Financial Accounting: An Integrated Statements Approach, 2nd Edition

Transaction Processing Systems 154

The Account 155, Rules of Debit and Credit 156, The

Journal 157, Effects of Journal Entries on the Financial

Statements 158, Posting to the Ledger 160, Trial

Balance 161

Financial Reporting System 163

Adjusting Entries 163, Financial Statements 165, Fiscal Year

168, Closing Entries 169, Post-Closing Trial Balance 171

The Accounting Cycle 172

EBITDA 173

Appendix: The Statement of Cash Flows 174

Summary of Learning Goals 177

Glossary 177

Chapter 5

Accounting for Merchandise Operations 210

Merchandise Operations 212

Financial Statements for a Merchandising Business 213

Multiple-Step Income Statement 214, Single-Step Income

Statement 217, Retained Earnings Statement 218, Balance

Sheet 218, Statement of Cash Flows 218, Integration of

Financial Statements 218

Sales Transactions 220

Sales Discounts 223, Sales Returns and Allowances 223

Purchase Transactions 224

Purchase Discounts 225, Purchases Returns and Allowances

225

Transportation Costs and Sales Taxes 226

Transportation Costs 226, Sales Tax 228

Dual Nature of Merchandise Transactions 228

Merchandise Shrinkage 230

Effects of Inventory Misstatements on the Financial

Statements 231

Gross Profit and Operating Profit Analysis 233

Appendix: Statement of Cash Flows: The Indirect Method

234

Cash Flows from Operating Activities 235, Cash Flows Used

for Investing Activities 235, Cash Flows Used for Financing

Activities 236

Summary of Learning Goals 237

Glossary 238

Chapter 6

Inventories 264

Inventory Classification for Merchandisers and

Manufacturers 266

Control of Inventory 268

Inventory Cost Flow Assumptions 268

Inventory Costing Methods under a Perpetual Inventory

System 271

First-In, First-Out Method 271, Last-In, First-Out Method 272,

Average Cost Method 273, Computerized Perpetual

Inventory Systems 273

Inventory Costing Methods under a Periodic Inventory

System 274

First-In, First-Out Method 274, Last-In, First-Out Method 275,

Average Cost Method 276

Comparing Inventory Costing Methods 277

Use of the First-In, First-Out Method 277, Use of the Last-In,

First-Out Method 278, Use of the Average Cost

Method 279

Valuation of Inventory at Other Than Cost 279

Valuation at Lower of Cost or Market 280, Valuation at Net

Realizable Value 280

Quick Response 281

Inventory Analysis and Interpretation 282

Summary of Learning Goals 283

Glossary 284

Chapter 7

Sarbanes-Oxley, Internal Control, and Cash 304

Sarbanes-Oxley Act of 2002 306

Internal Control 307

Objectives of Internal Control 308, Elements of Internal

Control 309, Control Environment 310, Risk Assessment 311,

Control Procedures 311, Monitoring 313, Information and

Communication 313

Cash Controls Over Receipts and Payments 315

Control of Cash Receipts 315, Control of Cash Payments

318

Bank Accounts 319

Use of Bank Accounts 319, Bank Statement 319, Bank

Accounts as a Control Over Cash 321

vi