IB – HvA
Financial Management Summary
Chapter 1, 2 and 3
16 th edition Financial & Managerial Accounting
Warren, Jonas and Tayler
Written by Nanoux Dassel
,IB – HvA
Table of Contents
Chapter 1: Introduction to accounting and business....................3
Objective 1: Describe the nature of business and the role of accounting and ethics in
business...................................................................................................................... 4
Objective 2: Describe generally accepted accounting principles, including the
underlying assumptions and principles.......................................................................7
Objective 3: State the accounting equation and define each element of the equation.
.................................................................................................................................... 9
Objective 4: Describe and illustrate how business transactions affect the elements of
the accounting equation............................................................................................ 12
Objective 5: Describe the financial statements and explain how they interrelate.....13
Objective 6: Describe and illustrate the use of the ratio of liabilities to stockholders’
equity in evaluating a company’s financial condition................................................16
Chapter 2: Analyzing Transactions............................................17
Objective 1: Describe the characteristics of an account and a chart of accounts......18
Objective 2: Describe and illustrate journalizing transactions using the double-entry
accounting system.................................................................................................... 21
Objective 3: Describe and illustrate the journalizing and posting of transactions to
accounts.................................................................................................................... 23
Objective 4: Prepare an unadjusted trial balance and explain how it can be used to
discover errors.......................................................................................................... 25
Objective 5: Describe and illustrate the use of horizontal analysis in evaluating a
company’s performance and financial condition.......................................................27
Chapter 3: The Adjusting Process.............................................28
Objective 1: Describe the nature of the adjusting process........................................29
Objective 2: Prepare adjusting entries for accruals...................................................31
Objective 3: Prepare adjusting entries for deferrals..................................................31
Objective 4: Prepare adjusting entries for depreciation.............................................32
Objective 5: Summarize the adjusting process..........................................................33
Objective 6: Prepare an adjusted trial balance..........................................................34
Objective 7: Describe and illustrate the use of vertical analysis................................35
Key terms...............................................................................36
EXTRA....................................................................................................................... 41
,IB – HvA
Chapter 1: Introduction to accounting and
business
, IB – HvA
Objective 1: Describe the nature of business and the role of
accounting and ethics in business.
Business:
An organization that combines resources (inputs) like materials and labor
to produce goods or services (outputs) for customers in order to earn a
profit.
Profit = Revenues – Expenses
Profit is the difference between the amounts received from customers for
goods or services and the amounts paid for the inputs used to provide the
goods or services and it shows the success of business operations.
Non profit organizations = hospitals, churches, and government
agencies.
Types of Businesses:
Service Business: provides services instead of products (e.g., KLM
– transportation services).
Merchandising Business: sells goods purchased from other
companies (e.g., Albert Heijn).
Manufacturing Business: converts raw materials into products
(e.g., Mercedes – cars).
Main Business Activities:
Operating Activities: day-to-day activities that generate revenue
(production, marketing, delivery).
Investing Activities: purchase of long-term assets like land, equipment,
or buildings.
Financing Activities: obtaining and repaying funds from creditors and
owners (loans, issuing shares, dividends).
Example: issuing stock or repaying loans.
Financial Management Summary
Chapter 1, 2 and 3
16 th edition Financial & Managerial Accounting
Warren, Jonas and Tayler
Written by Nanoux Dassel
,IB – HvA
Table of Contents
Chapter 1: Introduction to accounting and business....................3
Objective 1: Describe the nature of business and the role of accounting and ethics in
business...................................................................................................................... 4
Objective 2: Describe generally accepted accounting principles, including the
underlying assumptions and principles.......................................................................7
Objective 3: State the accounting equation and define each element of the equation.
.................................................................................................................................... 9
Objective 4: Describe and illustrate how business transactions affect the elements of
the accounting equation............................................................................................ 12
Objective 5: Describe the financial statements and explain how they interrelate.....13
Objective 6: Describe and illustrate the use of the ratio of liabilities to stockholders’
equity in evaluating a company’s financial condition................................................16
Chapter 2: Analyzing Transactions............................................17
Objective 1: Describe the characteristics of an account and a chart of accounts......18
Objective 2: Describe and illustrate journalizing transactions using the double-entry
accounting system.................................................................................................... 21
Objective 3: Describe and illustrate the journalizing and posting of transactions to
accounts.................................................................................................................... 23
Objective 4: Prepare an unadjusted trial balance and explain how it can be used to
discover errors.......................................................................................................... 25
Objective 5: Describe and illustrate the use of horizontal analysis in evaluating a
company’s performance and financial condition.......................................................27
Chapter 3: The Adjusting Process.............................................28
Objective 1: Describe the nature of the adjusting process........................................29
Objective 2: Prepare adjusting entries for accruals...................................................31
Objective 3: Prepare adjusting entries for deferrals..................................................31
Objective 4: Prepare adjusting entries for depreciation.............................................32
Objective 5: Summarize the adjusting process..........................................................33
Objective 6: Prepare an adjusted trial balance..........................................................34
Objective 7: Describe and illustrate the use of vertical analysis................................35
Key terms...............................................................................36
EXTRA....................................................................................................................... 41
,IB – HvA
Chapter 1: Introduction to accounting and
business
, IB – HvA
Objective 1: Describe the nature of business and the role of
accounting and ethics in business.
Business:
An organization that combines resources (inputs) like materials and labor
to produce goods or services (outputs) for customers in order to earn a
profit.
Profit = Revenues – Expenses
Profit is the difference between the amounts received from customers for
goods or services and the amounts paid for the inputs used to provide the
goods or services and it shows the success of business operations.
Non profit organizations = hospitals, churches, and government
agencies.
Types of Businesses:
Service Business: provides services instead of products (e.g., KLM
– transportation services).
Merchandising Business: sells goods purchased from other
companies (e.g., Albert Heijn).
Manufacturing Business: converts raw materials into products
(e.g., Mercedes – cars).
Main Business Activities:
Operating Activities: day-to-day activities that generate revenue
(production, marketing, delivery).
Investing Activities: purchase of long-term assets like land, equipment,
or buildings.
Financing Activities: obtaining and repaying funds from creditors and
owners (loans, issuing shares, dividends).
Example: issuing stock or repaying loans.
