Financial Accounting Essentials You Always Wanted To Know

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Financial Accounting Essentials You Always Wanted To Know covers Financial Accounting concepts in concise and easy-to-understand manner for business professionals and non-finance graduates. This book includes Financial Accounting FUNDAMENTALS, SOLVED Examples, Important CONCEPTS & PRINCIPLES and Ample PRACTICE Exercises.
 
This Self Learning Management Series intends to give a jump start to working professionals, whose job roles demand to have the knowledge imparted in a B-school but haven’t got a chance to visit one. This series is designed to address every aspect of business from HR to Finance to Marketing to Operations, be it any industry.  Each book includes basic fundamentals, important concepts, standard and well-known principles as well as practical ways of application of the subject matter. The distinctiveness of the series lies in that all the relevant information is bundled in a compact form that is very easy to interpret.
The topics covered are:
a) Understanding of Financial Accounting Terms
b) Need, nature and purpose of Financial Statements
c) Audience of Financial Statements
d) Balance Sheet
e) Income Statement
f) Statement of Cash Flows
 
The reader gains the following competence after reading this book:
a) Understanding of individual items in Financial Statements
b) Reading and understanding Balance Sheet, Income Statement and Statement of Cash Flows
c) Preparing  Balance Sheet, Income Statement and Statement of Cash Flows
 
Table of Contents
1.  Accounting Systems
     Financial Accounting Systems
     Need for Financial Accounting Systems
     Financial Statements
     Purpose of Financial Statements
     Financial Accounting Standards
     Solved Examples
     Practice Exercises
2. Overview of Financial Statements
     Balance Sheet
     Income Statement
     Statement of Cash Flows
     Notes to the Financial Statements
     Miscellaneous Accounting Concepts and Conventions
     Solved Examples
     Practice Exercises
3. The Balance Sheet
     Current Assets
     Long-term Assets
     Current Liabilities
     Long-term Liabilities
     Stockholders’ Equity
     Transaction Analysis & Balance Sheet Creation
     Solved Examples
     Practice Exercises
4. The Income Statement
     Measures of Income
     Types of Revenues
     Types of Expenses
     Earnings per Share (EPS) & Diluted EPS
     Revenue Recognition
     Expense Recognition
     Expanded Accounting Equation
     Transaction Analysis & Income Statement Creation
     Solved Examples
     Practice Exercises
5. The Statement of Cash Flows
     Categories of Cash Flow Activities
     Cash Flow Pattern
     Cash Flow Statement Preparation
     Solved Examples
     Practice Exercises
 
Bisac
BUS001010 - Business & Economics : Accounting – Financial
BUS001040 - Business & Economics : Accounting – Managerial
BUS001000 - Business & Economics : Accounting - General
 
Sample from the book
(Below Questions and Answers are randomly taken from different pages of the book)
 
1.1 Why would the following individuals or groups be interested in a firm’s financial statements?
a) Current shareholders of the firm
b) Creditors of the firm
c) Management of the firm
Solution:
a) Current shareholders of the firm
The current shareholders of the firm would look at the financial statements for 3 reasons – to decide if the stock is worth holding or selling, whether additional investment can be made in the company and to ensure that the management is keeping shareholder interests in mind while making decisions. The last part has become exceedingly important now with several individuals and groups filing class action lawsuits on firms.
b) Creditors of the firm
Individuals or groups would extend credit to a firm based on their financial strength which is there in the financial statements. This will help them decide on the amount of risk involved in extending credit and accordingly decide on the quantum and period of the credit.
c) Management of the firm
The management might decide targets based on the company’s financial statements. These could be in the form of profit growth percentage, sales growth percentage, decrease in the overhead costs etc.
 
2.4 Using the definition of Asset, choose whether the following form an asset.
a) The company has a legal title to a gold mine. The mine has yielded over $1 million of gold. Company’s engineers estimate that no further gold is extractable from the mine.
b) The company is currently negotiating the purchase of a building.
Solution:
a) Not an asset as it does not provide any economic benefit in future
b) Not an asset as the company does not yet own it so does not have control over it
 
3.3 Following items are available for the company’s fixed assets. Compute the values that will be shown in the balance sheet.
Land    $100,000
Building    $500,000
Equipment    $250,000
Accumulated depreciation – building    $200,000
Accumulated depreciation – equipment    $100,000
Solution:
Balance sheet shows the net value of the assets. In the above case, Land will be shown at its original value, whereas, building and equipment will be netted by removing the depreciation and shown as below.
Property and equipment:
Land    $100,000
Building    $500,000
Equipment    $250,000
Less accumulated depreciation    ($300,000)
Total property and equipment, net    $550,000
 
4.2 Indicate whether the following items fall under Revenue, Expense, Gain or Loss.
a) Interest earned on short-term investment
b) Retail price of goods sold
c) Fees received in exchange for providing a service
d) Wholesale cost of goods sold
Solution:
a) Interest earned on short-term investment – Revenue
b) Retail price of goods sold – Revenue. This is the selling price.
c) Fees received in exchange for providing a service – Revenue
d) Wholesale cost of goods sold – Expense. This is the cost of goods sold.
 
Tags
Accounting essentials, Accounting concepts, Financial accounting, self-learning series , management series. Accounting Systems, Financial Statements, Financial Statements Purpose, Balance Sheet, financial Revenue Recognition, financial Expenses types, Financial Accounting Standards, Miscellaneous Accounting Concepts , financial accounting Conventions, Accounting Solved Examples, accounting Practice Exercises