SUBJECT INDEX

A

ABC, see Activity-based costing

Absorption costing, 1055

Accelerated-depreciation method, 480

Accounts, 54–58

chart of, 64–65

correct titles for, 60–61

permanent, 167–168

temporary, 167–168

Accounts payable, 13

as current liabilities, 524

for statement of cash flows, 810

transaction analysis for, 19

Accounts payable (creditors’) subsidiary ledger, 332–335

Accounts receivable, 431–441

disposing of, 438–440

recognizing, 430–432

for statement of cash flows, 809

valuing, 432–438

Accounts receivable (customers’) subsidiary ledger, 332–335

Accounts receivable turnover, 447, 852

Accounting, 4–12

accrual- vs. cash-basis, 100

activities of, 4–5

assumptions in, 10–11, 129

career opportunities in, 29–31

cost, 940

ethics in, 7–8

financial, 894

generally accepted accounting principles, 8–9

managerial, 30. See also Managerial accounting

payroll, 532–543

as recruiting tool, 6

responsibility, see Responsibility accounting

users of accounting data, 5–7

Accounting cycle, 174–177, 573. See also specific steps in cycle

Accounting equation, see Basic accounting equation

Accounting information, in budgeting process, 1076

Accounting reports, 4, 5. See also Financial statements

Accounting systems (accounting information systems), 330–349

cash payments journal, 344–347

cash receipts journal, 339–342

computerized, 330–332

general ledger, 330–331

IFRS and GAAP for, 371–372

manual, 332

purchases journal, 342–344

sales journal, 336–338

special journals, 335–348

subsidiary ledgers, 332–335

Accruals, 103

adjusting entries for, 110–116

expenses, 103, 112–115

liabilities, 524

revenues, 103, 110–112

Accrual-basis accounting, 100, 114

Accumulated depreciation, 180

Accuracy, in financial reporting, 75

Acid-test ratio, 850–851

Activity base, 949

Activity-based costing (ABC), 910, 1000–1001, 1006–1008

Activity index (CVP), 1032

Additions and improvements, 483

Adjustable interest rates, 697

Adjusted trial balance, 119–123, 163, 165

Adjusting entries, 104–116

in accounting cycle, 230

for accruals, 110–116

for deferrals, 104–11, 124–128

IFRS and GAAP for, 157

for merchandising companies, 230–232

prior period, 659–660

relationships of, 116–117

types of, 103

on worksheet, 163–165, 246–248

from worksheets, 167

Admission of partners, 585–589

Affiliated company, 746

Agents, of corporations, 608–609

Aggregated data, 4

Aging schedule, 437

Aging the accounts receivable, 437

Airlines, costs and profits of, 909

Allowances:

purchase, 223–224, 243–244

sales, 227–228, 244

Allowance method, 433–438

Alternative accounting methods, 865

Amortization, 489

effective-interest method, 711–714

straight-line, 715–716

Analysis of information, 4

Annual rate of return, 1241–1242

Annuities, present value of, 707–709, G5–G7, H2

Appel, Jennifer, 572

Arm's-length transactions, 430

Articles of co-partnership, 571–572

Articles of incorporation, 611

Assets:

in accounting equation, 12–13

capital leases, 699–700

on classified balance sheet, 177–179

current, 178–179

depreciation of, 106–107

in double-entry system, 55–56

fixed, 180

IASB definition, 50

intangible, 180, 488–493

natural resources, 486–488

of partnerships, 568–569

pension, 547

property, plant, and equipment, see Plant assets

Asset turnover, 493, 854

Associate investments, 773

Assumptions in accounting, 10–11, 129

Auditing, 29

Auditors, internal, 383

Audit trail, 331

Authorized stock, 613

Available-for-sale securities, 271, 748, 750–751

Average collection period, 448–449, 852

Average-cost method, 281, 282, 285–286, 298–299

B

Background checks, 384

Bad debts, see Uncollectible accounts

Balanced scorecard, 910–911, 1194–1197

Balanced Scorecard Institute, 1223

Balance sheet, 21–24

budget, 1093–1094

classified, 177–184

effect of cost flow methods on, 288

and errors in inventory accounting, 291–292

horizontal analysis of, 843–844

investments on, 752–753

merchandising and manufacturing costs on, 905–906

for partnerships, 577

recovery of bad debts on, 434

stockholders’ equity section of, 626–627

transfer to worksheet, 246

unpaid notes payable on, 697

vertical analysis of, 846, 847

write-off of bad debts on, 434

Balsam, Craig, 556

Banks, 394–402

for internal control, 394

reconciling bank account, 397–400

statements from, 395–396

writing checks, 394–395

Bank reconciliations, 375, 432.

See also Reconciling bank accounts

Bank service charge, 396, 399

Bank statements, 395–396

Barnum, P.T., 7

Basic accounting equation, 12–21

assets and liabilities in, 12–13

owner's equity in, 12–14

in transaction analysis, 15–21

Batch jobs, 940

Bearer bonds, 687

Benford's Law, 849

Best-efforts contracts, 613n.2

Bezos, Jeff, 1030

Blank, Arthur, 4

Board of directors, 896

Bonds, 686–696

converting into common stock, 695–696

discount/premium on, 691–692

issued for credit, 790

issuing, 687–694, 698

long-term, 689

market value of, 688–689

present value of, 705–711, G7–G9

recording transactions with, 741–743

redeeming, 695

types of, 687

Bonds payable, 804, 810

Bond amortization:

effective interest method, 711–714

straight-line, 715–718

Bond indentures, 687

Bonding of employees, 383

Bond interest expense, 693

Bond issues, 687–694

at a discount, 692–693

at face value, 690–691

at a premium, 693–694

procedures for, 687–688

Bonuses:

on admission of a partner, 587–588

as fringe benefits, 533

on withdrawal of a partner, 590–591

Bookkeeping, 5

Book (carrying) value, 107, 476, 479–480, 692

Bowerman, Bill, 606

Bowline, Lyle, 1074

Break-even analysis, 1043–1047

Break-even point, 1043

Brock, Paula, 1134

Budgets, 1076

continuous 12-month, 1077

flexible, 1126–1135

standards vs., 1178

static, 1125–1126

Budgetary control, 1124–1135

flexible budgets, 1126–1135

static budgets, 1125–1126

Budgetary optimism, 1082

Budgetary planning, 1076–1100

accounting information in, 1076

budget balance sheet, 1093–1094

budget income statement, 1089–1090

cash budget, 1090–1093

direct labor budget, 1086–1087

direct materials budget, 1084

financial budgets, 1090–1095

foundation for, 1076–1077

and human behavior, 1078–1079

length of budget period, 1077

and long-range planning, 1079

manufacturing overhead budget, 1087

master budget, 1079–1080

for merchandisers, 1095–1096

in non-manufacturing companies, 1095–1097

for not-for-profit organizations, 1096–1097

process for, 1077–1078

production budget, 1082–1083

sales and administrative expense budget, 1087–1088

sales budget, 1081–1082

for service enterprises, 1096, 1097

Budgetary slack, 1079

Budget balance sheet, 1093–1094

Budget committee, 1078

Budget income statement, 1089–1090

Budget period, length of, 1077

Budget reforecasting, 1134

Budget reports, 1124, 1126, 1133–1135

Budget shortfalls, 1097

Buffett, Warren, 657, 840–841

Buildings, 473, 809

Business documents, 59, 226

Business transactions, 15. See also Transaction analysis

in double-entry system, 55–58

in partnerships, 573

purchasing, 221–226

sales, 226–229

By-laws of corporations, 611

C

Calendar years, 100

Callable bonds, 687

Capital:

corporate acquisition of, 609

owner's, 13

working, 528

Capital budgeting, 1240–1249

annual rate of return, 1241–1242

cash payback, 1243–1244

discounted cash flow, 1245–1249

evaluation process in, 1240–1241

Capital deficiency (partnership liquidation), 581–583

Capital expenditures, 483, 1241

Capital leases, 699–700

Capital ratios, for partnerships, 575

Capital stock, 626

Careers in accounting, 29–31

Carrying value, see Book value

Carrying (book) value method, 696

Cash, 402

and fraud, 386

IFRS definition, 426

net change in, 790–791

reporting, 402–404

for statement of cash flows, 811

Cash-basis accounting, 100

Cash bonuses, 533

Cash budget, 1090–1093

Cash controls, 386–393

Cash disbursements, internal controls for, 389–392

Cash discounts, 431

Cash dividends, 650

Cash equivalents, 402, 426, 838

Cash flows. See also Statement of cash flows

ability to generate, 778

classification of, 778–779

free, 793–795

Cash management, 1093

Cash payback, 1243–1244

Cash payments:

in direct method, 800–803

schedule of, 580–581

Cash payments (cash disbursements) journal, 344–347

Cash purchases, transaction analysis for, 16–17

Cash (net) realizable value, 434, 443

Cash receipts:

in direct method, 800

internal controls for, 386–389

transaction analysis for, 19

Cash receipts journal, 339–342

Cash register tapes, 226

Cash withdrawals, transaction analysis for, 19–20

Castle, Ted, 160

CEO (chief executive officer), 609, 896

Certified public accountants (CPAs), 29, 30

CFO (chief financial officer), 897

Changes in accounting principle, 863–864

Channel stuffing, 866

Charter, corporate, 610–611

Chart of accounts, 64–65

Checks:

altered, 380

for payroll, 537–538

writing, 394–395

Check register, 389

Chenfield, Cliff, 556

Chief executive officer (CEO), 609, 896

Chief financial officer (CFO), 897

China, 114, 180, 569

Claims, fictitious, 378

Classified balance sheet, 177–184

IFRS and GAAP for, 212–214

investments on, 754–755

for merchandising companies, 232, 236

Closely held corporations, 608.

See also Privately held corporations

Closing entries:

in accounting cycle, 230–231

for merchandising companies, 230–231, 245–246

for partnerships, 574–575

posting, 170–171

preparing, 168–170

Closing the books, 167–174

post-closing trial balance, 172–174

posting closing entries, 170–171

preparing closing entries, 168–170

with virtual closes, 171

CM (credit memorandum), 397

Code of ethics, 898

Collaboration, 1137

Collusion, 385

Commercial substance (exchanges), 497

Common-size analysis, 846.

See also Vertical analysis

Common stock, 612, 617–620

allocating cash dividends to, 652–653

converting bonds into, 695–696

earnings per share for, 664

no-par value, 618–619

par value, 618

for services or noncash assets, 618–619

for statement of cash flows, 804, 810l

Communication, 4, 5, 377

Comparability, 129

Competitive environment, 909

Component depreciation, 517

Components, make-or-buy decisions for, 1232–1234

Compound entries, 60–61

Compound interest, H2

Comprehensive income, 753, 864

Computerized accounting systems, 330–332

Computer recycling, 116

Computer-system tampering, 331

Conservatism, 289

Consigned goods, ownership of, 279

Consistency principle, 129, 288

Consolidated financial statements, 746–747

Constraints, theory of, 910

Construction of buildings, 473

Consumer cooperatives (co-ops), 216–217

Contingent liabilities, 529–531, 564

Continuous 12-month budgets, 1077

Contra accounts:

for assets, 106

for bonds at a discount, 692

for revenue, 228

for stockholders’ equity, 621–622

Contractual interest rate, 687, 691

Contributed capital, 626. See also Paid-in capital

Contribution margin per unit

(CVP analysis), 1041–1042, 1048, 1239

Contribution margin ratio (CVP analysis), 1042–1043, 1048

Control, internal, see Internal control

Control accounts, 333, 944

Control environment, 377

Controllability of items, 1138

Controllable margin, 1144, 1147–1148

Controllable revenues/costs, 1137

Controllable variance (overhead), 1191, 1203–1205

Controllers, 609, 897

Controlling interest, 746

Convergence, 9

Convertible bonds, 687, 695–696

Co-ops, 216–217

Co-ownership of property, 568–569

Copyrights, 489–490

Corporate capital, 615–617

Corporate social responsibility, 25, 181, 617, 911, 1192

Corporations, 11, 608–617

characteristics of, 608–610

corporate capital, 615–617

forming, 611

multinational, 48

owner's equity accounts in, 183

ownership rights of stockholders, 612

reasons for investing, 740–741

stock issues, 612–615. See also Stock

subchapter S, 570

Correcting entries, 176–177, 398–399

Cost(s):

in computation of depreciation, 476–477

controllable vs. noncontrollable, 1137

of copyrights, 489–490

depreciable, 477

factory labor, 943, 947–948

fixed, see Fixed costs

freight, 222–223, 243

in incremental analysis, 1230–1232

inventoriable, 901

labor, 900, 901, 943, 947–948, 985–987

in managerial accounting, 899

manufacturing, see Manufacturing costs

material, 985–987

materials, 900, 942, 945–947

mixed, 1035–1036

in noncash transactions, 619

non-recurring, 863

opportunity, 1233–1234

organization, 611

of patents, 489

period, 901

for plant assets, 472–475

product, 900–901

research and development, 491–492

standard, see Standard costs

unit production, 995

variable, 1032–1033, 1087, 1130

warranty, 529

Cost accounting systems, 940–941

Cost behavior analysis, 1032–1039

Cost centers, 1142, 1143

Cost constraints, 130

Cost drivers, 1000

Cost flows:

in merchandising companies, 219–221

in process vs. job order cost systems, 985

Cost flow assumptions/methods:

average-cost, 285–286

effects of, 286–288

first-in, first-out, 282–283

in inventory costing, 281–285

last-in, first-out, 284–285

in perpetual inventory systems, 297–300

Costing:

absorption, 1055

activity-based, 910, 1000–1001, 1006–1008

full, 1055

inventory, see Inventory costing

job order, see Job order costing

operations, 998

for service industries, 908–909

variable, 1055–1058

Cost method:

for stock investments, 743

for treasury stock, 621–622

Cost of goods manufactured, 903–905

Cost of goods manufactured schedule, 904–905

Cost of goods purchased, 902

Cost of goods sold, 218–219, 242, 243, 953

Cost-plus contracts, 956

Cost principle (historical cost principle), 9, 472

Cost reconciliation schedule, 995–996

Cost-volume-profit (CVP) analysis, 1040–1053

break-even analysis, 1043–1047

and changes in business environment, 1050–1051

CVP income statement, 1040–1043

margin of safety, 1048–1050

target net income, 1047–1048

Cost-volume-profit (CVP) graph, 1045–1046, 1048

Cost-volume-profit (CVP) relationships, 1032–1039

cost behavior analysis, 1032–1039

fixed costs, 1033

identifying cost types in, 1076–1077

mixed costs, 1035–1036

relevant range in, 1034–1035

variable costs, 1032–1033

Coupon bonds, 687

Covenants, 702

CPAs (certified public accountants), 29, 30

Credits, 54–58, 74

Credit agreements, 431

Credit balance, 54

Credit cards, 438–440, 522

Credit crisis, 446

Crediting accounts, 54–55

Credit losses, 432–433

Credit memorandum (CM), 397

Creditors, 13

Creditors’ subsidiary ledger, 333

Credit purchases, 16–18, 344

Credit terms, 223

Cross-footing a journal, 341

Cumulative dividends, 625

Current assets, 178–179, 786–787

Current liabilities, 524–528

bond interest payable, 691

on classified balance sheet, 182

current maturities of long-term debt, 526–527

leases, 700

noncash, 785–772

notes payable, 524–525

order of listing, 527

sales taxes payable, 525

statement presentation and analysis, 527–528

unearned revenues, 526

Current ratio, 528, 850, 851

Current replacement cost, 289

Customers, as external users, 7

Customers’ subsidiary ledger, 333

CVP analysis, see Cost-volume-profit

analysis

CVP graph, 1045–1046, 1048

CVP income statement, 1040–1043, 1052–1053

CVP relationships, see Cost-volume-profit relationships

D

Days in inventory, 293, 853

Debenture bonds, 687

Debits, 54–58, 74

Debit balance, 54

Debiting accounts, 54–55

Debit memorandum (DM), 397

Debt covenants, 702

Debt investments, 741–743

Debt to assets ratio, 701, 857–858

Decentralized companies, 1136

Decision-making, see Management decision-making

Declaration date (cash dividends), 651

Declining-balance depreciation, 479–481

Deferrals, 103–104

adjusting entries for, 104–110, 124–128

alternative treatment of, 124–127

basic relationships for, 127

Defined-benefit plans, 548

Defined-contribution plans, 547–548

Depletion (natural resources), 487

Depreciable cost, 477

Depreciation:

accumulated, 180

adjusting entries for, 106–107

computing, 476–477

declining-balance method, 479–481

and income taxes, 476–477

indirect method, 802

of plant assets, 475–483

recognizing, 476

revising estimates of, 482

for statement of cash flows, 810

straight-line method, 477–478, 481

units-of-activity method, 478–479, 481

Depreciation expense, 785

Depreciation schedule, 478

Differential analysis, 1228. See also Incremental analysis

Direct fixed costs, 1143–1144

Direct labor, 900

Direct labor budget, 1086–1087

Direct labor price standard, 1181

Direct labor quantity, 1181

Direct labor variances, 1188–1190

Direct materials, 900

Direct materials budget, 1084

Direct materials price standard, 1180

Direct materials quantity standard, 1180–1181

Direct materials variances, 1185–1187

Direct method (statement of cash flows), 782–783, 798–804

investing and financing activities, 803–804

net change in cash, 805

operating activities, 799–803

Direct write-off method, 432–433

Disbursements, 389–393

Disbursements journal, 344–347

Disclosure(s):

clarity of financial, 234

of contingent liabilities, 530–532

Discontinued operations, 861–862

Discounts:

bond, 691–693, 711–713, 715–716

cash, 431

purchase, 224–225

sales, 228–229

Discounted cash flow method, 1245–1249

Discount period, 224–225

Discount rate, 1245

Dishonored notes, 445

Disposal:

of accounts receivable, 438–440

of notes receivable, 444–445

of plant assets, 484–486

of treasury stock, 622–624

Divestments, owner's drawings as, 20

Dividends, 650–656

ability to pay, 778

cash, 650–654

IFRS and GAAP for, 682

on preferred stock, 625

stock, 654–656

from stock investments, 743–746

Dividends in arrears, 625

DM (debit memorandum), 397

Documentation procedures, 380–381, 484

Dollar signs, use of, 75

Double-declining-balance method, 480

Double-entry system, 55–58

Double taxation, 610

Drawings (by owners), 14, 20, 56

Dual posting, 347

Duties:

rotating, 383–384

segregation of, 379–380

E

Earnings, quality of, 865–866

Earnings per share (EPS), 664, 856

Earnings statement, 23. See also Income statement

Earning power, 861

Ebbers, Bernie, 483

Economic entity assumption, 10–11, 129

Effective-interest amortization, 711–714

Electronic funds transfers (EFTs), 401

Electronic spreadsheets, 162.

See also Worksheets

“Employee Benefits” (IAS 19), 564

Employee compensation, see Payroll accounting

Employee earnings record, 536

Employee theft, 385

Employer (pension plans), 546–547

Employer payroll taxes, 539–541

Enterprise resource planning (ERP)

systems, 331, 910

Envelope budgeting, 1174

EPS (earnings per share), 664, 856

Equal Employment Opportunity

Act, 1178

Equipment:

cost of, 473–474

retaining vs. replacing, 1235–1236

for statement of cash flows, 802, 809–810

Equity, 50

Equity method (stock investments), 744–745

Equivalent units, 990–994

ERP (enterprise resource planning)

systems, 331, 910

Errors:

in bank accounts, 398–399

correcting entries for, 176–177

inventory, 290–292

irregularities vs., 75

in trial balances, 75

Estimating:

depreciation, 482

inventories, 297–300

uncollectible accounts, 434

Ethics issues:

appearance of liquidity, 182

arm's-length transactions, 430

available-for-sale securities, 750

changes in accounting principle, 864

comparing cash from operations to net income, 778

computer-system tampering, 332

credit agreements, 431

disclosure of details, 235

discounted future cash flows, 1246

documentation control, 946

and economic entity assumption, 10

employee theft, 393

errors in statements, 176

expectations for EPS, 664

in financial reporting, 7–8, 226

fraudulent disbursements, 393

fraudulent documents, 59

inventory fraud, 290

lease accounting, 700

in managerial accounting, 897–899

manipulating current ratio/cash balance, 849

meeting standards, 1179

minimizing debt reported, 687

motivating employees, 533

non-owner managers, 609

overstating market value, 751

partnership agreements, 571–572

partnership liquidations, 578

purchase price allocation, 476

software for fraud control, 331–332

specific identification method, 281

standards of conduct for management accountants, I1–I2

telecommunications to remote areas, 908

temporary employees, 910

treasury stock purchase, 622

unrealistic budgets, 1079

Eurich, Beecher, 982

Europe, accounting in, 55

European Union, 9

Evaluation of companies, 793–795.

See also Financial statement analysis

Exchange of plant assets, 497–498

Exotic Newcastle Disease, 1134

Expenses:

accrued, 103, 112–115

in double-entry system, 57

IASB definition, 50

owner's equity decrease from, 14

payroll, 537

prepaid, 104–107, 125–126, 809

recognizing, 100–102

on single-step income statement, 234

transaction analysis for, 18–19

Expense recognition principle, 101, 130

Expense reports, fraudulent, 382–383

External transactions, 15

External users, 6–7

Extraordinary items, 862–863

F

Face value:

of bonds, 687, 691, 705–707

of notes, 443

Factors, 439

Factory labor costs, 943

Factory overhead, 900

Fair Labor Standards Act, 1178

Fair value, 444, 748

Fair value principle, 9, 130

Faithful representation, of financial information, 9

FASB, see Financial Accounting Standards Board

Federal Bureau of Investigation (FBI), 30

Federal Insurance Contribution Act (FICA), 533–534

Federal Trade Commission, 7

Federal unemployment taxes, 539

Federal Unemployment Tax Act (FUTA), 539

Fees, 532

FICA (Federal Insurance Contribution Act), 533–534

FICA taxes, 533–534, 539

FIFO, see First-in, first-out

Financial accounting, managerial accounting vs., 894

Financial Accounting Standards Board (FASB), 9, 49, 50

definitional structure of, 96

on financial instrument accounting, 444, 468, 736, 774

financial statement presentation project of, 213–214, 682–683, 838

financial statement structure project of, 271, 890

framework for accounting standards of, 372–373, 736

pension project of, 564–565

revenue recognition project of, 158

Financial budgets, 1079–1080, 1090–1095

Financial instruments, 444

Financial markets, 48

Financials (Oracle), 331

Financial statements, 4, 21–27.

See also individual statements

accuracy of, 75

from adjusted trial balance, 119–122

of Amazon.com, Inc., D1–D4

of Apple Inc., A1–A4

balance sheet, 21–24

of The Coca-Cola Company, C1–C4

consolidated, 746–747

current liabilities on, 527–528

depreciation on, 106–107

effect of cost flow methods on, 286–288

going beyond, 25

income statement, 21–23

intangible assets on, 492–493

inventories on, 292–294

investments on, 748–756

long-term liabilities on, 700–702

manufacturing costs in, 902–909

for merchandising companies, 233–238

monthly, 944

natural resources on, 492–493

owner's equity statement, 21–24

partners’ capital statement, 575–576

for partnerships, 576–577

of PepsiCo, Inc., B1–B5

plant assets on, 492–493

receivables on, 447–449

statement of cash flows, 21–24

stockholders’ equity on, 626–627, 661–665

time periods for, 100

of Wal-Mart Stores, Inc., E1–E4

from worksheets, 165–167

of Zetar plc, F1–F4

Financial statement analysis, 842–866

changes in accounting principle, 863–864

comprehensive income, 864

earning power, 861

horizontal, 843–846

IFRS and GAAP for, 889–890

irregular items, 861–864

need for, 842

quality of earnings, 865–866

ratio, 848–859

vertical, 846–848

Financing activities, 779, 789–790, 803–804

Finished goods inventory, 276, 952–953

First-in, first-out (FIFO), 282–283, 286–288, 297, 865

First-in, still here (FISH), 284

Fiscal year, 100

FISH (first-in, still here), 284

Fixed assets, 180, 472. See also Plant assets

Fixed costs:

in CVP, 1033

in flexible budget, 1130

in manufacturing overhead budget, 1087

for profit centers, 1143–1144

static budget reports for, 1126

Fixed interest rates, 697

Fixed ratios (income), 575

Flexible budgets, 1126–1135

case study of, 1130–1132

developing, 1128–1129

and management by exception, 1137–1138

and manufacturing, 1139

uses of, 1127–1128

Flexible budget reports, 1133–1135

FOB (free on board), 222–223

FOB destination, 222–223, 278–279

FOB shipping point, 222–223, 278–279

Food production, 1034

Footing a journal, 341

Forensic accounting, 30

For-profit corporations, 608

401(k) plans, 547

Franchises, 490

Fraud, 376

altered checks, 380

bank reconciliation, 431–432

cash as susceptible to, 386

employee theft, 385

fake expense reports, 382–383

fake invoices, 380

fictitious claims, 378

and forensic accounting, 30

in hotel housekeeping, 384

and IFRS, 425–426

inventory, 279, 290

involving payroll, 542–543

net income, 483

and numeric relationships, 849

and payroll accounting, 541

reimbursement requests, 381

sales commissions, 382

software controls for, 331–332

statement of cash flow, 788

and stock options, 620

theft of merchandise, 227

Fraud triangle, 376

Free cash flow, 793–795

Free on board (FOB), 222–223

Freight costs, 222–223, 243

Freight-in, 243

Fringe benefits, 539, 545–546.

See also Payroll accounting

Full costing, 1055

Full disclosure principle, 130, 531, 780

FUTA (Federal Unemployment Tax Act), 539

G

GAAP, see Generally accepted accounting

principles

Gains, 485, 578, 749, 753, 861

Geneen, Harold, 2

General journal, 59–62

adjusting entries in, 117–118

closing entries in, 168, 170

effects of special journals on, 347

posting to ledger from, 63–64

General ledger, 62–65

chart of accounts in, 64–65

control account in, 333

and post-closing trial balance, 172–174

posting to, 63–64, 337–338

standard form of account in, 74

General ledger accounting systems, 330–331

Generally accepted accounting principles (GAAP), 8, 9

for accounting systems, 371–372

for adjusting accounts, 157–158

for allowance method, 433

for classified balance sheet, 212

for dividends, 682

for financial statement analysis, 889–890

financial statements required by, 21

IFRS vs., 48–50

for inventories, 324–327

and inventory write-downs, 289

for investments, 773–774

for liabilities, 564, 735–736

for merchandising operations, 271

for plant, property, and equipment, 517–519

and quality of earnings, 865

for receivables, 467, 468

recording process for, 96

for revenue/expense recognition, 101

for statement of cash flows, 837, 838

and stockholders’ equity, 644–645

General partners, 570

Gift cards, accounting for, 109

Going concern assumption, 129

Goods in transit, ownership of, 278–279

Goodwill, 180, 181, 488, 490–491

Government accounting careers, 30

Governmental budgets, 1096–1097

Graham, Benjamin, 840

Green, selling, 229

Greenhouses, 1034

Gross earnings, 532

Gross profit, 233

Gross profit method, 301–302

H

Health insurance, 546

Held-to-maturity securities, 748

High-low method (CVP), 1037–1038

Historical cost principle, 9, 130

Honored notes, 444

Horizontal analysis, 843–846

Human behavior:

and budgetary planning, 1078–1079

and performance evaluation, 1138–1139

Human resource controls, 227, 384, 541

I

IAASB (International Auditing and Assurance Standards Board), 426

IAS 1 (standard), 271, 564, 735, 889

IAS 19 (standard), 564

IAS 37 (standard), 564, 735

IASB, see International Accounting Standards Board

Ideal standards, 1179

Identification of economic events, 4–5

IFRS, see International Financial Reporting Standards

Ig Nobel Prize, 426

IMA, see Institute of Management Accountants

IMA Statement of Ethical Professional Practice, 898

Imprest system, 390

Improper recognition, 866

Incentives, creating, 898

Income, 50, 278

Income from operations, 234

Income ratios, 575, 580

Income statement, 21–23

budget, 1089–1090

CVP, 1040–1043, 1052–1053

effect of cost flow methods on, 286–288

and errors in inventory accounting, 290–291

horizontal analysis of, 844–845

merchandising and manufacturing costs in, 902–905

for merchandising companies, 232–236

multiple-step, 233–235

stockholders’ equity on, 663

transfer to worksheet, 248

variances on, 1194

vertical analysis of, 846–848

Income taxes:

on corporation income statements, 663

for corporations, 611

and depreciation, 463

payroll deductions for, 533

Income taxes payable, 787, 810

Incremental analysis, 1228–1239

for accepting an order at a special price, 1230–1232

for allocating limited resources, 1239

for eliminating unprofitable segments, 1236–1238

for making vs. buying, 1232–1234

management decision-making process in, 1228

for retaining vs. replacing equipment, 1235–1236

for selling vs. processing further, 1234–1235

types of decisions involving, 1230

Indefinite life, 489

Independent contractors, 532

IN-10 Subject Index

Independent internal verification, 382–383

of bank reconciliations, 432

and inventory fraud, 279

of net income, 484

of payroll expenses, 541

of statement of cash flows, 788

of write-offs, 849

Indirect fixed costs, 1144

Indirect labor, 900

Indirect manufacturing costs, 900

Indirect materials, 900

Indirect method (statement of cash flows), 782–793

investing and financing activities, 789–790

net change in cash, 790–793

operating activities, 784–789

worksheet for, 806–811

Industry averages (norms), 842

Information, for internal control, 377

Information technology, 48

Initial public offering (IPO), 611

Institute of Management Accountants (IMA), 898, 935–936, 979

Insurance:

adjusting entries for, 105–106

health, 546

Intangible assets, 488–493

accounting for, 488–491

on classified balance sheet, 180

and research and development costs, 491–492

statement presentation and analysis of, 492–493

Intercompany comparisons, 842

Interest, 112–113, G1–G2

accrued, 112–113

on bonds, 686–687, 741–742

on buildings, 473

on notes receivable, 443

to partners, 575–576

on partners’ capital, 575

Interest coverage, 858

Interest payments (annuities), 707–709

Interest rates:

for bonds, 687, 691

for mortgages, 696–697

Internal auditors, 383

Internal control, 376–385

with accounting software, 331–332

for bank reconciliations, 432

components of, 377

and fraud, 376, 849

and inventory fraud, 279

limitations of, 384–385

for net income, 484

over cash, 386–393

for payroll, 542–543

principles of, 378–384

and Sarbanes-Oxley Act, 29, 49, 103

for statements of cash flow, 788

and theft of merchandise, 227

by using banks, 394–402

Internal rate of return (IRR) method, 1247–1248

Internal Revenue Service (IRS), 7, 30, 482, 541, 561

Internal transactions, 15

Internal users, 5–6

International Accounting Standards Board (IASB), 9, 48, 49

definitional structure of, 96

on financial instrument accounting, 444, 468, 735–736, 774

financial statement presentation project of, 213–214, 682–683, 838

financial statement structure project of, 271, 890

framework for accounting standards of, 372–373, 735–736

on liabilities, 564

pension project of, 564–565

revenue recognition project of, 158

International Auditing and Assurance Standards Board (IAASB), 426

International Financial Reporting Standards (IFRS), 9, 48–51

for accounting systems, 371–372

for adjusting accounts, 157

for classified balance sheet, 212–214

for dividends, 682

for financial statement analysis, 889–890

financial statements required by, 21

and fraud, 425–426

for inventories, 324–327

for investments, 773–775

for liabilities, 564, 735–736

for merchandising operations, 271–272

for plant, property, and equipment, 517–519

for receivables, 468

recording process for, 96

for statement of cash flows, 837–838

and stockholders’ equity, 644–645

Internet, value chain and, 910

Interpretation of information, 4, 5

Intracompany comparisons, 842

Inventoriable costs, 901

Inventory(-ies), 276–293

cost flow methods, 297–300

determining quantities, 277–278

errors in accounting for, 290–292

estimating, 297–300

excessive levels of, 293

in financial statements, 292–294

IFRS and GAAP for, 324–327

and income, 278

for manufacturing companies, 276, 905–906

for merchandising companies, 905–906

periodic system for, 220–221, 247

perpetual system for, 219–221, 297–300

for statement of cash flows, 809

Inventory costing, 280–290

consistency principle in, 288

cost flow assumptions, 281–285

lower-of-cost-or-market, 289–290

specific identification method, 280–281

Inventory turnover, 293, 294, 852–853

Investing activities:

cash flows from, 778, 779

direct method for, 803–804

indirect method for, 789–790

noncash, 780

Investments, 740–756

on classified balance sheet, 179

debt investments, 741–743

IFRS and GAAP for, 773–775

by owner, 13, 15–16

in partnerships, 586–588

reasons for making, 740–741

short-term, 752

stock investments, 743–747

valuing and reporting, 748–750

Investment centers, 1142, 1145–1148

Investment portfolio, 743

Invoices:

fake, 380

purchase, 221–222

sales, 226

IPO (initial public offering), 611

Irregular items, 861–864

Irregularities, 74

IRR (internal rate of return) method, 1247–1248

IRS, see Internal Revenue Service

J

Japan, 277, 491

Jean, Wyclef, 8

JIT (just-in-time) inventory, 276–277, 910

JIT (just-in-time) processing, 998–1000

Job cost data, reporting, 958–959

Job cost sheet, 944, 945

Job order cost flow, 941–958

accumulating manufacturing costs, 941–944

assigning costs to cost of goods sold, 953

assigning costs to finished goods, 952–953

assigning manufacturing costs to work in process, 944–952

Job order costing, 940–941

advantages and disadvantages, 957–958

cost accounting systems, 940–941

job order cost flow, 941–958

reporting job cost data, 958–959

for service companies, 955–956

Job order cost systems, 940, 985

process cost systems vs., 985–987

standard cost accounting system with, 1200–1202

Journals, 59–62. See also General journal cash payments (disbursements), 344–347

cash receipts, 339–342

cross-footing, 341

footing, 341

posting to, see Posting

purchases, 342–344

sales, 336–338

simple and compound entries in, 60–61

special, see Special journals

Journalizing, 59–60

adjusting entries, 117–118, 167

cash payments transactions, 344–347

cash receipts transactions, 339–341

closing entries, 168–170, 245–246

credit purchases, 344

credit sales, 336–337

illustration of, 71–72

special journals for, 336

with standard cost accounting system, 1200–1202

Just-in-time (JIT) inventory, 276–277, 910

Just-in-time (JIT) processing, 998–1000

K

Knight, Philip “Phil,” 4, 606, 609

Korean discount, 10

L

Labor costs, 900, 943, 947–948, 985–988

Labor productivity, in auto industry, 900

Labor quantity variance, 1189

Labor unions, as external users, 7

Labor variances:

direct, 1188–1190

price, 1090, 1188–1189

quantity, 1189–1190

total, 1188

Land, 472–473, 476, 803, 809

Land improvements, 473

Last-in, first-out (LIFO), 284–285

financial statement and tax effects, 287–288

and IFRS, 325

in periodic inventory systems, 281–282

in perpetual inventory systems, 298

and quality of earnings, 865

Last-in, still here (LISH), 283

LCM (lower-of-cost-or-market method), 289–290

Lean manufacturing, 909

Leases, 699–700

Leasing, 475

Ledgers, 62–65. See also General ledger; Subsidiary ledgers

proving, 337, 339, 342

with standard cost accounting system, 1202

Lenders, information from, 446

Leveraging, 855

Liabilities (financial):

in accounting equation, 12–13

accrued, 112

on classified balance sheet, 177–178, 182

contingent, 529–531, 564

current, 182, 524–528

in double-entry system, 55–56

IASB definition, 50

IFRS and GAAP for, 564, 735–736

long-term, 183. See also Long-term liabilities

payroll, 537

pension, 547

Liability (legal), in partnerships, 569–570

Licenses, 490, 611

Life insurance benefits, 546

Life of a corporation, 609

LIFO, see Last-in, first-out

LIFO conformity rule, 288

Limited liability, 11, 569–570, 608–609

Limited liability companies (LLCs), 569, 570

Limited liability partnerships (LLPs), 569, 570

Limited life, 489

Limited partners, 570

Limited partnerships (Ltd., LP), 569–570

Line positions, 896

Liquidating dividends, 650

Liquidation:

of partnerships, 578–583

of preferred stocks, 625–626

Liquidity:

defined, 182, 527

excess, 182

listing current liabilities in order of, 527

of receivables, 447

short-term creditor interest in, 842

Liquidity ratios, 850–853

LISH (last-in, still here), 283

LLCs (limited liability companies), 569, 570

LLPs (limited liability partnerships), 569, 570

Loans, bad, 446

Long-range planning, budgetary planning and, 1079

Long-term bonds, 689

Long-term debt, 526–527, G7–G9

Long-term debt due within one year, 527

Long-term investments, 179, 752–753

Long-term liabilities, 686–696

bonds, 686–696

on classified balance sheet, 183–184

on financial statements, 700–702

leases, 699–700

notes payable, long-term, 697–698

Losses:

from discontinued operations, 861–862

on disposal of plant assets, 485, 486

realized, 578, 753

on sale of equipment, 785

unrealized, 749, 753

Lower-of-cost-or-market method (LCM), 289–290

LPs (limited partnerships), 569–570

Ltd. (limited partnerships), 569–570

M

Machine time used, 988

MACRS (Modified Accelerated Cost Recovery System), 482

Madoff, Bernard, 401

Mail receipts, cash, 388

Make-or-buy decisions, 1232–1234

Maker (promissory notes), 441

Management accountants, ethical conduct for, I1–I2

Management accounting, see Managerial accounting

Management by exception, 1137–1138

Management consulting, 30

Management decision-making:

for accepting an order at a special price, 1230–1232

for allocating limited resources, 1239

for eliminating unprofitable segments, 1236–1238

financial and nonfinancial information in, 1228

incremental analysis for, 1228

for making vs. buying, 1232–1234

process for, 1228

for retaining vs. replacing equipment, 1235–1236

for selling vs. processing further, 1234–1235

Management of corporations, 609

Managers, functions of, 894–896

Managerial accounting, 30, 894–915

activities in, 894

business ethics in, 897–899

cost concepts in, 899

financial accounting vs., 894

managers’ functions in, 894–896

manufacturing costs, 899–900, 902–909

organizational structure, 896–897

practices of, 909–911

product vs. period costs, 901

Manual accounting systems, 332

Manufacturing companies, 899–900

classifying inventory in, 276–277

flexible budgets for, 1139

lean manufacturing by, 909

process cost systems for, 984

units-of-activity depreciation for, 478–479

Manufacturing costs, 899–900. See also Job order cost flow; Process cost system accumulating, 941–944

assigning, to work in process, 944–952

in balance sheet, 905–906

cost concepts, 906–908

and costing for service industries, 908–909

cost of goods manufactured, 903–905

in income statement, 902–905

in job order cost system, 985

journal entries for, 988

in process cost system, 985–989

Manufacturing overhead, 900, 943–944, 948–951

under activity-based costing, 1006–1007

journal entries for, 987–989

process vs. job order cost systems for, 985

under- or overapplied, 958–959

Manufacturing overhead budget, 1087–1088

Manufacturing overhead variance, 1190–1192

Margin of safety, 1048–1050

Margin of safety ratio (CVP), 1048–1050

Marketable securities, 752

Market interest rate, 691

Market positioning, 1247

Market value:

of bonds, 688–689

of stock, 614

Marshall, John, 608

Master budget, 1079

Matching principle, 101

Matching principle (expense recognition principle), 101

Materials, sell-vs.-processing further decisions for, 1234–1235

Materials costs, 900, 942, 945–947

journal entries for, 987–988

process vs. job order cost systems for, 985

Materials price variance, 1186, 1187

Materials quantity variance, 1186, 1187

Materials variances, direct, 1185–1187

Materiality, 483, 1138

Materiality principle, 483

Maturity date:

for bonds, 687, 695

for notes receivable, 442

Measurement principles, 9–10, 129

Medicare deductions, 533–534

Members (LLCs), 569

Merchandise, theft of, 227

Merchandise purchases budget, 1095–1096

Merchandising companies, 218–238, 899

adjusting entries for, 230–232

budgetary planning for, 1095–1096

closing entries for, 230–231, 245–246

cost of goods in, 904–908

flow of costs in, 219–221

forms of financial statements for, 233–238

IFRS and GAAP for, 271–272

operating cycles in, 218–219

periodic inventory system for, 242–245

recording purchases of merchandise, 221–226

recording sales of merchandise, 226–229

worksheets for, 240–241, 246–248

Merchandising profit, 233

Mergers and acquisitions, 48

Mintenko, Stephanie, 374

Mixed costs, in CVP, 1035–1036

Modified Accelerated Cost Recovery System (MACRS), 482

Monetary unit assumption, 10, 129

Monitoring, for internal control, 377

Mortgages, 696–697

Mortgage bonds, 687

Motion Picture Association of America, 1148

Moving-average method, 298–299

Multinational corporations, 48

Multiple-step income statement, 233–235

Murdock, Wilbert, 522

Mutual agency, in partnerships, 568

N

Natural resources, 486–488, 492–493

Net annual cash flow, 1243–1247

Net cash from operating activities, net income vs., 780

Net change in cash:

direct method, 805

indirect method, 790–791

Net income, 23

converting from accrual to cash basis, 782, 784–789, 799–803

and fraud, 483

on multiple-step income statement, 234

net cash from operating activities vs., 780

for partnerships, 69, 574–576

on worksheet, 165

Net losses, 23

closing entry for, 658

for partnerships, 569, 574–576

on worksheet, 165

Net pay, 535

Net present value (NPV) method, 1245–1247

Net (cash) realizable value, 434

Net sales, 233

Net 30, 224

New York Stock Exchange (NYSE), 614

No capital deficiency (partnership liquidation), 579–581

Nominal accounts, 168. See also Temporary accounts

Noncash activities, 780

Noncash current assets, changes to, 785–787

Noncash current liabilities, changes to, 786–787

Noncontrollable revenues/costs, 1137

Non-manufacturing companies, budgetary planning for, 1095–1097

Nonoperating activities, on multiple-step income statement, 234–235

Non-recurring charges, 863

No-par value stocks, 615, 618–619

Normal balances, in double-entry system, 55

Normal capacity, 1182

Normal range, see Relevant range

Normal standards, 1179

Notes payable, 13

as current liabilities, 524–525

long-term, 696–697

Notes receivable, 430, 441–446

computing interest on, 443

disposing of, 444–445

maturity date for, 442

recognizing, 443

valuing, 443

Not-for-profit corporations/organizations, 8, 608, 1096–1097, 1178

Not sufficient funds (NSF) checks, 396, 397

NPV (net present value) method, 1245–1247

NSF (not sufficient funds) checks, 397

Numeric relationships, fraud and, 849

NYSE (New York Stock Exchange), 614

O

Obsolescence, 476

Off-balance-sheet financing, 700

Olympic Games, 1093

Operating activities, 236

cash flows from, 778, 779

direct method, 799–803

indirect method, 782–789

Operating budgets, 1079–1080

Operating cycles, 179, 218–219

Operating expenses, on multiple-step income statement, 234–235

Operating leases, 699

Operations costing, 998

Opportunity costs, 1229, 1233–1234

Order of magnitude, for current liabilities, 527

Ordinary repairs, 483

Organizational structure, 896–897

Organization charts, 896–897

Organization costs, 611

Other comprehensive income, 271

Other expenses and losses, for merchandising companies, 234

Other receivables, 430

Other revenues and gains, for merchandising companies, 234

Overhead:

under activity-based costing, 1006–1007

journal entries for, 987–989

manufacturing, 900, 943–944, 948–951, 958–959

process vs. job order cost systems for, 985

standard predetermined, 1181

Overhead variances, 1203–1205

controllable, 1191, 1203–1205

manufacturing, 1190–1192

total, 1190–1191

volume, 1191, 1204

Over-the-counter cash receipts, 386–388

Owner's capital, 13, 56–58

Owner's equity. See also Corporate capital in accounting equation, 12–14

on classified balance sheet, 177–178, 183

decreases in, 14

in double-entry system, 56–57

increases in, 13–14

Owner's equity statement, 21–24

Ownership of goods, 278–279

Ownership rights:

in corporations, 608, 609

preemptive, 612

of stockholders, 612

P

Pacioli, Luca, 5n.2

Paid absences, 545–546

Paid-in capital, 616, 626, 650

Paid-in capital in excess of par value, 618

Paper (phantom) profit, 287–288

Parent company, 746

Participative budgeting, 1078–1079

Partners, 570

admission of, 585–589

withdrawal of, 589–591

Partners’ capital statement, 575–576

Partnerships, 11, 568–591

admission/withdrawal of partners, 585–591

advantages and disadvantages of, 571

characteristics of, 568–569

dividing net income/net loss, 574–576

financial statements for, 576–577

forming, 572–573

liquidation of, 578–583

owner's equity account in, 183

partnership agreements, 571–572

types of, 569–570

Partnership agreements, 571–572

Partnership dissolution, 568

Partnership liquidation, 578–583

capital deficiency, 581–583

no capital deficiency, 579–581

realization for, 578

Par value, 614–615, 618

Patents, 489

Payee (promissory notes), 441

Payment date (cash dividends), 651–652

Payout ratio, 857

Payroll accounting, 532–543

determining payroll, 532–535

employer payroll taxes, 539–541

filing/remitting payroll taxes, 541–542

and fraud, 541

internal control for, 542–543

recording payroll, 535–538

Payroll deductions, 533

Payroll processing centers, 539

Payroll register, 536

Payroll taxes, 539–541

Payroll tax expense, 539

PCAOB (Public Company Accounting Oversight Board), 376

Peachtree, 330, 331

Pensions, 546–547

P/E (price/earnings) ratio, 664n.3, 856–857

Percentage of receivables basis (uncollectibles), 436–438

Percentage of sales basis (uncollectibles), 436–437

Performance evaluation, 1137–1139, 1179

Performance obligations, 101, 108

Period costs, 901

Periodic inventory systems, 220–221, 242–245, 247, 277, 281

Periodicity assumption, 100. See also Time period assumption

Permanent accounts, 167–168, 173

Perpetual inventory systems, 219–221

in cost accounting systems, 940

cost flow methods in, 231–232, 297–300

determining quantities in, 277

entries for periodic system vs., 245

merchandising entries with, 231–232

Petty cash fund controls, 390–393

Phantom profit, 287–288

Physical controls, 227, 381

Physical inventory, 277–278

Physical unit flow, 994

Physical units, 994

Pickard, Thomas, 4

Plan administrators, 546–547

Plant and equipment, 472. See also Plant assets

Plant assets, 472–496

buildings, 473

depreciation of, 475–483

determining cost of, 472–475

disposal of, 484–486

equipment, 473–474

exchange of, 497–498

expenditures during useful life of, 483

land, 472–473

land improvements, 473

statement presentation and analysis of, 492–493

Ponzi schemes, 401

Post-closing trial balance, 172–174

Posting, 63–64

of adjusting entries, 117–118, 167

cash payments journal, 345, 347

cash receipts journal, 341–342

of closing entries, 168, 170–171, 245–246

of correcting entries, 176

dual, 347

illustration of, 71–72

purchases journal, 344

sales journal, 336–338

special journals for, 336

Post retirement benefits, 546–548

Practical range, see Relevant range

Preferred stock, 624–626, 652–653, 855

Premium:

on bonds, 691–693, 713–714, 716–718

on stock, 618

Prenumbering documents, 381

Prepaid expenses (prepayments), 103

adjusting entries for, 104–107

alternative treatment of, 124–127

for statement of cash flows, 809

“Presentation of Financial Statements” (IAS 1), 271, 564, 735, 889–890

Present value, 689

of an annuity, 707–709, G5–G7, H2

and bond pricing, 705–711

of bonds, 689

of face value, 706–707

of leases, 700

time periods in computing, 709–710

Price/earnings (P/E) ratio, 664n.3, 856–857

Price variances:

labor, 1090, 1188–1189

materials, 1187

Prior period adjustments, 659–660

Private accounting, 30. See also Managerial accounting

Privately held corporations, 608

Process cost flow, 987

Process cost system, 940–941, 984–1004

and activity-based costing, 1000–1001

assigning manufacturing costs, 987–989

equivalent units, 990–993

example of, 993–998

job order cost systems vs., 985–987

and just-in-time processing, 998–1000

process cost flow, 987

for service companies, 985

uses of, 984

Products, sell-vs.-processing further

decisions for, 1234–1235

Product costs, 901, 908–909

Production budget, 1082–1084

Production cost report, 993, 996–997

Product warranties, 529–530

Profitability, creditor interest in, 842

Profitability ratios, 853–857

Profit and loss statement, 23. See also Income statement

Profit centers, 1142, 1143–1145

Profit margin, 853–854

Pro forma income, 865

Promissory notes, 441–442. See also Notes receivable

Property, plant, and equipment, 180, 472, 517–519. See also Plant assets

Proprietorships, 10–11, 183

Proving ledgers, 337, 339, 342

Provisions, 564

“Provisions, Contingent Liabilities, and Contingent Assets” (IAS 37), 564, 735

Public accounting, 29–30

Public Company Accounting Oversight Board (PCAOB), 376

Publicly held corporations, 608

Pull approach to manufacturing, 999

Purchases:

of buildings, 473

of merchandise, recording, 221–226

recording, 243

transaction analysis for, 16–17

Purchase allowances, 223–224, 243–244

Purchase discounts, 224–225, 244

Purchase invoice, 221–222

Purchases journal, 342–344

Purchase of an interest (partnerships), 586

Purchase returns, 223–224, 243–244

Push approach to manufacturing, 998

Q

Quality of earnings, 865–866

Quantity variances:

labor, 1189–1190

materials, 1187

Quarterly tax reports, 541

QuickBooks®, 328–331

Quick ratio, 850. See also Acid-test ratio

R

Radio frequency identification (RFID) technology, 293

Ratio analysis, 842, 848–859

liquidity ratios, 850–853

profitability ratios, 853–857

solvency ratios, 857–858

Raw materials, 262, 900

Raw materials costs, 942, 945–947

R&D (research and development) costs, 491–492

Real accounts, 168. See also Permanent accounts

Real estate taxes payable, 13

Realized gain/loss, 753

Reasonable assurance concept, 384–385

Receivables, 430–449

accounts receivable, 431–441

on financial statements, 447–449

IFRS and GAAP for, 468

notes receivable, 441–446

types of, 430

Reconciling bank accounts, 397–400

electronic funds transfers, 401

entries form, 400–402

illustration of, 400–402

procedure for, 397–400

Reconciling items, for statement of cash flows, 809–810

Record date (cash dividends), 651–652

Recording process, 52–77, 244

accounts in, 54–58

activities in, 4, 5

for contingent liabilities, 529–530

debits and credits in, 54–58

for employer payroll taxes, 539–540

illustrated, 65–72

for payroll, 535–538

with periodic inventory system, 243–245

for purchases of merchandise, 221–226

for sales of merchandise, 226–229

for special and general journals, 347

steps in, 58–65

trial balance in, 73–77

Record-keeping, segregation of physical custody and, 380, 387

Recycling, 116, 992

Redeeming bonds, 695

Registered bonds, 687

Regular partnerships, 569

Regulations, government, 1178

for corporations, 610

as standards, 1178. See also Standard costs

Regulatory agencies, 7

Reimbursement requests, fraud involving, 381

Relevance:

of figures, 9

of financial information, 128

Relevant costs, 1229

Relevant range, 1034–1035, 1130

Repairs, ordinary, 483

Repurchase of shares, 623

Required rate of return, 1242, 1245

Research and development (R&D) costs, 491–492

Reserves, 644

Residual claims, 612

Residual equity, 13. See also Owner's equity

Residual value, 518

Resource allocation decisions, 1239

Responsibility, establishment of, 377

Responsibility accounting, 1135–1149

controllable vs. noncontrollable revenues/costs, 1137

responsibility centers, 1142–1149

responsibility reporting system, 1139–1142

Responsibility centers, 1142–1149

Responsibility reporting system, 1139–1142

Restricted cash, 403

Retailers, 218

Retail inventory method, 302–303

Retained earnings, 616, 658–661

payment of cash dividends from, 650

prior period adjustments, 659–660

restrictions on, 658–659

for statement of cash flows, 804, 810

Retained earnings statement, 660–661, 845–846

Retirement of plant assets, 484–485

Returns:

purchase, 223–224

sales, 227–228

Return on assets, 854–855

Return on common stockholders’ equity, 662, 855

Return on investment (ROI), 1145–1148, 1195, 1196

Revenues, 13–14

accrued, 103, 110–112

controllable vs. noncontrollable, 1137

in double-entry system, 57

recognizing, 101

for service companies, 957

on single-step income statement, 234

from stock investments, 745–746

unearned, see Unearned revenues

Revenue expenditures, 483

Revenue recognition principle, 101, 130

Reversing entries, 175, 177, 188–189

RFID technology, 293

Risk assessment, 377

Risk levels of activities, 385

ROI, see Return on investment

Rolling Stones, 1049

Romania, 425

Rowlings, J.K., 488

S

Safe cash payments schedule, 580. See also Schedule of cash payments

Salaries, 532–533. See also Payroll

accounting

accrued, 114–116

to partners, 575–576

Sales:

of bonds, 741–743

credit card, 438–440

of equipment, loss on, 785

of merchandise, recording, 226–229

of notes receivable, 445

of plant assets, 485–486

of receivables, 439

recording, 244–245

of stocks, 744

Sales and administrative expense budget, 1087–1088

Sales budget, 1081–1082

Sales commissions, fraud involving, 382

Sales discounts, 228–229, 244–245

Sales forecasts, 1077, 1081–1082

Sales invoices, 226

Sales journal, 336–338

Sales returns and allowances, 227–228, 244

Sales revenue (sales), 218

Sales taxes payable, 13, 525

Salvage value, 477, 480

SAP, 331

Sarbanes-Oxley Act (2002):

and accuracy of financial reports, 75

and corporation management, 609

and ethics, 7

and fraud, 376–377, 425, 426

and human resources, 384

and internal auditor's job, 30

and internal control, 29, 49, 103

and monitoring software, 331

Schedule of cash payments, 580–581

Scudamore, Brian, 1122

SEC, see Securities and Exchange Commission

Secured bonds, 687

Securities:

available-for-sale, 271, 748, 750–751

held-to-maturity, 748

marketable, 752

trading, 749–752

Securities and Exchange Commission (SEC), 7, 9, 30, 401, 751, 772

Segments, in responsibility accounting, 1136

Segregation of duties, 379–380, 432

Serial bonds, 687

Service companies:

budgetary planning for, 1096

industry trends for, 218

job order costing in, 950–951, 955–956

operating cycles for, 218

process cost systems for, 985

process vs. job order cost systems for, 985

product costing for, 908–909

revenue for, 957

Service revenue, 957

Shares, sale of, 11

Shareholders’ equity, 615. See also Corporate capital

Short-term investments, 752

Short-term paper, 752

Simple entries, 60

Single-step income statement, 234

Sinking fund bonds, 687

“Slush” funds, 391

Social responsibility, see Corporate social

responsibility

Social Security, 546

Social Security taxes, 533–534

Software:

for customization, 331

entry-level, 331

for fraud control, 331

for internal control, 331

network compatibility of, 331

Solvency, creditor interest in, 842

Solvency ratios, 857–858

South Korea, 10

SOX, see Sarbanes-Oxley Act (2002)

Special journals, 335–348

cash payments, 344–347

cash receipts, 339–342

effects on general journal, 347–348

purchases, 342–345

sales, 336–338

Special order-price decisions, 1230–1232

Specific identification method (inventory), 281

Staff positions, 896

Standards. See also Standard costs budgets vs., 1178

government, 1178

ideal vs. normal, 1179

Standard costs, 1178–1194

analyzing variances from, 1184–1194

need for, 1178

reporting variances from, 1193–1194

setting, 1178–1183

Standard cost accounting system, 1200–1202

Standard hours, 1191

Standard predetermined overhead, 1181

State income taxes, 534

Statement of cash flows, 21–24, 778–796

classification of cash flows, 778–779

company evaluation based on, 793–795

direct method for, 782–783, 798–804

format of, 780–781

IFRS and GAAP for, 837–838

indirect method for, 782–793

preparation of, 782–793

significant noncash activities, 780

usefulness of, 778

worksheet for, 806–811

Statement of comprehensive income, 889–890

Statement of earnings, 537–538

Statement of operations, 23. See also Income statement

State unemployment taxes, 539

Static budgets, 1125–1126

Static budget reports, 1125–1126

Stocks, 612–615

authorized, 613

capital, 626

common, 612, 617–620

direct issues, 613

indirect issues, 613

issued for credit, 790

market value of, 614

no-par value, 615

par value of, 614–615

preferred, 624–626

treasury, 620–624

Stock certificates, 612–613

Stock dividends, 654–656

Stockholders:

limited liability of, 608–609

ownership rights of, 612

Stockholders’ equity, 183, 615. See also Corporate capital

on balance sheet, 626–627

contra account for, 621–622

effect of dividends on, 655–656

on financial statements, 661–665

and IFRS/GAAP, 644–645

Stock investments, 743–747

Stock option plans, 533, 620

Stockpiling, 1085

Stock splits, 656–657

Straight-line amortization, 715–718

Straight-line depreciation, 477–478, 481

Su, Vivi, 428–429

Subchapter S corporations, 570

Subsidiary (affiliated) company, 746

Subsidiary ledgers, 332–335

job cost sheets as, 944, 945

posting from cash receipts journal to, 341–342

posting from purchases journal to, 344

Summa de Arithmetica, Geometria, Proportione et Proportionalite (Luca Pacioli), 5n.2

Summary entries, 943

Sunk costs, 1229

Supplies, adjusting entries for, 104–105

Sustainability reporting, 377, 488

T

Tabular summaries, 54

T-accounts, 54–55

Take-home pay, 535. See also Net pay

Target net income, 1047–1048

Taxes:

as accounting area, 30

on corporations, 611

and depreciation, 463

on dividends, 653

double taxation, 611

effect of cost flow methods on, 286, 288

on employers, 539–541

FICA, 533–534

income, see Income taxes

for partnerships, 568

payroll, 533, 539–541

sales taxes payable, 525

and time period divisions, 100

Taxing authorities, 7

Technology:

investment in, 1244

value chain and, 910

Temporary accounts, 167–168, 174

Term bonds, 687

Theft, 227, 385

Theory of constraints, 910

Three-column form of account, 63

Tilton, Glenn, 1197

Times interest earned, 701, 858

Timeliness, 129

Time period assumption, 100–102, 129, 157

Time value of money, 688, G1–G9

Time Warner, 748

Total labor variance, 1188

Total materials variance, 1185

Total overhead variance, 1190–1191

Total quality management (TQM), 910

Total standard cost per unit, 1182

TQM (total quality management), 910

Trademarks, 490

Tradenames, 490

Trade receivables, 430. See also Accounts receivable; Notes Receivable

Trading on the equity, 855

Trading securities, 749–752

Transaction analysis, 15–21, 70. See also Business transactions

Transportation-in, 243

Transposition error, 75

Treasurers, 609, 897

Treasury stock, 620–624

Trend analysis, 843. See also Horizontal analysis

Trend forecasting, 1247

Trial balances, 73–77

adjusted, 119–123

limitations of, 74

outdated information in, 103

post-closing, 172–174

on worksheet, 163–164, 246–247

Triple bottom line, 911

Trustees (bonds), 687

Turner, Ted, 738

U

Uncollectible accounts, 432–438

allowance method, 433–438

direct write-off method, 432–433

Understandability, 129

Underwriting, 613–614

Unearned revenues, 103

adjusting entries for, 108–110

alternative treatment of, 124–127

as current liabilities, 526

Unemployment taxes, 539

United Nations, 1034

Units-of-activity depreciation, 478–479, 481

Units-of-production method, see Units-of-activity depreciation

Unit production costs, 994–995

Unlimited liability, 569–571

Unprofitable segment elimination decisions, 1236–1238

Unrealized gains/losses, 749, 753

Unsecured bonds, 687

Useful financial information, 128–130

Useful life, 477, 483

Users of accounting data, 5–7

V

Vacations, required, 383–384

Valuation:

of accounts receivable, 432–438

cost allocation vs., 476

of investments, 748–750

of notes receivable, 443

Value chain, 909–910

Variable costs:

in CVP, 1032–1033

in flexible budget, 1130

in manufacturing overhead budget, 1087

Variable costing, 1055–1058

Variances from standards, 1184–1194

direct labor variances, 1188–1190

direct materials variances, 1185–1187

manufacturing overhead variance, 1190–1192

overhead, 1203–1205

reporting, 1193–1194

Venture capital firms, 569

Verifiability, 129

Verification, independent internal, see Independent internal verification

Vertical analysis, 842, 846–848

Virtual closes, 171

Voucher register, 389

Voucher system controls, 389–390

W

Wages, 532. See also Payroll accounting

Wage and Tax Statement (Form W-2), 542

Wages payable, 13

Warranties, product, 529–530

Wear and tear, 476

Weighted average method, 990–992

Weighted average unit cost, 285–286

West, Laura, 328

West, Paul, 328

Wholesalers, 218

Withdrawal of partners, 589–591

Working capital, 528

Work in process, 276, 944–952

Work in process inventory, 903

Worksheets, 162–167

for merchandising companies, 240–241, 246–248

preparing adjusting entries from, 167

preparing financial statements from, 165–167

for statement of cash flows, 806–811

steps in preparing, 163–165

Write-offs, 849

Y

Years, fiscal, 100

Year-end, 24

Year-end balance, 959

Z

Zero-interest bonds, 688

Zuckerberg, Mark, 611