15339_Index.qxd 12/13/07 11:52 PM Page 505

INDEX

A financial reporting problem, 165 turnover, 216, 226 Accelerated-depreciation method, Web exploration, 166 equation, 221 392, 393, 406 Accounting information illustration, 216 Account adjustments comparability, 34–35 types, 348–349 ethics case, 134 consistency, 35 valuation, 349, 350–357 exercises, 129–134 neutrality, 34 Accounts receivable (A/R) accounting timing, issues, 104–107 qualitative characteristics, 33, ethics case, 378 Account balance, appearance, 140 34–35 exercises, 374–378 Accounting relevance, 34 financial reporting problem, 378 assumptions, 9–11 reliability, 34 Web exploration, 377–378 usage, 38 Accounting principles, –41 Accrual-basis accounting, 129 components, 7–13 assumptions, 36–37 cash-basis accounting, contrast, 105–106 conceptual framework, 32–36 demonstration problem, 56–60 Accruals constraints, 41–44 economic/political conditions, adjusting entries illustration, 42 impact, 33 illustration, 115 data, users (identification), 4–5 ethics, example, 65 usage, 115–120 definition, 2–5 exercises, 62–65 adjustment, 115 department, organizational chart, 20 usage, 41 Accrued expenses (accrued liabilities), entity, representation, 413 Web exploration, 64 116–120, 129 entries, source documents, 293 Accounts, 68–74, 96 adjusting entry, 117–118 equation, 11–13, 25 basic form, 68 impact, 117 expansion, 73–74 chart, 80–81, 96 adjustment type, 120 illustration, 11 illustration, 81 alternative adjusting entries, inapplicability, ethics, example, 114 comparison, illustration, 125 127 external users, 4–5 normal balance, 70 Accrued interest, 117–118 glossary, 25 reconciliation, 302 Accrued revenues (accrued receivables), history, 5–6 standard form, 78–79 115–116, 129 information three-column form, 96 adjustment type, 120 relevance, 34 illustration, 78 Accrued salaries, 118–119 reliability, 33 type, identification, 81 Accumulated depreciation internal users, 4 uniform systems, 15–17 analysis, equipment category, 191 methods Accounts payable, 12 balance sheet, presentation, advertising alternatives, 223 account, 68 outlays 112 usage, disclosure, 34–35 analysis, illustration, 187 difference, 112 operating guidelines, 36 credit, 152 increase, 190–191 origins, 5 demonstration problem, 372–373 equipment category, 191 period increase, 187, 190 Accumulated depreciation—office equipment, cost of goods sold, determination, ledger, posting, 495 contra asset account, 112 237 payment, transaction, 49 Acid-test ratio (quick ratio), 215–216, 226 data, accumulation, 145 responsibility, 21 equation, 221 policies, 461–462 subsidiary ledger, 484, 501 illustration, 215 summary, 40 Accounts payables accounting Actual physical flow, costing (usage), process, 3 ethics case, 378 273–280 assumptions, usage, 36 COPYRIGHTEDexercises, 374–378 MATERIALAdditional debt, issuance, 210 constraints, impact, 36 financial reporting problem, 378 Additions and improvements, 406 profession, explanation, 25–27 Web exploration, 377–378 incurred costs, 395 reports, 3 Accounts receivable (A/R), 348–360, Adjusted cash balance per books, 308 study, usefulness, 6–7 374 Adjusted trial balance, 14, 122–123, 129 time period, selection, 105 account, 68 amounts, extension, 140. See also Financial Accounting cycle, 14–15, 73–74 aging, 374 statements adjusting entries, importance, 152 analysis, illustration, 187 columns, adjusted balances (entry), 140 steps, 15 current assets, 155 contents, display, 250 summary, 150–151 decrease, 190 demonstration problem, 197 Accounting cycle, completion, demonstration problem, 372–373 illustration, 122 246–248 disposal, 349, 357–360 preparation, 122 comparative analysis problem, increase, 186–187, 190 Adjusting entries, 129. See also Daily 166 recognition, 349–350 recurring adjusting/ ethics case, 166 responsibility, 21 closing entries exercises, 163–165 subsidiary ledger, 484, 501 basics, 107–121

505 15339_Index.qxd 12/13/07 11:52 PM Page 506

506 Index

categories, 108 sale, 435 Basic equation, expansion, 73 journalizing, facilitation, 139 turnover, 218, 226 Beginning inventory, 269 necessity, 107 equation, 221 Beverage cost calculations, 271–272 nonusage, problems, 110, 116, 118 illustration, 218 Beverage operation, food costs, 271 preparation, work sheet (usage), 144 Assistant controller, 20–21 Blum, Scott, 233 relationships, summary, 120–121 Assistant Director of Finance, assistant Boeing Co., high profit margins, 218 requirement, 107 controller (similarity), 20–21 Boise Cascade Corporation, units-of-activity types, 108 Association of Certified Fraud depreciation method, 391 Adjusting process, computer systems Examiners, 301 Bonds (usage), 119 Assumed cost flow methods, usage, common stock conversion, 180 Adjustments, 14 274–278 payable, increase, 192 approaches, comparison, 125, 126 Auditing, 27 Bonus, 340 columns, 249–250 Authorized stock, 426–427, 451 agreements, 324 demonstration problem, 128 Automobile insurance, 110 Book error, 309 entry, 139–140 Average collection period, 216 Bookkeeping, 25 journalization, 152 Average cost accounting, contrast, 6 nonjournalization, 139 illustration, 278 Book value (carrying value // unexpired relationships, summary, 127–128 method, 285 cost), 112, 129, 386. See also Assets; Administrative expenses (general usage, 274, 277–278 Declining book value expenses), 174, 198 Brunswick Corporation, balance sheet, Advertising purchase (on credit), 157 transaction, 47–48 B Building, increase, 192 Aging schedule, 355 Bad debts accounts, posting, 354, 356 Buildings, assets, 382, 384–385 illustration, 355 Bad debts expense, 374 Business, funding, 347 Allowance for Doubtful Accounts, increase, absence, 352–353 Business document, 74 disregarding, 354 recording, 350 Businesses, economic life (time period Allowance method, bases, 353–357 reporting, 352 divisions), 105 Already issued shares, transfer, 428 Bad debts losses, importance, 351 Business judgment rule, 424 Amazon.com Balance sheet, 52, 54, 61. See also Buy.com, game plan, 233 popularity, 369 Comparative balance sheets Bylaws, 451 profit, absence, 233 account, decrease, 109 American Airlines columns, 250 receipts, treatment, 112 credit amount, balancing, 141 C ticket sales, cash (receiving), 371 entries, reporting, 107 Calendar year, 105, 129 American Express format, international differences, Campbell Soup Company A/R billing/collecting, 357 155 advertising outlays, 110 credit sales, 359 horizontal analysis, 209 LIFO, usage, 278 national credit cards, offering, 358 increase, adjusting entry (impact), straight-line depreciation, usage, 389 American Hotel and Lodging Association 115 working capital, absence, 214 (AHLA), 17, 25 percentages, calculation (formula), Can cutting, 23 American Standard, working capital 211 Capital acquisition, ability, 421 (absence), 213 usage, 208 Capital expenditures, 395, 407 America Online, usage, 205 vertical analysis, 211 Capital stock, authorization, 427 Amortization, 401, 407 Bank Carrying costs, 283 Annual accounting period, 145, 151 account, reconciliation, 305–310 Cash Annual depreciation, prorating, 389 procedure, 306–307 account, 68 Application solution providers (ASPs), deposits, making, 302 adequacy, 438 93, 96 errors, 307, 308 amount, 55 Arm’s length transaction, 349 memoranda, 307, 308 cash equivalents, 179 Assets, 11, 25. See also Total assets reconciliation, 308–310 components, 297 account, credit (decrease), 109 entries, 308–310 controls, 296–302 accountability, 293 illustration, 307–308 count sheet, illustration, 298 book value, 112. See also Invested procedure, illustration, 307 credit cards, comparison, 359 assets service charges, 309, 312 current asset, 155 fair market value, difference, 398 statements, 304–310, 312 disbursements, internal control, depreciation, recognition, 387 demonstration problem, 311 300–302 equation, 70 illustration, 304 principles, application (illustration), maintenance, 46 usage, 302–311. See also Cash 300 fair market value, 399 Bankone Corporation, fine, 81 effects, reporting, 54–55 replacement, 387 Bar code, technology, 237 equivalents, 179 15339_Index.qxd 12/13/07 11:52 PM Page 507

Index 507

ethics, 182 illustration, 86 Closing the books, 144–150 cases, 315–316 Cash receipt (on account), transaction, Club industry, accounts (uniform exercises, 312–315 49 system), 16 increase, 49 Cash receipts Club Managers Association of America revenues, impact, 186 credit columns, 492–493 (CMAA), 16, 23 inflows, types, 180 debit columns, 492–493 Club operations, accounting/financial internal control, bank (usage), 302 internal control, 297–300 management, 23–24 investing, 182 journal, 490–494, 501 Coca-Cola net increase/decrease, 55 journalizing/posting, 491 capital expenditures, 395 determination, 186, 190 posting, 493 treasury stock, report, 432 nonadjustment, requirement, 308 transactions, journalizing, 492–493 Coca-Cola, advertising outlays, 110 obsolescence, 304 Casino hotel, financial management, Collection agent, 368 outflows, types, 180 18, 20 Column, footing, 90 register tapes, 243 Cendant Corporation, shares repurchase, Common stock, 71, 96 resources, 312 433 cash dividends, allocation, 440–441 sales, 358 Certified public accountant (CPA), 26 identification, 426 stocks/bonds issuance, 192 Changes, horizontal analysis (formula), issuance, 180, 429. See also Noncash Web exploration, 315 208 assets; No-par value common stock; Cash-basis accounting, 129 Charter, 451 Par value common stock; Services Cash dividends, 438–441, 451 granting, 424 issues, accounting, 429–432 declaration, impact, 439 Check register, 301 Comparability, 61 declaration/payment, cumulative Checks (negotiable instrument), 312 Comparative analysis, necessity, effect, 440 cancellation, 305 206–207 entries, 438–440 endorsement, payment proof, 323 Comparative balance sheets, 178 Cash flow payments, 300 illustration, 194 classification, 179–180 remittance advice, illustration, 303 increases/decreases, display, importance, 169 writing, 302–303 185, 189 income, 182 ChevronTexaco Corp., units-of-activity source, 183 meaning, 179 depreciation method, 391 Compound entry, 76, 96 predictability, 214 Chicago Cubs, revenue and expense usage, assumptions, 76 Cash flows statement, 52, 54–55, accounts, 72 Compound journal entry, illustration, 78 62, 198 Chinese Institute of Certified Public Computerization, future, 93 example (2008), 188–190 Accountants, members (policing), 5 Computerized accounting systems, 75 example (2009), 192–193 Choice Hotels International, shares Computer-related frauds, 294 financing/investing activities, repurchase, 433 Conceptual framework, 61 nonimpact, 180 City ledger, 355. See also Hotels illustration, 43 format, 181–182 CKE Restaurants, Inc., calendar year, Conservatism, 42, 61 illustration, 181 105 Consistency, 61 indirect method, 185–197 Classified balance sheet, 153–162 Consolidated balance sheet, 457 example (2009), 193 account form, 158 Consolidated financial statements, notes, illustration, 189 illustration, 158 459–478 noncash investing/financing activities, assets section, 177 Consolidated statement of cash flow, 456 noninclusion, 180 demonstration problem, 160–162 Consolidated statement of common preparation, 183 illustration, 158–162 shareholders’ equity, 458 accrual concept, nonusage, 183 report form, 158 Consolidated statement of income, steps, 183 illustration, 159 176, 198, 455 purpose/format, 178–184 standard classifications, 154–158 illustration, 176 usage, 169 usage, 176–177 Contra asset account, 129. See also usefulness, 182 Closely held corporation, 420 Accumulated depreciation—office Cash payments, 300 Closing, 14 equipment journal, 496–498, 501 Income Summary account, usage, 147 real account, equivalence, 145 posting, 498 process, diagram, 146 Contra revenue account, 245, 254 transactions, journalization, 496–497 Closing entries Control. See Internal control Cash realizable value (net realizable illustration, 147 account, 501 value), 351, 374 journalization, 147. See also General effectiveness, 291 comparison, 353 journal importance, 293 reporting, 364 posting, 147–148 procedures, establishment, 296 Cash receipt (for future service), illustration, 148 Controller, 25. See also Assistant illustration, 83 preparation, 145–146 controller Cash receipt (for services provided), ease, 247 usage, 20 15339_Index.qxd 12/13/07 11:52 PM Page 508

508 Index

Co-partnership, articles, 451 determination, periodic inventory system Darden Restaurants, inventory turnover Copyright Office, 156 (usage), 268 formula/computation (illustration), Copyrights, 402, 407 formula, illustration, 281 283 Corporate capital, 424, 451 increase, 243 Day trader, example, 205 Corporations, 451 involvement, 247 Debiting, 69 advantages/disadvantages, illustration, proof, illustration, 276, 277 Debits, 69, 96 423 section, 272 balance, 69 characteristics, 420–423 Credit cards addition, 356 continuous life, 421 retailer advantage, 358 credits, equivalence, 69 corporate capital, 424–429 sales, 358–360 effect, illustration, 70, 71, 72 exercises, 452–453 Credit department, 360 memorandum, 305 formation, 424 Crediting, 69 illustration, 240 government regulations, impact, 421 Credit manager, responsibility, 21 usage, 244 incorporation, 424 Creditors, 4 procedures, 69–72 international designation, 424 subsidiary ledger, 484, 501 requirement, determination, 81 legal obligation, 439 Credit policies, 360–361 rules, illustration, 73 management, 421 Credit purchase, support, 238 Debt, issuance, 180 organization, 10 Credits, 69, 96 Debt obligations/commitments, chart, 422 balance, 69 473–474 costs, incurred expenses, 424 effect, illustration, 70, 71, 72 Debt to total assets ratio, 220, 226 taxes, addition, 423 memorandum, 254, 305 equation, 222 Web exploration, 453 procedures, 69–72 illustration, 220 Correcting entries, 151–154 requirement, determination, 81 Decision usefulness, 34 illustration, 152, 153 rules, illustration, 73 Declaration date, 439, 451 posting, necessity, 152 Credit sales, 358 Declining-balance depreciation, 388, Cost Credit terms, 241–242, 254 391–392, 407. See also Double-declining- allocation, illustration, 275, 277 Cross-footing, 501 balance depreciation schedule definition, 9 Cuisine-on-the-Go, accounts adjustment method, formula (illustration), 391 expenditure components, 383–384 example, 103 Declining book value, 391 principle, 25, 40–41, 61, 383 Cumulative dividend, 437, 451 Deductions, 327. See also Payroll relevance, 40–41 Currency, usage, 329 Deficit, 451 reliability, 40 minimization, 302 Delivery truck, cost computation Cost flow assumptions, 274 Current assets, 154–155 (illustration), 385 accounting requirement, absence, adjustments, 193 Dell, Inc., stockholder equity, 158 274–275 changes, operating activities Del Monte Corporation, LIFO usage, Cost flow methods (relationship), 180 278 balance sheets, impact, 279 illustration, 215 Delta Air Lines comparative effects, illustration, 278 types, 155 balance sheet, 156 financial statement, impact, 278–279 Current income statement, source, 183 calendar year, 105 income statements, impact, 278–279 Current liabilities, 156–157 receipts, treatment, 112 taxes, impact, 279 adjustments, 193 Departmental income statement, 175 Cost of food consumed, 271 changes, operating activities illustration, 175 Cost of food sold, 271 (relationship), 180 necessity, 175 Cost of goods available for sale, 285 definition, 367–372 Deposits in transit, 306, 307, 312 computation, illustration, 269 illustration, 157 Deposit slip, illustration, 303 Cost of goods calculation Current ratio, 214–215, 226 Depreciable asset, 386 ethics case, 287 equation, 221 cost, 112 exercises, 286–287 simplicity, 215 Depreciable cost, 407 Web exploration, 287 Current year, horizontal analysis Depreciation, 129 Cost of goods on hand, determination, (formula), 208 adjustment 269 Customers illustration, 112 Cost of goods purchased, 285 accounts, deposit (crediting), 304 necessity, 111–112 computation, illustration, 269 information needs, 5 allocation concept, illustration, determination, 268–270 subsidiary ledger, 484, 501 386 procedure, 268 Cyberian Outpost, bankruptcy, 233 annual rate, 389 freight-in, 267 Cycle, term, 155 cessation, 390 Cost of goods sold (CGS // COGS), computation, factors, 387 39, 254, 268, 285 illustration, 387 computation, 269–270 D cost allocation, 386 illustration, 269 Daily recurring adjusting/closing entries, 248 estimate, recognition, 111 15339_Index.qxd 12/13/07 11:52 PM Page 509

Index 509

expense, 112 E investor criticism, 172, 251 deduction, IRS allowance, 393 Earliest goods, purchase, 275 Enterprise coverage, 323 determination, 190–191 Earnings Entries, comparison, 152 methods, 388. See also Accelerated- document, statement, 329 Equation, analyses, 109 depreciation method management, ethics, 39 Equipment comparison, 393 retention, 210 analysis, 192 patterns, 393 statement, 330 asset, 382, 385 relationship. See Income taxes eBay increase, 192 revision, computation (illustration), name, registration, 404 sale, loss, 191 394 profitability, consistency, 233 Equipment purchase (for cash), schedule, 389 E-business, usage, 10 transaction, 46 usage, 111, 386–394 Economic entities Equity, trading (leverage), 226 Diners Club accounting equation, application, 11 Errors, 305. See also Bank A/R billing/collecting, 357 assumption, 9–11, 25, 37, 61 irregularities, differentiation, 91 credit sales, 359 Economic events locating, 91 national credit cards, offering, communication, 2, 3, 6 offsetting, 91 358 identification, 2–3, 6 Error Some Place (ESP) method, 146 Direct methods, 183–184. See also internal action, 45 Estimated collectibles, recording, Operating activities involvement, 44–45 351–352 Director of Finance, 20 recordation, 2, 3, 6 Ethics, 25 Director of Information Technology, Economic planners, information needs, 5 business concept, 8 responsibility, 21–22 8 percent regulation/rule, 331 cases, analysis (steps), 8 Director of Purchasing, responsibility, Electronic controls, 294 eToys, bankruptcy, 233 22 Electronic data processing, 92–95 Europe, accounting (consideration), 33 Direct write-off method, 351, 374. Electronic funds transfer (EFT), 301, 312 Events See also Uncollectible accounts Employees. See Tipped employees credit policy, 360–361 effects, illustration, 351 cash, bonding, 295 systematic/chronological diary, 3 Discount period, 242 duties, rotation, 295 Executive committee, 18, 25 Dishonored note, 365, 374 earnings record, 327, 340 relationship. See General manager Disney. See Walt Disney Productions illustration, 328 Expenses, 12, 25 Dividends, 13, 25, 96, 438–445, 451. hiring, 321 account See also Cash dividends; Liquidating illustration, 85 crediting, 145 dividend; Stock dividends salaries, 324 debit increase, 109, 117, 124 corporation declaration/payment, vacations, taking, 295 incurred, 108 illustration, 85 work, nonduplication, 292 payment, transaction, 48–49 dates, illustration, 440 Employee’s Report of Tips to Employer (Form recognition, 106. See also Matching declaration, 438 4070), 333 principle distribution, 71 Employee’s Withholding Allowance Certificate GAAP relationship, illustration, 107 expenses, nonequivalence, 147 (W-4 form // Form W-4), 326, 340 pattern, 39 impact. See Retained earnings Employer payroll taxes, 336–339 report, ethics example, 174 investor interest, 439 illustration, 370 understatement, 118–119 payment, 192 recording, 337–338 Expired costs, 39. See also Unexpired ability, 182 Employers, taxes (levy), 336 costs quarterly reporting, 438 Employer’s Annual Information Return of Tip External transactions, 44–45 transaction, 50 Income and Allocated Tips (Form 8027), External users. See Accounting Dividends in arrears, 437 331 questions, 5 Documents, prenumbering, 293 illustration, 332 Dollar signs, usage, 91 Employment disability, providing, 325 F Double-declining-balance depreciation Employment status changes, human schedule, resources department (responsibility), 321 Factor, 374 illustration, 391 Ending inventory Fair Labor Standards Act (FLSA), Double-entry accounting system, 78 cost, 27, 276 323–324, 340 Double-entry system, 69–70, 96 costs, allocation, 276 maximum allowable tip credit, 331 Doubtful accounts, allowance, 352 error, 281 minimum wage specification, presentation, 352 illustration, 282 330–331 Dun & Bradstreet, 207 End of month (EOM) calculation, 242 regulation. See Overtime Duties Enron Section 13(a)(1), 324 principle, segregation, 295 board of directors, questions, 423 Faithful representation, 34 related activities, 292–293 code of ethics, waiver, 8 FASB. See Financial Accounting Standards segregation, 292–293, 312 financial/accounting scandal, 1 Board 15339_Index.qxd 12/13/07 11:52 PM Page 510

510 Index

Federal Insurance Contribution Act Web exploration, 201 Freight costs, 241 (FICA), 325 Financing activities, 179, 198 example, 267 taxes, 340 Financing transactions, 55, 182 incurring, 241 payment, 336 Finished goods, 263 Freight-in, addition, 268 Federal Unemployment Tax Act (FUTA), Fire and theft insurance, 110 Freight on board (FOB), 241 336–337 Firms, diversification, 223 destination, 241, 254 Federal unemployment taxes, 336, 340 First costs, illustration, 275 shipping point, 241, 254 Feedback value, 34 First-in, first-out (FIFO) accounting Fringe benefits, 340 Fees, 320 method, 34 percentage. See Total revenue Figures, summing, 90 selection, 35 Full disclosure principle, 40, 61 Final sums, double underlining, 54 First-in, first-out (FIFO) method, 285. satisfaction, 180 Finance, accounting (assistance), 7 See also Inventory Functions, separation, 292 Financial accounting, 6, 25, 32 assumption, 275 Furniture, fixtures, and equipment, Financial Accounting Standards Board illustration, 275 383 (FASB), 8–9, 25, 32 impact. See Net income Future cash flows, generation conceptual framework, 33 usage, 274, 275. See also General Motors ability, 182 FASB 95, 169 Corporation operating guidelines, recognition, 36 First units, acquisition, 275 public accounting rules, 15 Fiscal year, 105, 129 G Financial condition, 54 Fiscal year-end data, 223 Gains/losses, disclosure, 172 Financial ratio classifications, 213 Fixed assets, 383. See also Property, plant, Gaming industry, accounts (uniform Financial reporting, 15–17 and equipment system), 17 example, 1 Fixed ratio, remainder. See Partnerships General journal, 75, 96 objectives, 33 Flowcharts, usage, 299 adjusting entries, display, 120 practices, conceptual framework FLSA. See Fair Labor Standards Act closing entries, journalization, 145 (summary), 42–43 FOB. See Free on board; Freight on entries reconsideration, 40 board example/illustration, 76, 88 usage. See Hospitality Food and beverage cost analysis, 23 recording, 488 Financial statement analysis Food cost calculations, 271 special journal, impact, 498–500 basics, 206–207 Food operation, prime costs, 271 General ledger, 77, 96 comparative analysis problem, 230 Foodservice industry, accounts (uniform adjustment, 121 estimates, 222 system), 16 example, 89, 95 ethics case, 230–231 Foodservice managers, accounting illustration, 150 exercises, 226–231 information (usage), 4 temporary accounts, illustration, 151 financial reporting problem, 230 Foodservice operations, accounting/ Generally accepted accounting principles limitation, 222–225 financial management, 22–23 (GAAPs), 8–9, 25, 32, 61 tools, 207 Footing, 501 cash-basis accounting, nonaccordance, Financial statements, 3, 52–60, Foreign Corrupt Practices Act, 4 105 122–123 internal control requirement, 291 components, 106 columns, adjusted trial balance Forensic CPAs, 7 ignoring, 42 amounts (extension), 140 Forster’s Restaurant, recording process General management, accounting comparative analysis problem, 201 (example), 67 (assistance), 6 compilation, 14 Forte Hotels (comparison), classified General manager, 25 cost basis, 222 balance sheet (usage), 154 executive committee, relationship, 18 demonstration problem, 223–225 Four Seasons Hotels & Resorts General Mills derivation, work sheet (usage), 143 comparison, classified balance sheet accounts, usage, 80 elements, 33, 35–36, 61 (usage), 154 straight-line depreciation, usage, 389 ethics case, 202 financial statements, issuance, 34 General Motors Corporation exercises, 199–202 Franchises, 403, 407 FIFO, usage, 223 financial reporting problem, 201 Franklin Corporation, balance sheet vehicles, classification, 263 impact. See Cost flow methods (illustration), 159 General partner, 451 interrelationships, 53 Fraud. See Computer-related frauds Ghost employees, appearance, 321 preparation, 107, 122–123 examples, 291 Gift shop and sundries, merchandise adjusting entries, usage (necessity), inclusion. See Inventory (representation), 176 107 scams, 296 Global Crossing, financial/accounting trial balance, usage, 88 Free on board (FOB) problems, 1 work sheet, usage, 141–143 destination, 264 Going concern assumption, 37, 62 presentation, 43–44 shipping point, 264 Golf, athletic package, 24 standards, differences/uniformity, 44 Freight bill (bill of lading), 241 Goods usefulness, increase, 154 Freight charges, 385 actual physical flow, 273 15339_Index.qxd 12/13/07 11:52 PM Page 511

Index 511

ownership, determination, Hotels, departments illustration, 123 263, 264 interaction, 17–18 presentation. See Sales physical movement, 274–275 structure, 18–19 profit, display, 169 Goodwill, 403, 407 Hours worked method, 333, 340 subdivisions, 270 recording, 403 illustration, 335 usage, 170–178 Gross earnings, 324, 340 Housekeeping supervisors, accounting vertical analysis, 211 Gross profit, 171–172, 254 information (usage), 4 Income Summary, 145 computation, 171, 269 Houstonian Hotel, Club & Spa account, usage. See Closing rate formula/computation, 171 construction costs, 381 debiting, 145 section, 272 depreciation, 388 Income taxes, 325–327, Gross receipts method, 331, 340 Human element, 296 465–466 illustration, 334 Human resources department depreciation, relationship, 393 Growth, finance (selection), 210 authorization form, 322 Independent internal verification, Guest ledger, 355 responsibility. See Employment status 294–295 changes principle, illustration, 295 Indirect methods, 183–184, 198. H See also Cash flows statement; Hanover Compressor, financial results I Operating activities (restatement), 81 IASC. See International Accounting Individual coverage, 323 Harold’s Club, expense recognition Standards Committee Individuals, association, 413 guidelines, 39 IBM, gains/losses (detail, increase), 251 Industrial Age, 5–6 Head cashier, preparation, 298 Immediate liquidity, acid-test ratio Industry averages (norms), comparison, Hilton Grand Vacations Company, measurement, 215 207 example, 483 Impairment changes, 463 basis, 214 Hilton hotels Income and loss ratio, 416 Inflows cash registers, 298 Income from operations. reporting, 182 checks, receiving, 299, 371 See Operations types. See Cash common stock, par value, 428 Income measurement process. See Information per share dividend, 438 Merchandiser age, 6 Honored note, 364–365 Income ratio, 416, 451. See also flow, 14 Horizontal analysis, 207–210, 226. Partnerships usefulness, characteristics, 35 See also Balance sheet; Income Income statement, 52, 62. See also Information technology (IT), 21–22 statements; Retained earnings Consolidated income statement; Insurance fomula. See Changes; Current year; Departmental income statement; Multiple- accounts, adjustment (illustration), Net sales step income statement; Single-step income 111 Hospitality statement payment, 385 accounting/financial reporting, usage, account, increase, 109 illustration, 84 17–24 adjusting entry, impact, 115 usage, 110–111 industry, service (importance), 319 balance sheet Intangible assets, 156, 401–404, 407, success, 17 interaction, illustration, 178 463–464 Hospitality accounting relationship, 177–178 exercises, 407–409 exercises, 27–29 columns Web exploration, 409 financial reporting problem, 29 debit amount, balancing, 141 Intercompany basis, comparison, 207 Web exploration, 29 information, display, 250 Intercompany comparison, 214 Hospitality Financial and Technology condensation, 208–210 Intercompany income statement, Professionals (HFTP), 16, 25 demonstration problem, 196 comparison, 212 Hospitality merchandising operations, horizontal analysis, 209 Interest. See Accrued interest accounting illustration, 194–195 accounts, adjustment (illustration), ethics case, 258 impact. See Cost flow methods; 117 exercises, 254–258 Inventory computation, 363 Web exploration, 257–258 information, addition, 185 formula, illustration, 367 Hospitality Purveyors, accounts adjustment inventory coverage. See Times interest earned example, 103 errors, impact (illustration), 282 definition, 117 Hotels importance, 263 money, borrowing cost, 117 accounting department organization, items, reporting, 179 payment, 243 20–22 net income rate (annual rate), 363 city ledger, 361 display, 52, 178 Interim periods, 105, 129 division, 270 division, illustration, 418 Internal auditors, 312 industry, departmental structure, nonoperating activities, reporting, 173 Internal control, 312. See also Payroll 18–19 preparation, 272 ethics cases, 315–316 15339_Index.qxd 12/13/07 11:52 PM Page 512

512 Index

exercises, 312–316 J debit (decrease), 113 importance. See Timekeeping JC Penney Company, advertising outlays, 110 equation, 70 principles, 291–295. See also Cash Journal, 75–77, 96. See also General journal overstatement, 113 adherence, 263–264 demonstration problem, 94 presentation, 54 application, illustration, 297 exercises, 501–503 understatement, 118–119 usage, 290–296 expansion, 487–498 Licenses, 403, 407 Web exploration, 315 reference column, 80 Licensing rights, intangible assets (recording), Internal Revenue Service (IRS), 4 Web exploration, 503 403 allowance. See Depreciation Journal entries Limited liability, 10 income data requirements, 338 double posting, 91 Limited partnerships, 414, 451 Internal transactions, 45 posting, illustration, 79 Liquidating dividend, 438, 451 Internal users. See Accounting transfer, procedure, 79–80 Liquidity questions, 4 Journalizing, 14, 75, 96 acid-test ratio measurement. See Immediate International Accounting Standards account titles, usage (importance), 76 liquidity Committee summary illustration, 87–88 current assets order, listing, 155 (IASC), 44, 62 Juneau Country Club, accounts adjustment ratios, 214–217, 226 International Spa Association, 16 example, 103 summary, 221 Internet usage, increase/impact, 6 Lodging industry Intracompany basis, comparison, 207 accounts, uniform system, 16 Intracompany comparisons, 214 K departmental structure, 18–19 Inventoriable costs, 285 Kellogg, activities results (reporting), 105 Long John Silver’s, accounting procedures Inventoriable units/costs, illustration, Kentucky Fried Chicken, intangible assets, (changes), 93 274 401 Long-term assets, 383–401, 407 Inventory. See Merchandise inventory Kitchen equipment, cost computation book value, sale proceeds (excess), 397 account, 235 (illustration), 385 classes, subdivision, 383 basics, 262–266 Kmart, low profit margins, 218 cost, determination, 383–384 calculation Kroc, Raymond Albert, 411 disposal, 396–401 ethics case, 287 Kroger, low profit margins, 218 gain, 397–398 exercises, 286–287 loss, 398 Web exploration, 287 method, illustration, 396 classification, 263 L exchange, 398–401 cost flow methods, usage (consistency), Labor, division (result), 490 gain treatment, 399–400 280 Labor unions, information needs, 5 loss treatment, 398–399 costing Lake Swan Resort, accounts adjustment exercises, 407–409 FIFO method, 223 example, 103 percentage, relationship. See Total assets LIFO method, 223 Land, 383, 384 retirement, 396–397 periodic inventory system, usage, 273 cost, computation (illustration), 384 sale, 397–398 demonstration problem, 284 improvements, 382, 384 Web exploration, 409 errors, 281–282 increase, 192 Long-term creditor, 206 balance sheets, impact, 282 Large stock dividend, 442 Long-term debt, current maturities, 371–372 income statements, impact, 281 Last costs, illustration, 276 Long-term investments, 155 fraud, inclusion, 281 Last-in, first-out (LIFO) accounting method, Long-term liabilities, illustration, 157 item, marking/tagging/coding, 34 Lucas, George (cost expensing), 106 273–274 Last-in, first-out (LIFO) method, 285 quantities, determination, 263–265 assumption, 276 sale, average days (requirement), 217 usage, 274, 276–277 M summary sheets, 264 Ledger, 77–81, 96 MACRS. See Modified Accelerated Cost systems, 236–238. See also Perpetual account, reference column, 80 Recovery System units only inventory system correctness, 89 Mail receipts, 299–300 Inventory turnover, 216–217, 226, 285 proving, 490, 493–494 Maker (drawer), 302, 361, 374 equation, 221 usage, 14 Management consulting, 27 illustration, 217 Legal capital, 451 Managerial accounting, 6, 25, 27 Invested assets, book/market value par value stock/no-par value stock, Manual accounting systems, computerized (illustration), 415 relationship, 428 accounting systems (comparative Investing activities, 179, 198 representation, 428 advantages), 92 pertinence, 55 Legal existence, separation, 420 Manufacturer inventory, company ownership, Investing transactions, 55 Leverage. See Equity 263 Investments, 155 Liabilities, 11–12, 25 Marketing, accounting (assistance), 6 Investors, 4 account Market value, 9 criticism, 172, 251 credit (increase), 117 Marriott Corporation, straight-line 15339_Index.qxd 12/13/07 11:52 PM Page 513

Index 513

depreciation (usage), 389 accounting. See Hospitality merchandising division, 416–419 Marriott International, Inc. operations result, 12, 446 calendar year, 105 Merchandising profit, gross profit Net pay, 340 cash registers, 298 representation, 172 computation, illustration, 327 inventory report, 263 Meristar Hotels and Resorts, ASP determination, 327 per share dividend, 438 (usage), 93 Net purchases, 285 preferred stock, no par value, 428 Microsoft Corp., SEC charges (settlement), computation, illustration, 269 shares repurchase, 433 114 Net sales, 198 treasury stock, report, 432 Model business codes, adoption, 291 horizontal analysis, 208 Master account, billing preference, Modified Accelerated Cost Recovery illustration, 208 356 System (MACRS), 393–394, 407 New asset, cost, 399 MasterCard Monetary unit assumption, 9, 25, 37, 62 Night audits/Day audits, usage, 21 A/R billing/collecting, 357 Monthly rent, payment (illustration), Nominal accounts, 144 national credit cards, offering, 358 83 Noncash activities, 180–181 usage, 358 Moody’s, 207 Noncash assets, common stock (issuance), Matching principle (expense recognition), Mug and Musket 431 38–39, 62, 129 exercise, 93 Noncash charges, adjustments (illustration), Material, definition, 351 recording process, example, 67 194 Materiality, 42, 62 Multinational corporations (MNCs), Nonoperating activities, 170, 198 Maturity date 43–44 components, 172–174 computation, 362 Multiple-step income statement, 170–174, contrast. See Operating activities determination, 362–363 198 Nonoperating sections, items (reporting), illustration. See Notes receivable illustration, 173 173 McDonald’s Mutual agency, 413–414 Nonprofit corporation, 420 franchise commitment, 411 No-par value common stock, issuance, intangible assets, 401 430–431 Measurement, unit (constancy), 9 N No-par value stocks, 428, 451 Mechanical controls, 294 National Commission on Fraudulent Financial stated value, 428 Media advertising, costs, 110 Reporting, conclusions, 291 Normal balance, 70–72, 268. See also Medical benefits, providing, 325 National/international exchanges, trading Accounts Membership accounting, 23 volume, 427 Norms. See Industry averages Merchandise National Restaurant Association (NRA), North American Free Trade Agreement credit purchases, journalization, 495 23, 25 (NAFTA), 9 demonstration problem, 251–253 Negative amounts, parentheses (usage), 54 Note receivable, collection, 308–309 purchases, recording, 238–243, Net cash Notes payable, 367–368, 374 266–267 investing/financing activities usage, 12 sales, recording, 243–246, 267 (provided/usage), determination, 188, Notes receivable, 349, 361–366, 374 transactions, recording, 266 192–193 dishonor, 365 Merchandise inventory, 263 operating activities (provided/usage) disposal, 364–366 account, 269 conversion, summary, 193–194 honor, 364–365 current asset, classification, 176 determination, 188–191, 195 interest rate, importance, 364 decrease, 243 presentation, 187 maturity dates, illustration, 363 involvement, 247 illustration, 191 recognition, 364 Merchandiser Net income, 25 sale, 365 adjusting entries, usage, 246–247 adjustment, 186 profitability, 366 closing entries, impact, 247 computation, 140–141, 269 usage. See Payee income measurement process, 235 operating expenses, usage, 172 valuation, 364 income statement, periodic inventory division, 416–419 Not-for-profit accounting, 26–27 system (usage), 270 increase, FIFO (impact), 279 Not sufficient funds (NSF) internal decision-making, 244 measurement, 172 check, 309, 312 operating cycles, 236 net cash marking, 305 work sheet, 248–253 difference, reasons, 182 illustration, 249 operating activities contrast, 186 usage, 248–250 overstatement, 118 O Merchandising companies, balance representation, 13 Obligations, meeting (ability), 182 sheet, 263 result, 12 Obsolescence, 394 Merchandising entries, summary, reverse effect, 281 impact, 387 247–248 understatement, 113 Office equipment, purchase (illustration), Merchandising operations, Net loss, 25 82 234–238 computation, 140–141 Oldest goods, unit cost, 276–277 15339_Index.qxd 12/13/07 11:52 PM Page 514

514 Index

Operating activities, 179, 198 closing, ledger balances (illustration), Pension plans, 468–471 conversion, indirect/direct methods, 417 PepsiCo 183–184 closing entries, 416–417 accounting policies, 461–462 nonoperating activities, contrast, 170 dissolution, 414 accumulated other comprehensive transactions, cash effects, 179 exercises, 452–453 loss, 477 Operating cycles, 235. See also financial statements, 419 advertising outlays, 110 Merchandiser; Service company fixed ratio, remainder, 418–419 Coca-Cola, comparative analysis Operating expenses, 39, 254 formation, 415–416 problem, 230 accounting, 273 income ratios, 417–418 exercise, 55 computation, 269 interest, 418–419 financial reporting net income component, 172 limited life, 414 internal control, management recording, 403 net income/loss, sharing, 416 report, 480 subgrouping, 173, 174 partners, salaries, 418 management responsibility, 479 Operating guidelines, 33, 36 permanent investment, 417 problem, 29, 230, 378 Operations salaries, 418–419 financial statements, 1, 460–461 analyst, responsibility, 22 unlimited liability, 414 net income per common share, 476 cash effects, reporting, 54–55 Web exploration, 453 noncontrolled bottling affiliates, 472–473 first year data, 185–189 Par value common stock preferred/common stock, 477 income, 182, 198 demonstration problem, 449–450 supplemental financial information, 478 second year data, 189–197 issuance, 429–430 Percentage change, 210 Ordinary repairs, 395, 407 Par value stocks, 428, 451 Periodic depreciation, 394–395 Organization Pasta Pomodoro, Internet (usage), 93 Periodic inventory system, 254, 265 corporate form, 420–432 Patents, 402, 407 perpetual inventory system, comparison, costs, 424, 451 cost, amortization, 402 238 Other expenses and losses, 198 initial cost, 402 usage, 266–272, 274 reporting, 357 Paycheck, illustration, 330 Periodicity assumption, 105 section, 172 Payee, 302, 361, 374 Periodic system, 237 Other receivables, 374 notes receivable, usage, 362 Permanent accounts, 144, 147 Other revenues and gains, 198 Paymaster/General cashier, illustration, 150 section, 172 responsibility, 21 usage, 149 Outflows, reporting, 182 Payment date, 440, 451 Perpetual inventory system, 238, 254, Outstanding checks, 306, 308, 312 Payments, business activity 488 Outstanding stock, 451 classification, 180 Perpetual system, 236–237 Over-the-counter cash sales, execution, Payroll usage, 237–238 299 deductions, 325–327, 340 requirements, 246–247 Over-the-counter receipts, 298 illustration, 325 Perpetual units only inventory system, Overtime, FLSA regulation, 323 definition, 320 265 Ownership interest, change (absence), department records, maintenance, Personal liability insurance, 110 441 327–329 Pets.com, bankruptcy, 233 Ownership rights, transferability, 421 determination, 324–327 Phantom profit, reporting (avoidance), employees, calculations, 21 279 exercises, 340–345 Physical controls, 294 P expenses/liabilities, recognition, 329 Physical inventory Pacioli, Luca, 5 floating head, 344 control, 236 Paid-in capital, 12 group decision case, 344–345 example, 261 accounts, impact, 429 internal control, 320–324 execution, 263–264, 269 increase, 441 payment, 323 Policy Management Systems, accounting total, calculation, 430 recording, 329 example, 31 Paper profit, reporting (avoidance), 279 percentage. See Total revenue Pool of costs Park Place Entertainment, shares repurchase, preparation, 323 allocation/matching, 273 433 recording, 327–336 illustration, 276 Partners, capital statement (illustration), register, 328, 340 Postclosing trial balance, 14 419 taxes, 369–371. See also Employer illustration, 149 Partnerships, 25, 413–419, 451. See also payroll taxes preparation, 149–150 Limited partnerships expense, 336 Posting, 14, 79–80, 96 activities, separation, 10 payable, 369–371 chronological order, 79 advantages/disadvantages, 414–415 payment, 369–370 completion, determination process, illustration, 415 transactions, demonstration 79 agreement, 415 problem, 339 summary illustration, 87–88 characteristics, illustration, 413 Web exploration, 343–344 Predictive value, 34 15339_Index.qxd 12/13/07 11:52 PM Page 515

Index 515

Preferred stock, 436–437, 451 expansion, 496 analysis, illustration, 188 cash dividends, allocation, 440–441 posting, 495 crediting, 145 cumulative dividend, 437 returns, 240–241, 254 debits/credits, illustration, 448 dividend preferences, 437 units, 264 decrease, 49, 441 total dividends, computation Purchasing analysis, 22–23 expense (incurring), 48 (illustration), 437 increase, 192 Prenumbered invoices, 293 net income, equivalence, 71 Prenumbering, corollary, 293 Q reduction, dividends (impact), 50 Prepaid expenses, 109–112, 129 Qwest, financial/accounting problems, 1 restrictions, 446, 451 accounts, adjustment (illustration), statement, 52–54, 62, 447–448, 451 f125 cash dividends, display, 178 R adjusting entry, impact, 109 horizontal analysis, 210 adjustment type, 120 Rate of return on sales. See Profit preparation, illustration, 123 alternative treatment, 124–128 margin Retiree medical plans, 468–471 current assets, 155 Ratios, 226 Returned goods, COGS (estimated value), decrease, 190 analysis, 210, 213–222, 226 244–245 expiration, 109 summary, 221–222 Return on assets (ROA), 218–219, 226 increase, 190 Raw materials, 263 equation, 221 recording, 127 R&D. See Research and development illustration, 218 Prepayments Real accounts, 144 Return on common stockholder equity, adjusting entries, usage, 108–115 equivalence. See Contra asset account 219, 226 debit, 125 Real estate, accounting (assistance), 7 equation, 221 relationships, summary, 127 Reasonable assurance, concept, 296 illustration, 219 Price-level adjusted data, disclosure, 41 Receipts, business activity classification, Returns, ethics, 242 Prime costs. See Beverage operation; 180 Revenue accounts Food operation Receivable accounts, accrual adjustment accrual adjustment, illustration, 116 Principles. See Accounting (illustration), 116 credit (increase), 113 rules, 36 Receivables, 349. See also Accounts debiting, 145 Prior period adjustments, 447, 451 receivable debits/credits, impact, 72 Private accounting, 26, 27 basis, percentage, 355, 374 prepayment adjustment, impact, 113 Privately held corporation, 420, 451 sale, 357 Revenues, 12, 25. See also Unearned Profit, reporting (avoidance). See Paper reasons, 357 revenues profit; Phantom profit Receiving clerk, responsibility, 22 earned, 108 Profitability ratios, 217–219 Record date, 439, 451 expenditures, 395, 407 summary, 221 Recording process impact, 12. See also Stockholder Profit and loss ratio, 416 exercises, 96–100 equity Profit corporation, 420 financial reporting problem, 100 recognition, 106 Profit margin (rate of return on sales), illustration, 74, 81–87 GAAP relationship, illustration, 107 217–218, 226 steps, 74–81 principle, 38, 62, 106, 129 equation, 221 Records, importance (determination), 80 understatement, 113 illustration, 217 Redstone Hospitality, control issues, 306 Rhino Foods, Inc., accounting cycle Promissory note, 361–362, 374 Regulatory agencies, 4–5 completion example, 137 illustration, 362 Relevance, 62 Risk management, 474–475 Property, co-ownership, 414 Reliability, 62 River Oaks Country Club, computers Property, plant, and equipment (plant Rent-Way, Inc., accounting (usage), 148 assets // fixed assets), 156, 383, example, 31 Robert Morris Associates, 207 463–464 Reported data, uses/meaning/ Rooms division managers, accounting exchanges, 180 limitations, 3 information Proprietorship, definition, 10, 25 Report form. See Classified (usage), 4 Proxy fight, Internet (impact), 421 balance sheet Public accounting, 26, 27 Research and development (R&D) costs, Publicly held corporation, 420, 451 international accounting standards S Purchases (example), 44 Safeway, low profit margins, 218 allowance, 254 Residual equity, 12 Salaries, 340 debiting, 239 Responsibility, establishment, 291–292 accounts, adjustment (illustration), 118 discounts, 241–243 Restrictive endorsement, 299 adjustment, nonusage (problems), 118 example, 267 Restructuring, changes, 463 expense, account, 68 invoice, 254 Retained earnings, 12–13, 96, payment, 369 usage, 238 445–449, 451 illustration, 86 journal, 495, 501 account, net increase (causation), 188 wages, interchangeability, 320 15339_Index.qxd 12/13/07 11:52 PM Page 516

516 Index

Sales Spas, athletic package, 24 splits, 443–444, 451 basis, 38 Special journal, 487, 501 journalization, nonnecessity, 444 percentage, 354, 374 transactions, nonrecording, 488 splits, stock dividends (contrast), 444 discounts, 245–246, 254 Specific identification method, 285 transactions, corporate form, 420–432 column, 492 Standard & Poor’s, 207 Storeroom clerk, responsibility, 22 example, 268 Starwood Hotels and Resorts Straight-line depreciation, 388–389, 407 income statement presentation, Worldwide, Inc. demonstration problem, 405–406 171–172 inventory report, 263 formula, illustration, 389 invoice, 254 stocks, par value, 428 schedule, illustration, 389 usage, 239 Stated value, 428, 451. See also No-par Subsidiary ledger, 501 journals, 488–490, 501 value stocks advantages, 486 advantages, 490 Statement analysis, 282, 283 example, 485–486 posting, 488–490 Statement presentation, 112, 282–283 expansion, 484–487 returns/allowances, 244–245 State sales tax laws, tax collection, 368 nature/purpose, 484–485 example, 267 State unemployment tax acts (SUTAs), 337 technology, usage, 486 revenues, 243, 254 State unemployment taxes, 340 Subsidiary ledgers section, 272 Stephanie’s Gourmet Coffee and More exercises, 501–503 shipping, 264 cash register Web exploration, 503 taxes, inclusion, 385 reconciliation, 295 Sums-of-years’-digits depreciation, terms, illustration, 265 tape, usage, 293 388, 392, 407 Sales and real estate taxes payable, 12 money, control, 289 schedule, illustration, 392 Sales taxes payable, 368–369 questions, 310 Sunbeam Corporation, accounting Salomon Brothers, overbidding, 8 Stock-based compensation, 466–468 example, 31 Salvage value (residual value), 387, 407 Stock dividends, 441–442, 451. See also Sundry accounts, 492 demonstration problem, 404–405 Large stock dividend; Small stock Sun International, shares repurchase, 433 ignoring, 391 dividend Supplemental retirement, providing, 325 Savings plans, 468–471 entries, 442–443 Supplies Scams. See Fraud fair market value per share, 442 accounts, adjustment (illustration), 110 S-corporation, 423 impact, 443 usage, 109–110 Securities and Exchange Commission impact, illustration, 443 Supplies purchase (on credit) (SEC), 8–9, 25, 32 par/stated value per share, 442 illustration, 84 Selling expenses, 174, 198 Stockholder equity, 11–13, 25, 424 transaction, 47 Service company, operating cycles, 236 decrease, 440 Sweden, accounting (consideration), 33 Service revenue illustration, 158 Sysco Corporation account, 68 increase. See Total stockholder equity per share dividend per quarter, 438 credit, 152 revenue, impact, 47 stock splits, 444 Services increase/decrease, 13 cash rendering, transaction, 47, 48 overstatement, 118 common stock, issuance, 431 relationships, 72–73 T Services, credit rendering (transaction), 48 illustration, 73 Tabular summary, account form Shareholder equity, 424 subdivisions, 70–72 (comparison), 69 Shares, repurchase, 433 treasury stock, absence (illustration), T account, 68–69, 96 Short-term creditor, 206 433 form, 78–79, 147 Short-term investments, 155 Stockholders Taxation, 27 Short-term notes receivable, 364 cash investment, illustration, 82 quarterly reporting, 228 Signature card, signing, 302 investments, transaction, 46 Tax Equity and Fiscal Responsibility Act Simple entry, 96 limited liability, 420 (TEFRA), 331, 340 Single-step income statement, ownership rights, 425–426 Taxing authorities, 4 174–175, 198 shares, transfer, 10 Technology data classification, 174 Stockholders, profitability/solvency future, 93 illustration, 174 (interest), 206 usage, 221 Six Continents, checks (receiving), 299 Stock issue considerations, 426–429 TEFRA. See Tax Equity and Fiscal Small stock dividend, 442 Stock option plans, 324 Responsibility Act Social Security taxes, 325 Stocks Temporary accounts, 144. See also Sole proprietorships, 412–413, 451 certificate, 426 General ledger exercises, 452–453 issuance, 427 double-ruling, 149 Web exploration, 453 issue, underwriting, 427 permanent accounts, contrast, 145 Solvency ratios, 220–221, 226 market value, 427–428 usage, 147, 268 summary, 222 ownership, proof, 426 Tennis, athletic package, 24 Spa industry, accounts (uniform system), 16 par value, nonfactor, 431 Tiffany & Co., high profit margins, 218 15339_Index.qxd 12/13/07 11:52 PM Page 517

Index 517

Time card, 322 illustration, 90, 108 U.S. Office of Personnel Management, Timekeeping, internal control (importance), limitations, 89–91 323 321–323 preparation, 142. See also Work sheet U.S. Patent Office, 156 Time lags, 305 procedure, 91 Useful life, 129, 387, 407 Time period purpose, 88, 150 expenditures, 395–396 assumption, 37, 62, 129 usage, 88 selection. See Accounting Times interest earned (interest coverage), V 220–221, 226 U Venetian, expansion project, 395 equation, 222 UAL. See United Airlines, Inc. Vertical analysis, 207, 210–213, 226 illustration, 221 Uncollectible accounts Visa Timing, issues. See Account adjustments allowance method, 351–357 A/R billing/collecting, 357 Tipped employees, 330–331 direct write-off method, 350–351 cash sales, 358 Tip reporting, 331, 333 recovery, 353 national credit cards, offering, 358 To insure prompt service (TIPS), 330 write-off Voucher, 312 Total assets, 12 general ledger balances, 353 register, 301 base, 210 recording, 352–353 system, 300–301, 312 computation, 46 Uncollectible accounts receivable, decrease, 440 estimation, 351 W equity, increase, 435 Uncollectibles long-term assets, percentage estimation, 351 W-2 form. See Wage and Tax Statement (relationship), 382 bases, comparison, 354 W-4 form. See Employee’s Withholding Total cost, expiration, 112 recording. See Estimated collectibles Allowance Certificate Total debit/credit balances, equality Unearned revenues (deferred revenues), Wage and Tax Statement (Form W-2 // W-2 (proof), 122 112–113, 129 form), 338, 340 Total paid-in capital, impact, 444 accounts, adjustment (illustration), 126 Wages, 320, 340 Total revenue adjusting entry computation. See Total wages fringe benefits, percentage, 319 illustration, 113 interchangeability. See Salaries payroll, percentage, 319 impact, 113 payment, 369 Total stockholder equity adjustment type, 120 Wages payable, 12 increase, 435 alternative treatment, 124–128 Wal-Mart stability, 443 earning process, 126–127 low profit margins, 218 Total wages, computation, 324 recording, 127 rules, control, 233 Trademarks/trade names, 402, 407 usage, 371 Walt Disney Productions Trade receivables, 374 Unexpired costs, 39. See also Book value balance sheet, 156 description, 355 Uniform System of Accounts for calendar year, 105 Trading on the equity. See Equity Restaurants, 16, 25 checks, receiving, 299 Transactions, 44–51, 62. See also Uniform System of Accounts for Smaller inventory disclosures, illustration, 283 External transactions; Internal Hotels, 16 property, disposition, 420 transactions Uniform System of Accounts for the stocks, par value, 428 analysis, 45–50 Lodging Industry (Uniform System of Walton, Sam, 78, 146 purpose, 81 Accounts for Hotels), 16, 25 Waste Management Company, financial examples, 46–50 Uniform System of Financial Reporting for records identification process, 45 Clubs, 16, 25 (problems), 81 recording, 89. See also Merchandise Uniform System of Financial Reporting for Weighted-average unit cost, 277 summary, 50–51 Spas, 16 formula, illustration, 277 Transfers in/out, 270–271 Unit cost. See Weighted-average unit cost Weighted ratio, obtaining, 333 Transposition error, 91 United Airlines, Inc. (UAL) Whirlpool, working capital (absence), Treasury stock, 451 balance sheet, illustration, 155, 157 214 above cost sale, 434–435 receipts, treatment, 112 Withholding taxes, 369 accounting, 432–437 unearned ticket revenue, 371 table, 326 accounts, illustration, 435 Units-of-activity depreciation (units-of- Work, division, 292 below cost sale, 435–436 production method), 388, 389–391, Working capital disposal, 434–436 407 definition, 214 purchase, 433–434 formula, illustration, 390 ratio, 214 Trial balance, 14, 88–91, 96. See also schedule, illustration, 390 Work in process, 263 Adjusted trial balance; Postclosing trial Units only inventory system. See Perpetual Work sheet balance units only inventory system accounting record, nonpermanency, checkpoint, 89 U.S. Commerce Department, monthly 138 columns, 249 inventory data (publication), 262–263 adjustments, entry, 139–140 15339_Index.qxd 12/13/07 11:52 PM Page 518

518 Index

completion, 140–141 usage, 138–144. See also Adjusting Y columns, balancing, 141 entries; Financial statements; Yahoo!, Inc. financial statements, inequivalence, Merchandiser balance sheet, 155 141 option, 138 usage, 205 form/procedure, illustration, 139 WorldCom Year-ends, selection (timing), 54 income statement columns, accounting fraud, 396 Yield analysis, 22–23 revenue/expense account data company acquisitions, 8 (location), 145 financial/accounting problems, 1 nondistribution, 141 Z preparation, steps, 138–141 Zero balance, producing, 145 statement columns, totaling, 140–141 X trial balance, preparation, 139 Xerox, financial/accounting problems, 1