Intermediate Accounting For Dummies book cover

Intermediate Accounting For Dummies

By: Maire Loughran Published: 04-24-2012

The easy way to master an intermediate accounting course

Intermediate accounting courses are required for students seeking bachelor's degrees in accounting and often for degrees in finance, business administration, and management. Intermediate Accounting For Dummies provides you with a deeper and broader level of accounting theory, serving as an excellent course supplement and study guide to help you master the concepts of this challenging program.

With easy-to-understand explanations and realworld examples, Intermediate Accounting For Dummies covers all the topics you'll encounter in an intermediate accounting course: the conceptual framework of Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), financial ratio analysis, equity accounting, investment strategies, financial statement preparation, and more

  • Tracks to a typical intermediate accounting curriculum
  • Expert information and real-world examples
  • Other titles from Loughran: Financial Accounting For Dummies and Auditing For Dummies

With the help of Intermediate Accounting For Dummies, you'll discover the fast and easy way to take the confusion out of the complex theories and methods associated with a typical intermediate accounting course.

Articles From Intermediate Accounting For Dummies

page 1
page 2
page 3
page 4
page 5
page 6
page 7
page 8
page 9
page 10
page 11
108 results
108 results
Intermediate Accounting For Dummies Cheat Sheet

Cheat Sheet / Updated 02-22-2022

Intermediate accounting builds on basic financial accounting skills. It's still all about generally accepted accounting principles (GAAP) and preparing financial statements. The material that intermediate accounting covers, however, goes beyond basic accounting scenarios. Think of financial accounting as the appetizer and intermediate accounting as the main course. Hope you're ready to chow down (Number Munchers, anyone?)!

View Cheat Sheet
What Does Intermediate Accounting Cover?

Article / Updated 03-26-2016

Intermediate accounting delves into the more complex, more challenging aspects of accounting practices. It covers topics and accounting situations that go beyond the basics, including the following: Time value of money: Intermediate accounting involves advanced time value issues, such as deferred annuities and long-term bonds. Annuities are multiple payments over a period of time that you either make or receive. Deferred annuities are a type of annuity contract that delays payments to the investor until the investor elects to receive them. Long-terms bonds are bonds a business holds in another company that extends out more than twelve months into the future. Accounting for retail inventory: Inventory cost-flow assumptions, which are how the cost of inventory expenses on the income statement, are a big topic in financial accounting. An interesting expansion on this topic in intermediate accounting is accounting for retail inventory. The retail inventory method uses a cost ratio to convert the ending inventory valued at retail to cost. Basically, this works by taking goods available for sale at cost and dividing them by goods available for sale at retail. You can then multiply sales by the resulting percentage to come up with ending inventory at cost. Accounting for property, plant, and equipment: Intermediate accounting gets into the nitty-gritty of accounting for an involuntary conversions such as theft. When this happens, a company has to record the difference between insurance proceeds and the asset's net book value as gain or loss on disposal of asset. Research and development expenses (R&D): This thorny topic is rarely discussed in your financial accounting class. Intermediate accounting shows you how to handle the costs of R&D, such as when a drug company is developing a product to bring to market. Accounting for income taxes: No one likes income taxes and your financial accounting textbook discusses this topic minimally. Intermediate accounting to the rescue! Intermediate accounting covers how to calculate the difference between financial and tax accounting. A major difference between the two is financial and tax depreciation. Financial depreciation takes the long-way home while tax depreciation takes the short cut through the vacant lot! So net income between the two will differ.

View Article
Important Differences between U.S. and International Accounting Standards

Article / Updated 03-26-2016

Your intermediate accounting textbook homes in on generally accepted accounting principles (GAAP) in the United States, but, where applicable, points out international perspectives for accounting for the same events. Both positions are noted because GAAP and international accounting standards are on the road toward convergence, and one set of global accounting standards could evolve.. Here are some key differences between U.S. and international accounting standards: Extraordinary items: These items are unusual in nature and infrequent in occurrence. An example could be losses resulting from a major casualty such as a fire. US GAAP allows special financial reporting for these types of events while international standards do not. Accounting for leases: Whether a company expenses lease payments or treats them like loan payments divvying up the payment between principle and interest under US GAAP depends on GAAP capitalization rules. International standards are more user-friendly, and look at the basic facts and circumstances of the lease to determine whether lease payments are expensed or capitalized. Tax deferrals: Deferrals arise on the balance sheet because of the difference between financial and tax income. US GAAP allows for the classification of the deferrals as current or non-current, depending on the situation. International standards only allows for non-current treatment of these deferrals. Balance sheet preparation: It's Financial Accounting 101 knowledge that current accounts show up on the balance sheet before non-current ones. For example, current assets like cash list before property, plant, and equipment. However, companies using international standards often list non-current liabilities before current ones. Monetary assumptions: US GAAP ignores the effect of inflation and deflation for accounting measurement and analysis. Using international accounting standards, countries with persistent inflation will general a price-index to adjust for inflation's effect on their financial reporting.

View Article
What Is the Securities and Exchange Commission (SEC)?

Article / Updated 03-26-2016

In response to the stock market crash of 1929 and the ensuing Great Depression, the Securities Exchange Act of 1934 created the SEC. The SEC’s mission is to make sure publicly traded companies tell the truth about their businesses and treat investors fairly by putting the needs of the investors before the needs of the company. Publicly traded companies are those whose stock is available for sale in an open marketplace, such as the New York Stock Exchange. The SEC is run by five commissioners, who are appointed to five-year terms by the President of the United States. Their terms are staggered, and no more than three commissioners can be from the same political party at the same time. These commissioners ride herd over the SEC’s power to license and regulate stock exchanges, the companies whose securities trade on them, and the brokers and dealers who conduct the trading. The enforcement authority given by Congress allows the SEC to bring civil enforcement against individuals or companies alleged to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law. The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses, which include a criminal violation.

View Article
Corporations and Equity Accounts

Article / Updated 03-26-2016

The major advantage to incorporation is limited liability, which means that, unless debt is personally guaranteed, no individual retains responsibility for paying off debt. Other advantages are continuity, which means that, until the corporation is formally dissolved, it exists in perpetuity, and easy transferability of shares, which means you can sell your shares of stock in a corporation to anyone you want. One major exception arises concerning the limited liability aspect of incorporation: the trust fund portion of the payroll taxes. Trust funds include the FICA and federal withholding amount withheld from employee paychecks. This amount doesn’t include the employer FICA match. You may not have the same type of personal intrigue in a corporation as you have in a sole proprietorship, but this structure does have disadvantages. For example, it costs money to incorporate. You also must follow the proper corporate formalities of organizing and running a corporation to receive the benefits of being a corporation, including completing legal and taxation paperwork and filing in a timely fashion. Corporations have distinct equity accounts consisting of retained earnings, paid-in capital, and stock. Following is a brief discussion of each: Retained earnings: This account shows income and dividend transactions. For example, imagine that the business opens on April 1, 2013. On December 31, 2013, it has cleared $100,000 but has also paid $20,000 in dividends to shareholders. Retained earnings is $80,000 ($100,000 – $20,000). Retained earnings accumulate year after year, ergo the “retained” in the account name. So if the business makes $40,000 in 2014 and pays no dividends, retained earnings on December 31, 2014, is $120,000 ($80,000 + $40,000). You may have seen the accounting equation truncated down to net assets equaling equity. However, keep in mind that although retained earnings is a source of assets, it’s not an asset itself. It shows up in the equity section of the balance sheet because it’s an investment by the owners, which increases their interest in the actual assets of the business. Paid-in capital: This element of equity reflects stock and additional paid-in capital. Corporations raise money by selling stock, a piece of the corporation, to interested investors. Additional paid-in capital shows the amount of money the investors pay over the stock’s par value. Par value is the price printed on the face of the stock certificate. For example, if the par value of Green and Blue, Inc., is $20 per share and you buy 100 shares at $25 per share, additional paid-in capital is $500 [$5 ($25 – $20) @@ts 100 shares]. Another stock account is treasury stock. Treasury stock is its own stock that the company buys back from its investors. Treasury stock is a part of equity but isn’t a part of paid-in capital.

View Article
Current and Noncurrent Assets on the Balance Sheet

Article / Updated 03-26-2016

Assets are resources a company owns. They consist of both current and noncurrent resources. Current assets are ones the company expects to convert to cash or use in the business within one year of the balance sheet date. Noncurrent assets are ones the company reckons it will hold for at least one year. Current assets for the balance sheet Examples of current assets are cash, accounts receivable, and inventory. Cash: Cash includes accounts such as the company’s operating checking account, which the business uses to receive customer payments and pay business expenses, or an imprest account, which keeps a fixed amount of cash in it (such as petty cash). Accounts receivable: This account shows all money customers owe to a business for a completed sales transaction. For example, Business A sells merchandise to Business B with the agreement that B pay for the merchandise within 30 business days. Inventory: Goods available for sale reflect on a merchandiser’s balance sheet in this account. A merchandiser is a retail business, like your neighborhood grocery store, that sells to the general public. For a manufacturing company, a business that makes the items merchandisers sell, this category also includes the raw materials used to make items. Prepaid expenses: Prepaids are any expense the business pays for in advance, such as rent, insurance, office supplies, postage, travel expense, or advances to employees. They also list as current assets, as long as the company envisions receiving the benefit of the prepaid items within 12 months of the balance sheet date. Noncurrent assets for the balance sheet Long-term assets are ones the company reckons it will hold for at least one year. Typical examples of long-term assets are investments and property, plant, and equipment currently in use by the company in day-to-day operations. Fixed assets: This category is the company’s property, plant, and equipment. The account includes long-lived assets, such as a car, land, buildings, office equipment, and computers. Long-term investments: These investments are assets held by the company, such as bonds, stocks, or notes. Intangible assets: These assets lack a physical presence (you can’t touch or feel them). Patents, trademarks, and goodwill classify as noncurrent assets.

View Article
Current and Noncurrent Liabilities on the Balance Sheet

Article / Updated 03-26-2016

Liabilities are claimed against the company’s assets. As with assets, these claims record as current or noncurrent. Usually, they consist of money the company owes to others. For example, the debt can be to an unrelated third party, such as a bank, or to employees for wages earned but not yet paid. Some examples are accounts payable, payroll liabilities, and notes payable. Presenting both assets and liabilities as current and noncurrent is essential for the user of the financial statements to perform ratio analysis. Current liabilities on the balance sheet Current liabilities are ones the company expects to settle within 12 months of the date on the balance sheet. Settlement comes either from the use of current assets such as cash on hand or from the current sale of inventory. Settlement can also come from swapping out one current liability for another. At present, most liabilities show up on the balance sheet at historic cost rather than fair value. And there’s no GAAP requirement for the order in which they show up on the balance sheet, as long as they are properly classified as current. The big-dog current liabilities, which you’re more than likely familiar with from previous accounting classes, are accounts payable, notes payable, and unearned income. Keep in mind that any money a company owes its employees (wages payable) or the government for payroll taxes (taxes payable) is a current liability, too. Here’s a brief description of each: Short-term notes payable: Notes due in full less than 12 months after the balance sheet date are short term. For example, a business may need a brief influx of cash to pay mandatory expenses such as payroll. A good example of this situation is a working capital loan, which a bank makes with the expectation that the loan will be paid back from collection of accounts receivable or the sale of inventory. Accounts payable: This account shows the amount of money the company owes to its vendors. Dividends payable: Payments due to shareholders of record after the date declaring the dividend. Payroll liabilities: Most companies accrue payroll and related payroll taxes, which means the company owes them but has not yet paid them. Current portion of long-term notes payable: If a short-term note has to be paid back within 12 month of the balance sheet date, you’ve probably guessed that a long-term note is paid back after that 12-month period. However, you have to show the current portion (that which will be paid back in the current operating period) as a current liability. Unearned revenue: This category includes money the company collects from customers that it hasn’t yet earned by doing the complete job for the customers but that it anticipates earning within 12 months of the date of the balance sheet. Noncurrent liabilities on the balance sheet Noncurrent or long-term liabilities are ones the company reckons aren’t going anywhere soon! In other words, the company doesn’t expect to be liquidating them within 12 months of the balance sheet date. Bonds payable: Long-term lending agreements between borrowers and lenders. For a business, it’s another way to raise money besides selling stock. Long-term leases: Capital leases (you record the rental arrangement on the balance sheet as an asset rather than the income statement as an expense) that extend past 12 months of the date of the balance sheet. Because the rental arrangement is recorded as an asset, the related lease obligation must be recorded as a liability. Product warranties: Report as noncurrent when the company expects to make good on repairing or replacing goods sold to customers and the obligation extends beyond 12 months from the balance sheet date.

View Article
How to Calculate Single Sums

Article / Updated 03-26-2016

Single-sum problems involve a single amount of money that you either have on hand now or want to have in the future. You use these two tables to figure single sums: Future value of 1: This table shows how much a single sum on deposit will grow when invested for a specific period of time at a particular interest rate. For example, you deposit $500 in the bank today and want to know how much you’ll have two years from now. Present value of 1: The flipside of future value, this table tells you how much you’ll have to save today to have a certain amount at your disposal in the future. For example, you want to have $2,000 saved for a down payment on a new car in three years — how much do you need to put away today to reach that goal? Future value of a single sum Suppose that a company with an extra $100,000 lying around is trying to decide between investing the money at 4 percent for five years and using the extra money to expand the business. It sure would help if they know how much the $100,000 would grow if they invested it. Future value table to the rescue! Using this table, the company can calculate exactly what the $100,000 will grow to using the three variables of principal ($100,000), time (five years), and rate (4 percent). For this calculation, you find the number at the intersection of 4 percent and five periods, which is 1.21665. Multiply $100,000 times 1.21665 to get the future value of a single sum of $100,000. The future value of that single sum is $121,665 ($100,000 x 1.21665). The company now has valuable information. If it reckons that using the $100,000 to expand the business won’t increase the bottom line over the next five years by at least $21,665 ($121,665 – $100,000), investing the money at 4 percent is probably the wiser option. Present value of a single sum Computing the future value of a sum results in a larger amount than what you started with. The opposite is true when figuring the present value of a single dollar amount. In this case, you start with a smaller figure that, through the magic of compound interest, grows into a larger amount. Say that a company wants to figure out how much it needs to invest today at 5 percent to have $200,000 three years from now. Following is a partial present value of a single sum table. For this calculation, you find the factor at the intersection of 5 percent and three periods, which is .86384. Multiply $200,000 times .86384 to see how much the company has to invest today to have $200,000 in the future. The answer to that weighty question is $172,768 ($200,000 x .86384).

View Article
Markets for Assets and Liabilities Subject to Fair Value Accounting

Article / Updated 03-26-2016

ASC 820 outlines four potential markets for assets and liabilities subject to fair value accounting: active exchange, dealer, brokered, and principal-to-principal. Here’s a quick explanation of each: Active exchange: These markets are stock exchanges in which fair value closing prices for the financial asset or liability are readily available. As of the publication of this book, the major five stocks exchanges, in order, are as follows: NYSE Euronext: Located in New York City, it covers the U.S. and Europe economies. NASDAQ OMX: Located in New York City, it also covers the U.S. and European economies. Tokyo Stock Exchange: Located in Tokyo, it cover the Japanese economy. London Stock Exchange: Located in London, it covers the U.K. economy. Paris Stock Exchange: Located in Paris, it covers the French economy. Dealer market: In these markets, participants buy and sell for their own account, using their own money via the telephone or computer. In the U.S., they are known as over-the-counter (OTC) markets. Examples include forward contracts, which are agreements between two parties to buy or sell an asset in the future at the price agreed upon today. Brokered market: These markets match buyers with sellers. The broker, the individual doing the matchmaking, isn’t trading his own securities, nor is he operating from any inventory of securities. For example, imagine that you want to buy 100 shares of stock in AT&T. You call your stockbroker, who facilitates the transaction for you but doesn’t ever own the shares of AT&T during any part of the transaction. Principal-to-principal: The actual parties to the transaction negotiate directly with each other, without using a middleman. For example, Company A has a widget machine, and Company B is willing to pay a certain amount to purchase it.

View Article
What Are Balance Sheets and Classified Balance Sheets?

Article / Updated 03-26-2016

The balance sheet shows the health of a business from the day the business started operations to the specific date of the balance sheet report. The balance sheet has three sections: assets, liabilities, and equity. Following is a thumbnail sketch of the three: Assets: Resources a company owns, such as cash, equipment, and buildings Liabilities: Debt the business incurs for operating and expansion purposes Equity: Amount of ownership left in the business after deducting total liabilities from total assets Standing on their own, they contain valuable information about a company. However, a user has to see all three interacting together on the balance sheet to form an opinion approaching reliability about the company. A classified balance sheet groups like accounts together. For example, all current assets, such as cash and accounts receivable, show up in one grouping. Likewise, all current liabilities, such as accounts payable and other short-term debt, show up in another grouping. This structure assists users of the balance sheet so they don’t have to go on a scavenger hunt to round up all similar accounts. Note two important points about the balance sheet: The date on a balance sheet is always the last day of the accounting period reflected on the statement. Assets must always equal the total of liabilities plus equity. If they don’t, the balance sheet doesn’t balance — and then something is definitely wrong! This balancing act is known as the fundamental accounting equation. Get it? Balance sheet — balancing act? Another way to state it is net assets equals equity. Using the term net assets is the same as saying “assets minus liabilities. For a more detailed look into stockholders’ equity many companies also prepare a statement of changes in stockholders’ equity showing stockholders’ equity at both the beginning and end of the year.

View Article
page 1
page 2
page 3
page 4
page 5
page 6
page 7
page 8
page 9
page 10
page 11