BOOK
Financial Accounting, Global Edition
Walter T. Harrison | Charles T. Horngren | C. William Thomas | Wendy M. Tietz
(2017)
Additional Information
Book Details
Abstract
For introductory courses in Financial Accounting.
A User-Focused Approach and Solid Foundation in the Construction and Analysis of Financial Statements for Use in Future Courses and Careers
Financial Accounting: International Financial Reporting Standards (IFRS) continues to give readers a solid foundation in the fundamentals of accounting and the basics of financial statements under IFRS, and then builds upon that foundation to offer more advanced and challenging concepts and problems. This approach helps students to better understand the meaning and relevance of financial information and develop the skills needed to analyze financial information in both their courses and careers.
Written in a manner suitable for accounting and non-accounting majors, the Eleventh Edition, Global Edition, is the ideal text for a first course in financial accounting with a focus on IFRS. With its long-standing reputation in the marketplace for being easy to read and understand, this text drives home fundamental concepts in a reader-friendly way without adding unnecessary complexity. While maintaining the hallmark features of accuracy, readability, and ease of understanding, this Global Edition includes updated explanations, coverage, new real-world examples, and most importantly, updates to the Conceptual Framework.
Pearson MyLabTM Accounting not included. Students, if MyLab is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN and course ID. MyLab should only be purchased when required by an instructor. Instructors, contact your Pearson rep for more information.
MyLab is an online homework, tutorial, and assessment product designed to personalize learning and improve results. With a wide range of interactive, engaging, and assignable activities, students are encouraged to actively learn and retain tough course concepts.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Title Page | iii | ||
| Copyright Page | iv | ||
| About the Authors | vii | ||
| Brief Contents | xi | ||
| Contents | xiii | ||
| Preface | xx | ||
| Visual Walk-Through | xxiii | ||
| Acknowledgments | xxvii | ||
| Chapter 1: Conceptual Framework and Financial Statements | 1 | ||
| Spotlight: Alibaba Group | 1 | ||
| Understand the Role of Accounting in Communicating Financial Information | 3 | ||
| Business Decisions | 3 | ||
| Accounting Is the Language of Business | 3 | ||
| Two Perspectives of Accounting: Financial Accounting and Management Accounting | 4 | ||
| Organizing a Business | 4 | ||
| Role of Accounting Standards | 6 | ||
| Understand the Underlying Accounting Concepts in the IFRS Conceptual Framework | 8 | ||
| The Conceptual Framework | 8 | ||
| Why Is Financial Reporting Important? | 8 | ||
| Who Are the Users of Financial Reports? | 9 | ||
| What Makes Financial Information Useful? | 9 | ||
| What Constraints Do We Face in Providing Useful Information? | 11 | ||
| What Are Our Assumptions in Financial Reporting? | 11 | ||
| What Exactly Are We Accounting For? | 11 | ||
| Accounting Equations | 12 | ||
| Obtain Insights into Business Operations through Financial Statements | 14 | ||
| The Income Statement Shows a Company’s Financial Performance | 15 | ||
| The Statement of Changes in Equity Shows a Company’s Transactions with its Owners | 17 | ||
| The Balance Sheet Shows a Company’s Financial Position | 18 | ||
| The Statement of Cash Flows Shows a Company’s Cash Receipts and Payments | 21 | ||
| Identify Financial Statements and their Inter-Relationships | 22 | ||
| Understand the Role of Ethics in Accounting | 24 | ||
| Code of Ethics for Professional Accountants | 26 | ||
| End-of-Chapter Summary Problem | 27 | ||
| Chapter 2: Recording Business Transactions | 58 | ||
| Spotlight: Daimler AG | 58 | ||
| Explain what a Business Transaction is | 60 | ||
| Keep Track of Financial Statement Items | 60 | ||
| Assets | 61 | ||
| Liabilities | 62 | ||
| Equity | 62 | ||
| Analyze the Impact of Business Transactions on Accounts | 63 | ||
| Example: RedLotus Travel, Inc. | 63 | ||
| Transactions and Financial Statements | 68 | ||
| Mid-Chapter Summary Problem | 71 | ||
| Double-Entry Accounting | 72 | ||
| The T-Account | 73 | ||
| Increases and Decreases in the Accounts: The Rules of Debit and Credit | 73 | ||
| Additional Shareholders’ Equity Accounts: Income and Expenses | 74 | ||
| Record (Journalize and Post) Transactions in the Books | 76 | ||
| Copying Information (Posting) from the Journal to the Ledger | 76 | ||
| The Flow of Accounting Data | 77 | ||
| Accounts after Posting to the Ledger | 82 | ||
| Construct and Use a Trial Balance | 83 | ||
| Analyzing Accounts | 83 | ||
| Correcting Accounting Errors | 84 | ||
| Chart of Accounts | 85 | ||
| The Normal Balance of an Account | 86 | ||
| Account Formats | 86 | ||
| Analyzing Transactions Using Only T-Accounts | 87 | ||
| End-of-Chapter Summary Problem | 89 | ||
| Chapter 3: Accrual Accounting | 129 | ||
| Spotlight: Richemont | 129 | ||
| Explain how Accrual Accounting Differs from Cash-Basis Accounting | 132 | ||
| Accrual Accounting and Cash Flows | 133 | ||
| The Time-Period Concept | 133 | ||
| Apply the Revenue and Expense Recognition Principles | 134 | ||
| The Revenue Recognition Principle | 134 | ||
| The Expense Recognition Principle | 136 | ||
| The Matching Concept | 136 | ||
| Ethics in Business and Accounting Decisions | 137 | ||
| Mid-Chapter Summary Problem | 138 | ||
| Adjust the Accounts | 141 | ||
| Which Accounts Need to Be Updated (Adjusted)? | 141 | ||
| Categories of Adjusting Entries | 142 | ||
| Prepaid Expenses | 143 | ||
| Unearned Revenues | 145 | ||
| Accrued Expenses | 147 | ||
| Accrued Revenues | 148 | ||
| Depreciation of Property, Plant and Equipment | 149 | ||
| Summary of the Adjusting Process | 152 | ||
| The Adjusted Trial Balance | 154 | ||
| Prepare Updated Financial Statements | 154 | ||
| Close the Books | 156 | ||
| End-of-Chapter Summary Problem | 158 | ||
| Chapter 4: Presentation of Financial Statements | 207 | ||
| Spotlight: BASF | 207 | ||
| Appreciate the Role of Annual Reports as a Communication Tool | 209 | ||
| Substance Over Style | 209 | ||
| Obtaining Annual Reports | 210 | ||
| Typical Structure of an Annual Report | 212 | ||
| Corporate Information | 213 | ||
| Analysis and Commentaries | 214 | ||
| Other Statements and Disclosures | 215 | ||
| Financial Statements | 216 | ||
| Know the General Presentation Requirements of Financial Statements | 219 | ||
| Complete Set of Financial Statements | 219 | ||
| Fair Presentation and Compliance with IFRS | 220 | ||
| Going Concern | 220 | ||
| Accrual Basis of Accounting | 220 | ||
| Materiality and Aggregation | 220 | ||
| Offsetting | 222 | ||
| Frequency of Reporting | 222 | ||
| Comparative Information | 223 | ||
| Consistency of Presentation | 223 | ||
| Notes to the Accounts | 223 | ||
| Mid-Chapter Summary Problem | 225 | ||
| Understand the Presentation Requirements for Statement of Financial Position | 226 | ||
| Understand Presentation Requirements for Statement of Comprehensive Income | 228 | ||
| Understand Presentation Requirements for Statement of Changes in Equity | 232 | ||
| Evaluate a Company’s Short-Term Liquidity | 234 | ||
| Current Ratio | 234 | ||
| End-of-Chapter Summary Problem | 235 | ||
| Chapter 5: Internal Control, Cash, and Receivables | 253 | ||
| Spotlight: LEGO | 253 | ||
| Understand the Role of Internal Controls and Corporate Governance | 255 | ||
| Fraud and Its Impact | 255 | ||
| Ethics in Business and Accounting Decisions | 259 | ||
| Internal Control | 259 | ||
| The Sarbanes-Oxley Act (SOX) | 260 | ||
| Internal Control Procedures | 262 | ||
| The Limitations of Internal Control—Costs and Benefits | 265 | ||
| Apply Internal Controls over Cash Receipts and Cash Payments | 266 | ||
| Internal Control Over Cash Receipts | 266 | ||
| Internal Control Over Cash Payments | 267 | ||
| Prepare and Use a Bank Reconciliation | 269 | ||
| Preparing the Bank Reconciliation | 273 | ||
| Online Banking | 275 | ||
| Using a Budget to Manage Cash | 277 | ||
| Reporting Cash on the Balance Sheet | 278 | ||
| Mid-Chapter Summary Problem | 278 | ||
| Account for Receivables and its Potential Impairment | 280 | ||
| Types of Receivables | 280 | ||
| Internal Controls over Cash Collections on Account | 281 | ||
| How Do We Manage the Risk of Not Collecting? | 282 | ||
| Accounting for Uncollectible Receivables | 283 | ||
| Allowance Method | 283 | ||
| Direct Write-Off Method | 288 | ||
| Computing Cash Collections from Customers | 289 | ||
| Accounting for Notes Receivable | 290 | ||
| How to Speed Up Cash Flow | 292 | ||
| Evaluate a Company’s Ability to Collect Receivables | 294 | ||
| End-of-Chapter Summary Problem | 295 | ||
| Chapter 6: Inventory and Merchandising Operations | 328 | ||
| Spotlight: Fast Retailing | 328 | ||
| Understand the Nature of Inventory and Retailing Operations | 330 | ||
| Sale Price vs. Cost of Inventory | 332 | ||
| Basic Inventory Relationship | 333 | ||
| Record Inventory-Related Transactions | 334 | ||
| Inventory Systems | 334 | ||
| Recording Transactions in the Perpetual System | 335 | ||
| Understand and Apply Different Inventory Cost Assumptions | 337 | ||
| Effects of FIFO, LIFO, and Average Cost on Cost of Goods Sold, Gross Profit, and Ending Inventory | 341 | ||
| Comparison of the Inventory Methods | 342 | ||
| Mid-Chapter Summary Problem | 343 | ||
| Other Inventory Issues | 345 | ||
| Analyze Effects of Inventory Errors | 347 | ||
| Evaluate a Company’s Retailing Operations | 349 | ||
| Analyzing Financial Statements | 352 | ||
| End-of-Chapter Summary Problem | 353 | ||
| Chapter 7: PPE and Intangibles | 389 | ||
| Spotlight: Airbus Group | 389 | ||
| Understand the Different Types of Long-Term Assets | 391 | ||
| Property, Plant and Equipment (PPE) | 391 | ||
| Intangible Assets | 392 | ||
| Other Non-Current Assets | 392 | ||
| Determine the Cost of PPE on Initial Recognition | 393 | ||
| Recognition of PPE and Intangible Assets | 393 | ||
| Measurement of PPE on Initial Recognition | 393 | ||
| Land and Land Improvements | 394 | ||
| Buildings, Machinery, and Equipment | 395 | ||
| Lump-Sum (or Basket) Purchases of Assets | 396 | ||
| Understand when to Capitalize or Expense Subsequent Costs | 397 | ||
| Subsequent Costs | 397 | ||
| Measure and Record Depreciation | 399 | ||
| How to Allocate Depreciation | 400 | ||
| Depreciation Methods | 401 | ||
| Comparing Depreciation Methods | 405 | ||
| Choosing a Depreciation Method | 406 | ||
| Mid-Chapter Summary Problem | 407 | ||
| Other Issues in Accounting for PPE | 408 | ||
| Depreciation for Tax Purposes | 408 | ||
| Depreciation for Partial Years | 410 | ||
| Changes in Estimates of Useful Lives or Residual Values | 410 | ||
| Impairment of PPE | 412 | ||
| Measurement Subsequent to Initial Recognition | 413 | ||
| Using Fully Depreciated Assets | 414 | ||
| Account for PPE Disposals | 414 | ||
| T-Accounts for Analyzing PPE Transactions | 417 | ||
| Accounting for Natural Resources | 417 | ||
| Understand the Recognition and Subsequent Measurement of Intangible Assets | 418 | ||
| Accounting for Specific Intangibles | 419 | ||
| Accounting for Research and Development Costs | 421 | ||
| Accounting for the Impairment of an Intangible Asset | 422 | ||
| Reporting Long-Term Assets Transactions on the Statement of Cash Flows | 422 | ||
| Evaluate a Company’s Performance Based on its Assets | 423 | ||
| End-of-Chapter Summary Problem | 425 | ||
| Chapter 8: Investments and International Operations | 449 | ||
| Spotlight: Vivendi | 449 | ||
| Investments: An Overview | 451 | ||
| Understand Categories of Financial Asset Investments | 453 | ||
| Trading Securities | 455 | ||
| Held-to-maturity | 458 | ||
| Available-for-Sale Investments | 460 | ||
| Summary of Financial Assets Recognition and Measurements | 463 | ||
| Mid-Chapter Summary Problem | 463 | ||
| Use the Equity Method for Investments | 463 | ||
| Understand the Concept of Consolidated Financial Statements | 466 | ||
| Consolidation Accounting | 466 | ||
| The Consolidated Balance Sheet and the Related Worksheet | 467 | ||
| Goodwill and Non-Controlling Interest | 469 | ||
| Income of a Consolidated Entity | 470 | ||
| Account for International Operations and Transactions | 473 | ||
| Foreign Currencies and Exchange Rates | 473 | ||
| Accounting for Foreign Currency Transactions | 474 | ||
| Reporting Gains and Losses on the Income Statement | 476 | ||
| Should We Hedge Our Foreign-Currency Transaction Risk? | 476 | ||
| Consolidation of Foreign Subsidiaries | 476 | ||
| Impact of Investing Activities on the Statement of Cash Flows | 478 | ||
| Evaluate a Company’s Overall Performance | 478 | ||
| End-of-Chapter Summary Problem | 480 | ||
| Chapter 9: Liabilities | 503 | ||
| Spotlight: Jardine Matheson Holdings Ltd. | 503 | ||
| Understand the Various Types of Liabilities | 505 | ||
| Account for Contingent Liabilities | 512 | ||
| Are All Liabilities Reported on the Balance Sheet? | 513 | ||
| Summary of Current Liabilities | 514 | ||
| Mid-Chapter Summary Problem | 515 | ||
| Account for Bonds | 515 | ||
| Bonds: An Introduction | 516 | ||
| Issuing Bonds Payable at Par (Face Value) | 519 | ||
| Issuing Bonds Payable at a Discount | 520 | ||
| What Is the Interest Expense on These Bonds Payable? | 521 | ||
| Interest Expense on Bonds Issued at a Discount | 522 | ||
| Issuing Bonds Payable at a Premium | 525 | ||
| Partial-Period Interest Amounts | 528 | ||
| The Straight-line Amortization Method: A Quick Way to Measure Interest Expense | 529 | ||
| Should We Retire Bonds Payable Before Their Maturity? | 529 | ||
| Convertible Bonds and Notes | 530 | ||
| Account for Leases | 530 | ||
| Types of Leases | 531 | ||
| Do Lessees Prefer Operating Leases or Capital Leases? | 534 | ||
| Analyze the Advantages and Disadvantages of Borrowing | 535 | ||
| Financing Operations with Bonds or Shares? | 535 | ||
| Evaluate a Company’s Debt-Paying Ability | 536 | ||
| Debt Ratio | 536 | ||
| The Times-Interest-Earned Ratio | 537 | ||
| Reporting Financing Activities on the Statement of Cash Flows | 538 | ||
| End-of-Chapter Summary Problem | 539 | ||
| Chapter 10: Shareholders’ Equity | 568 | ||
| Spotlight: L’Occitane | 568 | ||
| Explain the Features of a Corporation | 570 | ||
| Organizing a Corporation | 571 | ||
| Account for the Issuance of Shares | 576 | ||
| Ordinary Shares | 577 | ||
| Share Issuance for Other than Cash Can Create an Ethical Challenge | 579 | ||
| Preference Shares | 580 | ||
| Mid-Chapter Summary Problem | 581 | ||
| Authorized, Issued, and Outstanding Shares | 582 | ||
| Account for Treasury Shares | 583 | ||
| How Are Treasury Shares Recorded? | 583 | ||
| Resale of Treasury Shares | 584 | ||
| Issuing Treasury Shares as Compensation | 585 | ||
| Retiring Treasury Shares | 585 | ||
| Account for Other Equity Transactions | 586 | ||
| Retained Earnings, Dividends, and Splits | 586 | ||
| Should the Company Declare and Pay Cash Dividends? | 586 | ||
| Cash Dividends | 586 | ||
| Dividends on Preference Shares | 587 | ||
| Dividends on Cumulative and Non-Cumulative Preference Shares | 588 | ||
| Share Dividends | 588 | ||
| Stock Splits | 589 | ||
| Summary of the Effects on Assets, Liabilities, and Shareholders’ Equity | 590 | ||
| Understand the Different Values of Shares | 591 | ||
| Market, Redemption, Liquidation, and Book Value | 591 | ||
| Reporting Shareholders’ Equity Transactions | 592 | ||
| Statement of Cash Flows | 592 | ||
| Evaluate a Company’s Return to Equity Holders | 593 | ||
| End-of-Chapter Summary Problem | 596 | ||
| Chapter 11: Cash Flows | 631 | ||
| Spotlight: Singtel | 631 | ||
| Identify the Purposes of the Statement of Cash Flows | 633 | ||
| How’s Your Cash Flow? Telltale Signs of Financial Difficulty | 634 | ||
| Distinguish Among Operating, Investing and Financing Cash Flow Activities | 635 | ||
| Operating, Investing, and Financing Activities | 635 | ||
| Two Formats for Operating Activities | 637 | ||
| Prepare Cash Flows from Operating Activities Using the Indirect Method | 639 | ||
| Understanding Reconciliation of Net Income to Cash Flows from Operations | 640 | ||
| Prepare Cash Flows from Investing Activities | 642 | ||
| Prepare Cash Flows from Financing Activities | 644 | ||
| Completing the Statement of Cash Flows (Indirect CFO) | 647 | ||
| Noncash Investing and Financing Activities | 648 | ||
| Mid-Chapter Summary Problem | 649 | ||
| Prepare Cash Flows from Operating Activities Using the Direct Method | 651 | ||
| Compute Operating Cash Flows by the Direct Method | 652 | ||
| Evaluate a Company’s Ability to Generate Cash Flows | 657 | ||
| Free Cash Flow | 659 | ||
| Cash Realization Ratio | 659 | ||
| Examining Cash Flow Patterns | 660 | ||
| End-of-Chapter Summary Problem | 663 | ||
| Chapter 12: Financial Statement Analysis | 702 | ||
| Spotlight: Nestlé | 702 | ||
| It Starts with the Big Picture | 705 | ||
| Perform Basic (Horizontal and Vertical) Analysis on Financial Statements | 706 | ||
| Horizontal Analysis | 706 | ||
| Trend Analysis | 709 | ||
| Vertical Analysis | 710 | ||
| Prepare Common-Size Financial Statements | 711 | ||
| Benchmarking | 711 | ||
| Mid-Chapter Summary Problem | 713 | ||
| Perform Financial Ratio Analysis to Make Business Decisions | 714 | ||
| Efficiency Ratios | 716 | ||
| Financial Strength Ratios | 719 | ||
| Profitability Ratios | 722 | ||
| Investment Ratios | 725 | ||
| Putting It All Together | 727 | ||
| Using the Statement of Cash Flows | 728 | ||
| Use Other Information to Make Investment Decisions | 728 | ||
| Economic Value Added (EVA®) | 728 | ||
| Other Issues in Financial Statement Analysis | 729 | ||
| Limitations of Ratio Analysis | 729 | ||
| Red Flags in Financial Statement Analysis | 730 | ||
| End-of-Chapter Summary Problem | 732 | ||
| Glindex | 766 | ||
| Company Index | 777 | ||
| Back Cover | Back Cover |