Accounting for Non-Accountants: Financial Accounting Made Simple for Beginners
Genres: Accounting
Book Preface
What is accounting? Who needs it? How does it benefit businesses?
This book answers those questions for the non-accountant.
Accounting provides information that helps people in business increase their chances of making decisions that will benefit their companies. Accounting is the language of business, and like other languages, it has its own terms and rules. Understanding this language and learning to interpret it is your first step to becoming successful in your own business and in your personal financial life as well.
In your personal life you can use accounting information to make decisions about investing in the stock market, applying for a loan, and evaluating potential jobs. Banks use accounting information to make decisions about granting loans. Government agencies base their regulations on accounting information. Accounting information can even be useful to non-business entities with an interest in how businesses affect local, national, or foreign communities and community members. Businesses use accounting information for planning and budgeting and for making decisions about borrowing and investing. Overall, accounting aids businesses in the process of making better decisions.
The basics of accounting are the same regardless of the size or type of business. In Accounting for Non-Accountants, you will learn the basics of accounting through the examination of an imaginary small business, Solana Beach Bicycle Company. For more complex businesses, the economic transactions become more varied and complex, as does the process of reporting them to various users. The foundation of it all, however, remains the same. This book will give you a solid foundation you will be able to use in any accounting situation you encounter.
Whether you own a business or do not, even if you’ve never had any experience with accounting and financial statements, this is the book for you.
Several changes have been made to create this third edition.
Chapter 2, Generally Accepted Accounting Principles, has been expanded to include a comparison of U.S. standards to those of the International Accounting Standards Board and a discussion of these differences. In chapter 5, the entire approach to the Statement of Cash Flows has been changed to make it more understandable to non-accountants. Many changes have been made to chapter 11, Audits and Auditors, to include more information on the Sarbanes-Oxley Act, which puts more responsibility on the management of companies as well as the auditors to better report areas of potential fraud and weaknesses in internal control. A new chapter has been added (chapter 12) to discuss fraud and ethics and how ignoring these issues can be the downfall of a small business. The appendix on websites to help accountants and non-accountants has been expanded, and a new appendix has been added with useful questions and answers for you to use as a reference after reading the book.
One of the biggest and most exciting changes in this third edition is reader access to two new websites that offer a wealth of accounting resources for the non-accountant. Free online tests and practice problems not found in the book are available exclusively to Accounting for Non-Accountants readers at www.sourcebooks.com/accountingquizzes. At www.LearnAcctgOnline.com, you can chat about questions you have concerning accounting and small business, and you can participate in a blog on important accounting topics. You will also be able to learn more about the study guide that accompanies this book, which includes practical questions and answers on topics covered throughout the second edition. I hope that you find this book useful in helping you understand these accounting issues as they apply to your small business and to your personal life. Please feel free to contact me at [email protected] with your thoughts on the book or on the other materials, or questions about accounting in general.
Contents
Acknowledgments
Introduction
Chapter 1: Introducing Accounting and Financial Statements
What Is Accounting?
Who Uses Accounting Information?
Financial Statements
How Different Business Entities Present Accounting Information
Chapter 2: Generally Accepted Accounting Principles
Who Are the SEC, AICPA, FASB, and IASB? (or What Is This, Alphabet Soup?)
What Are Generally Accepted Accounting Principles (GAAP)?
What Are the Differences Between U.S. Accounting Standards and International Standards?
Chapter 3: The Balance Sheet and Its Components
Understanding the Balance Sheet
The Accounting Equation
Components of the Balance Sheet
Transactions behind the Balance Sheet
Chapter 4: The Income Statement
Understanding the Income Statement
The Income Statement Illustrated
Transactions That Affect the Income Statement
Business Transactions
Chapter 5: Preparing and Using a Statement of Cash Flows
What Is a Statement of Cash Flows?
Cash and Cash Equivalents
The Statement of Cash Flows Illustrated
Chapter 6: The Corporation
The Corporation Defined
What Is Capital Stock?
Cash Dividends, Stock Dividends, and Stock Splits
Incorporating Solana Beach Bicycle Company
What Is Treasury Stock?
Chapter 7: Double-Entry Accounting
The General Journal
The General Ledger
Trial Balance
Adjusting Journal Entries
Closing Journal Entries
Chapter 8: Using Financial Statements for Short-Term Analysis
Using Short-Term Ratios
Current and Quick Ratios
Working Capital
Composition of Assets
Inventory Turnover Ratio
Average Collection Period
Chapter 9: Using Financial Statements for Long-Term Analysis
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
What Is a Budget?
Planning and Control
Advantages of Budgeting
Master Budget
Sales Budget
Capital Budget
Budgeted Income Statement
Cash Budget
Chapter 11: Audits and Auditors
What Is an Audit?
Types of Auditors
The Standard Audit Opinion Illustrated
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
Fraud Defined
What Causes Fraud
How Fraud Is Committed
Why Do Employees Steal?
What Can You Do to Prevent Fraud in Your Organization?
What If My Business Is Too Small to Hire Additional Employees or Consultants?
Ethics
Appendix A: Internet for Accountants
What Resources Are Available for Accountants?
Appendix B: Frequently Asked Questions
Appendix C: Financial Statements: The Coca-Cola Company
A Note to My Readers
About the Author
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Read Now | Epub | November 18, 2020 |
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