CHANGES IN THE 2ND EDITION
Several substantial changes have been made in the Second Edition. Below is list of some of the more significant revisions.
Chapter 1: Nike is the new focus company for Chapter 1, replacing Berkshire Hathaway. This chapter was reorganized and thoroughly revised to better motivate the subject matter. Chapter 1 includes more discussion of the conceptual framework and considerable effort was made by the authors to reduce the amount of new terminology introduced.
Chapter 2: Starbucks replaces Disney as the focus company. A new, 3-step process for analyzing and recording transactions is introduced in Chapter 2 and carried throughout the book. Students use the Financial Statement Effects Template to analyze each transaction (Step 1) before recording the transaction using Journal Entries (Step 2) and T-accounts (Step 3). The transactions of Java House are used to illustrate transaction analysis using the 3-step process for analyzing and recording accounting events.
Chapter 3: Starbucks replaces FedEx as the focus company. The Java House illustration introduced in Chapter 2 is continued in Chapter 3 to help students see how the adjusting process affects financial statements. The Income Summary account has been eliminated in favor of closing directly to the Retained Earnings account. Chapter 3 has also been streamlined to reduce any redundancies between Chapters 2 and 3.
Chapter 4: Chapter 4 has been completely rewritten to be more appropriate as an early introduction to cash flows. Blockbuster replaces Starbucks as the focus company for the chapter, and the Java House illustration is continued (from Chapters 2 and 3) to facilitate student understanding of the preparation and analysis of the statement of cash flows. A spreadsheet approach to preparing the statement is incorporated to help students formulate the task.
Chapters 5, 6 and 7: Chapters 7, 8, and 9 of the 1st edition have been reorganized to follow a more standard sequence and presentation. The topics contained in those chapters of the 1st edition now comprise Chapter 5 (Revenues, Receivables, and Cash), Chapter 6 (Inventory), and Chapter 7 (Long-Term and Intangible Assets) of the 2nd edition.
Chapters 8 and 9: Chapter 8 has been updated and revised using current data. The coverage of taxes, which was in both Chapters 7 and 9 of the 1st edition, has been streamlined and incorporated into new Chapter 9 covering Leases, Pensions, and Taxes.
Chapters 10 and 11: Chapter 10 has been updated and revised using current data. Chapter 11 on Intercorporate Investments now includes a discussion of Fair Value accounting, and Google replaces Hewlett-Packard as the chapter’s focus company.
Chapter 12: Chapters 5 and 6 of the first edition (Financial Analysis) have been streamlined and combined into a single chapter on the analysis of financial statements. This new chapter concludes the book as Chapter 12 and uses the financial statements of Home Depot to illustrate the analysis techniques introduced in the chapter.
Appendices: The appendices on forecasting financial statements (Appendix B in the first edition), and valuation (Appendix C in the first edition) are no longer in the book but are available for download from the book’s Website. In addition to the chapter specific changes, there have been several changes that span the entire book. Some of these global changes include: updated numbers for examples, illustrations, and assignments that use real data; updated footnotes and other nonfinancial disclosures; updated excerpts from the business and popular press; numerous assignments in each chapter have been revised or replaced with new assignments; and a new, accessible design was created for the 2nd edition.
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