Introduction 1 About This Book 1 Foolish Assumptions 2 Icons Used in This Book 3 Beyond the Book 3 Where to Go from Here 4 Part 1: Business Accounting Basics 5 Chapter 1: Business Accounting Fundamentals 7 Keeping the Accounting Equation in Balance 8 Distinguishing Between Cash- and Accrual-Basis Accounting 10 Summarizing Profit Activities in the Income (Profit & Loss) Statement 13 Assembling a Balance Sheet 15 Partitioning the Statement of Cash Flows 17 Tracing How Dishonest Accounting Distorts Financial Statements 20 Answers to Problems on Elements of Business Accounting 22 Chapter 2: Financial Effects of Transactions 27 Classifying Business Transactions 28 Seeing Both Sides of Business Transactions 30 Concentrating on Sales 33 Concentrating on Expenses 37 Determining the Composite Effect of Profit 40 Answers to Problems on Financial Effects of Transactions 43 Chapter 3: Getting Started in the Bookkeeping Cycle 51 Constructing the Chart of Accounts 52 Distinguishing Real and Nominal Accounts 55 Knowing Your Debits from Your Credits 58 Making Original Journal Entries 62 Recording Revenue and Income 64 Recording Expenses and Losses 66 Recording Set-Up and Follow-Up Transactions for Revenue and Expenses 70 Recording Investing and Financing Transactions 72 Answers to Problems on the Bookkeeping Cycle 74 Chapter 4: The Bookkeeping Cycle: Adjusting and Closing Entries 81 Getting Accurate with Adjusting Entries 82 Breaking Down the End-of-Year Adjusting Entries 84 Recording depreciation expense 84 Recording amortization expense 87 Recording other adjusting entries 88 Closing the Books on the Year 92 Instituting Internal Controls 94 Answers to Problems on the Bookkeeping Cycle 97 Chapter 5: Accounting in the Digital Age 105 Keeping a Few Foundational Accounting Concepts in Mind 106 Using Accounting Software and the Services of an Expert 109 Controlling and Protecting Money Flows in the Electronic Age 111 Processing payroll 112 Monitoring bank accounts 112 Surveying bank forms of electronic payments 113 Checking out non-bank forms of electronic payments 113 Using enhanced accounting controls 114 Managing the Accounting Function in the On-Demand World 117 Source documentation 117 Data rooms 117 Financial reporting 118 Flash reports, dashboards, and KPIs 118 Accounting and financial analysis tools 119 Answers to Problems on Accounting in the Digital Age 121 Part 2: Preparing Financial Statements 123 Chapter 6: Understanding Basic Accounting Concepts and Methods 125 Touching on Basic Accounting Theories and Concepts 126 Providing Some Examples of Choosing Accounting Methods 128 Getting Off to a Good Start 129 Determining Whether Products Are Unique or Fungible 133 Contrasting Cost of Goods Sold Expense Methods (for Fungible Products) 133 Averaging things out 135 Going with the flow: The FIFO method 137 Going against the flow: The LIFO method 138 Appreciating Depreciation Methods 140 Timing Bad Debts Expense 143 Answers to Problems on Choosing Accounting Methods 147 Chapter 7: The Effects and Reporting of Profit 155 Understanding the Nature of Profit 156 Keeping standards of reporting in mind 156 Following profit 157 Choosing the Income Statement Format 158 Deciding on Disclosure in the Income Statement 161 Examining How Sales and Expenses Change Assets and Liabilities 163 Summing Up the Manifold Effects of Profit 168 Answers to Problems on the Effects and Reporting of Profit 172 Chapter 8: Reporting Financial Condition in the Balance Sheet 179 Getting Started on the Balance Sheet 181 Building a Balance Sheet 185 Fleshing Out the Balance Sheet 188 Clarifying the Values of Assets in Balance Sheets 193 Answers to Problems on Reporting Financial Condition in the Balance Sheet 197 Chapter 9: Coupling the Income Statement and Balance Sheet 205 Rejoining the Income Statement and Balance Sheet 206 Filling in Key Pieces of the Balance Sheet from the Income Statement 209 Putting Fixed Assets in the Picture 214 Completing the Balance Sheet with Debt and Equity 215 Answers to Problems on Coupling the Income Statement and Balance Sheet 218 Chapter 10: Reporting Cash Flows and Changes in Owners'' Equity 223 Figuring Profit from the Balance Sheet 224 Reporting the Statement of Changes in Stockholders'' Equity 227 Determining Cash Effect from Profit Generating Activities 229 Presenting the Statement of Cash Flows 232 Reporting cash flows 233 Connecting balance sheet changes with cash flows 235 Answers for Problems on Reporting Cash Flows and Changes in Owners'' Equity 239 Part 3: Managerial, Manufacturing, and Capital Accounting 245 Chapter 11: Analyzing Profit Behavior 247 Mapping Profit for Managers 248 Analyzing Operating Profit 251 Analysis method #1: Contribution margin minus fixed costs 251 Analysis method #2: Excess over breakeven 252 Analysis method #3: Minimizing fixed costs per unit 253 Analyzing Return on Capital 257 Improving Profit Performance 260 Selling more units 260 Improving margin per unit 262 Answers to Problems on Analyzing Profit Behavior 266 Chapter 12: Tackling Managerial Cost Accounting 275 Minding Manufacturing Costs 276 Product costs 277 Period costs 278 Separating period and product costs 278 Taking a Short Tour of Manufacturing Entries 280 Calculating Product Cost: Basic Methods and Problems 284 Connecting fixed manufacturing overhead costs and production capacity 285 Boosting profit by boosting production 287 Calculating Product Cost in Unusual Situations 291 Answers to Problems on Manufacturing Cost Accounting 297 Chapter 13: Business Planning and Raising Capital 309 Starting with the Business Plan 310 Realizing the Importance of Business Forecasts 313 Getting a grip on how forecasting works 313 Gaining insight into forecasting terms 314 Identifying Types of Available Capital 316 Utilizing equity to capitalize your business 317 Leveraging debt to finance business operations 326 Noting key points in raising capital 330 Answers to Problems on Managing Business Capital 332 Part 4: The Part of Tens 337 Chapter 14: Ten Things You Should Know About Business Financial Statements 339 Rules and Standards Matter 340 Exactitude Would Be Nice, but Estimates Are Key 340 Financial Statements Fit Together Hand in Glove 341 Accrual Basis Is Used to Record Profit, Assets, and Liabilities 342 Cash Flow Differs from Accrual Basis Profit 342 Profit and Balance Sheet Values Can Be and Often Are Manipulated 343 Financial Statements May Be Revised Later to Correct Errors and Fraud 344 Some Asset Values Are Current, but Others May Be Old 344 Financial Statements Leave Interpretation to Readers 345 Financial Statements Tell the Story of a Business, Not Its Individual Shareowners 345 Chapter 15: A Ten-Point Checklist for Management Accountants 347 Designing Internal Accounting Reports 348 Helping Managers Understand Their Accounting Reports 349 Involving Managers in Choosing Accounting Methods 349 Designing Profit Performance Reports for Managers 350 Designing Cash Flow Reports for Managers 350 Designing Management Control Reports 351 Developing Financial Forecast Models for Management Decision-Making Analysis 351 Working Closely with Managers in Planning 352 Establishing and Enforcing Internal Controls 353 Staying Current in the Digital Age and Global Economy 353 Index 355.