assignment on introduction to accounting

• 101 Accounting Basics Strong foundation on fundamental concepts and the accounting process
• FIN Financial Accounting Financial accounting and reporting, financial statements, IFRS and GAAP
• MNG Managerial Accounting Managerial/management accounting topics to aid in decision-making
• DIC Accounting Dictionary Accounting terms defined and carefully explained
• MIS Misc Articles Miscellaneous topics about anything accounting
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Accounting Basics Accounting 101

Introduction to accounting.

• What is Accounting? Its Definition and Meaning
• Purpose of Accounting – Why It is Important
• Users of Financial Statements / Accounting Information
• Types of Accounting (Branches / Fields of Specialization)
• Areas of Accounting Practice
• Types of Business and Forms of Ownership
• Summary of Topics Covered
• Quiz and Answers

Fundamental Accounting Concepts

• Basic Accounting Principles
• Elements of Accounting: Assets, Liabilities and Capital
• The Accounting Equation and How It Stays in Balance
• Accounting Equation: More Examples and Illustration
• Expanded Accounting Equation: The Spread-Out Version
• The Double Entry Accounting System
• Accounting Cycle: 9-Step Accounting Process

The Financial Statements

• Introduction to Financial Statements: An Overview
• Income Statement a.k.a. Profit and Loss Statement
• Statement of Changes in Owner's Equity
• Balance Sheet: Statement of Financial Position
• Statement of Cash Flows

Analyzing, Recording, and Classifying

• Understanding and Analyzing Business Transactions
• Rules of Debit and Credit: Left versus Right
• The Chart of Accounts: Explanation and Example
• Journal Entries: Recording Business Transactions
• More Journal Entry Examples
• Posting to the Accounting Ledger
• Trial Balance: Checking the Equality of Debits and Credits
• Correcting Entries for Errors Discovered

Adjusting Entries

• Introduction to Adjusting Journal Entries
• Adjusting Entry for Accrued Income
• Adjusting Entry for Accrued Expense
• Adjusting Entry for Unearned Income
• Adjusting Entry for Prepaid Expense
• Depreciation Expense
• Bad Debts Expense
• Adjusted Trial Balance

How to Prepare Financial Statements

• How to Prepare an Income Statement
• How to Prepare a Statement of Owners Equity
• How to Make a Balance Sheet

Closing Entries

Post-closing trial balance, reversing entries.

Accounting is known as the language of business. Through a series of steps known as accounting cycle , it gathers information about business transactions, and collates and summarizes them to generate reports for a business entity.

This course offers free online tutorials on accounting basics. It aims to build and solidify one's knowledge of the foundations which are vital in building a career in accounting & finance or in managing a small business.

The lessons here will serve as a primer for beginners and a refresher for those who already have some accounting background.

More topics

• • Financial Accounting
• • Management Accounting
• • Accounting Dictionary
• • Accounting Certifications
• • Big 4 Accounting Firms

• Goals Achievement
• Fill in the Blanks
• Multiple Choice
•  Key Terms 

Chapter One: The Accounting Equation

About the Author | Mission Statement | Contact Us | Terms of Use | Privacy Policy Principlesofaccounting.com ™ Copyright © 2015. All rights reserved.

• List of Commerce Articles
• Class 11 Accountancy Chapter 1 Introduction To Accounting

Introduction to Accounting - Meaning, Objectives

Definition of accounting.

Accounting can be defined as a process of reporting, recording, interpreting and summarising economic data. The introduction of accounting helps the decision-makers of a company to make effective choices, by providing information on the financial status of the business.

The American Institute of Certified Public Accountants (AICPA) had defined accounting as the “art of recording, classifying, and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof”.

Today, accounting is used by everyone and a good understanding of it is beneficial to all. Accountancy act as a language of finance. To understand accounting efficiently, it is important to understand the aspects of accounting.

• Economic Events- It is a consequence of a company has to undergo when the number of monetary transactions is involved. Such as purchasing new machinery, transportation, machine installation on-site, etc.
• Identification, Measurement, Recording, and Communication- The accounting system should be outlined in such a way that the right data is identified, measured, recorded and communicated to the right individual and at the right time.
• Organization- In refers to the size of activities and level of a business operation.
• Interested Users of Information- It is about communicating important financial information to the customers, according to which they will make the correct decision.

Fundamentals of Accounting

• Assets- The economic value of an item which is possessed by the enterprise is referred to as Assets. To put it in other words, assets are those items that can be transformed into cash or that generates income for the enterprise shortly. It is useful in paying any expenses of the business entity or debt.
• Liabilities- The economic value of an obligation or debt that is payable by the enterprise to other establishment or individual is referred to as liability. To put it in other words, liabilities are the obligations that are rising out of previous transactions, which is payable by the enterprise, through the assets possessed by the enterprise.
• Owner’s Equity- Owner’s equity is one of the 3 vital segments of a sole proprietorship’s balance sheet and one of the main aspects of the accounting equation: Assets = Liabilities + Owner’s Equity. It depicts the owner’s investment in the trade minus the owner’s withdrawal from the trade + the net income since the business concern commenced.

Objectives of Accounting

The main objectives of accounting are:

To maintain a systematic record of business transactions

• Accounting is used to maintain a systematic record of all the financial transactions in a book of accounts.
• For this, all the transactions are recorded in chronological order in Journal and then posted to principle book i.e. Ledger.

To ascertain profit and loss

• Every businessman is keen to know the net results of business operations periodically.
• To check whether the business has earned profits or incurred losses, we prepare a “Profit & Loss Account”.

To determine the financial position

• Another important objective is to determine the financial position of the business to check the value of assets and liabilities.
• For this purpose, we prepare a “Balance Sheet”.

To provide information to various users

• Providing information to the various interested parties or stakeholders is one of the most important objectives of accounting.
• It helps them in making good financial decisions.

To assist the management

• By analysing financial data and providing interpretations in the form of reports, accounting assists management in handling business operations effectively.

Characteristics of Accounting:

The following attributes or characteristics can be drawn from the definition of Accounting:

(1) Identifying financial transactions and events

• Accounting records only those transactions and events which are of financial nature.
• So, first of all, such transactions and events are identified.

(2) Measuring the transactions

• Accounting measures the transactions and events in terms of money which are considered as a common unit.

(3) Recording of transactions

• Accounting involves recording the financial transactions inappropriate book of accounts such as Journal or Subsidiary Books.

(4) Classifying the transactions

• Transactions recorded in the books of original entry – Journal or Subsidiary books are classified and grouped according to nature and posted in separate accounts known as ‘Ledger Accounts’.

(5) Summarising the transactions

• It involves presenting the classified data in a manner and in the form of statements, which are understandable by the users.
• It includes Trial balance, Trading Account, Profit and Loss Account and Balance Sheet .

(6) Analysing and interpreting financial data

• Results of the business are analyzed and interpreted so that users of financial statements can make a meaningful and sound judgment.

(7) Communicating the financial data or reports to the users

• Communicating the financial data to the users on time is the final step of Accounting so that they can make appropriate decisions.

What are the Different Branches of Accounting?

The following are the main branches of accounting:

(a) Financial accounting:

Financial Accounting is that branch of accounting which involves identifying, measuring, recording, classifying, summarising the business transactions, i.e. it involves the steps from Identifying, Recording of transactions to Summarisation, and communicating the financial data.

(b) Cost accounting:

Cost Accounting is that branch of accounting which is concerned with the process of ascertaining and controlling the cost of products or services.

(c) Management accounting

Management accounting refers to that branch of accounting which is concerned with presenting the accounting information in such a way that helps the management in planning and controlling the operations of a business and in decision making.

Also Read: What is Management Accounting?

Steps of the Accounting Process:

Accounting process is the process of collecting, recording, classifying, summarising and communicating financial information to the users for judgement and decision-making. The following steps are involved in accounting process:

(1) Identification: It is the process of identifying and analysing business transactions.

(2)Recording: For recording, we use ‘Journal’ or Subsidiary Books.

(3) Classification of transactions: Classification means segregation of transactions on the basis of nature and posting them in a format known as Ledger Account.

(4) Summarisation: It includes preparation of Trial Balance and Financial Statements .

(5) Analysis & Interpretation: It includes an assessment of the financial reports and making some meaningful conclusions.

(6) Communicating information to the users: It includes sharing the financial reports and interprets results to the users of financial statements.

What is the Difference Between Bookkeeping and Accounting?

What are the Advantages of Accounting?

The following are the main advantages of accounting:

1. Provide information about financial performance

• Accounting provides factual information about financial performance during a given period of time
• Like, profit earned or loss incurred over a period and financial position at a particular point of time.

2. Provide assistance to management

• Accounting helps management in business planning, decision making and in exercising control.
• For this, it provides financial information in the form of reports.

3. Facilitates comparative study

• By keeping systematic records and preparation of reports at regular intervals, accounting helps in making a comparison.

4. Helps in settlement of tax liability

• Systematic accounting records help in settlement of various tax liabilities. Such as – Income Tax, GST, etc.

5. Helpful in raising loan

• Banks and Financial Institutions grant a loan to the firm on the basis of appraisal of the financial statement of the firm.

6. Helpful in decision making

• Accounting provides useful information to the management for taking decisions.

What Are the Limitations of Accounting?

Following are the limitations of accounting:

• Accounting is not precise : Accounting is not completely free from personal bias or judgment.
• Accounting is done on historic values of assets:  Accounting records assets at their historical cost less depreciation. It does not reflect their current market value.
• Ignore the effect of price level changes: Accounting statements are prepared at historical cost. So changes in the value of money are ignored.
• Ignore the qualitative information: Accounting records only monetary transactions. It ignores the qualitative aspects.
• Affected by window dressing:  Window dressing means manipulation in accounting to present a more favourable position of the business than the actual position.

Explain the Users of Accounting Information:

Users may be categorised into internal users and external users.

(A) Internal Users

• Owners : Owners contribute capital in the business and thus they are exposed to maximum risk. So, they are always interested in the safety of their capital.
• Management : Accounting information is used by management for taking various decisions.
• Employees : Employees are interested in the financial statements to assess the ability of the business to pay higher wages and bonuses.

(B) External U sers

• Banks and financial institutions:  Banks and Financial Institutions provide loans to business. So, they are interested in financial information to ensure the safety and recovery of the loan.
• Investors:  Investors are interested to know the earning capacity of business and safety of the investment.
• Creditors:  Creditors provide the goods on credit. So they need accounting information to ascertain the financial soundness of the firm.
• Government:  The government needs accounting information to assess the tax liability of the business entity.
• Researchers:  Researchers use accounting information in their research work.
• Consumers:  They require accounting information for establishing good accounting control, which will reduce the cost of production.

Qualitative Characteristics of Accounting Information

Qualitative characteristics are the attributes of accounting information, which enhance its understandability and usefulness:

• Reliability:  Reliability implies that the information must be free from material error and personal bias.
• Relevance:  Accounting information must be relevant to the decision-making requirements of the users.
• Understandability:  Information should be disclosed in financial statements in such a manner that these are easily understandable.
• Comparability:  Both intra-firm and inter-firm comparison must be possible over different time periods.

Explain the System of Accounting

System of accounting

• There are following two systems of recording transactions in the books of accounts:
• Double Entry System
• Single Entry System

Double-entry system

• The double entry system is based on the Dual Aspect Principle.
• Every transaction has two aspects, ‘a Debit’ and ‘a credit’ of an equal amount.
• This system of accounting recognises and records both aspects of the transaction.

Single entry system

• Under this system, both aspects are not recorded for all the transactions.
• Either only one aspect is recorded or both the aspects are not recorded for all the transactions.

What Are the Advantages of the Double-entry System of Accounting?

Following are the main advantages of the double-entry system of accounting:

Scientific system

• As compared to the other systems, this system of recording transactions is more scientific and useful to achieve the objective of accounting.

A complete record of the transaction

• Since both the aspects of transactions are considered there is a complete recording of each and every transaction.
• Using these records we are able to compute profit or loss easily.

Checks arithmetical accuracy of accounts

• Under this system, by preparing a Trial Balance we are able to check the arithmetical accuracy of the records.

Determination of profit/loss and depiction of financial position

• Under this system by preparing ‘Profit & Loss A/c’ we get to know about the profit earned or loss incurred.
• By preparing the ‘Balance Sheet’ the financial position of the business can be ascertained, i.e. position of assets and liabilities is depicted.

Helpful in decision making

• Administration and management are able to take decisions on the basis of factual information under the double-entry system of accounting.

The above mentioned concept ‘Introduction to Accounting’ is elucidated in detail for Commerce students. To know more, stay tuned to BYJU’S.

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About Principles of Accounting

Principles of Accounting is designed to meet the scope and sequence requirements of a two-semester accounting course that covers the fundamentals of financial and managerial accounting. This book is specifically designed to appeal to both accounting and non-accounting majors, exposing students to the core concepts of accounting in familiar ways to build a strong foundation that can be applied across business fields. Each chapter opens with a relatable real-life scenario for today’s college student. Thoughtfully designed examples are presented throughout each chapter, allowing students to build on emerging accounting knowledge. Concepts are further reinforced through applicable connections to more detailed business processes. Students are immersed in the “why” as well as the “how” aspects of accounting in order to reinforce concepts and promote comprehension over rote memorization.

Coverage and scope

Our Principles of Accounting textbook adheres to the scope and sequence requirements of accounting courses nationwide. We have endeavored to make the core concepts and practical applications of accounting engaging, relevant, and accessible to students.

Principles of Accounting, Volume 1: Financial Accounting

Chapter 1: The Role of Accounting in Society

Chapter 2: Introduction to Financial Statements

Chapter 3: Analyzing and Recording Transactions

Chapter 4: The Adjustment Process

Chapter 5: Completing the Accounting Cycle

Chapter 6: Merchandising Transactions

Chapter 7: Accounting Information Systems

Chapter 8: Fraud, Internal Controls, and Cash

Chapter 9: Accounting for Receivables

Chapter 10: Inventory

Chapter 11: Long-Term Assets

Chapter 12: Current Liabilities

Chapter 13: Long-Term Liabilities

Chapter 14: Corporation Accounting

Chapter 15: Partnership Accounting

Chapter 16: Statement of Cash Flows

Principles of Accounting, Volume 2: Managerial Accounting

Chapter 1: Accounting as a Tool for Managers

Chapter 2: Building Blocks of Managerial Accounting

Chapter 3: Cost-Volume-Profit Analysis

Chapter 4: Job Order Costing

Chapter 5: Process Costing

Chapter 6: Activity-Based, Variable, and Absorption Costing

Chapter 7: Budgeting

Chapter 8: Standard Costs and Variances

Chapter 9: Responsibility Accounting and Decentralization

Chapter 10: Short-Term Decision-Making

Chapter 11: Capital Budgeting Decisions

Chapter 12: Balanced Scorecard and Other Performance Measures

Chapter 13: Sustainability Reporting

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About the authors

Senior contributing authors

Mitchell Franklin, Le Moyne College (Financial Accounting)

Mitchell Franklin (PhD, CPA) is an Associate Professor and Director of Undergraduate and Graduate Accounting Programs at Le Moyne College’s Madden School of Business. His research interests include the impact of tax law on policy, and innovative education in both financial accounting and taxation, with articles published in journals including Issues in Accounting Education, Advances in Accounting Education, Tax Notes, Journal of Taxation , and The CPA Journal and Tax Adviser . He teaches introductory and advanced courses in individual and corporate taxation as well as financial accounting. Prior to joining Le Moyne College, he served on the faculty at Syracuse University.

Patty Graybeal, University of Michigan-Dearborn (Managerial Accounting)

Patty Graybeal received her BBA from Radford University and her MACCT and PhD from Virginia Tech. She teaches undergraduate and graduate courses in financial, managerial, governmental, and international accounting. She has published scholarly articles on performance plans and compensation structures, as well as bankruptcy prediction, and she currently focuses on pedagogical issues related to instructional methods and resources that enhance student academic success. Prior to UM-Dearborn, she was on the faculty at Wake Forest University, George Mason University, and Virginia Tech. She brings significant real-world experience to the classroom from her prior work in healthcare administration and her current work with the auto industry.

Dixon Cooper, Ouachita Baptist University

Dixon Cooper received his BBA in Accounting and MS in Taxation from the University of North Texas. He has taught undergraduate and graduate courses in accounting, finance, and economics. In addition to his academic activities, he served for approximately fifteen years as an author/editor for the AICPA’s continuing education program and maintained a tax compliance and financial services practice. He also has several years of experience in public accounting and consulting. Prior to teaching at Ouachita Baptist University, he was a faculty member at the University of North Texas, Texas Christian University Austin College, and the University of Arkansas.

Contributing authors

LuAnn Bean, Florida Institute of Technology

Ian Burt, Niagara University

Shana Carr, San Diego City College

David T. Collins, Bellarmine University

Shawna Coram, Florida State College at Jacksonville

Kenneth Creech, Briar Cliff University

Alan Czyzewski, Indiana State University

Michael Gauci, Florida Atlantic University

Cindy Greenman, Embry-Riddle Aeronautical University

Michael Haselkorn, Bentley University

Christine Irujo, Westfield State University

Cynthia Johnson, University of Arkansas at Little Rock

Cynthia Khanlarian, North Carolina Agricultural and Technical State University

Terri Lukshaitis, Ferris State University

Debra Luna, Southwest University

Bill Nantz, Houston Community College

Tatyana Pashnyak, Bainbridge State College

Brian Pusateri, University of Scranton

Ellen Rackas, Muhlenberg College

Marianne Rexer, Wilkes University

Roslyn Roberts, California State University, Sacramento

Rebecca Rosner, Long Island University

Jeffrey J. Sabolish, University of Michigan-Flint

Jason E. Swartzlander, Bluffton University

Diane Tanner, University of North Florida

Mark M. Ulrich, Queensborough Community College

Janis Weber, University of Louisiana Monroe

Linda Williams, Tidewater Community College

Darryl Woolley, University of Idaho

Janice Akao, Butler Community College

Chandra D. Arthur, Cuyahoga Community College

Kwadwo Asare, Bryant University

Dereck Barr-Pulliam, University of Wisconsin–Madison

John Bedient, Albion College

Debra Benson, Kennesaw State University

Amy Bourne, Oregon State University

Stacy Boyer-Davis, Northern Michigan University

Dena Breece, Methodist University

Lawrence Chui, University of St. Thomas, Minnesota

Sandra Cohen, Columbia College Chicago

Bryan Coleman, Assumption College

Sue Cooper, Salisbury University

Constance Crawford, Ramapo College of New Jersey

Cori O. Crews, Valdosta State University

Annette Davis, Glendale Community College

Ronald de Ramon, Rockland Community College

Julie Dilling, Moraine Park Technical College

Terry Elliott, Morehead State University

Jim Emig, Villanova University

Darius Fatemi, Northern Kentucky University

Rhonda Gilreath, Tiffin University

Alan Glazer, Franklin & Marshall College

Marina Grau, Houston Community College

Amber Gray, Adrian College

Jeffry Haber, Iona College

Michelle Hagadorn, Roanoke College

Regina Ivory Butts, Fort Valley State University

Simone Keize, Broward College

Christine Kloezeman, California State University, Los Angeles

Lauri L. Kremer, Lycoming College

W. Eric Lee, University of Northern Iowa

Julie G. Lindsey, University of Phoenix

Jennifer Mack, Lindenwood University

Suneel Maheshwari, Indiana University of Pennsylvania

Richard Mandau, Piedmont Technical College

Josephine Mathias, Mercer County Community College

Ermira Mazziotta, Muhlenberg College

Karen B. McCarron, Georgia Gwinnett College

Michelle A. McFeaters, Grove City College

Britton McKay, Georgia Southern University

Christopher McNamara, Finger Lakes Community College

Glenn McQueary, Houston Community College

Tammy Metzke, Milwaukee Area Technical College

Stacey Mirinaviciene, Keuka College

Eleonor Moore, Kirtland Community College

Hassan Niazi, Northern State University

Felicia Olagbemi, Colorado State University-Global Campus

Suzanne Owens, Colorado Mesa University

Jenice Prather-Kinsey, University of Alabama at Birmingham

Tom Prieto, College of the Canyons

Atul Rai, Wichita State University

Kevin Raiford, College of Southern Nevada

Dave Repp, Strayer University

Patrick Rogan, Cosumnes River College

John Rossi, Moravian College

Angela Seidel, Saint Francis University

Margaret Shackell, Cornell University

Debra Sinclair, University of South Florida St. Petersburg

Mohsen Souissi, Fayetteville State University

Zivia Sweeney, University of Southern California

Tim Swenson, Sullivan University

Hai Ta, Niagara University

Andress Walker, Ventura County Community College District

Teresa Walker, Greensboro College

Roland Warfield, Seton Hill University

Michael Wiggins, Georgia Southern University

Joseph Winter, Niagara University

David Ziebart, University of Kentucky

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• Authors: Mitchell Franklin, Patty Graybeal, Dixon Cooper
• Publisher/website: OpenStax
• Book title: Principles of Accounting, Volume 1: Financial Accounting
• Publication date: Apr 11, 2019
• Location: Houston, Texas
• Book URL: https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters
• Section URL: https://openstax.org/books/principles-financial-accounting/pages/preface

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Learning Accounting

1.0 introduction to accounting.

In order to function, the people who operate such a system ... must be reprogrammed to stop thinking as humans and to start thinking like accountants . As everyone from ancient times till today knows, clerks and accountants think in a non-human fashion .  This is not their fault ."

Harari, Y.N., Sapiens: A Brief History of Humankind , 2015, P129-130 in discussing the importance of accounting in ancient Mesopotamia. Emphasis added.

No one does accounting for fun. Accounting is done because it is useful. The first thing it is useful for is simply keeping track of things. Who owes money and how much, who is owed money and how much, what goods are available to sell, what supplies are available to be used, etc. We won't dwell on this but it should not be overlooked.

These factual records also for the basis for creating accounting statements and reports that are useful in less direct ways. These are:

• Informing decision making;
• Influencing behavior;
• Guiding regulatory and legal judgments.

Decision-making

In both profit and not-for-profit organizations, accounting reports are key sources of information for making strategic decisions. For example, accounting information will be utilized to help determine:

• What to produce and what services to offer;
• What combination of inputs should be used to produce those products and services;
• Whether to enter a new market;
• How much cash should be raised and when;
• Whether to invest in a joint venture.

Essentially, any time an organization faces a decision that requires weighing benefits and costs, at least some of which are financial in nature, it is natural to look to an accounting system to inform that decision. Accounting systems provide information about similar situations in the past and the state of current resources. Accounting systems also can be used to project future resources and revenue flows.

Behavior-influencing

Accounting reports influence behavior. When people are aware that their performance will be assessed using accounting-based information, they alter their conduct to conform to how their work is measured. For example, executives often have bonus plans tied to net income, return on assets, return on equity, and other numbers drawn from an organization's accounting system.

Thorough understanding of what accounting numbers mean is necessary to design such performance evaluation systems properly. Boards and senior managers hope tying compensation to summary measures drawn from the accounting system will provide incentives for managers to pay attention to key organizational goals. However, performance evaluation schemes that do not make appropriate use of accounting information can actually lead to damaging behavior, as managers "game" the system to improve their rewards, but not improve organizational performance.

Inputs to the Regulatory and Justice Systems

Though often-overlooked, regulators, courts and the legal system often make extensive use of accounting information. For example, when one company has harmed another by using intellectual property without paying royalties, the damages are often assessed using accounting reports and systems. How much extra profit was earned through the misuse of a given piece of intellectual property? How much profit was foregone by the failure to collect royalties and fees? Assessments of these amounts usually begins by studying accounting reports.

Different Specifics, Common Structure

As an important source of information for everyone from investors to the government, accounting reports are governed by a lot of different rules and conventions, some of which are chosen with particular uses in mind. For example, the tax code in the United States guides how accounting reports for federal taxation purposes must be done. That code is established by the U.S. Congress, administered by the Internal Revenue Service, and interpreted by federal courts. Accounting reports that claim to be compiled under Generally Accepted Accounting Principles (GAAP) must follow the rules governed by the U.S. Securities & Exchange Commission, which delegates the specifics to the Financial Accounting Standards Board and related bodies. There is also an international accounting rule-making apparatus that determines the rules for reporting under International Financial Reporting Standards.

Regardless of the specific rules, all financial accounting systems share a common underlying structure. They use double entry accounting techniques to compile financial reports about a situation at a point in time and about flows over periods of time. While we use U.S. GAAP as our primary example, a major goal of this site is to expose the underlying common structure that all financial accounting systems share. Understanding the common structure will allow you to adapt to financial statements prepared under different rules, as well as to understand how new rules and conventions will change existing reports. The important thing is to understand the common structure of all accounting systems, not specific rules.

Entity and Transactions

To begin accounting, you must first identify the entity you will be considering. The entity, for example, could be an individual, a partnership, a limited liability company, a corporation, a non-profit or a government.

Whatever the entity, it must interact with outside parties to accomplish its goals. We think of these interactions as transactions in which the parties involved trade things of value.

Here's a short video that discusses the entity concept and transactions:

An accounting system and the reports reflect three elements:

Aspirations

Conventions.

A framework for understanding accounting and its products, financial reports, requires knowing what the accounting is trying to achieve (aspirations), the practical ways it goes about it (conventions) and the context in which the accounting is being done.

Accounting systems do not "measure" the "truth." The world of economic activity is too complex for that. At best, accounting systems aspire to give useful insights as to an entity's operations from a particular point of view. Understanding what the creators of an accounting system were looking to capture is a key step in interpreting the results from the system

One of the problems in assessing value is that it is very hard to define precisely what we mean by “value”, much less measure it. For example, how much is a key piece of machinery worth? Worth to whom and for what purpose? Should one value it at its purchase price depreciated by its age? Should it be valued by how much someone else might be willing to pay for it? Should it be valued at the market price of purchasing a new replacement? You can make an argument for any one of these methods (and people have).

Instead of getting bogged down in a misguided attempt to “measure” the “truth”, accountants adopt conventions to deal with such thorny issues. If applied properly, the conventions may not capture the full reality of a situation. But if you understand the convention, you can diagnose an accounting report's limitations (and strengths).

Accounting does not take place in a vacuum. It is done by human beings who are naturally influenced by their personal goals, the society in which they live, the prevalent economic conditions, and the political winds that are flowing. The influence of the context is sometimes difficult to parse, but time and time again, we have seen how it sways accounting reports.

Here's a video that discusses these three parts of the Framework:

Importance of Tracking Wealth Creation

One of the key aspirations of for-profit accounting is to examine whether an entity is actually creating wealth. This is more difficult to determine than you might imagine. Money flows into an entity from a variety of sources – for example there are early investors, bond-holders, later investors, customer deposits, and supplier credits. The central goal of a for-profit entity is to add value to inputs and generate a profit. However, sometimes entities just move money from one outside party to another, giving the appearance of being successful, but actually not generating wealth.

(NOTE: This video refers to T-bills, which is short for Treasury Bills. T-bills are one way the U.S. Federal Government borrows money. It also refers to the S&P 500, which is short for Standard & Poors 500. The S&P 500 is an index of the stock prices of 500 large U.S. companies picked to be representative of the U.S. economy.)

More on Ponzi Schemes

Financial Statements 101

Accounting statements present two types of financial information:

• Financial information pertaining to a point in time .
• Financial information pertaining to flows over a period of time .

An accounting statement focused on a point in time is like a snapshot to present financial "position." The balance sheet , or statement of financial position , is this type of accounting report.

An accounting statement focused on flows over a period of time is like a movie that shows financial "motion." For a for-profit entity, the income statement , cash flow statement , and statement of changes in shareholders' equity are these kinds of statements. For a not-for-profit entity, the statement of activities and statement of cash flows show similar information .

An important feature of accounting is that the snapshots and the movies must all fit together - i.e., they must articulate . Here is a video to help you visualize this structure.

You can tell from the video how important the Fundamental Accounting Identity is in guiding accountants' thinking about balance sheets. It is so important that we should take more time to go into it more deeply.

Principles of Accounting Volume 1 Financial Accounting

(11 reviews)

Contributing Authors

Copyright Year: 2019

ISBN 13: 9781947172678

Publisher: OpenStax

Language: English

Formats Available

Conditions of use.

Learn more about reviews.

Reviewed by Richard Hale, Associate Professor, Berea College on 12/1/23

The authors do a fine job of proceeding through the expected topics at a manageable pace while giving sufficient depth for an introductory course. read more

Comprehensiveness rating: 5 see less

The authors do a fine job of proceeding through the expected topics at a manageable pace while giving sufficient depth for an introductory course.

Content Accuracy rating: 5

Coverage of content is accurate. Basic principles are introduced in the proper sequence, and the authors clearly present the topics in the expected manner.

Relevance/Longevity rating: 5

Examples are current and relevant.

Clarity rating: 5

Accounting is often referred to as "the language of business." Accordingly, the text does a fine job of relating the terminology to introductory students to topics and concepts they may not have encountered in prior dealings.

Consistency rating: 5

No unexpected jumps in difficulty nor lapses in topic coverage.

Modularity rating: 5

As with all other OpenStax offerings, modularity is an area in which this textbook shines. It would be easily possible to assemble a survey course combining topics from this book and the second offering (Principles of Managerial Accounting) to create a one-semester offering.

Organization/Structure/Flow rating: 5

Principles of Accounting has a certain flow to it which this book replicates.

Interface rating: 5

The textbook reads as well online as it does in print.

Grammatical Errors rating: 5

No editorial or grammatical errors noted.

Cultural Relevance rating: 5

OpenStax has traditionally been inclusive in its examples.

An issue that may arise when adopting this textbook...there is an appalling lack of publisher-provided ancillaries. Yes, there are PowerPoint slides. No, there are not quizzes, homework assignments, or in-class work available. Supposedly, these materials exist in the user community, yet I was unable to locate or obtain them. This remains a stumbling block (in my mind) to adoption.

Reviewed by JiangBo Huangfu, Assistant Professor of Accounting, Berea College on 11/30/23

I'm pleasantly surprised by the book's comprehensiveness. For instance, my classes use a textbook from a major publisher, and upon comparison, I observe no significant difference in the breadth and depth of the content they cover read more

I'm pleasantly surprised by the book's comprehensiveness. For instance, my classes use a textbook from a major publisher, and upon comparison, I observe no significant difference in the breadth and depth of the content they cover

I incorporated some exercises from this book into my current classes, and they proved to be highly effective. I did an intensive reading of one chapter for class preparation, I did not identify any errors.

I'm currently using the latest edition of a textbook from a major publisher. I think the content of this textbook is up-to-date content because it aligns well with the one I am using. Nonetheless, it would be beneficial if the textbook included relevant case problems.

I read a couple of chapters in greater depth and find the textbook offers remarkable clarity, making complex concepts easily understandable for readers.

I find a coherent and connected learning experience when I scanned the whole book and when I intensively read a few of the chapters.

I feel that the chapters in this textbook are effectively structured with well-defined subsections. Each chapter is thoughtfully organized into digestible segments, allowing readers to navigate through the material with ease. This breakdown into subsections enhances comprehension by presenting information in manageable portions.

I think the organization of this textbook is both logical and systematic. Each chapter unfolds in a coherent manner, with a clear progression of ideas and concepts. The content is well structured, often beginning with an introduction with a case to set the stage, followed by a systematic breakdown into sections or subsections. This organization facilitates a smooth flow of information, helping readers understand the material progressively. Key concepts are appropriately highlighted, and the inclusion of relevant examples and illustrations further enhances clarity.

The online version is easy to navigate.

Upon careful review, I found no apparent or obvious errors were detected in the content. I quite enjoy reading the book and feel the information presented is thoroughly checked and consistently reliable.

I appreciate the textbook's focus on accounting and business principles. The content is tailored to provide comprehensive insights into accounting practices and their applications in the business world without perpetuating cultural insensitivity.

Reviewed by Dave Jordan, Instructor, Northeastern Illinois University on 4/29/23

Principles of Accounting Volume 1 is comprehensive and covers all elements of a typical introductory accounting course. The text goes deep into certain areas and only touches the surface on others. The text sometimes takes a multi-pass approach... read more

Comprehensiveness rating: 4 see less

Principles of Accounting Volume 1 is comprehensive and covers all elements of a typical introductory accounting course. The text goes deep into certain areas and only touches the surface on others. The text sometimes takes a multi-pass approach to explain a topic. In Chapter 2 - the text provides an introduction to the financial statements and then builds on it in Chapter 3. I have seen this in other textbooks. My desired approach is show an income statement with operating income / other / tax / EPS; show a statement of owners equity with dividends. Chapter 3 is great. I love that expenses are explained using the house of GAAP. Nice touch. I would have introduced a compare and contrast of expenses to assets in Chapter 3. In recording JEs in Chapter 3; I would have preferred less transactions and the T-Account to be illustrated earlier. JE, A=L+E; T-account, then end with TB and F/S.

So as it relates to comprehensiveness - It's there; sometimes over-explained with words (like trying to show both perpetual and periodic inventory methods simultaneously (why??)) / underexplained (like in Chapter 2) / but mostly topics are explained, and are sufficiently covered

Some chapters are not organized naturally (e.g. AIS.) The student is learning about inventory and then immediately accounting information systems in the next chapter. I like the content in the chapter but either early on as a basis for understanding tools that accountants use or at the end. In teaching from this book - I would be forced to skip chapters and introduce chapters out of order. There are too many chapters (provides options for instruction who emphasize certain chapters over others) but a concern is the way the text is constructed.

In Summary - the book is comprehensive. I rate it a 4 out of 5 as in very good.

Content Accuracy rating: 4

Principles of Accounting Volume 1 is highly accurate. I do think there are some issues with immaterial items like re-naming titles of sections (e.g. 1.3 Describes Typical Accounting Activities and the Role Accountants Play in Identifying, Recording, and Reporting Financial Activities to "Types of Organizations: as it appears to me as this section is mis-titled), but more importantly when the text defines elements of revenues and expenses it defines these elements over multiple chapters; and the earlier chapters (Chapter 2) is actually materially incomplete. The text provides an introductory definition and then provides a better definition in later chapters. Just define it correctly, once? When the text simplifies a definition - the text approaches misleading the student into an understanding of an element that is incorrect. Another example of this is the first pass (introduction) of the statement of cash flows. It is not wrong but it does not show a statement of cash flows, it's elements, or its purpose. I would show a more complete statement and let the instructor simplify the illustration.

The text is accurate and comprehensive. I gave it a 4/5 as in very accurate. Many items, I can teach directly from the text by only using the text. Accurate and clearly presented.

Principles of Accounting Volume 1 is mostly an outline of accounting rules that have been around for a long time; won't change; and will be relevant for the foreseeable future. There are some changes (e.g. analytics) that changing the way accountants work. The text does have material in Chapter 7 (e.g. 7.1 storing data) that may need to be addressed as technology changes and/or might make it obsolete, but I don't see a way around this. AIS is an important topic and is a basic tool. It needs to be explain now even though the tools are evolving quickly to be cloud based and app based.

Overall the relevance of this text is up to date that will not quickly become obsolete (depending in part on technology changes in the near future).

Clarity rating: 3

Principles of Accounting Volume 1 could be presented much more concisely, more simply; and with better clarity. Certain chapters could be explained with less words, although I love the picture selections (e.g. Capone); certain chapters could be partially eliminated (i.e. Chapter 2 and explanation of periodic and perpetual inventory methods at the same time; certain chapters break continuity (e.g.AIS); and certain chapters could be completely eliminated (e.g. Chapter 14 accounting for corporations, which is outlined in each chapter before). These suggestions would improve clarity from the student learning perspective and process.

The text could provide a general introduction to accounting (tasks, profession, and regulation) in a more clear approach.

I gave the text 3/5 as being both accessible prose and inaccessible (confusing) prose, adequate content and inadequate content. It is a sold text book that would require significant modification and adaptation to work for me.

Consistency rating: 4

The text is consistent in terms of terminology and framework. The approach used by the authors through each chapter is consistent.

Modularity rating: 3

The text is divisible into smaller reading sections but not easily. Some content as presented is confusion so my approach would be to reframe it and not use it. Some content is too wordy but that is easily remedied by paraphrasing and summarizing (making it fine for modularity)

Overall the text is fine (3/5) but not great.

Organization/Structure/Flow rating: 4

The chapters could be more progressive building off of each other better. As a storyboard - the profession / the users / the systems (AIS) / The tasks (journal entries from start to finish (adjusting and closing) /Trial Balance / Financial Statements.

The text, however, took a curvy approach to the explanation of the topic, but not unlike other textbooks. Overall it wasn't great but it was typical and above average. I could use this textbook with modifications and content selectiveness (some content needs expounding / some needs modification / some needs elimination) and chapters don't work as presented for me.

The text navigation was straight forward. The chapters might be distracting or require modification but the interface was straight-forward. The pictures (images and graphs) were great! Really brings the student into the objective of the chapter/unit.

I am not the best judge - but to me the book was overly wordy in some sections - did not have any grammatical issues.

The text is professional and inclusive.

Overall the text is usable, informative, and complete. I would rate it a 3.8/5 rounding to a 4 as better than average but the text could use some work for my preferences. Accounting is difficult enough on its own - and no book is a complete instruction manual; so my preference would be to create an environment that outlines in a clear simple approach the profession / tasks (recording and reporting) / and the governance (regulations) of the profession.

Reviewed by Jennifer Sherman, Associate Professor, Bunker Hill Community College on 3/15/23

The book covers all the basics and starts with the foundations, what is accounting, the steps of accounting and thru the various parts of the balance sheet. Each chapter includes a section with the appropriate ratio, an important part of linking... read more

The book covers all the basics and starts with the foundations, what is accounting, the steps of accounting and thru the various parts of the balance sheet. Each chapter includes a section with the appropriate ratio, an important part of linking financial accounting to managerial accounting to finance

I did not find any glaring errors

The accounting field changes almost annually so it's difficult to say all content is 'up to date'. It is current up to it's publishing date (2019) so it will need to be updated soon

Clarity rating: 4

It flows as much as possible given that many of the terms are so particular to the industry

Very consistent!

Modularity rating: 4

As it's laid out, it can be subdivided. I do think the first 2 chapters could be combined but overall it looks easy to divide up

It flows well - or at least how I organize my classes.

Interface rating: 1

There seems to be no interface with Moodle or any online homework/testing that competitors (e.g. McGraw Hill) has. Also seems limited in student resources (e.g. videos) and the instructor resources are pathetic compared to other cometitors

I didn't see any grammar issues but I'm also not an English teacher!

Given the topic, there is little cultural impact/sensitivity. Given that this is for US based accounting for business, including international perspectives in any kind of great detail would just add to confusion and dilute the learning. Mention it yes, go into detail , no.

While I think this book is quite adequate, the lack of instructor and student resources makes it less desirable. The lack of an online homework/testing component would also prevent me from using the book.

Reviewed by Michael Griffin, Associate Teaching Professor, University of Massachusetts Dartmouth on 11/8/22

This book covers all the same topics that I would cover in an Accounting I course. read more

This book covers all the same topics that I would cover in an Accounting I course.

As an OpenStax book, it has gone through QA procedures and reviews and it also appears to me to be accurate and error-free.

Relevance/Longevity rating: 4

It has a 2019 copyright and is up-to-date with current financial accounting fundamentals. I do think that in its next update, some consideration should be given to the evolution of the CPA exam and the emphasis on data analytics. Also, some problem-solving with MS Excel would be a nice addition to the text.

The writing is clear and concise. Accounting does have a lot of specialize language/vocabulary and the book does a nice job with that.

The book is consistent throughout.

The sections of the text make it possible to assign various modules and to stop and lecture and problem solve based on those sections.

The topics are organized along the same lines as best-selling financial accounting textbooks.

This interface is effective, navigation of the ebook is easy and intuitive, and all tables and figures seem to load correctly and make sense.

I see now grammatical errors in the text.

OpenStax does a good job of working an editorial process that eliminates any culturally insensitive content.

One concern that I have with any accounting textbook is whether there will be a homework system that the students can benefit from and that makes grading homework an easy process. With the books that I use in my courses (McGraw-Hill, Wiley, and Pearson), I rely heavily on the LMS platforms that the publisher provides. I could be wrong, but I did not see evidence of that in this text. Of course, I could create such a homework system with our university's blackboard system but it would be a great deal of work, especially if a robust and comprehensive (content) system was created. Again, if I missed that type of technology and content, I apologize. I do know that Blackboard cartridges are available but those do not usually offer the same kind of homework that I am looking for whereby students complete worksheets, journal entries, ledgers, financial statements, and even MS Excel-like work and it is all graded by the system. Students in a financial course need lots of hands-on work - learning by doing and grading all that manually, is an impossible task because of other demands on faculty time.

Reviewed by Sayan Sarkar, Assistant Professor, University of Mary Washington on 7/8/22

With respect to comprehensiveness- the text book is very comprehensive. It also includes a section on Time value of Money which is a very important section in financial accounting. read more

With respect to comprehensiveness- the text book is very comprehensive. It also includes a section on Time value of Money which is a very important section in financial accounting.

The text-book is accurate and I did not find any error. As per my understanding, I did not find any bias.

The test is consistent. Updating the book should not be a difficult. Just by revising the examples, the book can be easily updated. I do see the book to be relevant for a long time.

For the most most part the book is clear. Though combining a few chapters can really help. This is a one semester class and covering 16 chapters can be a lot. Combing chapter 1 and 2 and combining chapter 12 and 13 can reduce the number of chapters from 16 to 14. Also financial statement analysis is an integral part of financial accounting, I suggest introducing ratios to respective chapter where they are more relevant. For examples introduce inventory management ratios in the chapters that deals with inventory.

The textbook is consistent with respect to terminology.

Overall the chapters can be easily divided into smaller parts.

Organization/Structure/Flow rating: 3

For the most part the text are presented in a logical, clear fashion. Though I suggest, moving Chapter 10 Inventory after Chapter 6 Merchandising Transactions makes more sense. Chapter 6 and Chapter 10 are both related to inventory management and moving chapter 10 to chapter 7 makes the flow much better.

Interface rating: 3

This is a place where the book can use some some help. For examples creating some more images/charts to explain the accounting equation and transactional analysis can really help with the understanding,

Grammatical Errors rating: 1

I did not find any grammatical errors.

Cultural Relevance rating: 1

As this is mostly a quantitative subject, issue of culture is not really relevant. But the examples that are used seemed very inclusive and there is no cultural in-sensitiveness.

Reviewed by Cheryl Kline, Online Faculty/Instructor, Trine University on 6/23/22

This textbook covers all areas that I would expect to see in an Accounting 1 course. There are many examples presented that make the material easier for accounting and non-accounting students to understand. The book contains an index. There are... read more

This textbook covers all areas that I would expect to see in an Accounting 1 course. There are many examples presented that make the material easier for accounting and non-accounting students to understand. The book contains an index. There are also PowerPoint slides that include selected graphics from the text, key concepts and definitions, examples, and discussion questions. The index is an in-depth glossary of terms used throughout the book,, and also states which chapter and subsection the term is used.

The book is accurate, error-free and unbiased. The book complies with the current accounting rules and regulations. OpenStax updates these textbooks on a regular basis, so there is no worry about using an outdated textbook for your classes. The principles of GAAP which pertain to accounting consistency, transparency and ethics are followed. There were no errors found during my review. I did not note or sense any bias throughout the book.

The students love not having to purchase a book. Instructors can rely on up-to-date accounting information, but unlike purchased publisher textbooks, these are not replaced every other year. Any significant accounting changes will be updated and the examples will not be outdated.

This book is specifically designed for both accounting and non-accounting majors, explaining the core concepts of accounting in familiar ways to students. Each chapter opens with a relatable real-life scenario for today’s college student to build a strong foundation that is applicable across many aspects of business.

Consistency in the terminology and framework was prevalent throughout the textbook. The accounting framework is used consistently to measure, recognize, present, and disclose the information appearing in financial statements.

The modularity is consistent throughout the book. Each chapter is divided into subsections that may be individually assigned if that is more appropriate for a class than assigning the entire chapter. For example, a chapter on Fraud, Internal Controls, and Cash has seven subsections; one on Petty Cash and another one on Bank Reconciliations. If you want to concentrate on one or more of these topics rather than the entire chapter, it is very easy to do. This also makes the reading more comprehensive and easier for the students who cannot finish the reading assignment at one time.

The topics are presented in a logical and clear fashion. The chapters build on one another and flow from one to the other effortlessly.

Interface rating: 4

The book's is basically free of interface issues. The book has a detailed chapter of contents and an index with an alphabetized glossary. The images and charts are simple and easy to read and understand. There didn't seem to be any display features that would distract the normal reader. There was an issue with the embedded charts and graphs. These are not acceptable for the reading impaired, and it was necessary to retype them when using them for assignments. It would also be great to have page numbers included for students using the online version of the book. Page numbers are sometimes used in OER classes to direct students to the correct assignment.

There were no grammatical errors found in my review.

There were no culturally insensitive or offensive words, phrases, or references observed. It would be advisable to include examples for races, ethnicities', and inclusive backgrounds.

I would recommend this book for use in accounting classrooms. There is also a second book, Principles of Accounting 2, which concentrates on management accounting.

Reviewed by Dianne Poulos, Adjunct Professor, Bunker Hill Community College on 6/30/20

The textbook provides a thorough overview of the accounting system. It delves quite a bit into the "why" of accounting which is sometimes glossed over in favor of mechanics in other texts. read more

The textbook provides a thorough overview of the accounting system. It delves quite a bit into the "why" of accounting which is sometimes glossed over in favor of mechanics in other texts.

No errors were encountered in my review.

The life examples are drawn from companies which are relevant and understandable to students today.

Looking at this from the context of a non-native English speaker, some of the language or vocabulary would be difficult to comprehend. Words such as ancillary even though explained later, might turn off a reader who already struggles with the language.

There is much consistency between the chapters in terms of how they are structured. Terminology is consistent as well.

Each chapter is broken into smaller, easily digested sections. Although chapters 1-5 must be presented in sequential order since we are discussing a sequence of events in an accounting cycle, the others can easily be moved around in terms of order presented.

The illustrations are particularly helpful. Also, really liked how debits and credits are brought into the discussion of the accounting equation early. Other texts have the instructor teaching to the equation and then introducing the concept of debits and credits. This creates a lot of confusion in some of the students.

Interface was great.

No grammatical errors detected.

I did not detect any. However, as a straight, white woman, I might not be as sensitive to the issues.

This is a good, solid textbook. There are many exercises and problems for students to use in the application of the material. The "Think it Through" sections in the chapter will provide some good fodder for discussion. I'm always looking for a way to not be lecturing but discussing. These open framework hypotheticals do the trick. Real life examples are presented in a way that most students have encountered in their life. This has been the way I've been teaching and this book will be a good resource to further enhance my lectures.

Reviewed by William Holmes, Instructor, LSUE on 4/15/20

The text covers all the important aspects that should be covered in the introduction to financial accounting. The text covers an overview of accounting information systems which I have not seen in textbooks I've used. It looks like the content... read more

The text covers all the important aspects that should be covered in the introduction to financial accounting. The text covers an overview of accounting information systems which I have not seen in textbooks I've used. It looks like the content is solid and comprehensive.

The information contained in the book is accurate and inline with what would be expected from an introduction to financial accounting textbook.

The topics covered in the book are relevant. I've used two textbooks for my course in the last five years and the information is comparable.

The book is clearly written.

The book is consistent.

The book is split into appropriate parts. This book did introduce financial statements and how to prepare them early than other books I've reviewed; however, I see how this can assist the student in understanding how financial statements are useful in business and how they can be used before getting into the weeds of details on analyzing accounts. As noted, I like the fact they are introducing accounting information systems which is an important topic.

Please refer to the previous comment, the book is well organized and consistent with other books that I have reviewed on the subject matter.

The book interfaced well. There did not appear to be any problem with navigation or other displays such as charts and graphs.

No grammatical errors were noted.

This text is straight forward and focused on the subject of financial accounting. It was no insensitive in any way.

After reviewing the book, and the accompanying resources I will consider adopting it for use in my classes. If not as a primary resource, I will recommend the source as an additional reading option for my students.

Reviewed by Darin Bell, Business Instructor, Treasure Valley Community College on 1/4/20

This textbook has all of the content that I cover with the publisher textbook that I have used for the past 6 years. read more

This textbook has all of the content that I cover with the publisher textbook that I have used for the past 6 years.

I have not used this test yet for an actual course but in my initial review I did not find any errors in the text.

This text includes some very relevant information about careers in accounting. I did not see a tie-in with data analysis which would have been nice but there are other ways to integrate this in to a course.

This textbook uses of T-accounts and diagrams to make the concepts become clearer for students. For a fee there are also videos through the OpenStax app.

This text is written in a single voice and allows for consistency through out the entire textbook. The types of graphics and the language that provides structure is also the same throughout the entire book.

Each chapter has subunits and it would be possible to remove or skip some of the units and there learning objectives because they are all numbered and ordered.

This text lays out the basic accounting foundation in the first five chapters. The publisher book I have used does it in 4 chapters. Having more chapters is a plus especially if your student struggle with the basic concepts. I wish that the chapters on merchandising and inventory were back-to-back. I will flip these when I use the book in my class to provide more continuity for these concepts. All of the other chapters are in a logical order.

There are many format options that are common to OpenStax textbooks that make this book a very accessible and usable book.

In my limited review I did not find any grammatical errors. I have not used this text yet in a course. Upon using it in a course I suspect any errors will surface.

I did not find any culturally insensitive or offensive content in this textbook.

I am excited to use this textbook in my courses this next year. I plan on creating my own videos and exam problems to expand the course. I will also create a Canvas course that I am will to share.

Reviewed by Andrew Hartzler, Professor of Accounting, Goshen College on 7/15/19

This book is perhaps the most comprehensive text I have seen for financial accounting. For those who are familiar with Financial Accounting, the index and glossary are sufficiently detailed. The fact that the text is so comprehensive is both a... read more

This book is perhaps the most comprehensive text I have seen for financial accounting. For those who are familiar with Financial Accounting, the index and glossary are sufficiently detailed. The fact that the text is so comprehensive is both a positive and a negative. It is positive in the sense that it has essentially every topic that you may want to cover in an introductory course. For newer instructors however it may be a bit daunting to distill the content down to what is most essential to cover in an introductory course. The text has some content that is more relevant to courses such as Accounting Information Systems, Financial Management, and Intermediate Accounting. An experienced instructor can recognize this and use the necessary elements for a principles course whereas for a new instructor the content is too extensive to cover in a single semester long course and would potentially overwhelm them. If an instructor's principles course contained only students who quickly and easily understood accounting concepts, then it would be possible to touch on such a wide variety of concepts in an introductory course. However, most principles courses contain business majors and other non-accounting majors who would struggle with the pace required to cover so much material.

I noticed a few typo-graphical errors but overall the text is well-written and accurate. I noticed no specific bias in the writing or examples.

Basic accounting concepts have not changed for a long time. For that reason, open source texts such as this one should be more widely used. The small incremental changes made in the basic structure of accounting do not warrant the frequent new editions that publishers try to push through. The only elements that would need to be updated may be the dates after a period of time so that they are more current and perhaps a few of the examples. The basic accounting elements however will not become obsolete and will remain relevant for the foreseeable future.

This text is very well-written. It contains excellent explanations of concepts such as the differences/similarities between revenue and gains. The primary issue I see with the text (as with other financial accounting texts) is how quickly it assumes students understand concepts of revenues/expenses, the function of accounts, and cash vs. accrual accounting. For those very familiar with accounting, the ordering of the concepts in financial accounting textbooks seems to make sense. However, if one takes a step back and thinks about what students might be struggling with, one can quickly see how fast these texts expect students to make leaps in their understanding. An example of this (which is common to most financial accounting texts) is the introduction of financial statements in chapter two before students fully grasp what the elements reflected on the financial statements represent. It is critical to spend enough time with students making sure that they understand how the basic accounting system works (revenues, expenses, accounts, cash and accrual basis) before they can make full use of the subsequent accounting concepts that are presented.

The structure of the book is consistent throughout.

The text is sufficiently modular in format to be easily reorganized and realigned.

The topics follow a clear, logical order. The only exceptions are chapters 1 and 2. Chapter 1 presents a broad overview of accounting which is common in financial accounting texts. What is included is fairly logical, but I find that topics such as retail businesses vs. service businesses and the difference between lenders/creditors/stockholders are more meaningfully included later in the text when the instructor is dealing directly with the accounting elements that illustrate the differences between these topics. As I mentioned previously, chapter 2 makes the assumption that students already grasp at this early stage what revenues and expenses are and the differences between cash and accrual accounting.

The interface is clean and easy to follow.

I noticed a few typo-graphical errors but overall the text is well-written grammatically.

I did not notice any cultural insensitivity. I noted a variety of inclusive examples.

Table of Contents

• 1. Role of Accounting in Society
• 2. Introduction to Financial Statements
• 3. Analyzing and Recording Transactions
• 4. The Adjustment Process
• 5. Completing the Accounting Cycle
• 6. Merchandising Transactions
• 7. Accounting Information Systems
• 8. Fraud, Internal Controls, and Cash
• 9. Accounting for Receivables
• 10. Inventory
• 11. Long-Term Assets
• 12. Current Liabilities
• 13. Long-Term Liabilities
• 14. Corporation Accounting
• 15. Partnership Accounting
• 16. Statement of Cash Flows
• 17. Answer Key

Ancillary Material

About the book.

Principles of Accounting is designed to meet the scope and sequence requirements of a two-semester accounting course that covers the fundamentals of financial and managerial accounting. Due to the comprehensive nature of the material, we are offering the book in two volumes. This book is specifically designed to appeal to both accounting and non-accounting majors, exposing students to the core concepts of accounting in familiar ways to build a strong foundation that can be applied across business fields. Each chapter opens with a relatable real-life scenario for today’s college student. Thoughtfully designed examples are presented throughout each chapter, allowing students to build on emerging accounting knowledge. Concepts are further reinforced through applicable connections to more detailed business processes. Students are immersed in the “why” as well as the “how” aspects of accounting in order to reinforce concepts and promote comprehension over rote memorization.

About the Contributors

Senior Contributing Authors Mitchell Franklin, LeMoyne College (Financial Accounting) Patty Graybeal, University of Michigan-Dearborn (Managerial Accounting) Dixon Cooper, Ouachita Baptist University

Contribute to this Page

Course Resources

Assignments.

The assignments in this course are openly licensed, and are available as-is, or can be modified to suit your students’ needs. Answer keys are available to faculty who adopt Lumen Learning courses with paid support. This approach helps us protect the academic integrity of these materials by ensuring they are shared only with authorized and institution-affiliated faculty and staff.

If you import this course into your learning management system (Blackboard, Canvas, etc.), the assignments will automatically be loaded into the assignment tool.

You can view them below or throughout the course.

• Module 0: Personal Accounting— Assignment: Creating a Budget
• Module 1: The Role of Accounting in Business— Assignment: Lopez Consulting
• Module 2: Accounting Principles— Assignment: Accounting Principles
• Module 3: Recording Business Transactions— Assignment: Recording Business Transactions
• Module 4: Completing the Accounting Cycle— Assignment: Completing the Accounting Cycle
• Module 5: Accounting for Cash— Assignment: Accounting for Cash
• Module 6: Receivables and Revenue— Assignment: Manilow Aging Analysis
• Module 7: Merchandising Operations— Assignment: Merchandising Operations
• Module 8: Inventory Valuation Methods— Assignment: Inventory Valuation Methods
• Module 9: Property, Plant, and Equipment— Assignment: Property, Plant, and Equipment
• Module 10: Other Assets— Assignment: Other Current and Noncurrent Assets
• Module 11: Current Liabilities— Assignment: Calculating Payroll at Kipley Co
• Module 12: Non-Current Liabilities— Assignment: Non-Current Liabilities
• Module 13: Accounting for Corporations— Assignment: Collins Mfg Stockholders’ Equity
• Module 14: Statement of Cash Flows— Assignment: Kachina Sports Company Cash Flows
• Module 15: Financial Statement Analysis— Assignment: Coca Cola FSA

Discussions

The following discussion assignments will also be preloaded (into the discussion-board tool) in your learning management system if you import the course. They can be used as is, modified, or removed. You can view them below or throughout the course.

• Module 0: Personal Accounting— Discussion: Winning the Lottery
• Module 1: The Role of Accounting in Business— Discussion: The Crafty Coffee Crook
• Module 2: Accounting Principles— Discussion: SoftSheets
• Module 3: Recording Business Transactions— Discussion: Baker’s Breakfast Bars
• Module 4: Completing the Accounting Cycle— Discussion: Closing the Books in QuickBooks
• Module 5: Accounting for Cash— Discussion: Counter Culture Cafe
• Module 6: Receivables and Revenue— Discussion: Maximizing Revenue
• Module 7: Merchandising Operations— Discussion: Inventory Controls
• Module 8: Inventory Valuation Methods— Discussion: LIFO, FIFO, Specific Identification, and Weighted Average
• Module 9: Property, Plant, and Equipment— Discussion: Cooking the Books
• Module 10: Other Assets— Discussion: Other Assets
• Module 11: Current Liabilities— Discussion: Current Liabilities
• Module 12: Non-Current Liabilities— Discussion: Off-Balance Sheet Financing
• Module 13: Accounting for Corporations— Discussion: Home Depot
• Module 14: Statement of Cash Flows— Discussion: Facebook, Inc.
• Module 15: Financial Statement Analysis— Discussion: Financial Statement Analysis

Alternative Excel-Based Assignments

For Modules 3–15, additional excel-based assignments are available below.

Module 3: Recording Business Transactions

• Module 3 Excel Assignment A
• Module 3 Excel Assignment B

Module 4: The Accounting Cycle

• Module 4 Excel Assignment A
• Module 4 Excel Assignment B
• Module 4 Excel Assignment C
• Module 4 Excel Assignment D

Module 5: Accounting for Cash

• Module 5 Excel Assignment

Module 6: Receivables and Revenue

• Module 6 Excel Assignment A
• Module 6 Excel Assignment B

Module 7: Merchandising Operations

• Module 7 Excel Assignment

Module 8: Inventory Valuation Methods

• Module 8 Excel Assignment A
• Module 8 Excel Assignment B
• Module 8 Excel Assignment C

Module 9: Property, Plant, and Equipment

• Module 9 Excel Assignment A
• Module 9 Excel Assignment B

Module 10: Other Assets

• Module 10 Excel Assignment

Module 11: Current Liabilities

• Module 11 Excel Assignment

Module 12: Non-Current Liabilities

• Module 12 Excel Assignment A
• Module 12 Excel Assignment B

Module 13: Accounting for Corporations

• Module 13 Excel Assignment A
• Module 13 Excel Assignment B
• Module 13 Excel Assignment C

Module 14: Statement of Cash Flows

• Module 14 Excel Assignment A
• Module 14 Excel Assignment B

Module 15: Financial Statement Analysis

• Module 15 Excel Assignment

Review Problems

There are also three unit review assignments and a final review. These reviews include a document which sets up the problems and an excel worksheet.

Unit 1 Review Problem (After Module 6)

• Review Problem Document

Unit 2 Review Problem (After Module 8)

Unit 3 review problem (after module 9), final review (after module 15).

• Assignments. Authored by : Cindy Moore and Joe Cooke. Provided by : Lumen Learning. License : CC BY: Attribution

Introduction to Accounting

Accounting is a wonderful but confusing discipline. The widely view is it’s typically mind-numbing number-crunching; the idea certainly has a few of them, but additionally it is also a rich intellectual pursuit with a good amount of convincing along with suspect troubles. Accountants will often be stereotyped since soulless drones laboring listlessly inside bowels of corporate bureaucracies. But quite a few accountants will certainly show you it’s people skills, not technological information, which might be crucial to their achievements. In addition to despite the fact that it has been looked at as some sort of self-discipline of identify exactitude together with rigorous principles, used accountants depend heavily in finest rates along with informed guesses that want cautious wisdom along with strong creativeness.

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