iv

Preface vi

CHAPTER 1

Evaluating Transactions 1

Using the Accounting Equation 3Using Account Names and Descriptions 5Evaluating a Transaction 7Recording Transactions 10Concepts Review 16Putting It Together 16Knowledge Check A 22Knowledge Check B 25

CHAPTER 2

The Accounting Cycle 31

Analyzing Business Transactions 33Recording Journal Entries 34

Generally Accepted Accounting Principles 35Posting Journal Entries 36Preparing the Unadjusted Trial Balance 38Adjusting Journal Entries 39Preparing Financial Statements 41Closing Journal Entries 43Concepts Review 45Putting It Together 45Knowledge Check A 46Knowledge Check B 48

CHAPTER 3

Journal Entries & T-Accounts 51

Using Debits & Credits 53Using T-Accounts 57Using General & Special Journals 63Using General & Subsidiary Ledgers 66Concepts Review 70Putting It Together 70Knowledge Check A 77Knowledge Check B 81

CHAPTER 4

Adjusting Entries 87

Creating a Trial Balance 89Adjusting Entries 91

Deferred Expenses 91Deferred Revenues 92Accrued Expenses 93Accrued Revenues 93

Working with Depreciation 95Straight-Line Depreciation 95Double-Declining Balance Depreciation 95Recording the Depreciation Adjusting Entry 98

Preparing the Adjusted Trial Balance 99Concepts Review 101Putting It Together 102Knowledge Check A 106Knowledge Check B 110

Table of Contents

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Accounting Basics: An Introduction for Non-Accounting Majors

Table of Contents v

CHAPTER 5

Financial Statements & Closing Entries 117

Preparing an Income Statement 119Preparing the Statement of Owner’s Equity 121Preparing the Balance Sheet 122Setting Up the Statement of Cash Flows 124Closing the Entries 126Completing the Post-Closing Trial Balance 129Concepts Review 131Putting It Together 132Knowledge Check A 136Knowledge Check B 139

CHAPTER 6

Computerized Systems, Cash, & Payroll 143

Safeguarding Cash 145Using Internal Controls 145

Recording Petty Cash 147Preparing a Bank Reconciliation 149

Evaluating a Reconciling Item 149Reconciling Journal Entries 152Determining Payroll Calculations and Journal Entries 153

Calculating Employee Withholdings 153Calculating Employer Payroll Taxes 154

Utilizing Computerized Accounting Systems 156Concepts Review 158Putting It Together 158Knowledge Check A 160Knowledge Check B 164

CHAPTER 7

Financial Statement Analysis 167

Completing a Horizontal Analysis 169Completing a Vertical Analysis 172

Preparing Common-Size Financial Statements 173Calculating Liquidity Ratios 176

The Current Ratio 176The Quick Ratio 176

Calculating Solvency Ratios 178Calculating Profitability Ratios 180Concepts Review 183Putting It Together 183Knowledge Check A 189Knowledge Check B 192

CHAPTER 8

Comprehensive Exercise 197

First Month of Operations 199

Glossary 201

Index 205

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Accounting Basics: An Introduction for Non-Accounting Majors