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Cover of Principles of Accounting, Volume 1: Financial Accounting

Principles of Accounting, Volume 1: Financial Accounting

by Mitchell Franklin, Patty Graybeal and Dixon Cooper

Published by OpenStax

BusinessCollege

Principles of Accounting is designed to meet the scope and sequence requirements of a two-semester accounting course that covers the fundamentals of financial and managerial accounting. Due to the comprehensive nature of the material, we are offering the book in two volumes. This book is specifically designed to appeal to both accounting and non-accounting majors, exposing students to the core concepts of accounting in familiar ways to build a strong foundation that can be applied across business fields. Each chapter opens with a relatable real-life scenario for today’s college student. Thoughtfully designed examples are presented throughout each chapter, allowing students to build on emerging accounting knowledge. Concepts are further reinforced through applicable connections to more detailed business processes. Students are immersed in the “why” as well as the “how” aspects of accounting in order to reinforce concepts and promote comprehension over rote memorization.

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Attribution

Adapted from Principles of Accounting, Volume 1: Financial Accounting by Mitchell Franklin, Patty Graybeal, and Dixon Cooper, published by OpenStax (Rice University) under CC BY-NC-SA 4.0 (https://creativecommons.org/licenses/by-nc-sa/4.0/). Access the original for free at https://openstax.org/details/books/principles-financial-accounting. Changes: converted to CuraCourse lessons, with interactive practice added.

Table of contents

120 pages in 18 modules. Sign up to read and adopt them.

  1. Preface1 page
    1. Preface
  2. 1Role of Accounting in Society7 pages
    1. Why It Matters
    2. 1.1Explain the Importance of Accounting and Distinguish between Financial and Managerial Accounting
    3. 1.2Identify Users of Accounting Information and How They Apply Information
    4. 1.3Describe Typical Accounting Activities and the Role Accountants Play in Identifying, Recording, and Reporting Financial Activities
    5. 1.4Explain Why Accounting Is Important to Business Stakeholders
    6. 1.5Describe the Varied Career Paths Open to Individuals with an Accounting Education
    7. Practice
  3. 2Introduction to Financial Statements5 pages
    1. Why It Matters
    2. 2.1Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate
    3. 2.2Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses
    4. 2.3Prepare an Income Statement, Statement of Owner’s Equity, and Balance Sheet
    5. Practice
  4. 3Analyzing and Recording Transactions8 pages
    1. Why It Matters
    2. 3.1Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements
    3. 3.2Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions
    4. 3.3Define and Describe the Initial Steps in the Accounting Cycle
    5. 3.4Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
    6. 3.5Use Journal Entries to Record Transactions and Post to T-Accounts
    7. 3.6Prepare a Trial Balance
    8. Practice
  5. 4The Adjustment Process7 pages
    1. Why It Matters
    2. 4.1Explain the Concepts and Guidelines Affecting Adjusting Entries
    3. 4.2Discuss the Adjustment Process and Illustrate Common Types of Adjusting Entries
    4. 4.3Record and Post the Common Types of Adjusting Entries
    5. 4.4Use the Ledger Balances to Prepare an Adjusted Trial Balance
    6. 4.5Prepare Financial Statements Using the Adjusted Trial Balance
    7. Practice
  6. 5Completing the Accounting Cycle6 pages
    1. Why It Matters
    2. 5.1Describe and Prepare Closing Entries for a Business
    3. 5.2Prepare a Post-Closing Trial Balance
    4. 5.3Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity
    5. 5.4Appendix: Complete a Comprehensive Accounting Cycle for a Business
    6. Practice
  7. 6Merchandising Transactions9 pages
    1. Why It Matters
    2. 6.1Compare and Contrast Merchandising versus Service Activities and Transactions
    3. 6.2Compare and Contrast Perpetual versus Periodic Inventory Systems
    4. 6.3Analyze and Record Transactions for Merchandise Purchases Using the Perpetual Inventory System
    5. 6.4Analyze and Record Transactions for the Sale of Merchandise Using the Perpetual Inventory System
    6. 6.5Discuss and Record Transactions Applying the Two Commonly Used Freight-In Methods
    7. 6.6Describe and Prepare Multi-Step and Simple Income Statements for Merchandising Companies
    8. 6.7Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory System
    9. Practice
  8. 7Accounting Information Systems7 pages
    1. Why It Matters
    2. 7.1Define and Describe the Components of an Accounting Information System
    3. 7.2Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders
    4. 7.3Analyze and Journalize Transactions Using Special Journals
    5. 7.4Prepare a Subsidiary Ledger
    6. 7.5Describe Career Paths Open to Individuals with a Joint Education in Accounting and Information Systems
    7. Practice
  9. 8Fraud, Internal Controls, and Cash9 pages
    1. Why It Matters
    2. 8.1Analyze Fraud in the Accounting Workplace
    3. 8.2Define and Explain Internal Controls and Their Purpose within an Organization
    4. 8.3Describe Internal Controls within an Organization
    5. 8.4Define the Purpose and Use of a Petty Cash Fund, and Prepare Petty Cash Journal Entries
    6. 8.5Discuss Management Responsibilities for Maintaining Internal Controls within an Organization
    7. 8.6Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries
    8. 8.7Describe Fraud in Financial Statements and Sarbanes-Oxley Act Requirements
    9. Practice
  10. 9Accounting for Receivables9 pages
    1. Why It Matters
    2. 9.1Explain the Revenue Recognition Principle and How It Relates to Current and Future Sales and Purchase Transactions
    3. 9.2Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches
    4. 9.3Determine the Efficiency of Receivables Management Using Financial Ratios
    5. 9.4Discuss the Role of Accounting for Receivables in Earnings Management
    6. 9.5Apply Revenue Recognition Principles to Long-Term Projects
    7. 9.6Explain How Notes Receivable and Accounts Receivable Differ
    8. 9.7Appendix: Comprehensive Example of Bad Debt Estimation
    9. Practice
  11. 10Inventory7 pages
    1. Why It Matters
    2. 10.1Describe and Demonstrate the Basic Inventory Valuation Methods and Their Cost Flow Assumptions
    3. 10.2Calculate the Cost of Goods Sold and Ending Inventory Using the Periodic Method
    4. 10.3Calculate the Cost of Goods Sold and Ending Inventory Using the Perpetual Method
    5. 10.4Explain and Demonstrate the Impact of Inventory Valuation Errors on the Income Statement and Balance Sheet
    6. 10.5Examine the Efficiency of Inventory Management Using Financial Ratios
    7. Practice
  12. 11Long-Term Assets7 pages
    1. Why It Matters
    2. 11.1Distinguish between Tangible and Intangible Assets
    3. 11.2Analyze and Classify Capitalized Costs versus Expenses
    4. 11.3Explain and Apply Depreciation Methods to Allocate Capitalized Costs
    5. 11.4Describe Accounting for Intangible Assets and Record Related Transactions
    6. 11.5Describe Some Special Issues in Accounting for Long-Term Assets
    7. Practice
  13. 12Current Liabilities7 pages
    1. Why It Matters
    2. 12.1Identify and Describe Current Liabilities
    3. 12.2Analyze, Journalize, and Report Current Liabilities
    4. 12.3Define and Apply Accounting Treatment for Contingent Liabilities
    5. 12.4Prepare Journal Entries to Record Short-Term Notes Payable
    6. 12.5Record Transactions Incurred in Preparing Payroll
    7. Practice
  14. 13Long-Term Liabilities6 pages
    1. Why It Matters
    2. 13.1Explain the Pricing of Long-Term Liabilities
    3. 13.2Compute Amortization of Long-Term Liabilities Using the Effective-Interest Method
    4. 13.3Prepare Journal Entries to Reflect the Life Cycle of Bonds
    5. 13.4Appendix: Special Topics Related to Long-Term Liabilities
    6. Practice
  15. 14Corporation Accounting7 pages
    1. Why It Matters
    2. 14.1Explain the Process of Securing Equity Financing through the Issuance of Stock
    3. 14.2Analyze and Record Transactions for the Issuance and Repurchase of Stock
    4. 14.3Record Transactions and the Effects on Financial Statements for Cash Dividends, Property Dividends, Stock Dividends, and Stock Splits
    5. 14.4Compare and Contrast Owners’ Equity versus Retained Earnings
    6. 14.5Discuss the Applicability of Earnings per Share as a Method to Measure Performance
    7. Practice
  16. 15Partnership Accounting7 pages
    1. Why It Matters
    2. 15.1Describe the Advantages and Disadvantages of Organizing as a Partnership
    3. 15.2Describe How a Partnership Is Created, Including the Associated Journal Entries
    4. 15.3Compute and Allocate Partners’ Share of Income and Loss
    5. 15.4Prepare Journal Entries to Record the Admission and Withdrawal of a Partner
    6. 15.5Discuss and Record Entries for the Dissolution of a Partnership
    7. Practice
  17. 16Statement of Cash Flows8 pages
    1. Why It Matters
    2. 16.1Explain the Purpose of the Statement of Cash Flows
    3. 16.2Differentiate between Operating, Investing, and Financing Activities
    4. 16.3Prepare the Statement of Cash Flows Using the Indirect Method
    5. 16.4Prepare the Completed Statement of Cash Flows Using the Indirect Method
    6. 16.5Use Information from the Statement of Cash Flows to Prepare Ratios to Assess Liquidity and Solvency
    7. 16.6Appendix: Prepare a Completed Statement of Cash Flows Using the Direct Method
    8. Practice
  18. Appendices3 pages
    1. AFinancial Statement Analysis
    2. BTime Value of Money
    3. CSuggested Resources