Intermediate Accounting: IFRS Edition, 2nd Edition

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. 1 Understand basic accounting terminology.
2. 2 Explain double-entry rules.
3. 3 Identify steps in the accounting cycle.
4. 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.
5. 5 Explain the reasons for preparing adjusting entries.
6. 6 Prepare financial statements from the adjusted trial balance.
7. 7 Prepare closing entries.
8. 8 Prepare financial statements for a merchandising company.

Needed: A Reliable Information System

Maintaining a set of accounting records is not optional. Regulators require that companies prepare and retain a set of records and documents that can be audited. The reasons: A company that fails to keep an accurate record of its business may lose revenue, operate ineffectively, and provide information that is inaccurate and misleading.

However, accurate records may not be provided because of economic crime or corruption. It is clear that economic crime remains a persistent and difficult problem for many companies. Presented to the right is a chart that indicates the types of economic crimes that companies around the world have experienced recently.

The top four economic crimes are asset misappropriation, cybercrime, bribery and corruption, and accounting fraud. Many of the frauds include employee expense fraud, fraudulent invoicing, related payments, and inappropriate ...