subject index
A
Abbreviations, B31, 46, 208, 284, 490, 551, 609, 836
ABI Inform (UMI, Inc.), 69
Accelerated method, 522, 526, 551
Accounting
cost, 47
ethics. See Ethics in accounting
financial, 47
managerial, 48
adjusting entries. See Adjusting entries
defined, 208
double-entry accounting system, 152–158, 209
See also Financial statements
frequency, 199
opening balances, 161
posting to the ledger, 173–177, 209
transaction analysis, 163
See also Transaction analysis
Accounting data
qualitative characteristics, 12–16
Accounting equation, 29, 29–30, 47, 75–76
Accounting ethics. See Ethics in accounting
Accounting in the news
accrual-based accounting in the federal government, 102
auditor's report, 37
bonds, 637
debt, 416
expense fraud, 392
financial statement analysis, 807, 821
gift cards, 589
intangible assets, 537, 538, 539, 542
leases, 653
purchasing power, 388
responsibilities of corporate directors, 17
revenue recognition and statement of earnings, 247, 252, 254, 259
shareholders' equity, 712, 722, 732
venture capital, 75
Accounting policy choices, 776–779
Accounting Standards Board (AcSB), 7, 46
Accounts, 75
payable. See Accounts payable
posting the accounts, 209
receivable. See Accounts receivable
Accounts payable, 29, 82–83, 118, 171, 581–582
Accounts payable turnover ratio, 596–597, 815–816, 836
Accounts receivable, 27, 84, 118, 284, 405–416, 431
aging of accounts receivable method of estimating bad debt, 410, 411, 412–414, 431
direct write-off method, 407, 415–416, 431
percentage of credit sales method, 410, 411–412, 432
ratio analysis, 419–425, 431, 812–813, 836
valuation methods, 406
Accounts receivable turnover ratio, 424–425, 431, 812–813, 836
Accrual-basis accounting, 79–80, 102, 118
Accrued liabilities, 29
Accumulated depreciation, 95, 154, 208
Accumulated other comprehensive income, 278, 284, 739
Acquisition method, B4, 7–8, 33
Acquisition of inventory, 248–249
Activity ratios. See Turnover ratios
Actuaries, 682
Adjusted trial balance, 191–192, 208
Adjusting entries, 179–191, 208
Advertising, 538
Aging of accounts receivable, 410, 411, 412–414, 431
Allowance for doubtful accounts, 408
Allowance method, 407–414, 431
Amortization
See also Depreciation; Intangible assets
See also H&M annual report
Articles of incorporation, 717, 750
Asset purchases, B3, 9, 33, 519–520, 551
capital. See Capital assets
defined, 46
fixed. See Property, plant, and equipment
recognition of revenue from others' use of, 264–266
Available-for-sale investments, 400, B10–11
Average payment period, 597
See also Debt
Balance between benefit and cost, 16, 46
Balance between qualitative characteristics, 16, 46
accumulated other comprehensive income, 278, 284
defined, 47
See also Statements of financial position
Balsillie, Jim, 653
Bank indebtedness, 29
Bank reconciliation, 391–396, 431
Barrett, John, 459
Basic accounting equation, 29–30, 47, 75–76
Basic earnings per share ratio, 820–822, 836
Benefit vs. cost constraint, 16
Blended payments, 593
Board of the International Accounting Standards Committee (IASC), 12
Bond interest rate, 636
characteristics, 636
interest expense and liability balances, 641–642
mortgage, 636
with no explicit interest, 646
present value, 638–640, 680–682, 684
public bond issues, 636
Books, 47
Business, 4
C
Canada Business Corporations Act, 717
Canada Deposit Insurance Corporation (CDIC), 279–280
Canada, federal government, full accrual accounting, 102
Canada Pension Plan (CPP), 582–583, 584
Canada's Venture Capital & Private Equity Association (CVCA), 75
Canadian Accounting Standards Board (AcSB), 7
Canadian Institute of Chartered Accountants (CICA), 11, 46
Canadian practice
capital assets, 517
intercompany investments, B10, 13
inventory, 464
short-term investments, 399–402
short-term liabilities, 581
Capital assets, 28, 513–575, 551
additional expenditures, 532–533
Canadian practice, 517
corporate income taxes, 528–530
depreciation. See Depreciation
interest capitalization, 520–521, 552
property, plant, and equipment. See Property, plant, and equipment
purchase of, B3, 9, 33, 519–520, 551
recognition, 515
return on assets (ROA) ratio. See Return on assets (ROA)
statement analysis considerations, 545–546
writedown/disposal of, 533–534
Capital cost allowance (CCA), 528–530, 551
Capitalizable costs, 518–520, 551
Carrying value, 105, 118, 516, 551
conversion cycle, 348
internal control and management of, 389–391
as payment on accounts, 89–90, 171
statement analysis considerations, 397
Cash and cash equivalents, 317, 348
Cash as payment on accounts, 89–90, 171
Cash-basis accounting, 80, 118
Cash conversion cycle, 310, 348
See also Statements of cash flows
Cash-to-cash cycle, 248–251, 284, 310, 348
Certified General Accountants Association of Canada, 38
Certified General Accountants (CGAs), 38, 46
Certified Management Accountants (CMAs), 38, 46
Characteristics of accounting information, 12–17
Chart of accounts, 159–161, 209
Chartered Accountants (CAs), 38, 46
Classified balance sheets, 28, 47
Classified statements of financial position, 105, 118
CMA, 38
Collateral, 417, 431, 592, 609
Collateral trust bonds, 636, 683
Collection, 88–89, 170–171, 249–250, 263
Commercial paper, 631
Common shares, 24, 47, 720–722, 724–725, 750
Common size data, 789–795, 836
Common stock. See Common shares
Compact/Disclosure Canada, 69
Comparative balance sheets. See Classified balance sheets
Compensating balances, 391, 431
Complex organizations. See Intercompany investments
Compound interest method of depreciation, 522, 551
Comprehensive income, 276–278, 284
Consolidated financial statements, B4, 33, 24, 47
Consolidating working papers, B15–17, 19–21, 33
Consolidation method, B11
Consolidation of subsidiaries. See Intercompany investments
Constructive obligations, 591
Contingent liabilities, 579, 597–602, 609
Contra-asset account, 95, 118, 154, 209
Controlling interest, B3, 33, 721–722, 750
Convertible preferred shares, 724, 750
Corporate financial reporting, 3–71
Corporate income taxes, 270, 528–530, 583–584
Corporations, 7–8, 715, 717, 750
income taxes, 270, 528–530, 583–584
See also Dividends; Shares
Cost flow assumptions, 472–479, 487–489, 490
Cost method, B11
Cost of goods removed from inventory for sales, 87–88
Cost of goods sold, 25, 84, 87–88, 118, 167–168, 462–463
Cost, replacement, 463, 464, 491, 516, 552
Costs, 80
Coupon rate, 638
Credit, 153
Credit purchase, 118
Cross-sectional analysis, 787–789, 836
Crown corporations, 7, 69, 629, 630
Cumulative preferred shares, 723–724, 750
Current gross margin, 490
Current liabilities, 47, 106, 118, 581–597
statement analysis considerations, 596–597
See also Short-term liabilities
Current portion of long-term debt, 595–596, 609
Current ratio, 419–420, 431, 808–809, 836
Customer rewards, 590
CVCA, 75
Cyclical business, B2
D
Days to pay ratio, 597
Debt
accounting for under the allowance method, 408–410
current portion of long-term debt, 595–596, 609
estimation using the allowance method, 410–414
estimation using the percentage of credit sales method, 410, 411–412, 432
foreign-denominated, 670
Debt to equity ratio, 336, 348, 816–818, 836
Debt to total assets ratio, 666, 669, 816–818, 836
Declining-balance method, 522, 526, 551
Deferred asset or liability, 529, 551
Deferred income taxes, 270, 284, 661–664, 665
Defined benefit pension plans, 655–656
Defined contribution pension plans, 655
Delivery of product, 249
Delivery of services, revenue recognition, 263–264
Depreciable cost, 521
Depreciation, 22, 47, 521–532, 551
accelerated method, 522, 526, 551
changes in estimates/methods, 531–532
choice of method, 531
corporate income taxes, 528–530
statement analysis considerations, 545–546
straight-line method, 93, 119, 521–524, 552
units-of-activity method, 522, 524–525, 552
writedown/disposal of capital assets, 533–534
Depreciation costs, 551
Diluted earnings per share, 276, 284, 822–823, 836
Direct write-off method, 407, 415–416, 431
Directors, corporate, 8, 17, 47
Discontinued operations, 270–271, 284
Discount (bonds), 683
Discounted cash flows, 639
Disposal of property, plant, and equipment, 533–534
Dividend declaration, 91–92, 118, 172–173, 726, 750
declared for payment later, 172–173
payable, 29
Dividends in arrears, 724, 750
Double-declining-balance method, 526, 527, 551
Double-entry accounting system, 152–158, 209
E
Early extinguishment of debt, 644
Early retirement of debt, 644–645
Earnings from normal operations, 269–270
Earnings from unusual or infrequent events, 270
Earnings management, 39, 47, 254–255, 284, 551
adjusting entries, 185
capital assets, 518
current assets, 419
current liabilities, 603
depreciation, 532
inventory, 478
share prices, 735
short-term liabilities, 603
Earnings per share
basic (EPS), 24, 47, 274–276, 285, 721, 820–822, 836
diluted, 276, 284, 822–823, 836
price/earnings ratio and, 742
EDGAR Filings, 69
EDI, 490
Effective interest rate, 638
Electronic data interchange (EDI), 471, 490
Employee stock options, 731–735, 750
Employment insurance (EI), 582–583
Equipment writedown and disposal, 533–534
Equity, 47
Equity analysis ratios, 820–824
Equity in earnings of the investment (EEI), B13, 33
Estimating bad debt
aging of accounts receivable method, 410, 411, 412–414, 431
percentage of credit sales method, 410, 411–412, 432
Estimation of inventory, 480–481
Ethics in accounting, 35, 38, 180, 267, 396, 473
capital assets, 518
Events, 161
Excess fair market value, B7, 33
prepaid, 80
F
Faithful representation, 14, 47
Financial Accounting Standards Board (FASB), 11, 47
Financial information
See also ratio analysis
Financial instruments, 399, 431
Financial services companies, statement analysis for, 824
Financial statement analysis, 781–855
common size data, 789–795, 836
non-manufacturing or non-retail company analysis, 824
ratio data, 796
reading financial statements, 784–786
retrospective vs. prospective analysis, 787
time-series vs. cross-sectional analysis, 787–789, 837
understanding the business, 783–784
See also Ratio analysis
Financial statements
See also Accounting cycle
balance sheets. See balance sheets
cash flow statements.
See Statements of cash flow
conceptual framework, 11
income statements.
See Statements of earnings
independent auditor's report, 34–37
notes to the financial statements, 33–34
statement of management's responsibility, 34
See also Consolidated financial statements
Financing, inadequate, 312
Financing activities, 17–18, 33, 47
cash flows and, 307, 318–320, 327–334, 348
current liabilities related to, 591–596
First-in, first-out (FIFO), 474–476, 487–488, 490
Fixed assets. See Property, plant, and equipment
Flow statements, 22–23, 47, 307–308
Foreign-denominated debt, 670
Forms of organization, 7–8, 713–717
advantages and disadvantages compared, 716–717
corporations. See Corporations
limited liability comparison, 715
sole proprietorships, 7, 713–714, 751
taxation comparison, 716
Full cost method, 534–535, 551
Full financials on-line, 6
Future income tax assets or liabilities, 661
Future income taxes. See Deferred income taxes
G
See also IFRS insights; International perspectives
Gains
Generally Accepted Accounting Principles (GAAP), 11, 48, 324
Glossaries, B32–33, 46–49, 118–119, 208–209, 284–285, 348–349, 431–432, 490–491, 551–552, 609–610, 682–684, 750–751, 836–837
Going-concern assumption, 464, 490
Goods available for sale, 469, 490
Goodwill, B7, 33, 539–542, 552
Gross margin estimation method, 481, 490
Group financial statements, 24, 48
H
H&M annual report, A1–A40, 19–37
Held for trading investments, 400
High growth rates, 312
Historical costs, 93, 118, 398, 431, 463, 516
Horizontal integration, B2, 33
I
See also International perspectives
IASC, 12
Identifiable net assets, B6, 33
IFAC, 12
See also international perspectives
IFRS Insights
IFRS 9 standard, B11
non-financial liabilities, 591
pensions, 659
reserves, 740
warranties, 587
IFRS versus ASPE
constructive obligations, 591
contingent liabilities, 599
deferred income taxes, 665
other comprehensive income, 740
strategic investments, B27
valuing capital assets, 518
Impairment loss, 517, 528, 552
Inadequate financing, 312
Income from non-operating sources, 270
comprehensive income, 276–278, 284
defined, 48
performance evaluation, 308–312
See also Statements of comprehensive income; Statements of earnings
Income summary account, 196, 209
Income Tax Act, 529
Income taxes
corporate, 270, 528–530, 583–584
expenses, 25, 100–101, 270, 285
Income taxes payable, 29, 583–584
Indenture agreements, 636, 683
Independence, 38
Independent auditor's report, 34–37
Indirect approach, 321, 348–349
Intangible assets, 514, 536–542, 552
advertising, 538
goodwill, B7, 33, 539–542, 552
patents, trademarks, and copyrights, 538–539
Intellectual property, 538–539
Intercompany investments, B1–46
asset purchases, B3, 9, 33, 519–520, 551
consolidation method, B11
consolidation procedures: 100 percent acquisition, B13–21
consolidation procedures: less than 100 percent acquisition, B21–24
consolidations: intercompany transactions, B24–25
cost method, B11
methods of obtaining influence and control, B3
purchase method, B42
share acquisitions, B3, 5–7, 34
statement analysis considerations, B26
Interest, 81
Interest capitalization, 520–521, 552
Interest expense, 25, 98–99, 180–181, 641–642
Interest payment, bond, 683
Internal control system, 390, 431
International Accounting Standards Board (IASB), 11–12, 48
See also International perspectives
International Accounting Standards (IASs), 12, 48
International Federation of Accountants (IFAC), 12, 48
International Financial Reporting Standards (IFRS), 6–7, 12, 48
See also international perspectives
International perspectives
capital asset valuation, 517
conceptual framework for financial reporting, 11, 15
contingent gains and assets, 602
financial instruments, 399
income taxes, 664
independence, 39
intangible assets, 536
statement of cash flows, 324
uncollectible accounts, 414
Canadian practice, 464
cost flow assumptions, 472–479, 487–489, 490
first-in, first-out (FIFO), 474–476, 487–488, 490
last-in, first-out (LIFO), 473
last-in, still here (LISH), 475, 490
lower of cost and market (LCM), 466–467
periodic inventory systems, 470–472, 487–489, 491
perpetual inventory systems, 470, 471–472, 491
ratios, 481–482, 490, 813–815, 837
recognition, 462
statement analysis considerations, 481–482
weighted average, 488–489, 491
Inventory turnover ratios, 481–482, 490, 813–815, 837
Investing activities, 18, 33, 48, 307, 329–334, 349
Investments. See Intercompany investments; Short-term investments
Investors, 10, 17–18, 48, B3, 33
Issuance of common shares, 724–725
Issuance of shares, 78–79, 169
J
Johnson, Deborah, 385
L
Last-in, first-out (LIFO), 473, 490
Last-in, still here (LISH), 475, 490
LCM. See Lower of cost and market
Lead/lag relationship, 310, 312, 314–316, 349
Lease term, 647
Lessee, 647
Lessor, 647
Leverage, 803–807, 816–818, 837
LEXIS/NEXIS Database, 69
accrued, 29
defined, 48
See also Long-term liabilities; Short-term liabilities
Liability, limited or unlimited, 715, 750, 751
Liability method, 661
Limited partnerships, 7, 715, 751
Lines of credit, 309, 349, 591–592, 609
Liquidation, 721
Liquidity, 28, 48, 105, 118, 397, 431
short-term, 419–425, 808–811, 826
Loans
amortization table, 593, 609, 633
lines of credit, 349, 591–592, 609
repayment of, 164
working capital loans, 591–592, 610
Long-term debt, 29
Long-term liabilities, 629–709
bonds. See Bonds
current portions of long-term debt, 595–596
leases. See Leases
pensions. See Pensions
post-employment benefits, 661, 684
statement analysis considerations, 666–671
time value of money tables, 680–682
Long-term liquidity ratios, 816–820
debt to equity ratio, 336, 348, 816–818, 836
debt to total assets ratio, 666, 669, 816–818, 836
operating cash flow to total debt, 818–820, 837
times interest earned (TIE), 669–670, 818–820, 837
realized or unrealized, 398, 432
Lower of cost and market (LCM), 398–399, 431
net realizable value, 464, 466–468
Loyalty programs, 590
M
Management, 8, 20–21, 34, 48, 479–480
Management Discussion and Analysis, 20–21
Market value, 30, 48, 398, 431, 463, 516–517, 741–742
Marketable securities, 397, 431
Matching concept, 86, 118, 251–252
MD&A (Management Discussion and Analysis), 20–21
Measurement of revenue, 253
Minority interest, B23, 34, 722, 751
Monetary assets, 386
Mortgage bonds, 636
Multi-step statements of earnings, 269–271, 285
Mutually unexecuted contracts, 580, 609
N
Net book value (NBV), 516, 529, 552
Net earnings, 22, 48, 251, 280–281
See also Net earnings
Net profit margin, 797
See also Net earnings
Net realizable value (NRV), 408, 464, 491, 516, 552
Net recoverable amount, 517, 552
Nominal rate, 638
Non-controlling interest (NCI), B22, 34, 722, 751
Non-current asset/liability, 48, 106, 119
Non-financial liabilities, 591
Non-strategic investments, B1, 34
Notes payable, 29, 83, 119, 592–595, 631
Notes receivable, 89, 119, 432
Notes to financial statements, 33–34
O
One-line consolidation, B33
Ontario Securities Commission (OSC), 254
Opening balances, 161
Operating activities, 19, 31, 48, 248, 285
cash flows and, 306, 321–324, 327–329, 349
current liabilities relating to, 581–591
Operating cash flow to short-term debt ratio, 810–811, 837
Operating cash flow to total debt ratio, 818–820, 837
Operating leverage, 824
Operations, earnings from, 269–270, 270–271
Optimal capital structure, 807, 837
Ordinary shares, 720
Organization, forms of. See Forms of organization
OSC, 254
Other comprehensive income, 277, 285
Other income, 25
Outstanding shares, 725–726, 751
Owner's capital, 714
P
P/E ratio, 742–743, 751, 823–824, 837
Parent companies, B4, 24, 34, 48
Partially executed contracts, 580, 609
Participating preferred shares, 724, 751
Partnership agreements, 714, 751
Payment of cash on accounts payable, 89–90, 171
annual statement disclosures, 656–660
Canada Pension Plan (CPP), 582–583, 584
defined benefit plans, 655–656
defined contribution plans, 655
Percentage of completion method, 261–263
Percentage of credit sales method, 410, 411–412, 432
Performance, 253
Performance measurement, 253, 278–281, 308–312
Performance ratios. See Ratio analysis
Periodic inventory systems, 470–472, 487–489, 491
Permanent accounts, 154, 156, 161, 209
Perpetual inventory systems, 470, 471–472, 491
Plant writedown and disposal, 533–534
Post-closing trial balance, 198–199, 209
Post-employment benefits, 661, 684
Posting the accounts, 209
Posting to the ledger, 173–177, 209
Pre-emptive right, 721–722, 751
Preference shares, 723
Preferred shares, 722–724, 751
Prepaid insurance, 80
Present value, 406, 432, 580, 610
Price/earnings (P/E) ratio, 742–743, 751, 823–824, 837
Private placement, 636
Privately held corporations, 7, 48
Production method, 522, 524–525, 552
Profit margin ratio, 109, 119, 837
Profitability ratios, 109–110, 797–803
Property dividends, 727–728, 751
Property, plant, and equipment
basket purchases, 519–520, 551
depreciation. See Depreciation
interest capitalization, 520–521, 552
purchase of equipment, 79–80, 168–169
Prospective analysis, 787, 837
Provision for income taxes, 270, 285
Provisions, 591
Public market for bonds, 636
Publicly traded corporations, 7, 48
Purchase commitments, 602, 610
Purchase method, B42
Purchase of equipment, 79–80, 168–169
Purchase of inventory, 82–83, 165–166
Purchase of office supplies for cash, 168
Purchase on account, 119
Q
Quebec Pension Plan (QPP), 583
Quick ratio, 420–424, 432, 809–810, 837
R
Rate of depreciation, 524, 552
Ratio analysis, 106–110, 796–836
accounts payable turnover, 596–597, 815–816, 836
accounts receivable, 419–425, 431, 812–813, 836
current ratio, 419–420, 431, 808–809, 836
debt to equity ratio, 336, 348, 816–818, 836
debt to total assets ratio, 666, 669, 816–818, 836
earnings per share ratios. See Earnings per share
interpretation, 825
inventory turnover, 481–482, 490, 813–815, 837
leverage, 803–807, 816, 816–818, 837
long-term liquidity ratios, 816–820
operating cash flow to short-term debt, 810–811, 837
operating cash flow to total debt, 818–820, 837
price/earnings (P/E) ratio, 742–743, 751, 823–824, 837
profitability ratios, 109–110, 797–803
quick ratio, 420–424, 432, 809–810, 837
ratio data, 796
return on assets (ROA), 109, 119, 546–547, 552, 799–802, 837
return on equity (ROE), 109, 119, 743, 799, 802–803, 837
return on investment (ROI), 278–280, 285, 799
short-term liquidity ratios, 419–425, 808–811, 826
summary of, 826
times interest earned (TIE), 669–670, 818–820, 837
total asset turnover ratio, 811–812, 837
turnover ratios, 424–425, 481–482, 596–597, 811–816
Ratio data, 796
Reading financial statements, 784–786
Realized gains or losses, 398, 432
Recognition
capital assets, 515
dividend and interest, 402–403
Recognition. See Revenue recognition
revenues. See Revenue recognition
Recovery of account, 409
Redeemable preferred shares, 724, 751
Regan, David, 711
Reliability of information, 14, 49
Replacement cost, 463, 464, 491, 516, 552
Representational faithfulness. See Faithful representation
Residual value, 94, 119, 515, 552
Retained earnings, 18, 30–31, 49, 735–737
Retractable preferred shares, 724, 751
Retrospective analysis, 787, 837
Return on assets (ROA), 109, 119, 546–547, 552, 799–802, 837
Return on equity (ROE), 109, 119, 743, 799, 802–803, 837
Return on investment (ROI), 278–280, 285, 799
criteria for, 85–86, 119, 251–254
multiple lines of business, 266–267
performance measurement, 278–281
at the time of collection, 263
at the time of contract signing, 259–260
at the time of production, 260–263
recognition criteria. See Revenue recognition
ROA ratio, 109, 119, 546–547, 552, 799–802, 837
Robinson, Matt, 245
ROE ratio, 109, 119, 743, 799, 802–803, 837
Rules of debit and credit, 155, 209
S
Sale of goods, revenue recognition, 255–263
Sales on account, 83–86, 119, 166–167
Sarbanes-Oxley Act, 21, 49, 721
Secured debts, 592
Securities, 432
Selling activity, 249
Service period, 731
Share acquisition, B3, 5–7, 34
Share capital, 30, 49, 724–725
Shareholders' equity, 29–31, 711–779
financial statement analysis. See Financial statement analysis
property dividends, 727–728, 751
statement of retained earnings, 735–737
See also Shares
common, 24, 47, 720–722, 724–725, 750
defined, 49
share capital, 30, 49, 724–725
Short-term investments, 27, 397–405
dividend and interest recognition, 402–403
initial acquisition, 402
recognition of gains and loss, 403–405
Short-term liabilities, 577–627
Canadian practice, 581
current portions of long-term debt, 595–596
short-term notes and interest payable, 592–595
wages and other payroll liabilities, 582–583
working capital loans and lines of credit, 591–592
Short-term liquidity ratios, 419–425, 808–811, 826
Short-term notes payable, 592–595
Significantly influenced companies, B12, 34
Simon Fraser University, 781–782
Single-step statements of earnings, 271–273, 285
Sole proprietorships, 7, 713–714, 751
Solvency ratios. See Long-term liquidity ratios
Specific identification method, 472, 491
Stated rate, 638
Statement analysis considerations
cash, 397
consolidation procedures, B26
intercompany investments, B26
long-term liabilities, 666–671
short-term liquidity, 419–425, 808–811, 826
See also Ratio analysis
Statement of changes in equity, 735–736, 737–741
Statements of cash flows, 110–111, 306, 349
cash and cash equivalents, 317, 348
components of cash flow, 317–324
defined, 49
financing and investing activities, 33, 307, 318–320, 329–334, 348, 349
operating activities, 31, 321–324, 327–329
performance evaluation, 308–312
solutions to the cash flow problem, 312–317
T-account approach, 326
Statements of changes in financial position. See Statements of cash flows
Statements of comprehensive income, 22–25, 49, 285
See also Statements of earnings
Statements of earnings, 103–104, 267–278
corporate income taxes, 270
earnings from discontinued operations, 270–271
earnings from non-operating sources, 270
earnings from normal operations, 269–270
earnings from unusual or infrequent events, 270
multi-step format, 269–271, 274, 285
performance evaluation, 308–312
single-step format, 271–273, 275, 285
See also Income statements
Statements of financial position, 104–106, 107–108, 155–158
accumulated other comprehensive income, 278, 284, 739
See also Balance sheets
Statements of management's responsibility, 34
Statements of operations. See Statements of earnings
Statements of profit and loss. See Statements of earnings
Statements of profit or loss. See Statements of comprehensive income
Statements of retained earnings, 735–737
Stock
common. See Common shares
Stockout, 491
Straight-line method of depreciation, 93, 119, 521–524, 552
Strategic investments, B2, 28, 34
Strategies for success, 44, 113, 201–202, 282, 283, 343–344, 426, 427, 483, 484, 548–549, 607, 672, 673, 674, 675, 745, 830
Strike price, 731
Student Investment Advisory Service (SIAS), 781–782
Subordinated debentures, 636, 684
Successful efforts method, 534–535, 552
Syndicates, 636
Synonyms, 46, 118, 208, 284, 490, 551, 609, 682, 750, B32
T
method for preparing statement of cash flows, 326
See also Double-entry accounting system
Take-or-pay contracts, 602, 610
See also Property, plant, and equipment
Temporary differences, 662
Thomas, Huw, 513
TIE ratio, 669–670, 818–820, 837
Time-series analysis, 787–789, 837
Time value of money, 580–581, 610, 680–682
Time value of money tables, 680–682
Times interest earned (TIE) ratio, 669–670, 818–820, 837
Total asset turnover ratio, 811–812, 837
Transaction analysis, 75–149, 161–173
accrual-basis vs. cash-basis accounting, 79–80
basic accounting equation, 75–76
collections from customers on account, 88–89, 170–171
cost of goods removed from inventory for sales, 87–88
depreciation of equipment, 92–95
dividends declared and paid, 91–92
interest expense, 98–99, 180–181
issuance of shares for cash, 78–79, 169
payments on accounts payable, 89–90, 171
prepaid expenses, 80
purchase of equipment for cash, 79–80
purchase of inventory on account, 82–83
sale of inventory on account, 83–86
See also Adjusting entries
Trustees, 655
accounts payable, 596–597, 815–816, 836
accounts receivable, 424–425, 431, 812–813, 836
inventory, 481–482, 490, 813–815, 837
U
Unclassified balance sheet, 28, 49
Uncollectible accounts, 408, 432
Undepreciated capital cost (UCC), 529, 552
Undercapitalization, 312
Unearned revenues, 587–588, 610
Unit-of-measure assumption, 388, 432
Units-of-activity method, 522, 524–525, 552
Units-of-output method. See Units-of-activity method
Unrealized gains or losses, 398, 432
Unsecured debts, 592
Useful life, 93, 119, 521, 552
Users of financial statements, 8–11
internal users, 9
management and the board of directors, 8
other users, 10
regulators, 10
shareholders and potential investors, 9–10
taxing authorities, 10
V
Valuation
accounts receivable, 406
short-term investments, 398–399
short-term liabilities, 580–581
W
Warranty service, 250, 584–587, 603
Weighted average, 488–489, 491
Wong, Doug, 577
Working capital, 340, 349, 808
Working capital loans, 591–592, 610
Writedowns of property, plant, and equipment, 533–534
Y
Yee, Derek, 781
Yield, 638