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Introduction to Accounting: An Integrated Approach, 8th Edition



Introduction to Accounting: An Integrated Approach, 8th Edition

Penne Ainsworth, Dan Deines

ISBN: 978-1-119-60013-8 May 2019 736 Pages

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The new, revised, and updated edition of the popular textbook for introductory accounting courses

Accounting plays a central role in a multitude of areas, from everyday personal finance to global corporate operations. Introduction to Accounting helps students understand the concepts, principles, methods, and mechanisms of the field. Designed to benefit all students, regardless of major, this innovative textbook integrates life skills and business skills to provide an accessible, engaging introduction to accounting. Rather than separating financial accounting from managerial accounting, this textbook demonstrates how to plan and evaluate business activities from both external and internal reporting perspectives.

Now in its eight edition, Introduction to Accounting enables students to understand both the nature and functions of business and the mechanics of the bookkeeping process. Three organizing themes—the accounting information system, business processes, and the balanced scorecard—help students learn why and how activities are planned and evaluated by different stakeholders. Based on extensive instructor feedback, as well as the authors’ six decades of combined teaching experience, this new edition has been thoroughly revised to enhance readability and highlight real-world examples. A complete array of pedagogical tools includes improved and expanded learning objectives, updated definitions, questions and problem sets, newcritical-thinking and ethical-challenge exercises, and more.

  • Focuses on accounting as an information system used in each business processes to provide information to plan and evaluate activities
  • Stimulates interest in the field of accounting with relatable, reader-friendly narrative
  • Employs various pedagogical devices to stimulate active and cooperative learning for students
  • Uses the example of Apple, Inc. throughout the text to illustrate central concepts and significant issues
  • Includes extensive online support including test problems and essay exercises for every chapter of the text, PowerPoint slides and Excel templates, downloadable solution manuals, and links to professional resources

Offering a wealth of instructor resources, Introduction to Accounting, 8th Edition is ideally suited for introductory accounting courses in both high school and university-level settings.

Related Resources

About the Authors  


Part One Introduction: Business Operating Activities  

Chapter 1 Accounting and Business  

Accounting: Who Needs It?  

Business Today  

Customer-Focused Operations  

Global Markets  

Manufacturing and Communication Advances  


Business and Accounting: Together Forever  

Ancient Babylonia  

Commerce in Old Italy  

Pacioli and the Method of Venice  

Advent of the Corporation   

The Stock Market Crash of 1929  

Return to the Present  

Generally Accepted Accounting Principles  

Statements of Financial Accounting Concepts  

International Accounting Standards  

Financial Statements  

Income Statement  

Statement of Owners’ (Shareholders’) Equity  

Statement of Cash Flows  

Balance Sheet (Statement of Financial Position)  

Comprehensive Inome

Report of the Independent Accountant (Auditor)  

Relationship of the Financial Statements  

Current Ratio  

Return on Sales Ratio  

Debt-to-Equity Ratio  

Codification of GAAP


Key Terms  

Chapter 2 Business Processes and Accounting Information  

Management Cycle  

Planning Phase  

Performing Phase  

Evaluating Phase  

Business Processes  

Business Organization and Strategy Process  

Operating Processes  

Capital Resources Process  

Performance Measurement and Management Process 

Balanced Scorecard Approach  

Financial Perspective  

Internal Perspective  

Customer Perspective  

Learning and Growth Perspective  

Internal Control  

Control Environment 

Risk Assessment

Control Activities

Information and Communication


Applying Internal Control to Protect Cash  

Cash Receipts  

Cash Disbursements  

Bank Reconciliation  

Bank Statement  

Bank Reconciliation Process  


Key Terms  

Chapter 3 Operating Processes: Planning and Control  

Revenue Process  

Generate Sales  

Receive and Accept Orders  

Deliver Goods and/or Services  

Receive Payment from Customers  

Provide Customer Support 

Expenditure Process  

Determine the Company’s Need for Goods 

Select Suppliers and Order Goods  

Receive Goods  

Pay Suppliers  

Conversion Process  

Schedule Production  

Obtain Direct Materials  

Use Labor and Other Manufacturing Resources to Make Products  

Store Finished Goods Until Sold  

Cost and Revenue Behavior  

Behavior Patterns  

Relevant Range  

Activity Measures  

Fixed Costs and Revenues  

Variable Costs and Revenues  

Mixed Costs and Revenues  

Cost/Revenue Estimation Methods  

High/Low Method  


Appendix: Linear Regression Analysis

Key Terms  

Part Two Planning: Operating Activities  

Chapter 4 Short-Term Decision Making  

Short-Term Decisions  

Cost-Volume-Profit Analysis  

Determining the Breakeven Point  

Determining the Target Profit Level  

Determining the Target Profit Level After Taxes  

Sensitivity Analysis  

Change in Selling Price  

Change in Variable Cost  

Change in Fixed Cost  

Change in Tax Rate  

Relevant Variable Analysis  

Sunk Costs Are Never Relevant  

Opportunity Costs Are Always Relevant  

Incremental Costs and Revenues May Be Relevant 

Identify the Alternative Actions  

Determine the Relevant Revenues, Costs, and Profit  

Choose the Best Alternative  

Special Order (Accept-or-Reject) Decision  

Outsourcing (Make-or-Buy) Decision  

Product Mix (Keep-or-Drop) Decision  

Another (More Difficult) Example  


Key Terms  

Chapter 5 Strategic Planning Regarding Operating Processes  

Revenue Process: Determining the Selling Price  

Customers: Customer Perspective  

Competitors: Learning and Growth Perspective   

Legal and Social Forces: Learning and Growth Perspective  

Cost: Internal Process Perspective  

Pricing Strategies  

Penetration Pricing  

Skimming Pricing  

Life-Cycle Pricing  

Target Pricing  

Conversion Process: Determining the Inventory Model  

Reasons to Maintain Inventory  

Reasons to Not Maintain Inventory  

Balancing Ordering and Carrying Costs  

Inventory Models  

Comparison of Inventory Models 

Expenditure Process: Determining the Employee Compensation Package  

Paid Compensation  

Health and Life Insurance  

Paid Leave  

Contingent Compensation: Bonuses  


Key Terms  

Chapter 6 Planning, the Balanced Scorecard, and Budgeting  

Budgeting and Goal Setting  


Communication and Coordination  

Resource Allocation  

Evaluation and Control  

Time and Resource Requirements  

Adaptability of Departments and Segments  

Motivation and Behavior of Individuals  

Mandated versus Participatory Budgeting  

Mandated Budgeting  

Participatory Budgeting  

Incremental Budgeting versus Zero-Based Budgeting  

Incremental Budgeting  

Zero-Based Budgeting  

Master Budget 

Revenue Process Planning  

Balanced Scorecard Goals  

Sales Budget  

Cash Receipts Schedule  

Accounts Receivable Schedule  

Marketing and Distribution Budget  

Conversion Process Planning  

Balanced Scorecard Goals  

Production Budget  

Expenditure Process Planning  

Balanced Scorecard Goals  

Budgeting for Human Resources  

Administrative Budget  

Cash Disbursements Schedule  

Accounts Payable Schedule  


Appendix: Conversion Process Planning

Balanced Scorecard Goals

Production Budget

Direct Labor and Manufacturing Overhead Budget  

Direct Materials Purchases Budget  

Key Terms  

Part Three Recording and Evaluating: Operating Activities  

Chapter 7 Accounting Information Systems  

Manual Accounting Systems  

Accounting Events  

Chart of Accounts  



Adjusting Entries  

Closing Entries  

Comprehensive Example  

Computer-Based Transaction Systems  

Database Systems  


Key Terms 

Chapter 8 Purchasing/Human Resources/Payment Process: Recording and Evaluating Expenditure Process Activities  

Expenditure Process 

Special Journals and Subsidiary Ledgers  

Special Journals  

Subsidiary Ledgers  


Perpetual versus Periodic Inventory Systems  

Gross versus Net Price Methods  

Purchasing Inventory

Reporting Inventory Purchase and Payment Events  

Human Resources  

Withholdings from Employees  

Employer Taxes 

Accounting Events in the Payroll Process  

Reporting Human Resource Events  

Other Expenditure Process Activities  

Cash Outflow before Expense (Assets Created)  

Expense before Cash Outflow (Liabilities Incurred)  

Expense Concurrent with Payment  

Reporting Other Expenditure Process Activities  

Financial Statements and the Expenditure Process  

Estimating Cash Paid for Inventory  

Estimating Cash Paid for Operating Expenses  

Internal Evaluation of Expenditure Process Events  


Key Terms  

Chapter 9 Recording and Evaluating Conversion Process Activities  

Manufacturing Inventories  

Recording Raw Material Activities  

Recording Labor Activities  

Recording Manufacturing Overhead Events  

Actual Manufacturing Overhead  

Applied Manufacturing Overhead  

Overhead Application Process Using ABC  

Over- and Underapplied Manufacturing Overhead  

Recording Finished Goods  

Reporting Conversion Process Events  

Internal Evaluation of Conversion Process Events  

Direct Labor Variance Analysis  

Direct Materials Variances  


Key Terms  

Chapter 10 Marketing/Sales/Collection/Customer Support Process: Recording and Evaluating Revenue Process Activities  

Revenue Recognition  

Revenue Recognized When Cash Collected  

Revenue Recognized before Cash Collected (Asset Created) 

Revenue Recognized after Cash Received (Liability Incurred)  

Sales Returns and Allowances  

Sales Discounts  

Cost of Goods Sold 

Specific Identification Method  

First-In, First-Out (FIFO) Method  

Last-In, First-Out (LIFO) Method  

Periodic Inventory System and Cost Flow Assumptions  

FIFO, LIFO, and GAPP External Reporting  

Estimating Uncollectible Credit Sales  

Proper Income Measurement  

Proper Asset Valuation  

Recording Estimated Uncollectible Accounts  

Recording Actual Uncollectible Accounts  

Reporting Revenue Process Events  

Estimating Cash Receipts from Customers  

Internal Evaluation of Revenue Process Events  

Revenue Variances  


Key Terms  

Part Four Introduction: Capital Resource Process Activities  

Chapter 11 Time Value of Money  


Time Considerations  

Initial Investment Considerations  

Rate of Return  

Expected Rate of Return  


Attitudes toward Risk  

Types of Risk  

Risk/Return Relationship  

Risk Premiums  

Risk/Return and Investors’ Money  

Time Value of Money  

Simple and Compound Interest  

Future Value of the Amount of $1  

Present Value of the Amount of $1  


Future Value of an Annuity  

Present Value of an Annuity  

How to know which tools to use

Step 1. Determine Whether the Problem Is an Annuity  

Step 2. Determine Whether the Problem Is Present or Future Value  

Step 3. Identify the Missing Element  

Step 4. Solve for the Missing Element  

More Time Value of Money Problems  


Key Terms  

Appendix: Time Value of Money Tables  

Part Five Planning: Capital Resource Process Activities  

Chapter 12 Planning Investments: Capital Budgeting  

The Capital Budgeting Process  

Identifying Long-Term Investment Opportunities  

Tie to Business Organization and Strategy Process  

Selecting Appropriate Investments  

Net Present Value Analysis  

Assumptions of NPV  

Source of Cash Flows  

Uneven Cash Flows  

Income Taxes  

Tax Shield  

Gains and Losses on Disposal of Assets  

Comprehensive Example

Payback Method  

Other Issues  

Human Judgment  


Qualitative/Ethical Factors  

Capital Expenditures and Budgeting  


Key Terms  

Chapter 13 Planning Equity Financing  

Tie to Business Organization and Strategy Process  

Debt versus Equity Financing  

Risk of Debt Financing  

Debt-to-Equity Ratio  

Times Interest Earned Ratio  

Reward of Debt Financing  

Return on Owners’ Equity Ratio  

Reward of Equity Financing  

Risk of Equity Financing  

Equity Financing  

Sole Proprietorships and Partnerships  


Planning for Partnership Equity  

Partnership Income Allocations  

Other Changes in Capital  

Planning Corporate Equity  

Common Stock  

Preferred Stock  

Return on Common Equity  

Stock Shares  

Stock Values  


Dividend Dates  

Stock Splits  

Corporate Equity Planning and Budgeting  


Key Terms  

Chapter 14 Planning Debt Financing  

Debt Financing  

Long-Term Debt Instruments  

Periodic Payment (Installment) Note  

Lump-Sum Payment (Noninterest-Bearing) Note  

Periodic Payment and Lump-Sum Note  

Comparison of the Three Types of Notes  

Sources of Debt Financing  

Nonpublic Funding  



Public Funding: Bonds  

Comprehensive Example: Chapters 12 through 14  


Key Terms  

Part Six Recording and Evaluating Capital Resource Processes  

Chapter 15 Recording and Evaluating Capital Resource Process Activities: Financing  

Review of Transaction-Based Accounting Systems  

Equity Financing Activities  

Contributions by Owners (Shareholders)  

Corporate Earnings  

Corporate Distributions  

Financial Statements and Owners’ Equity Activities  

Debt Financing Activities  

Installment Notes Payable  

Noninterest-Bearing Notes Payable  

Bonds Payable: Market Rate Greater Than the Face Rate  

Bonds Payable: Market Rate Less Than the Face Rate  

Bonds Payable: Market Rate Equal to the Face Rate 

Accounting for Leases

Financial Statements and Financing Activities  

Internal Evaluation of Financing Activities  


Key Terms  

Chapter 16 Recording and Evaluating Capital Resource Process Activities: Investing  

Plant Assets  

Acquisition of PPE  

Use of PPE  


Other PPE Usage Issues  

Disposal of PPE  

Discard PPE  

Sell PPE  

Exchange PPE  

Exchanges When No Gains and Losses Are Recorded  

Natural Resources  

Intangible Assets  

Nonoperational Investments 

Internal Evaluation of Investment Activities  


Key Terms  

Part Seven Evaluating: Operating and Capital Resource Processes  

Chapter 17 Company Performance: Profitability  

Purpose of the Income Statement  

GAAP and Comprehensive Income  

What Are Earnings?  

Earnings per Share  

Calculating Earnings per Share  

Calculating Diluted Earnings per Share  

Other Earnings per Share Disclosures  

Other Required Income Statement Disclosures  

Reporting Issues Concerning the Income Statement  

Historical Cost and Conservatism  

Cost Allocations  

Full-Absorption Costing  

Internal Profitability Reporting  

Variable and Throughput Costing Methods  

Product Line (Divisional) Income Reports  

Return on Investment for the Division  

Du Pont Method of Return on Investment  


Key Terms  

Chapter 18 Company Performance: Owners’ Equity and Financial Position  

Statement of Comprehensive Income

Statement of Shareholders’ Equity  

Retained Earnings  

Other Disclosures  

Statement of Financial Position (Balance Sheet)  

What Is Financial Position?  

Why is the Distinction between Current and Noncurrent Items Important?  

Balance Sheet Classifications  


Liabilities and Shareholders’ (Owners’) Equity  

Internal Financial Position Reporting  


Key Terms  

Chapter 19 Company Performance: Cash Flows  

GAAP and the Statement of Cash Flows  

Purpose of the Statement of Cash Flows  

Sections of the Statement of Cash Flows  

Operating Activities: Cash Flows  

Brief Comparison of the Direct and Indirect Methods  

Calculation of Operating Cash Flows: Direct Method  

Calculation of Operating Cash Flows: Indirect Method  

Comparison of Direct and Indirect Methods  

Apple’s Operating Cash Flows  

Investing Activities: Cash Flows  

Calculating Investing Cash Flows  

Investing Cash Flows of Apple  

Financing Activities: Cash Flows  

Calculating Financing Cash Flows  

Financing Cash Flows of Apple  

Net Change in Cash  

Other Investing and Financing Activities  

Internal Evaluation of Cash Flows  


Key Terms  

Chapter 20 Company Performance: Comprehensive Evaluation  

External Stakeholders  

Creditors and Investors  


Trading in Capital Markets  

Information in Capital Markets  

Issues to Consider  

Role of Independent Auditor  

Annual Report Analysis  

Studying the Financial Statements  

Industry Analysis  

Statement Analyses  

Vertical Analysis  

Horizontal Analysis  

Ratio Analysis  

Other Information  

Management’s Letter to Shareholders  

Segment and Quarterly Data  

Auditor’s Report  


Key Terms  

Appendix Apple’s 2017 Financial Statements and Accompanying Notes