Suppose you were to receive $100 as a result of
some event. Would it make a difference what
the event was? Yes it would! If you received
$100 for your birthday, it’s a gift. If you re-
ceived $100 as a result of working part time for
a week, then it’s the result of your effort. If you
received $100 as a loan, then it’s money that
you would have to pay back in the future. If
you received $100 as a result of selling your
stereo, then it’s the result of giving up some-
thing tangible. Thus, we see that the $100 re-
ceived can be associated with different types of
events, and that these events have different
meanings to you. You’d much rather receive a
$100 gift than a $100 loan, given the choice.
Likewise, a company would also view events
such as these differently.
For example, Wm. Wrigley Jr. Company
receives money in return for providing a very
simple, but widely used product: chewing gum.
So, what’s the attraction of gum?
Scientific studies have shown that chewing
gum relaxes nerves and muscles, eases ten-
sion, facilitates concentration, helps keep one
alert, helps keep teeth clean, and freshens
breath. Even ancient civilizations recognized
the benefits of gum. For example, the populace
of early Greek civilizations chewed gum made
from the bark of the mastic tree.
In addition to its gum, Wrigley is famous
for its corporate headquarters building on
North Michigan Avenue, along the north bank
of the Chicago River. The Wrigley Building is a
symbol of Chicago and has appeared in nu-
merous articles, books, movies, and television
programs, including ER, My Best Friend’s
Wedding, and While You Were Sleeping.
Wm. Wrigley Jr. Company’s history is part
of the lore of Chicago. As the company moves
forward, its stakeholders are interested in its fu-
ture financial condition and success. As we dis-
cussed in Chapter 1, the financial condition and
changes in financial condition of a business are
assessed through analyzing financial statements.
In this chapter, we continue our discussion of fi-
nancial statements. We begin by describing the
basic elements of a financial accounting system
that will enable the preparation of financial state-
ments. We then distinguish types of accounting
systems and illustrate the simplest form of an ac-
counting system based upon a cash basis. In do-
ing so, this chapter will serve as foundation for
our later discussions of modern day accounting
systems and financial reporting.Wm. Wrigley Jr. Company
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