Madison: Barriques 5-1 5.1 Fraud and Internal Control 5-3 Fraud 5-3 The Sarbanes-Oxley Act 5-3 Internal Control 5-4 Principles of Internal Control Activities 5-5 Data Analytics and Internal Controls 5-10 Limitations of Internal Control 5-11 5.2 Cash Controls 5-12 Cash Receipts Controls 5-12 Cash Disbursements Controls 5-14 Petty Cash Fund 5-16 5.3 Control Features of a Bank Account 5-17 Electronic Banking 5-17 Bank Statements 5-18 Reconciling the Bank Account 5-20 5.4 Reporting Cash 5-26 Cash Equivalents 5-26 Restricted Cash 5-26 Managing and Monitoring Cash 5-27 Cash Budgeting 5-29 Data Analytics in Action 5-51 6 Merchandising Operations and the Multiple-Step Income Statement 6-1 Buy Now, Vote Later: REI 6-1 6.1 Merchandising Operations and Inventory Purchases 6-2 Flow of Costs 6-3 Recording Purchases Under a Perpetual Inventory System 6-4 Freight Costs 6-5 Purchase Returns and Allowances 6-7 Purchase Discounts 6-7 Summary of Purchasing Transactions 6-8 6.2 Recording Sales Under a Perpetual Inventory System 6-9 Recording Sales 6-10 Sales Returns and Allowances 6-10 Sales Discounts 6-11 Data Analytics and Credit Sales 6-11 6.3 Multiple-Step Income Statement 6-13 Format of the Multiple-Step Income Statement 6-13 Components of the Multiple-Step Income Statement 6-13 6.4 Gross Profit Rate and Profit Margin 6-17 Gross Profit Rate 6-17 Profit Margin 6-18 Data Analytics in Action 6-33 7 Reporting and Analyzing Inventory and Receivables 7-1 “Where Is That Spare Bulldozer Blade?”: Caterpillar 7-1 7.1 Classifying and Determining Inventory 7-3 Classifying Inventory 7-3 Determining Inventory Quantities 7-3 7.2 Inventory Methods and Financial Effects 7-6 Specific Identification 7-7 Cost Flow Assumptions 7-7 Financial Statement and Tax Effects of Cost Flow Methods 7-13 7.3 Reporting Receivables 7-15 Types of Receivables 7-16 Recognizing Accounts Receivable 7-16 Valuing Accounts Receivable 7-16 Data Analytics and Receivables Management 7-21 7.4 Inventory Presentation and Analysis 7-23 Presentation 7-23 Analysis 7-23 Data Analytics in Action 7-46 8 Reporting and Analyzing Long-Lived Assets 8-1 A Tale of Two Airlines: American Airlines 8-1 8.1 Plant Asset Expenditures 8-3 Determining the Cost of Plant Assets 8-3 Expenditures During Useful Life 8-6 8.2 Depreciation Methods 8-8 Factors in Computing Depreciation 8-8 Depreciation Methods 8-9 Revising Periodic Depreciation 8-14 Impairments 8-15 8.3 Plant Asset Disposals 8-16 Sale of Plant Assets 8-16 Retirement of Plant Assets 8-18 8.4 Intangible Assets 8-18 Accounting for Intangible Assets 8-19 Types of Intangible Assets 8-20 Research and Development Costs 8-22 8.5 Statement Presentation and Analysis 8-23 Presentation 8-23 Analysis 8-25 Data Analytics in Action 8-45 9 Reporting and Analyzing Liabilities 9-1 And Then There Were Two: Maxwell Car Company 9-1 9.1 Accounting for Current Liabilities 9-3 What Is a Current Liability? 9-3 Notes Payable 9-3 Sales Taxes Payable 9-4 Unearned Revenues 9-5 Current Maturities of Long-Term Debt 9-6 Payroll and Payroll Taxes Payable 9-6 9.2 Characteristics of Bonds 9-9 Types of Bonds 9-9 Issuing Procedures 9-10 Bond Trading 9-10 Determining the Market Price of a Bond 9-11 9.3 Accounting for Bond Transactions 9-14 Issuing Bonds at Face Value 9-14 Discount or Premium on Bonds 9-15 Issuing Bonds at a Discount 9-16 Issuing Bonds at a Premium 9-17 Redeeming Bonds at Maturity 9-19 9.4 Accounting for Long-Term Notes Payable 9-20 9.5 Presentation and Analysis 9-21 Presentation 9-21 Analysis 9-22 10 Reporting and Analyzing Stockholders’ Equity 10-1 Oh Well, I Guess I’ll Get Rich: Meta 10-1 10.1 Corporate Form of Organization 10-3 Characteristics of a Corporation 10-3 Forming a Corporation 10-6 Stockholder Rights 10-7 Stock Issue Considerations 10-8 Corporate Capital 10-10 10.2 Accounting for Common, Preferred, and Treasury Stock 10-11 Accounting for Common Stock 10-11 Accounting for Preferred Stock 10-13 Accounting for Treasury Stock 10-14 10.3 Accounting for Cash Dividends, Stock Dividends, and Stock Splits 10-16 Cash Dividends 10-17 Dividend Preferences 10-18 Stock Dividends 10-20 Stock Splits 10-21 10.4 Presentation and Analysis of Stockholders’ Equity 10-24 Balance Sheet Presentation of Stockholders’ Equity 10-24 Analysis of Stockholders’ Equity 10-24 Debt versus Equity Decision 10-27 Data Analytics in Action 10-47 11 Statement of Cash Flows 11-1 Got Cash?: Microsoft 11-1 11.1 Usefulness and Format of the Statement of Cash Flows 11-3 Usefulness of the Statement of Cash Flows 11-3 Classification of Cash Flows 11-3 Significant Noncash Activities 11-4 Format of the Statement of Cash Flows 11-5 11.2 Preparing the Statement of Cash Flows—Indirect Method 11-6 Indirect and Direct Methods 11-7 Indirect Method—Computer Services Company 11-7 Step 1: Operating Activities 11-9 Summary of Conversion to Net Cash Provided by Operating Activities—Indirect Method 11-13 Step 2: Investing and Financing Activities 11-14 Step 3: Net Change in Cash 11-16 11.3 Analyzing the Statement of Cash Flows 11-18 The Corporate Life Cycle 11-18 Free Cash Flow 11-20 Data Analytics in Action 11-42 12 Financial Analysis: The Big Picture 12-1 It Pays to Be Patient: Warren Buffett 12-2 12.1 Sustainable Income and Quality of Earnings 12-3 Sustainable Income 12-3 Quality of Earnings 12-7 12.2 Horizontal Analysis and Vertical Analysis 12-9 Horizontal Analysis 12-10 Vertical Analysis 12-12 12.3 Ratio Analysis 12-15 Liquidity Ratios 12-16 Solvency Ratios 12-17 Profitability Ratios 12-17 Financial Analysis and Data Analytics 12-18 Comprehensive Example of Ratio Analysis 12-18 Appendix A Specimen Financial Statements: Apple Inc. A- 1 Appendix B Specimen Financial Statements: Columbia Sportswear Company B- 1 Appendix C Specimen Financial Statements: Under Armour, Inc. C- 1 Appendix D Double-Entry Accounting System D- 1 D.1 Accounts, Debits, and Credits D- 2 Debits and Credits D- 2 Debit and Credit Procedures D- 3 Summary of Debit/Credit Rules D- 5 D.2 Using a Journal and Ledger D- 6 The Recording Process D- 6 The Journal D- 6 The Ledger D- 7 Chart of Accounts D- 7 Posting D- 7 The Recording Process Illustrated D- 7 D.3 The Trial Balance D- 10 D.4 Adjusting Entries D- 11 The Need for Adjusting Entries D- 11 The Adjusting Process Illustrated D- 12 Preparing Financial Statements D- 13 Appendix E Time Value of Money E- 1 E.1 Interest and Future Values E- 2 Nature of Interest E- 2 Future Value of a Single Amount E- 3 Future Value of an Annuity E- 5 E.2 Present Values E- 8 Present Value Variables E- 8 Present Value of a Single Amount E- 9 Present Value of an Annuity E- 11 Time Periods and Discounting E- 13 Present Value of a Long-Term Note or Bond E- 13 E.3 Capital Budgeting Situations E- 16 E.4 Using Technological Tools E- 18 Present Value of a Single Sum E- 19 Present Value of an Annuity E- 20 Future Value of a Single Sum E- 21 Future Value of an Annuity E- 22 Internal Rate of Return E- 22 Useful Applications E- 23 Appendix F Reporting and Analyzing Investments F- 1 F.1 Accounting for Debt Investments F- 2 Why Corporations Invest F- 2 Accounting for Debt Investments F- 2 F.2 Accounting for Stock Investments F- 4 Holdings of Less Than 20% F- 5 Holdings Between 20% and 50% F- 6 Holdings of More Than 50% F- 7 F.3 Reporting Investments in Financial Statements F- 9 Debt Securities F- 9 Equity Securities F- 13 Balance Sheet Presentation F- 14 Presentation of Realized and Unrealized Gain or Loss F- 15 Company Index / Subject Index I- 1 Rapid Review