Accounting for Non-Accountants, 2E: The Fast and Easy Way to Learn the Basics

242 Pages·2010·2.94 MB·English

by  Wayne Label

What Readers Are Saying About
Accounting for Non-Accountants
“I have worked in accounting for over twenty-five years, and this is the
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—Cheryl K., Henderson, Tennessee
“Dr. Label’s explanations are simple and straightforward. The step-
by-step examples are easy to digest and make sense as they build on
each other.”
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in a step-by-step, understandable manner.”
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“It’s both an excellent cover-to-cover read as well as a great reference.”
—Daniel Balfour, New York
“I bought this book because, as a non-accountant, I wanted to learn
about it for work, and I found it very helpful. The author made ideas
very easy to understand. I liked the examples and especially liked the
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Accounting
for
Non-Accountants

Accounting
for
Non-Accountants
The Fast and Easy Way to Learn the Basics
Wayne a. LabeL, CPa, Mba, PhD
2nD eDition
Copyright © 2006, 2010 by Wayne A. Label
Cover and internal design © 2010 by Sourcebooks, Inc.
© Copyright 2008 the Coca-Cola Company
Cover images © peepo/iStockphoto.com; 5198862/iStockphoto.com
Sourcebooks and the colophon are registered trademarks of Sourcebooks, Inc.
All rights reserved. No part of this book may be reproduced in any form or by
any electronic or mechanical means including information storage and retrieval
systems—except in the case of brief quotations embodied in critical articles or
reviews—without permission in writing from its publisher, Sourcebooks, Inc.
This publication is designed to provide accurate and authoritative information
in regard to the subject matter covered. It is sold with the understanding that
the publisher is not engaged in rendering legal, accounting, or other professional
service. If legal advice or other expert assistance is required, the services of a com-
petent professional person should be sought.—From a Declaration of Principles
Jointly Adopted by a Committee of the American Bar Association and a Committee
of Publishers and Associations
All brand names and product names used in this book are trademarks, registered
trademarks, or trade names of their respective holders. Sourcebooks, Inc., is not
associated with any product or vendor in this book.
Published by Sourcebooks, Inc.
P.O. Box 4410, Naperville, Illinois 60567-4410
[phone]
Fax: [phone]
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Library of Congress Cataloging-in-Publication Data
Label, Wayne A. (Wayne Allan)
Accounting for non-accountants : the fast and easy way to learn the basics /
Wayne Label.
p. cm.
Includes bibliographical references and index.
1. Accounting. 2. Financial statements. I. Title. II. Title: Accounting for nonac-
countants.
HF5636.L33 2006
657—dc22
2006012421
Printed and bound in the United States of America.
VP 10 9 8 7 6 5 4 3 2 1
Contents
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
INTRODuCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
ChApTER 1: Introducing Accounting and Financial Statements . . . 1
• What Is Accounting?
• Who Uses Accounting Information?
• Financial Statements
• How Different Business Entities Present Accounting Information
ChApTER 2: Generally Accepted Accounting principles . . . . . . . . 11
• Who Are the SEC, AICPA, FASB, and IASB?
• Generally Accepted Accounting Principles (GAAP)
ChApTER 3: The Balance Sheet and Its Components . . . . . . . . . . . 25
• Understanding the Balance Sheet
• The Accounting Equation
• The Components of the Balance Sheet
• The Transactions Behind the Balance Sheet
ChApTER 4: The Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . 45
• Understanding the Income Statement
• The Income Statement Illustrated
• Transactions That Affect the Income Statement
ChApTER 5: preparing and using a Statement of Cash Flows . . 65
• What Is a Statement of Cash Flows?
• Cash and Cash Equivalents
• The Statement of Cash Flows Illustrated
ChApTER 6: The Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
• The Corporation Defined
• What Is Capital Stock?
• Dividends and Splits
• Incorporating Solana Beach Bicycle Company
• What Is Treasury Stock?
ChApTER 7: Double-Entry Accounting . . . . . . . . . . . . . . . . . . . . . . . 97
• The General Journal
• The General Ledger
• Adjusting Journal Entries
• Closing Journal Entries
ChApTER 8: using Financial Statements for
Short-Term Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 125
• Using Short-Term Ratios
• Current and Quick Ratios
• Working Capital
• Composition of Assets
ChApTER 9: using Financial Statements for
Long-Term Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 137
• Quality of Earnings
• Rate of Return on Investment
• Sales-Based Ratios or Percentages
• Earnings Data
• Long-Term Debt Position
• Dividend Data
• Footnotes
ChApTER 10: Budgeting for Your Business . . . . . . . . . . . . . . . . . 149
• What Is a Budget?
• Planning and Control
• Advantages of Budgeting
• The Master Budget
• Sales Budget
• Capital Budget
• Budgeted Income Statement
• The Cash Budget
ChApTER 11: Audits and Auditors . . . . . . . . . . . . . . . . . . . . . . . . 159
• What Is an Audit?
• Types of Auditors
• The Standard Audit Opinion Illustrated
• The Parts of the Report
• Other Types of Audit Reports
• Why Audits Are Useful to You
• Other Services Provided by Auditors
ChApTER 12: Fraud and Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
• Fraud Defined
• What Causes Fraud
• How Fraud is Committed
• Ethics
AppENDIx A: Internet for Accountants . . . . . . . . . . . . . . . . . . . . . 183
AppENDIx B: Frequently Asked Questions . . . . . . . . . . . . . . . . . 189
AppENDIx C: Financial Statements—The Coca-Cola Company . . 195
INDEx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
ABOuT ThE AuThOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226