Accounting For Dummies

421 Pages·2013·4.2 MB·English

by  John A. Tracy

Accounting For Dummies®, 5th Edition
Published by
John Wiley & Sons, Inc.
111 River St.
Hoboken, NJ 07030-5774
www.wiley.com
Copyright © 2013 by John Wiley & Sons, Inc., Indianapolis, Indiana
Published by John Wiley & Sons, Inc., Indianapolis, Indiana
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system
or transmitted in any form or by any means, electronic, mechanical,
photocopying, recording, scanning or otherwise, except as permitted under
Sections 107 or 108 of the 1976 United States Copyright Act, without either
the prior written permission of the Publisher, or authorization through
payment of the appropriate per-copy fee to the Copyright Clearance Center,
222 Rosewood Drive, Danvers, MA 01923, [phone], fax (978) 646-
8600. Requests to the Publisher for permission should be addressed to the
Permissions Department, John Wiley & Sons, Inc., 111 River Street,
Hoboken, NJ 07030, [phone], fax [phone], or online at
http://www.wiley.com/go/permissions.
Trademarks: Wiley, the Wiley logo, For Dummies, the Dummies Man
logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily,
The Fun and Easy Way, Dummies.com, Making Everything Easier, and
related trade dress are trademarks or registered trademarks of John Wiley &
Sons, Inc. and/or its affiliates in the United States and other countries, and
may not be used without written permission. All other trademarks are the
property of their respective owners. John Wiley & Sons, Inc., is not
associated with any product or vendor mentioned in this book.
Limit of Liability/Disclaimer of Warranty: The publisher and the
author make no representations or warranties with respect to the
accuracy or completeness of the contents of this work and specifically
disclaim all warranties, including without limitation warranties of
fitness for a particular purpose. No warranty may be created or
extended by sales or promotional materials. The advice and strategies
contained herein may not be suitable for every situation. This work is
sold with the understanding that the publisher is not engaged in
rendering legal, accounting, or other professional services. If
professional assistance is required, the services of a competent
professional person should be sought. Neither the publisher nor the
author shall be liable for damages arising herefrom. The fact that an
organization or Website is referred to in this work as a citation and/or a
potential source of further information does not mean that the author
or the publisher endorses the information the organization or Website
may provide or recommendations it may make. Further, readers should
be aware that Internet Websites listed in this work may have changed
or disappeared between when this work was written and when it is
read.
For general information on our other products and services, please contact
our Customer Care Department within the U.S. at 877-762-2974, outside
the U.S. at 317-572-3993, or fax [phone].
For technical support, please visit www.wiley.com/techsupport.
Wiley also publishes its books in a variety of electronic formats and by
print-on-demand. Some content that appears in standard print versions of
this book may not be available in other formats. For more information
about Wiley products, visit us at www.wiley.com.
Library of Congress Control Number: 2012956425
ISBN 978-1-118-48222-3 (pbk); ISBN 978-1-118-50262-4 (ebk); ISBN
978-1-118-50263-1 (ebk); ISBN 978-1-118-50264-8 (ebk)
Manufactured in the United States of America
10 9 8 7 6 5 4 3 2 1
About the Author
John A. Tracy (Boulder, Colorado) is Professor of Accounting, Emeritus,
at the University of Colorado in Boulder. Before his 35-year tenure at
Boulder, he was on the business faculty for four years at the University of
California in Berkeley. Early in his career he was a staff accountant with
Ernst & Young. John is the author of several books on accounting and
finance, including How To Read a Financial Report, The Fast Forward
MBA in Finance, and Cash Flow For Dummies and Small Business
Financial Management Kit For Dummies with his son Tage C. Tracy. John
received his BSC degree from Creighton University. He earned his MBA
and PhD degrees at the University of Wisconsin in Madison. He is a CPA
(inactive status) in Colorado.
Dedication
For our twelve grandchildren — Alexander, Ryan, Mitchel, Paige, Katrina,
Claire, Eric, MacKenzie, Madison, Tanner, Karsen, and Brody.
Author’s Acknowledgments
I’m deeply grateful to everyone at Wiley Publishing who helped produce
this book. Their professionalism, courtesy, and good humor were much
appreciated. It has been a pleasure working with everyone.
I got a call in 1996 from Kathy Welton, then Vice President and Publisher
for the Consumer Publishing Group of the For Dummies books. Kathy
asked if I’d be interested in doing this book. It didn’t take me very long to
say yes. Thank you again, Kathy!
I can’t say enough nice things about Pam Mourouzis, who as project editor
on the first edition of the book had to teach me the Dummies ways. The
book is immensely better for her insights and advice. The two copyeditors
on the book — Diane Giangrossi and Joe Jansen — did a wonderful job.
Mary Metcalfe provided valuable suggestions on the manuscript. Thanks to
Holly McGuire and Jill Alexander who encouraged me to revise the book.
The second edition benefited from the editing by Norm Crampton and Ben
Nussbaum.
I owe a special thanks to Stacy Kennedy, acquisitions editor, for asking me
to do this and previous revisions. Joan Friedman was the project editor on
the two previous editions. Joan was a delight to work with, and it goes
without saying that she made the book much better. Susan Hobbs (or Suz,
as she prefers) was the project editor for this revision. She had the thankless
task of keeping me in line — and she did a very good job. Suz didn’t let any
sloppy sentences slip through, and she made many helpful suggestions.
Thank you most sincerely Suz, and I hope to work with you again on the
next edition. Also, thanks to Carla Su DeWitt, the technical editor on this
edition, who made several good suggestions.
I’ve been very fortunate to see five editions of this book. But I’m getting
older. I have convinced my son Tage to come on as coauthor for the next
edition. We are already coauthors on three books, and you will notice in this
edition I refer to our books several times. This is not just fatherly pride.
Tage is a very successful business and financial consultant with a wealth of
experience. You could say that I’m the “academic” and he’s the practitioner.
It is my great joy that we work together so well. A chip off the old block, as
they say.
Publisher’s Acknowledgments
We’re proud of this book; please send us your comments at
http://dummies.custhelp.com. For other comments, please contact our
Customer Care Department within the U.S. at 877-762-2974, outside the
U.S. at 317-572-3993, or fax [phone].
Some of the people who helped bring this book to market include the
following:
Acquisitions, Editorial, and Media Development
Project Editor: Susan Hobbs
(Previous Editions: Joan Friedman, Norm Crampton)
Acquisitions Editor: Stacy Kennedy
Copy Editor: Susan Hobbs
(Previous Edition: Joan Friedman)
Assistant Editor: David Lutton
Editorial Program Coordinator: Joe Niesen
Technical Editor: Carla Su DeWitt
Editorial Manager: Carmen Krikorian
Editorial Assistant: Rachelle Amick
Art Coordinator: Alicia B. South
Cover Photo: © Yue Wang / iStock Images
Cartoons: Rich Tennant (www.the5thwave.com)
Composition Services
Project Coordinator: Katie Crocker
Layout and Graphics: Carl Byers, Joyce Haughey
Proofreaders: Lindsay Amones, Evelyn Wellborn
Indexer: Potomac Indexing, LLC
Publishing and Editorial for Consumer Dummies
Kathleen Nebenhaus, Vice President and Executive Publisher
Ensley Eikenburg, Associate Publisher, Travel
Kelly Regan, Editorial Director, Travel
Publishing for Technology Dummies
Andy Cummings, Vice President and Publisher
Composition Services
Debbie Stailey, Director of Composition Services
®
Accounting For Dummies , 5th Edition
Visit www.dummies.com/cheatsheet/accounting to view this
book's cheat sheet.
Table of Contents
Introduction
About This Book
Conventions Used in This Book
What You’re Not to Read
Foolish Assumptions
How This Book Is Organized
Part I: Opening the Books on Accounting
Part II: Exploring Financial Statements
Part III: Accounting in Managing a Business
Part IV: Preparing and Using Financial Reports
Part V: The Part of Tens
Glossary
Icons Used in This Book
Where to Go from Here
Part I: Opening the Books on Accounting
Chapter 1: Accounting: The Language of Business, Investing, Finance, and
Taxes
Accounting’s Main Jobs: Providing Vital Information to Non-Accountants
Distinguishing among different users of accounting information
Overcoming the stereotypes of accountants
Making good use of accounting in your personal financial life