Introductory Financial Accounting and Reporting

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Introductory Financial Accounting and Reporting

Introductory Financial Accounting and Reporting

Authors: Barry P. Smith

Published: October 2010 Pages: 192

eISBN: 9780335241262 | ISBN: 9780335241255

Front cover

Half title page

Title page

Copyright page

Contents

Preface

Chapter 1

The essence of fi nancial accounting

1.1 What is the purpose of fi nancial accounting and reporting?

1.2 What are the ‘qualitative characteristics' of fi nancial statements?

1.3 What is the accounting equation?

1.4 Illustrative example of the accounting equation

1.5 What is a statement of fi nancial position?

1.6 How do transactions affect the statement of fi nancial position?

1.7 What is double-entry bookkeeping?

1.8 Summary and conclusion

Test your understanding

Further practice and reading

Chapter 2

The statement of fi nancial position

2.1 What is a statement of fi nancial position?

2.2 What are current and noncurrent assets and liabilities?

2.2.1 Current and noncurrent assets

2.2.2 Current and noncurrent liabilities

2.2.3 Is owner equity split into current and noncurrent components?

2.3 What are current and comparative reporting periods?

2.4 How are other fi nancial statements related to the statement of fi nancial position?

2.4.1 Statement of comprehensive income (Chapters 3 and 9)

2.4.2 Statement of changes in equity (Chapter 10)

2.4.3 Statement of cash fl ows (Chapter 11)

2.4.4 Notes accompanying the fi nancial statements

2.5 Summary and conclusion

Test your understanding

Further practice and reading

Chapter 3

The income statement

3.1 What is the purpose of the income statement?

3.2 Illustrative example of accounting for the purchase and sale of inventory

3.3 What are the bookkeeping entries?

3.4 How are transactions between the business and its owners accounted for?

3.5 What are the three common types of business entity?

3.5.1 What is a sole trader?

3.5.2 What is a partnership?

3.5.3 What is a limited company?

3.6 Summary and conclusion

Test your understanding

Further practice and reading

Chapter 4

Capital and revenue expenditure

4.1 What is the difference between capital and revenue expenditure?

4.2 Illustrative example of capital and revenue expenditures

4.3 What are the bookkeeping entries?

4.4 Accounting issues caused by the distinction between capital and revenue expenditure

4.4.1 Classifying expenditure as capital or revenue expenditure is not always obvious

4.4.2 How can the profi t calculation be accurate if capital expenditure is excluded from the income statement?

4.5 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 5

Depreciation, disposals and revaluations

5.1 Why are noncurrent assets depreciated?

5.2 Methods of depreciation

5.2.1 What is the straight-line method of depreciation?

5.2.2 What is the reducing balance method of depreciation?

5.2.3 Bookkeeping entries required to account for depreciation

5.3 Accounting for disposals of noncurrent assets

5.3.1 Illustrative example of a gain on disposal

5.3.2 Illustrative example of a loss on disposal

5.3.3 Bookkeeping entries to account for gains and losses on disposals

5.4 Accounting for revaluations of noncurrent assets

5.4.1 Illustrative example of a surplus on a noncurrent asset revaluation

5.4.2 Illustrative example of a defi cit on a noncurrent asset revaluation

5.4.3 Bookkeeping entries to account for revaluation surpluses and defi cits

5.4.4 What are the exceptions to how revaluation surpluses and defi cits are accounted for?

5.5 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 6

Accruals and prepayments

6.1 What is the accruals basis of accounting?

6.1.1 Illustrative example of the difference between accruals accounting and cash accounting

6.2 How are accruals accounted for?

6.2.1 Illustrative examples of accounting for expense accruals

6.3 How are prepayments accounted for?

6.3.1 Illustrative example of accounting for expense prepayments

6.4 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 7

Irrecoverable debts, estimates and provisions

7.1 What is an irrecoverable debt?

7.1.1 Illustrative example of an irrecoverable debt

7.2 What is an allowance for receivables?

7.2.1 Illustrative example of an allowance for receivables

7.3 Illustrative example of a change in an allowance for receivables

7.4 What are the characteristics of provisions and estimates?

7.4.1 What is a provision?

7.4.2 What are accounting estimates?

7.5 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 8

Preparing fi nancial statements from trial balance

8.1 What is the purpose of a trial balance?

8.1.1 Balancing off ledger accounts

8.1.2 Confi rming that the sum of the debits equals the sum of the credits

8.2 Why are adjustments to a trial balance required before the fi nancial statements are prepared?

8.3 Illustrative example of the preparation of fi nancial statements from trial balance

8.3.1 The trial balance

8.3.2 Adjustments to the trial balance

8.3.3 Finalized fi nancial statements

8.4 What are the bookkeeping entries?

8.5 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 9

Statement of comprehensive income

9.1 What is comprehensive income?

9.2 Illustrative example of a statement of comprehensive income

9.3 What are the bookkeeping entries?

9.4 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 10

Statement of changes in equity

10.1 Why is it useful to prepare a statement of changes in equity?

10.2 Illustrative example of a statement of changes in equity

10.3 What are the bookkeeping entries?

10.4 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 11

Statement of cash fl ows

11.1 Why is it useful to prepare a statement of cash fl ows?

11.2 What are the three main types of cash fl ow?

11.2.1 Operating activities

11.2.2 Investing activities

11.2.3 Financing activities

11.3 What are the two methods of preparing a statement of cash fl ows?

11.4 Illustrative example of the preparation of a statement of cash fl ows

11.4.1 Direct method of preparing a statement of cash fl ows

11.4.2 Indirect method of preparing a statement of cash fl ows

11.4.3 Why are there adjustments for changes in working capital in an indirect method statement of cash fl ows?

11.5 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 12

Interpretation of fi nancial statements

12.1 What does the interpretation of fi nancial statements involve?

12.2 Illustrative example of common size fi nancial statements

12.3 Illustrative example of the commonly calculated ratios

12.3.1 Profi tability ratios

12.3.2 Activity ratios

12.3.3 Liquidity ratios

12.3.4 Solvency ratios

12.3.5 Investment ratios

12.3.6 What would an analyst conclude about the fi nancial health of Bazwaldo Limited?

12.4 What are the common mistakes made when interpreting fi nancial statements?

12.5 Summary and conclusions

Test your understanding

Further practice and reading

Chapter 13

Regulatory and conceptual frameworks

13.1 How do accounting techniques contribute to high-quality fi nancial statements?

13.2 What is a regulatory framework?

13.3 What is the IASB conceptual framework?

13.4 Summary and conclusions

Further practice and reading

Appendix: Solutions to Test Your Understanding

Index

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