Note to Students The primary focus
of this book is uncovering the meaning of accounting information – and
how this information is used by decision-makers. Throughout this text,
we provide you with financial and managerial accounting concepts to give
you an understanding of how accounting information is used to make informed
decisions. We introduce you only briefly to actual accounting practices
and techniques. Today, everyone needs
a basic understanding of accounting information, not just those students
planning careers in business. You will work with accounting information
in any career and will use it in managing your personal financial activities.
Using accounting information is simply a part of everyday life. Our Approach Our goals in this
text are to develop your abilities to understand accounting information
and to use this information in making economic decisions. To understand
accounting information, you must also understand the economic activities
that the information describes. In this book, we focus primarily on business
activities. However, many of the accounting concepts we discuss also apply
to the economic activities of individuals, government, and nonprofit organizations. The purpose of accounting
is to provide information useful to economic decision-makers. Throughout
the course, we will cast you in many decision-making roles. We have implemented
many new elements to provide a greater understanding of how accounting
information is used in decision-making. Refer to our Walkthrough pages
in this preface for a detailed look at the features designed to enhance
your decision-making skills. Note to Instructors The twelfth edition
of Financial and Managerial Accounting: The Basis for Business Decisions
features a more contemporary design, cutting-edge supplements, and fresh
insights based on reviewer feedback. We scrutinized and
reworked the contents of the text for the Twelfth Edition. A few of our
content changes include the following: the financial accounting chapters
now take a corporate approach, the accounting cycles chapters have been
split into three chapters to enable faculty to cover this critical material
in more manageable pieces, forms of business organization material has
been integrated throughout the text, new chapter 24 covers performance
measurement, and Tootsie Roll replaces Toys "R" Us as the annual
report referenced throughout the text’s EOC material. Summary of Contents
and Changes Chapter 1 Accounting:
Information for Decision Making - Accounting is introduced
as a system of information for decision making.
- Both financial
and managerial accounting are introduced in parallel fashion by discussing
(1) users of the information, (2) their objectives with regard to the
information, (3) the integrity of the information, and (4) specific
characteristics of the information.
Chapter 2 Basic
Financial Statements - This chapter introduces
the accounting equation and how a company’s financial statement changes
as result of a series of simple business transactions.
- The chapter ends
with an illustration of a simple balance sheet, income statement, and
statement of cash flows and a discussion of how these statements articulate.
Chapter 3 The Accounting
Cycle: Capturing Economic Events (NEW!) - We have split the
accounting cycle chapters into three chapter to enable faculty to cover
this critical material in more management pieces.
- This chapter builds
on the comprehensive illustration introduced in Chapter 2.
- Students are introduced
to the complete accounting cycle, from analyzing economic events to
preparing of financial statements (including a simple statement of cash
flows).
Chapter 4 The Accounting
Cycle: Accruals and Deferrals (NEW!) - This chapter builds
on the material covered in Chapter 3. It includes thorough coverage
of the adjusting entries.
Chapter 5 The Accounting
Cycle: Reporting Financial Results (NEW!) - This chapter builds
on the material covered in Chapters 3 and 4. It focuses on the relationship
of the income statement, statement of retained earnings and the balance
sheet. It also focuses on the closing process.
- A supplemental
topic, "The Worksheet", is included at the end of the chapter.
Comprehensive Problem
1 – Tony’s Rentals Chapter 6 Accounting
for Merchandising Activities - This chapter introduces
students to merchandising businesses, inventories, and the cost of goods
sold.
- Both perpetual
and periodic inventory systems are discussed.
- Various performance
measures of merchandising business are introduced and illustrated.
Chapter 7 Financial
Assets - This chapter addresses
accounting and reporting issues related to cash (and cash equivalents),
short-term investments, and accounts receivable.
- Mark-to-market
reporting of short-term investments is explained, and the need for estimating
uncollectible accounts receivable is discussed and illustrated.
Chapter 8 Inventories
and the Cost of Goods - This chapter identifies
the various cost flow assumptions used by business in accounting for
inventories.
- Both perpetual
and period inventory systems are illustrated.
- FIFO versus LIFO
reporting issues are illustrated (including a discussion of a LIFO reserve).
Comprehensive Problem
2 – Guitar Universe Chapter 9 Plant
Assets and Depreciation - This chapter focuses
on accounting issues related to tangible and intangible long-term fixed
assets (including the disposal of plant assets and valuation issues
pertaining to certain intangible assets).
- The widespread
use of straight-line depreciation is emphasized.
Chapter 10 Liabilities - This chapter covers
both current and noncurrent liabilities.
- Noncurrent liability
coverage include issues related to bonds, pensions, and other postretirement
benefits.
- The chapter can
be used in conjunction with Appendix B, which covers the time value
of money, should an instructor choose to do so.
Chapter 11 Stockholders’
Equity: Paid-in-Capital - In this chapter
various issues related to contributed capital are discussed.
- Topics include
legal capital, preferred stock, treasury stock, stock splits, book value,
and market value.
Chapter 12 Income
and Changes in Retained Earnings - The presentation
of net income and its components is the primary subject of this chapter.
- Some of the specific
topics covered are discontinued operations, extraordinary items, accounting
changes, earnings per share, cash and stock dividends, and the statement
of changes in stockholders’ equity.
Chapter 13 Statement
of Cash Flows - The statement of
cash flows is covered by emphasizing the different broad classifications
of cash flows: operating, investing, and financing.
- Emphasis is placed
on the form and content of the statement of cash flows by both the direct
and the indirect method, with particular emphasis on reconciling net
income to net cash provided by (or used in) operating activities.
Chapter 14 Financial
Statement Analysis - General approaches
for analyzing financial statements are introduced, as are specific ratios
and other procedures for analyzing various aspects of a company’s activities.
- These activities
include liquidity and credit risk, profitability, quality of earnings,
and capital structure.
Comprehensive Problem
3 – Tootsie Roll Industries, Inc. Chapter 15 Global
Business and Accounting - This chapter provides
students with an understanding of the issues that impact accounting
in the global business environment. The economic, cultural, political,
and technological international differences that result in differences
among accounting information systems are identified.
- International differences
in financial and management accounting procedures are discussed and
related to variations in cultures, laws, economics, and technological
infrastructures across countries.
Chapter 16 Management
Accounting: A Business Partner - The three basic
principles of management accounting system design are introduced and
explained. A management accounting system assigns decision-making authority,
provides information to support decision making, and furnishes information
for performance evaluation and reward assignment.
- Demonstrates the
basic manufacturing process and matching cost flows. Distinguishes period
and product costs, direct and indirect costs, raw materials, work in
process, and finished goods inventories.
Chapter 17 Accounting
Systems for Measuring Costs - This chapter covers
manufacturing methods and related costs that result in different accounting
system designs. Job order, process, and activity-based costing are introduced
and demonstrated. Exhibits show how each costing method matches the
cost flow with the manufacturing method.
- The impact of accounting
system choices on related information for decision making is discussed
as a lead-in to the next chapter. Motivations for cost allocation and
choices of cost objects are introduced.
Chapter 18 Costing
and the Value Chain - Focuses on how
decision making across the value chain drives the type of costs created
by management. The chapter also shows the need for cost information
related to the value chain.
- Cost procedures
that are useful to management over the life cycle of the value chain
are introduced. These procedures include target costing, life-cycle
costing, just-in-time techniques, and tracking cost of quality.
Chapter 19 Cost-Volume-Profit
Analysis - This chapter defines
fixed, variable, and semivariable costs and also explains the use of
contribution margin and breakeven analysis in short-run decision settings.
- An illustration
demonstrates how the assumptions required as inputs to the use of C-V-P
can lead managers to different conclusions about a marketing decision.
Chapter 20 Incremental
Analysis - This chapter covers
the definitions and importance of opportunity costs, sunk costs, incremental
costs, and revenues for short-run business decisions.
- This chapter also
demonstrates incremental analysis in a variety of business decision
settings, including special order, where to produce, resource input
mix, and pricing decisions.
Comprehensive Problem
4 – The Gilster Company Chapter 21 Responsibility
Accounting and Performance Evaluation - This chapter explains
how cost, profit, and investment center structures assign decision-making
authority over a firm’s assets.
- The chapter also
shows how top executives use accounting information to hold managers
of cost, profit and investment centers responsible for their decisions.
- The impact of different
transfer pricing methods on the accounting outcomes of cost, profit
and investment centers is illustrated.
Chapter 22 Operational
Budgeting - This chapter clarifies
how the budgeting process (1) assigns decision-making authority, (2)
requires the organization to plan and share information, and (3) is
useful for evaluating and rewarding performance.
- The working of
the master budget process is demonstrated, and static and flexible budgets
are contrasted.
Chapter 23 Standard
Cost Systems - This chapter explains
the purpose of standard costing as a control mechanism and specifies
how standards are determined as well as their motivational impact.
- Computation of
overhead, materials, and labor variances are discussed, along with their
usefulness for decision making.
Chapter 24 Rewarding
Business Performance (NEW!) - This new chapter
clarifies the role of incentive systems in the functioning of firms.
The chapter presents methods and means that businesses use to motivate,
evaluate, and reward good business decision-making.
- The DuPont method
for analyzing the components of return on investment (ROI), residual
income, and economic value added concepts are described. The balanced
scorecard is introduced as a means for motivating, evaluating and rewarding
comprehensive business performance.
Comprehensive Problem
5 – Utease Corporation Chapter 25Capital Budgeting - This chapter considers
the role of capital budgeting in the firm’s ability to achieve long-range
goals and objectives and also links capital and operational budgets.
- Capital budgeting
procedures that account for the time value of money are illustrated,
including payback, internal rate of return, and net present value.
Student-Oriented
Text Today, most careers
do not center around the preparation of accounting information.
However, every student will be a lifelong user of accounting information.
That is, how you use accounting information to make business decisions. We have worked to
make this text more relevant to students’ needs as well as more interesting,
thereby motivating students to make the most of this learning opportunity.
Evidence of this can be found in every problem and almost every exercise,
which now contain an analytical element that asks students to interpret
the information they are working with or to use it in some form of business
decision. Our approach is to
involve students more directly in the learning process, and we challenge
them to express their views. Features aimed at achieving this goal include
the interactive Your Turn cases in every chapter, the analytical elements
in our assignment material, and our Internet-related features. Our Internet features
encourage students to explore interesting, accounting-related websites
on their own. We make this very simple by providing the addresses of these
sites in the textbook and by providing links to these sites through the
book’s home page. No instructor assistance should be required. Contemporary Text Any course is more
relevant and more interesting if it is up to date. We have tried to make
this text contemporary in all respects, from coverage of real-world companies
in the chapter openers to topical coverage to assignment material. We Have Listened
to You Reviewer comments
for this edition and the previous edition have guided us in this revision.
We extend our sincere thanks for their efforts to the following people: Elenito Ayuyao, Los
Angeles City College Sharla Bailey, Southwest
Baptist University Walter Baggett, Manhattan
College Jill Bale, Doane College Scott Barhight, Northampton
County Area Community College William Barze, St.
Petersburg Junior College John Bayles, Oakton
Community College Janet Becker, University
of Pittsburg Jerard Berardino,
Community College of Allegheny Teri Bernstein, Santa
Monica College Cynthia Bolt-Lee,
The Citadel Nancy Boyd, Middle
Tennessee State University Sallie Branscom, Virginia
Western Community College Russell Bresslauer,
Chabot College R.E. Bryson, University
of Alabama Priscilla Burnaby,
Bentley College Bryan Burks, Harding
University Loring Carlson, Western
New England College David Chu, College
of the Holy Cross Stanley Chu, Borough
Manhattan Community College William Cravey, Jersey
City State College Marcia Croteau, University
of Maryland -- Baltimore County Brian Curtis, Raritan
Valley Community College Steve Czarsty, Mary
Washington College Larry Davis, Southwest
Virginia County College Victoria Doby, Villa
Julie College Carlton Donchess,
Bridgewater State College Steve Driver, Horry-Georgetown
Tech Pamela Druger, Augustana
College Anita Ellzey, Hartford
Community College Emmanuel Emenyonu,
Sacred Heart University David Erlach, CUNY
– Queens College Paul Everson, Northern
State University Mary Lou Gamma, East
Tennessee State University Brother Gerald Fitzgerald,
LaSalle University Ralph Fritsch, Midwestern
State University Mike Fujita, Leeward
Community College Don Van Gieson, Kapiolani
Community College Peter Gilbert, Thomas
College Penny Hanes, Mercyhurst
College Lyle Hicks, Danville
Area Community College Richard Hanna, Ferris
State University Stephen Hano, Rockland
Community College Sara Harris, Arapahoe
Community College Jeannelou Hodgens,
Florence-Darlington Technical College Patricia H. Holmes,
Des Moines Area Community College Michael Holt, Eastern
Nazarene College Evelyn Honaker, Walters
State Community College Dave Jensen, Bucknell
University Dewey Martin, Husson College David Junnola, Eastern
Michigan University Leo Jubb, Essex Community
College Khondkar Karim, Monmouth
University James Kennedy, Texas
A&M University Jane Kingston, Piedmont
Virginia Community College Ed Knudson, Linn Benton
Community College Raymond Krasniewski,
Ohio State university David Lardie, Tunxis
Community College Bill Lasher, Jamestown
Community College Suk Jun Lee, Chapman
University Eric Lewis, Union
College Philip Little, Western
Carolina University J. Thomas Love, Walters
State Community College Josie Miller, Mercer
Community College Merrill Moore, Delaware
Tech & Community College Deborah Most, Dutchess
Community College Haim Mozes, Fordham
University Frank Olive, Nicholas
College Bruce Oliver, Rochester
Institute of Technology Ginger Parker, Creighton
University Michael Prockton,
Finger Lakes Community College Annette M. Leps, Goucher
College Gary Reynolds, Ozard
Technical College Renee Rigoni, Monroe
Community College Earl Roberts, Delaware
Tech & Community College Julie Rosenblatt,
Delaware Tech & Community College Bob Rothenberg, SUNY
-- Oneonta Victoria Rymer, University
of Maryland Francis A. Sakiey,
Mercer County Community College Linda Schain, Hofstra
University Mike Schoderbek, Rutgers
University – New Brunswick Monica Seiler, Queensborough
Communityg College Stan Stanley, Skagit
Valley College Jim Stanton, Mira
Costa College Carolyn Strickler,
Ohlone College Robert Stilson, CUNY Barbara Sturdevant,
SUNY Gene Sullivan, Liberty
University and Central Virginia Community College Mary Ann Swindlehurst,
Carroll Community College Larry Tartaglino,
Cabrillo College Martin Taylor, University
of Texas at Arlington Anne Tippett, Tarrant
County College South Bruce Toews, Walla
Walla College Cynthia Tomes, Des
Moines Area Community College Harold Wilson, Middle
Tennessee State University Steve Wilts, Bucknell
University Teri Yohn, Georgetown
University We also want to acknowledge
the following individuals, each of whom has authored supplements to accompany
the text: Charles W. Caldwell, Susan C. Galbreath, and Richard S. Rand,
all of Tennessee Technological University, and Jack Terry of Comsource
Associates. Our special thanks
goes to Barbara Schnathorst, The Write Solution, Inc., for assisting us
with detailed reviews of our chapter and assignment material. The assistance of
Robert Zwicker of Pace University and Alice Sineath of Forsyth Technical
Community College was invaluable in preparation of the manuscripts for
many supplementary materials. We appreciate the
expert attention given to this project by the staff of McGraw-Hill/Irwin,
especially Jeff Shelstad, Stewart Mattson, Jennifer Jackson, Erin Cibula,
Ryan Blankenship, Heather Burbridge, Rebecca Nordbrock, David Tietz, Artmeio
Ortiz, Becky Szura, and Ed Przyzycki. Sincerely, Jan R. Williams Susan F. Haka Mark S. Bettner Robert F. MeigsWalkthrough Main
Features The following special
features have been integrated throughout the text to help students develop
their decision-making skills. Chapter Openers
(NEW!) The chapter openers
feature vignettes that focus on real-world companies, such as Amazon.com
and Nike, that relate to the accounting concepts covered in the chapter. A Second Look (NEW!) A Second Look box
at the end of each chapter reintroduces the real-world company highlighted
in the chapter opener. This second look allows students to relate the
accounting topics they have just learned to those practiced by actual
businesses. Cash Effects Cash Effects sections
show how a transaction or method impacts the cash flow of an organization. Your Turn Your Turn boxes put
students in the role of the decision-maker, requiring him/her to apply
chapter concepts to situations faced by investors, creditors, and managers.
An ethical icon indicates boxes that require ethical decision. Case in Point Case in Point boxes
use actual business events to illustrate the relationship between accounting
concepts and the real world. An international icon indicates boxes that
contain international information. Financial Analysis Financial Analysis
boxes cover the ratios used for financial statement analysis in the chapters
where the ratios’ accounts are introduce. This prepares students for the
comprehensive coverage of financial statement analysis found in Chapter
14. Management Strategy
(NEW!) Management Strategy
boxes help students understand how businesspeople use accounting information
to make decisions. The following special
features can be found in the end-of-chapter material. They will help students
clarify and apply the topics introduced in the chapter. Key Terms and Self-Test
Questions Defined Key Terms
and Self-Test Questions review and reinforce chapter material. Comprehensive Problems 5 Comprehensive Problems,
each ranging from two to five pages in length, review and synthesize text
material throughout the book. Demonstration Problems Demonstration problems
are provided along with solutions to allow students to test their knowledge
of key points in the chapter. Internet Assignments Internet Assignments
at the end of each chapter require you to go to a specific Internet site
to answer questions given. Business Week Assignments Business Week Assignments
are writing assignments appearing at the end of each chapter that reference
a current article and require students to answer questions relating accounting
concepts to current events. Icons Icons identify General
Ledger Applications Software (GLAS), Spreadsheet Applications Template
Software (SPATS), ethical issues, group activities, international issues,
and writing exercises. Annual Report The 1999 annual report
from Tootsie Roll Industries, Inc.,
is used throughout the text in exercise and problem material to reveal
actual business applications of text material. Technology The Student CD-ROM
will be packaged with every new copy of the textbook. It will include
General Ledger Applications Software (GLAS), Spreadsheet Applications
Template Software (SPATS), and Tutorial Software. General Ledger
Applications Software (GLAS) This accounting program saves time
and minimizes errors because it operates as an integrated system. Amounts
entered in the general journal of special journals can be posted to
the general ledger with a single keystroke. GLAS icons in the text show
students where this tool can be used to solve end-of-chapter problems. Spreadsheet Applications
Template Software (SPATS) This software allows students to develop
important spreadsheet skills by using these templates to solve selected
assignments that are identified by an icon in the end-of-chapter material. Tutorial Software
Provides a variety of ways to test students’ knowledge of the material
in the text. Students can randomly access different review methods.
Explanations of right and wrong answers are provided and scores are
tallied. This new web site
at www.mhhe.com/business/accounting/williams12 will support the
twelfth edition with the following features: eLearning Session
Study tools are placed strategically within the chapter outline to help
students learn the concepts using different sources of information such
as PowerPoint®, web links, and online quizzes. Also allows instructors
to pull material into their PageOut course syllabus. Links to Professional
Resources These links send students to various sites to gather real-world
data and market news. Quizzes
Multiple-choice online quizzes for students to test their knowledge. Alternate Problems
Alternative versions of the end-of-chapter problems to give students
more practice at applying their knowledge. Solutions are provided for
instructors. Downloadable
Instructor Supplements Instructors can access the following supplements
electronically: PowerPoint, Solutions Manual, Instructor’s Manual, and
SPATS solutions. PageOut PageOut
is an exclusive McGraw-Hill product that allows an instructor to quickly
create a professional course website in less than an hour. - (NEW!) NetTutor™
NetTutor™ is an online, live tutoring service that guides
students through their accounting problems step-by-step. Students can
also watch as other students’ problems are answered – giving them the
opportunity to constantly improve their accounting skills. Students
can gain access to NetTutor™by purchasing a new textbook
with the NetTutor password card. Contact your McGraw-Hill/Irwin sales
representative for more information.
- (NEW!) PowerWeb
PowerWeb is a database of online financial and managerial titles – updated
weekly. Exercises and teaching suggestions for professors are also provided.
Students can gain access to PowerWeb by purchasing a new textbook with
the PowerWeb password card.
- Interactive
Financial Accounting Lab by Ralph E. Smith and Rick Birney, both
of Arizona State University (ISBN 0072361379)
Interactive Managerial
Accounting Lab by Diane Pattison, University of San Diego; Patrick
McKenzie and Rick Birney, both of Arizona State University (ISBN 0072361387) Available in network
of stand-alone versions, this innovative software allows students to
solve accounting problems and receive feedback in a motivating, interactive,
multimedia environment. The Administration Module and Gradebook features
allows the instructor to manipulate the "calendar" of assignments
students are required to complete and also to track students’ performance.
The Financial Accounting Lab provides a comprehensive review
of the fundamentals of the accounting cycle, while the Managerial
Accounting Lab offers over 15 hours of computerized exercise sets
to help students learn management accounting. - Computerized
Practice Sets
Prepared by Leland
Mansuetti and Keith Weidkamp of Sierra College, these business simulations
for Windows provide a dynamic educational alternative to manual sets. Granite Bay Jet
Ski, Level 1 (ISBN 0072340886), Instructor’s Manual (ISBN 0072341041) Granite Bay Jet
Ski, Level 2 (ISBN 007234105x), Instructor’s Manual (ISBN 0072341068) Wheels Exquisite,
Inc. Level 1 (ISBN 0075612437), Instructor’s Manual (ISBN 0075612429) - Understanding
Corporate Annual Reports: A Financial Analysis Project, Fourth Edition,
by William R. Pasewark (ISBN 0072387149) This project contains extensive
instructions for obtaining and analyzing an annual report from a publicly
traded corporation.
Supplements For Students - Study Guide
(Vol. 1 ISBN 0072465905, Vol. 2 ISBN 0072465840) Students can measure
their progress through a wealth of self-test material (with solutions)
and a summary of chapter key points.
- Working Papers
(Vol. 1 ISBN 0072465824, Vol. 2 ISBN 0072465832) This soft-cover booklet
is filled with columnar paper for each Problem and Comprehensive Problem
in the textbook. Students encounter Checkpoints throughout the working
papers to ensure they are on the right track.
For Instructors - Instructor’s
Manual (Vol. 1 ISBN 0072465948, Vol. 2 ISBN 007246593x) For each
chapter and appendix, you will find:
A brief topical
outline that indicates the topics to discuss in class. An assignment guide
that provides at a glance the topical content of each Exercise, Problem,
and Case. Comments and observations
concerning the chapter content, methods of presentation and usefulness
of specific assignment material. Many real-world
examples not found in the text, including additional Business Week
and Internet assignments, sample assignment schedules, and suggestions
for using each element of the supplemental package. - Solutions Manual
with CD-ROM (Vol. 1 ISBN 0072468467, Vol. 2 ISBN 0072468475) This
comprehensive manual provides solutions to all Discussion Questions,
Exercises, Problems, Cases and Comprehensive Problems. The enclosed
CD-ROM contains the manual’s electronic files.
- Solutions Transparencies
(Vol. 1 ISBN 0072465808, Vol. 2 ISBN 0072465913) A complete set of acetates
contains the solutions to all of the Exercises and problems found in
the Solutions Manual.
- Test Bank
(Vol. 1 ISBN 0072465883, Vol. 2 ISBN 0072465891) With an abundance of
objective questions and short exercises, this supplement is a valuable
resource for instructors who prepare their own quizzes and examinations.
- Computerized
Test Bank (ISBN 0072465956) This computerized version of the manual
test bank is available in Windows® format.
- Ready Shows
(Vol. 1 ISBN 0072468521, Vol. 2 ISBN 007246853x) This comprehensive
package is filled with multimedia aids that use PowerPoint software
to illustrate chapter concepts.
- Instructor Spreadsheet
Application Template Software (SPATS) (ISBN 0072468548) Solutions
to the students SPATS.
- Case Videos
(with Manual) (ISBN 0070434409) Eight vignettes ranging from 5 to
15 cover various accounting topics as applied in real company scenarios.
A brief summary, key concepts and topics, suggested homework assignments,
student handouts, small group activities, discussion questions, and
teaching notes are provided for each vignette. Topical coverage includes
external audits, inventory cost flows, ethics and reporting issues,
cash versus accrual income, break-even analysis, capital budgeting,
corporate bonds, and making investment decisions.
- Financial Accounting
Video Library (ISBN 0072376163) and Managerial/Cost Accounting
Video Library (ISBN 0072376171) This diverse array of videos prepared
by Dallas County Community College District Telecourse can be used to
stimulate classroom discussion, illustrate key concepts, or review critical
material.
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