Income Measurement & The Reporting Cycle - The Accounting Cycle

This book is the second of fifteen books which introduces the basic principles of accounting. It introduces income measurement, basic elements of revenue and expense recognition, the adjusting process, depreciation, accruals. This book also introduces accrual versus cash basis accounting, the fundamental accounting equation, and four core financial statements. The Accounting cycle and closing process, reversing entries, classified balance sheet, and key ratios for assessing business liquidity are also introduced.

Part 1: Income Measurement

1. “Measurement Triggering” Transactions and Events
1.1 The Meaning of “Accounting” Income
1.2 More Income Terminology
1.3 An Emphasis on Transactions and Events

2. The Periodicity Assumption
2.1 Accounting Implications

3. Basic Elements of Revenue Recognition
3.1 Payment and Revenue Recognition

4. Basic Elements of Expense Recognition
4.1 Payment and Expense Recognition

5. The Adjusting Process and Related Entries
5.1 Illustration of Prepaid Insurance
5.2 Illustration of Prepaid Rent
5.3 I’m a Bit Confused – Exactly When do I Adjust?
5.4 Illustration of Supplies
5.5 Depreciation
5.6 Unearned Revenues
5.7 Accruals
5.8 Accrued Salaries
5.9 Accrued Interest
5.10 Accrued Rent
5.11 Accrued Revenue
5.12 Recap of Adjustments
5.13 The Adjusted Trial Balance
5.14 Alternative Procedures for Certain Adjustments

6. Accrual- Versus Cash- Basis Accounting
6.1 Modified Approaches
6.2 Illustration of Cash- Versus Accrual Basis of Accounting

Part 2: The Reporting Cycle

7. Preparing Financial Statements
7.1 An Illustration
7.2 Considering the Actual Process for Adjustments
7.3 Financial Statements
7.4 Computerization
7.5 A Worksheet Approach
7.6 An Additional Illustration

8. The Accounting Cycle and Closing Process
8.1 The Closing Process
8.2 Post Closing Trial Balance
8.3 Revisiting Computerization

9. Reversing Entries

10. Classified Balance Sheets
10.1 Assets
10.2 Liabilities
10.3 Equity
10.4 Other Entity Forms
10.5 Notes to the Financial Statements

11. Business Liquidity and the Operating Cycle
11.1 Working Capital
11.2 Current Ratio
11.3 Quick Ratio

Larry M. Walther, Ph.D., CPA, CMA, is the Ernst & Young Professor and Head of the School of Accountancy at Utah State University. Dr. Walther has authored numerous accounting textbooks and articles, and has served as director and/or consultant to a number to a number of public and nonpublic companies. Dr. Walther obtained his Ph.D. in accounting from Oklahoma State University and has public accounting experience with Ernst & Young. He currently serves as the accounting accreditation committee of the AACSB and is past president for the federation of schools of accountancy.

Dr. Chris Skousen obtained his Ph.D. at Oklahoma State University. He earned MBA and BA degrees from Utah State University. Dr. Skousen gained public accounting auditing experience with KPMG in their Portland, Oregon office, and as an intern in their in Düsseldorf, Germany office, and at Squire & Co. Dr. Skousen has taught accounting at Utah State University, The University of Texas at Arlington, Oklahoma State University, and Brigham Young University-Idaho. He has published in Accounting Horizons, Behavior Research in Accounting, Accounting and the Public Interest, and other journals.