Cambridge Business Publishers

BALANCED APPROACH

As instructors of introductory financial accounting, we recognize that the first financial accounting course serves the general business students as well as potential accounting majors. Financial Accounting embraces this reality. This book balances financial reporting, analysis, interpretation, and decision making with the more standard aspects of accountings such as journal entries, T-accounts, and the preparation of financial statements.

3-Step Process: Analyze, Journalize, Post

One technique we use throughout the book to maintain a balanced approach is the incorporation of a 3-step process to analyze and record transactions. Step 1 analyzes the impact of various transactions on the financial statements using the financial statement effects template. Step 2 records the transaction using journal entries and Step 3 requires students to post the journal entries to T-accounts.

The template captures the transaction’s financial statement effects on the four financial statements: the balance sheet, income statement, statement of stockholders’ equity, and statement of cash flows. For the balance sheet, we differentiate between cash and noncash assets so as to identify the cash effects of transactions. Likewise, equity is separated into the contributed and earned capital components (the latter includes retained earnings as its major element). Finally, income statement effects are separated into revenues, expenses, and net income (the updating of retained earnings is denoted with an arrow line running from net income to earned capital). This template provides a convenient means to represent financial accounting transactions and events in a simple, concise manner for assessing their effects on financial statements.

REAL DATA INCORPORATED THROUGHOUT

Today’s business students must be skilled in using real financial statements to make business decisions. We feel strongly that the more exposure students get to real financial statements, the more comfortable they become with the variety in financial statements across companies and industries. Through their exposure to various financial statements, students will learn that, while financial statements do not all look the same, they can readily understand and apply them for business decisions. Furthermore, today’s business students must have the skills to go beyond basic financial statements to interpret and apply nonfinancial statement disclosures, such as footnotes and supplementary reports. We expose students to the analysis and interpretation of real company data and nonfinancial disclosures through the use of focus companies in each chapter, the generous incorporation of footnotes, financial analysis discussions in nearly every chapter, and an abundance of assignments that draw on real company data and disclosures.

Focus Companies for Each Chapter

Each chapter’s content is explained through the accounting and reporting activities of real companies. Each chapter incorporates a “focus company” for special emphasis and demonstration. The enhanced instructional value of focus companies comes from the way they engage students in real analysis and interpretation. Focus companies were selected based on student appeal and the diversity of industries.

Chapter 1 Nike	Chapter 7 Procter & Gamble
Chapter 2 Starbucks	Chapter 8 Verizon
Chapter 3 Starbucks	Chapter 9 Southwest Airlines
Chapter 4 Blockbuster	Chapter 10 Pfizer
Chapter 5 Cisco	Chapter 11 Google
Chapter 6 3M	Chapter 12 Home Depot

Footnotes and Management Disclosures

We incorporate footnote and other management disclosures, where appropriate, throughout the book. We explain the significance of the footnote and then demonstrate how to use the disclosed information to make managerial inferences and decisions. A representative sample follows.

Financial Analysis Discussions

Towards the end of nearly every chapter, we include a financial analysis discussion where we introduce key ratios and apply them to the financials statements of the chapter’s focus company. By weaving some analysis into each chapter, we try to instill in students a deeper appreciation for the significance of the accounting methods being discussed. One such analysis discussion follows.

Assignments that Draw on Real Data

It is essential for students to be able to apply what they have learned to real financial statements. Therefore, we have included an abundance of assignments in each chapter that draw on recent, real data and disclosures. These assignments are readily identified by an icon in the margin that usually includes the company’s ticker symbol and the exchange on which the company’s stock trades. A representative example follows.