Index

•A• applying lower of cost or market rule, 93,

103–104, 279–281
accounting assets
choosing methods of, 93–111, 263–290 about, 79
elements of, 5–16 changing with sales and expenses, 236

AL
manufacturing cost, 131–150, 317–334 classifying, 68–69, 243–244
accounting equation, 5, 6–8, 181–185 effect of sales and expenses on, 60
Accounting For Dummies (Tracy), 1 operating, 79, 87, 252–253, 259

RI
accounts, constructing, 28, 204–205 audit opinion, 63
accounts payable, 5 average annual ROI over multiple years,

TE
accounts receivable, 5, 75, 247–249 configuring, 343–345
accrual of unpaid expenses, 49–50, 226–228 average cost method, 100–103, 273–279
accrual-basis accounting, 5, 8–11, 185–188
accuracy, with adjusting entries, 46, 221–223
adjusting
for changes in operating assets, 87, 259
MA
•B•
balance sheet
for changes in operating liabilities, 87–88, about, 13–14, 64, 238–240
D
259–260 building, 65–66, 240–241
for depreciation, 87–88, 260–261 calculating profit from comparative, 84–85,
TE

entries, 45–55, 221–233 255–257

for non-cash items, 87–88, 260–261 combined with income statement, 73–81,
allowance method, 93 246–255
GH

alternative accounting methods, 107–109, comparative, 84–85, 255–257

285–288 financial condition and, 191–192, 238–246
amortization expense, 48–49, 78, 225–226, fleshing out, 66–68, 241–243
RI

251–252 period of time for, 63

analyzing reporting financial condition on, 63–71, 238–246
financial statements, 163–177, 348–356 role in business valuation, 70–71, 244–246
PY

operating profit, 115–116, 292–296 bookkeeping cycle

return on capital, 120–122, 304–306 about, 27–44, 204–221
statement of changes in owners’ adjusting and closing entries, 45–55, 221–233
CO

(shareholders’) equity, 263 borrowing, in installments, 154–155, 340

answers and explanations Boyd, Ken (author)
accounting methods, 263–290 Cost Accounting For Dummies, 2
balance sheet, 238–255 break-even, compared with excess, 117–118,
bookkeeping cycle, 204–233 299–302
cash flow, 255–261 break-even point, 113
elements of accounting, 181–194 building
financial effects of transactions, 195–203 balance sheet, 65–66, 240–241
financial statement analysis, 348–356 on imputed cost of capital, 346–347
income statement, 246–255 business entities, types of, 6, 181
investment analysis, 334–348 business transactions
manufacturing cost accounting, 317–334 about, 19–20, 196–197
profit, 233–238, 291–317 classifying, 18–19, 195
statement of changes in owners’ business valuation, role of balance sheet in,
(shareholders’) equity, 261–263 70–71, 244–246
358 1,001 Accounting Practice Problems For Dummies �������������������������������
•C•
calculating. See also determining
interest, 152, 334–335
product cost, 147–149, 329–332
profit from comparative balance sheets, 84–85,
255–257
capital
recording transactions with debt sources of,
40–42, 217–219
recording transactions with equity sources of,
40–42, 219–221
carry-through transactions, recording, 38–40,
214–217
cash flow
about, 14–16, 192–194
analysis of, 174–177, 354–356
reporting, 83–88, 255–261
reporting from operating activities with direct
method, 86, 258
reporting from operating activities with
indirect method, 86, 258–259
types of, 85, 257–258
cash-basis accounting, compared with
accrual-basis accounting, 8–11, 185–188
Cheat Sheet (website), 1
choosing
accounting methods, 93–111, 263–290
depreciation methods, 105–107, 281–285
classifying
assets, 68–69, 243–244
business transactions, 18–19, 195
end-of-period adjusting entries, 47, 223
liabilities, 68–69, 243–244
manufacturing costs, 132–134, 317–319
non-manufacturing costs, 132–134, 317–319
closing
books on the year, 51–53, 228–231
entries, 45–55, 221–233
comparative balance sheets, calculating profit
from, 84–85, 255–257
comparing cost of goods sold expense methods,
95–96, 265–267
compound interest, 154, 339
configuring average annual ROI over multiple
years, 159, 343–345
constructing accounts, 28, 204–205
contribution margin
about, 113
compared with fixed costs, 116–117,
296–299
Cost Accounting For Dummies (Boyd), 2
cost of goods sold expense, 76–77, 95–96,
249–250, 265–267
cost of sales, 131
credit cards, 27
credits
about, 206–207
compared with debits, 30–32
customer payments, posting, 17
•D•
debits
about, 27, 206–207
compared with credits, 30–32
debt, 80, 253–254
debt sources of capital, recording transactions
with, 40–42, 217–219
deferral of prepaid expenses, 50–51, 228
depreciation
about, 45
adjusting for, 87–88, 260–261
choosing methods for, 105–107, 281–285
depreciation expense, 17, 47–48, 77–78, 83,
223–225, 250–251
determining. See also calculating
financial effects of profit/loss, 202–203
future value, 160–161, 347–348
net present value, 160–161, 347–348
present value, 160–161, 347–348
return on investment (ROI), 155, 340–341
whether products are unique or fungible,
94–95, 263–265
direct method, reporting operating activities
from cash flow with, 86, 258
disclosure, in income statement, 60, 235
discounting loans, 153, 337–338
distinguishing between return on and return of
investment, 157–158
dividends, 73
•E•
effective interest rates, 152–153, 336–337
elements, of accounting, 5–16
end-of-period adjusting entries, classifying,
47, 223
entries, adjusting and closing, 45–55, 221–233
equity, 83
equity balance, 63
equity sources of capital, recording transactions
with, 43–44, 219–221
excess, compared with break-even, 117–118,
299–302
expenses
about, 22–23, 198–200
accrual of unpaid, 49–50, 226–228
������������������������������������������������������������������ Index
before and after transactions of, 23–24, 200–202
amortization, 48–49, 78, 225–226, 251–252
changing assets/liabilities with, 236
cost of goods sold, 76–77, 95–96, 249–250,
265–267
deferral of prepaid, 50–51, 228
depreciation, 17, 47–48, 77–78, 83, 223–225,
250–251
effect on assets and liabilities of, 60
interest, 80, 253–254
posting, 17
recording, 36–38, 212–214
explanations and answers
accounting methods, 263–290
balance sheet, 238–255
bookkeeping cycle, 204–233
cash flow, 255–261
elements of accounting, 181–194
financial effects of transactions, 195–203
financial statement analysis, 348–356
income statement, 246–255
investment analysis, 334–348
manufacturing cost accounting, 317–334
profit, 233–238, 291–317
statement of changes in owners’
(shareholders’) equity, 261–263
•F•
FIFO (first-in, first-out) method, 97–98, 267–269
Financial Accounting For Dummies (Loughran), 2
financial condition, 13–14, 191–192, 238–246
financial effects
of loss, 24–25, 202–203
of profit, 24–25, 61–62, 202–203, 236–238
of transactions, 17–25, 195–203
financial statements, analyzing, 163–177,
348–356
finished goods, 131
first-in, first-out (FIFO) method, 97–98, 267–269
fixed assets, 73, 77–78, 250–251
fixed costs
compared with contribution margin, 116–117,
296–299
minimizing per unit, 119–120, 302–304
fleshing out balance sheet, 66–68, 241–243
formats, for income statement, 58–59
fungible products, 94–95, 263–265
future value, determining, 160–161, 347–348
•G•
gross margin, 57, 113
gross profit, 57
359
•H•
Holtzman, Mark P. (author)
Managerial Accounting For Dummies, 2
•I•
improving
margins, 125–127, 311–314
profit performance, 122–123, 306–309
imputed cost of capital, 160, 346–347
income, recording, 34–36, 209–212
income statement
about, 11–13
combined with balance sheet, 73–81, 246–255
disclosure in, 60, 235
formats for, 58–59, 233–235
period of time for, 63
profit activities and, 188–191
income tax, 81, 254
income tax payable, 81, 254
indirect method, reporting cash flow from
operating activities with, 86, 258–259
installments, borrowing and investing in,
154–155, 340
intangible assets, 45, 78, 251–252
interest, calculating, 152, 334–335
interest expense, 80, 253–254
internal controls, testing, 53–55, 231–233
internal rate of return (IRR), 151, 161, 348
inventory, 17, 76–77, 131, 249–250
investing, in installments, 154–155, 340
investment analysis, 151–161, 334–348
•J•
journal entries, 32–34, 208–209
•L•
last-in, first-out (LIFO) method, 98–100,
270–272
liabilities
about, 79
changing with sales and expenses, 236
classifying, 68–69, 243–244
effect of sales and expenses on, 60
operating, 87–88, 252–253, 259–260
LIFO (last-in, first-out) method, 98–100,
270–272
liquidity, 63, 163
liquidity analysis, 165–169, 350–352
loans, discounting, 153, 337–338
360 1,001 Accounting Practice Problems For Dummies �������������������������������
loss
financial effects of, 24–25, 202–203
nature of, 58, 233
recording, 36–38, 212–214
Loughran, Maire (author)
Financial Accounting For Dummies, 2
lower of cost or market rule, 93, 103–104,
279–281
•M•
Managerial Accounting For Dummies
(Holtzman), 2
managers, mapping profit for, 114–115, 291–292
manipulating reported profit, 109–111, 288–290
manufacturing cost accounting, 131–150,
317–334
manufacturing costs
about, 134–138, 319–322
classifying, 132–134, 317–319
manufacturing entries, basic cycle of, 144–146,
327–329
mapping profit for managers, 114–115, 291–292
margins, improving, 125–127, 311–314
massaging the numbers, 109–111, 288–290
minimizing fixed cost per unit, 119–120,
302–304
•N•
net income, 73, 81, 255
net present value, determining, 160–161,
347–348
net sales, 27
net worth, 83
nominal accounts, 27, 29–30, 205–206
nominal interest rates, 152–153, 336–337
non-cash items, adjusting for, 87–88, 260–261
non-manufacturing costs, classifying, 132–134,
317–319
non-operating profit, 113
numbers, massaging the, 109–111, 288–290
•O•
operating activities
reporting cash flow from with direct method,
86, 258
reporting cash flow from with indirect method,
86, 258–259
operating assets, 79, 87, 252–253, 259
operating income/expense, 57
operating liabilities, 87–88, 252–253, 259–260
operating profit
about, 113
analyzing, 115–116, 292–296
overhead costs, 131
owners’ equity, reporting changes in, 89–92,
261–263
•P•
period costs
compared with product costs, 138–141,
322–324
recording, 142–144, 325–327
prepaid expenses, deferral of, 50–51, 228
preparatory transactions, recording, 38–40,
214–217
present value, determining, 160–161, 347–348
product costs
about, 131
calculating, 147–149, 329–332
compared with period costs, 138–141,
322–324
recording, 142–144, 325–327
production levels, syncing with sales levels,
149–150, 332–334
products, unique compared with fungible,
94–95, 263–265
profit
about, 57–62, 233–238
calculating from comparative balance sheets,
84–85, 255–257
financial effects of, 24–25, 61–62, 202–203,
236–238
improving performance of, 122–123, 306–309
manipulating reported, 288–290
mapping for managers, 114–115, 291–292
nature of, 58, 233
profit activities, 5, 11–13, 188–191
profit behavior analysis, 113–129, 291–317
profitability analysis, 170–174, 352–354
•Q•
questions
accounting methods, 94–111
balance sheet, 64–71, 74–81
bookkeeping cycle, 28–44, 46–55
cash flows, 84–88
elements of accounting, 6–16
financial effects of transactions, 18–25
financial statement analysis, 164–177
income statement, 74–81
investment analysis, 152–161
������������������������������������������������������������������ Index
manufacturing cost accounting, 132–150
profit, 58–62, 114–129
statement of changes in owners’
(shareholders’) equity, 90–92
•R•
ratios, usefulness of, 164–165, 348–350
real accounts, compared with nominal
accounts, 29–30, 205–206
recording
amortization expense, 48–49, 225–226
carry-through transactions, 38–40, 214–217
depreciation expense, 47–48, 223–225
expenses, 36–38, 212–214
income, 34–36, 209–212
losses, 36–38, 212–214
period costs, 142–144, 325–327
preparatory transactions, 38–40, 214–217
product costs, 142–144, 325–327
revenue, 34–36, 209–212
transactions with debt sources of capital,
40–42, 217–219
transactions with equity sources of capital,
43–44, 219–221
reported profit, manipulating, 109–111
reporting
balance sheet, 63–71
cash flow, 83–88, 255–261
cash flow from operating activities with direct
method, 86, 258
cash flow from operating activities with
indirect method, 86, 258–259
changes in owners’ equity, 89–92, 261–263
financial conditions on balance sheet, 63–71,
238–246
retained earnings, 73, 81, 255
return of investment, compared with return on
investment (ROI), 157–158, 343
return on capital, analyzing, 120–122, 304–306
return on investment (ROI)
compared with return of investment,
157–158, 343
components of, 156, 342
configuring average over multiple years, 159
determining, 155, 340–341
revenue
about, 73
recording, 34–36, 209–212
rule of 72, 151, 159, 345–346
361
•S•
sales
about, 20–22, 197–198
before and after transactions of, 23–24,
200–202
changing assets/liabilities with, 236
effect on assets and liabilities of, 60
syncing levels of with production levels,
149–150, 332–334
sales revenue, 75, 247–249
Securities and Exchange Commission
(SEC), 57
selling, general, and administration (SG and A)
expenses, 57
selling units, 124–125, 309–311
solvency, 63, 163
solvency analysis, 165–169, 350–352
solving, for internal rate of return (IRR), 161, 348
statement of cash flows, 5, 14–16, 192–194
statement of changes in owners’ (shareholders’)
equity, 90–92, 261–263
synchronizing production and sales levels,
149–150, 332–334
•T•
testing internal controls, 53–55, 231–233
Tracy, John A. (author)
Accounting For Dummies, 1
trade-offs, 127–129, 314–317
transactions
carry-through, 38–40, 214–217
financial effects of, 17–25, 195–203
recording with debt sources of capital, 40–42,
217–219
recording with equity sources of capital,
40–42, 219–221
•U•
unique products, 94–95, 263–265
units, selling, 124–125, 309–311
unpaid expenses, accrual of, 49–50, 226–228
•W•
work-in-process goods, 131
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