Accounting, 3rd Edition

SECTION A

Financial Accounting: The Techniques

In this section, we look at the accounting techniques which underpin the preparation and interpretation of the financial statements. Chapter 2 sets the scene for this section explaining the essential background. It deals with the nature and importance of financial accounting and introduces some of the basic concepts and terminology.

In these initial chapters, we focus primarily on the financial statements of the sole trader as these are the most straightforward. In Chapter 3, the key accounting techniques of the accounting equation, double-entry bookkeeping and the trial balance are introduced. The double-entry section of this chapter is self-contained and can be passed over by those students not wishing to study bookkeeping in depth. In Chapters 4 and 5, the essential nature, function and contents of the income statement and statement of financial position are discussed. This will enable students more fully to appreciate the importance of the income statement and statement of financial position before their preparation from the trial balance is explained in Chapter 6. In Chapter 7, we prepare the income statement and statement of financial position (balance sheet) of partnerships and limited companies. The final two chapters look at the statement of cash flows (Chapter 8) and the interpretation of accounts (Chapter 9) primarily from the perspective of limited companies. The statement of cash flows is the third most important financial ...