Contents of Chapters 2-19
Provided by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
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Chapter 2: History and Development of Accounting Theory to 1959. 33-74.
The Origins of Accounting Theory
The Theory Behind the Italian Method
Development of Accounting Thought in the 17th and 18th Centuries
Development of Accounting Thought in the 19th and early 20th Centuries
The Effect of Technological Changes
The Development of Cost Accounting
The Influence of Railroad Growth
The Influence of Governmental Regulatory Bodies
The Influence of Income Taxation
The Influence of the Corporation
The Development of Accounting Thought Prior to 1930
The Presentation of Financial Statements
Accounting Practices of the 1920s
The Income Statement
The Balance Sheet
Accounting Literature in the 1920s and 1930s
Development of Accounting Principles by the American Institute of Certified Public Accountants
The Special Committees
The Committee on Accounting Procedure
The Accounting Research Bulletins
The Terminology Bulletins
The Securities and Exchange Commission
The Development of Accounting Standards by the American Accounting Association
A Comparison of the AAA Statements
Objectives of Financial Statements
Asset Valuation
The Measurement of Income
Selected Additional Reading on Chapter Topics
Chapter 3: The Development of Accounting Theory since 1959. 75-103.
Development of Accounting Principles by the American Institute of Certified Public Accountants
The Accounting Principles Board
The Accounting Research Division
APB Statement No. 4
The Financial Accounting Standards Board
The Securities and Exchange Commission
The Cost Accounting Standards Board
The Development of Accounting Standards by other Societies and Agencies Interested in Accounting
The American Accounting Association
The National Association of Accountants
The Financial Executives Institute
The Institute of Chartered Accountants in England and Wales
The Canadian Institute of Chartered Accountants
Australian Societies
International Associations
The Frontiers of Research in Accounting Theory
Selected Additional Reading on Chapter Topics
Chapter 4: Concepts, Measurement, and Structure of Accounting Theory. 104-138.
The Framework of Accounting Theory
The Nature of Accounting Postulates
Environmental Postulates
The Accounting Entity
Continuity
The Objectives of Accounting
Relevance
Information and Data
User Constraints
Materiality
Consistency
Uniformity and Comparability
Timeliness
Measurement in Accounting
Measurement Constraints
Uncertainty
Objectivity and Verifiability
Freedom from Bias
Limitations of the Monetary Unit
Conservatism
The Framework of Accounting Theory
Selected Additional Reading on Chapter Topics
Chapter 5: Income Concepts for Financial Reporting. 139-175.
The Objectives of Net Income Reporting
Income Concepts at the Structural Level
The Transactions Approach to Income Measurement
The Activities Approach to Income Measurement
Interpretive Concepts of Income
Capital versus Income
The Wealth Maintenance Concepts of Income
Capitalization
Market Valuation of the Firm
Current Cash Equivalent
Historical Input Prices
Current Input Prices
Maintenance of Constant Purchasing Power
Summary
Income as a Measurement of Efficiency
Behavioral Concepts of Income
Income as a Predictive Device
Other Behavioral Concepts
1. Managerial Decision Making
2. Estimation Theory
3. User-Orientation Approaches
What Should be Included in Income?
The Current Operating Concept of Income
The All-Inclusive Concept of Income
Recurring and Nonrecurring Income
Prior Period Adjustments
Extraordinary Items
Net Income to Whom?
The Value-Added Concept of Income - Selling price of firm's product less cost of goods and services acquired by transfer. Income recipients include all employees, owners, creditors, and governments.
Enterprise Net Income - Excess of revenues over expenses; all gains and losses. Expenses do not include interest charges, income taxes, and true profit-sharing distributions. Recipients include stockholders, bondholders, and government.
Net Income to Investors - Same as enterprise net income, but after deducting income taxes. Recipients include stockholders of long-term debt.
Net Income to Stockholders - Net income to investors less interest charges and profit sharing distributions. Recipients include stockholders (preferred and common).
Net Income to Residual Equity Holders - Net income to shareholders less preferred dividends. Recipients include current and potential common stockholders unless priority payments cannot be met.
Summary of Net Income Classification by Income Recipients. (See above).
Selected Additional Reading on Chapter Topics
Chapter 6: Revenues and Expenses, Gains and Losses. 176-211.
Revenues
The Nature of Revenue
What Should be Included in Revenue?
The Measure of Revenue
The Timing of Revenue
The Reporting of Revenue during Production - Establishment of a firm price based on contract or general business terms or existence of market prices at various stages of production.
Long-Term Constricts
Accretion
The Reporting of Revenue at the Completion of Production - Existence of a determinable selling price or stable market price. No substantial cost of marketing.
The Reporting of Revenue at the Time of Sale - Established price for the product. Reasonable method for estimating amount collectible. Estimation of all material related expenses.
The Reporting of Revenue Subsequent to Sale - At time of collection - Impossible to value assets received with fair degree of accuracy. Additional material expenses are likely, and these cannot be estimated with a fair degree of accuracy at the time of sale.
Summary of Revenue Reporting
Expenses
What Should be Included in Expense?
How Should Expenses be Measured?
Historical Cost
Current Prices
The Timing of Expenses
The Matching Concept
Direct or Product Matching
Indirect or Period Matching
The Allocation Concept
Gains and Losses
Gains
Losses
Selected Additional Reading on Chapter Topics
Chapter 7: Financial Reporting and Price Changes. 212-240.
The Nature of Price Changes
General Price-Level Changes
Specific Price Changes
Relative Price Changes
The Monetary and Nonmonetary Classifications
Gains and Losses on Monetary Items
The Restatement of Nonmonetary Items
Price-Level Restatement Models
General Price-Level Adjustments
Restatement of Specific Price Changes
Relative Price Changes
An Evaluation of Price-Level Restatements
General Purchasing Power
Purchasing Power of Stockholders
Investment Purchasing Power of the Firm
Specific Replacement Purchasing Power
Foreign Currency Translations and Price Changes
Selected Additional Reading on Chapter Topics.
Chapter 8: Cash and Funds Flows. 241-255.
The Objective of Cash Flow Information
Cash Flows and the Prediction of Dividends
The Presentation of Cash Flow Information
Funds Flow Concepts
Short-Term Monetary Asset Flows
Net Monetary Asset Flows
Working Capital Concept of Funds
The All Financial Resources Concept of Funds
The All Significant Financial Events Approach
Accounting Principles Board Opinion No. 19
An Evaluation of Cash and Funds Flow Concepts
Selected Additional Reading on Chapter Topics
Chapter 9: Assets and Their Measurement. 256-285.
The Nature of Assets
The Objectives of Asset Measurement
Valuation as a Method of Measuring Income
Valuation as a Step in the Matching Process
Valuation as a Measure of Accretion
The Presentation of Financial Position to Investors
The Balance Sheet as a Step between Two Income Statements.
The Position Statement as a Means of Prediction
The Presentation of the Claims of the Several Equity Holders
Valuation for Use by Creditors
Valuation for Use by Management
Valuation Concepts
Exchange Output Values
Discounted Future Cash Receipts or Service Potentials
Current Output Prices
Current Cash Equivalents
Liquidation Values
Exchange Input Values
Historical Costs
Current Input Costs
Discounted Future Costs
Standard Costs
Absorption Costing and Direct Costing
Absorption Costing
Direct Costing
The Lower-of-Cost-or-Market Valuation
Evaluation of Measurement Concepts
Selected Additional Reading on Chapter Topics
Chapter 10: Current Assets and Current Liabilities. 286-311.
The Objectives of Asset and Liability Classifications
The Presentation of Solvency to Creditors
The Description of Enterprise Operations
Classification According to the Accounting Structure
Classification According to Valuation Methods
The Prediction of Cash Flows
Working Capital
The Definition of Current Assets
The Definition of Current Liabilities
Inadequacies of the Current Asset and Current Liability Classifications
Monetary Current Assets
Money
Receivables
The Installment Basis
Monetary Investments
Nonmonetary Current Assets
Nonmonetary Investments
Prepaid Expenses
The Measurement of Current Liabilities
Monetary Current Liabilities
Nonmonetary Current Liabilities
Selected Additional Reading on Chapter Topics
Chapter 11: Inventories. 312-355.
The Nature of Inventories
The Objectives of Inventory Measurement
The Determination of Inventory Quantities
The Bases for Valuation of Inventories
Output Values
Discounted Money Receipts
Current Selling Prices
Net Realizable Values
Input Values
Historical Cost
Current Replacement Costs
Net Realizable Value Less a Normal Markup
The Lower of cost or Market
Normal-Stock Valuation
What Should be Included in Cost?
The Association of Costs with Inventories and Cost of Sales
The Objectives of Cost Association
Specific Identification of Cost
Average Cost Methods
First-In, First-Out
Last-In, First-Out Methods
Last-In, First-Out
Lifo or Market
Dollar-Value Lifo
Retail Inventory Methods
Retail Lower of cost or Market
Lifo Applied to the Retail Method
The Gross Profit Method
Comparison of the Various Cost Methods during Periods of Price Changes
Summary of Cost Association Methods
Selected Additional Reading on Chapter Topics
Chapter 12: Plant and Equipment: Purchased and Leased. 356-387.
The Nature of Plant and Equipment
The Bases of Valuation
Input Values
Historical Input Values
Historical Cost to the Firm
Prudent Cost
Original Cost
Current Input Values
Current Replacement Cost
Appraisal Value
Fair Value
Current Recommendations
Definition and Content of Cost
The Content of Initial Cost
Capital and Revenue Expenditures
Self-Constructed Assets
Leases of Plant and Equipment
Leases Having Sale or Financing and Purchase Characteristics
Leases Reported by the Lessee
Leases Reported by Lessors
Sales-Type Leases Reported by the Lessor
The Operating Lease
Leveraged Leases
Capitalization of All Long-Term Noncancelable Commitments
Disclosure of Leases
Selected Additional Reading on Chapter Topics
Chapter 13: Depreciation. 388-425.
Definition of Depreciation
Decline in Service Potential
The Maintenance of Capital
The Current Cost of Services Consumed
Concepts of Depreciation
Depreciation as a Decline in Asset Value
Decline in Discounted Net Revenue Contribution
Decrease in Resale Price of Used Asset
Depreciation as a Process of Matching Costs with Expected Benefits
Time-Adjusted Depreciation
Depreciation Based on a Constant Cost to Net Revenue Contribution Ratio
Depreciation as an Allocation of Cost to Physical Service Units
Depreciation Allocation Based on the Usefulness of the Reported Figures
The Net Service Contribution
Depreciation, Repairs, and Replacements
Repairs, Maintenance, and Asset Life
Repairs and Replacements
Repairs and Efficiency
Evaluation of Various Depreciation Methods
Methods Preceding the Use of Cost Allocation
Inventory Method
The Replacement Method
Cost Allocation Methods
Variable Charge Methods
Straight-Line Allocation
Increasing Charge Methods
Decreasing Charge Methods of Depreciation
Summary of Depreciation Methods
Summary of Conditions under Which Each pattern is Applicable
Depreciation For Nonprofit Organizations
Selected Additional Reading on Chapter Topics
Chapter 14: Intangibles, Noncurrent Investments, and Deferred Charges. 426-445.
The Nature of Intangibles
The Valuation of Intangibles
The Amortization of Intangible Assets
Intangibles with Limited Life
Intangibles with Indefinite Lives
Research and Development Costs
Goodwill
The Valuation of Favorable Attitudes toward the Firm
The Present Value of Superior Earnings
Goodwill as a Master Valuation Account
The Recording of Goodwill
Purchased Goodwill
"Negative Goodwill"
Investments in Unconsolidated Subsidiaries
Deferred Charges
Selected Additional Reading on Chapter Topics
Chapter 15: Liabilities and Their Measurement. 446-462.
The Nature of Liabilities
Circumstances for Liabilities to Exist
Equitable and Legal Obligations
Unconditional right of Offset
Measurability of Liabilities
Should the Payee be Known or Ascertainable?
Basic Characteristics of Liabilities
The Valuation of Liabilities and the Computation of Interest
Contingent Liabilities
Current Valuation of Liabilities
Long-Term Liabilities
Early Extinguishment of Debt
Convertible Debt
Deferred Credits
Selected Additional Reading on Chapter Topics
Chapter 16: Income Taxes and Pension Costs. 463-486.
Income Tax Allocation
Intraperiod Allocation
Interperiod Allocation
The Matching Concept Applied to Income Taxes
Tax Allocation as a Process of Valuation
Tax Allocation and Cash Flows
Carry-Back and Carry-Forward of Tax Losses
The Investment Tax Credit
Cost Reduction
Tax Reduction
A Summary Evaluation
Accounting For Pension Costs and Obligations
The Allocation of Pension Costs
Current Service Cost
Past Service Costs
Actuarial Gains and Losses
Presentation of Pension Assets and Liabilities
Financial Statements of the Fund or Plan
Selected Additional Reading on Chapter Topics
Chapter 17: Ownership Equities. 487-511.
The Nature of Ownership Equities
The Proprietary Theory
The Entity Theory
The Residual Equity Theory
The Enterprise Theory
The Fund Theory
The Commander Theory
Summary of the Equity Theories
The Classification of Single Proprietorship and Partnership Equities
The Classification of Stockholder Equities
Classification by Source of Capital
The Disclosure of Legal Capital
The Disclosure of Restrictions on the Disposition of Income
The Disclosure of Restrictions on Liquidation Distribution
Consolidated Financial Statements
The Purpose and Nature of Consolidated Financial Statements
Consolidated Balance Sheet
Consolidated Income Statements
The Classification of Consolidated Equities
Selected Additional Reading on Chapter Topics
Chapter 18: Changes in Stockholders' Equities. 512-544.
Increase in Invested Capital
Capital Stock Subscriptions
Conversions of Debt and Preferred Stock
Stock Dividends and Stock Splits
The Nature of Stock Dividends
The Capitalization of Par or Stated Value
The Capitalization of Market Price
Stock Options and Stock Warrants
Rights Granted to the Purchasers of Other Securities
Noncompensatory Employee Stock Purchase Plans
Compensatory Stock Option Plans
Decreases In Invested Capital
Treasury Stock
The Single-Transaction Concept
The Two-Transactions Concept
Evaluation of the Single-Transaction and Two-Transactions Concepts
Business Combinations
Combinations Treated as Purchases
Pooling of Interest
An Evaluation of Purchases and Pooling of Interests
The Valuation of Assets in a Combination
The classification of the Stockholders' Equity of the Combination
Earnings Per Share
Objectives of Earnings per Share
Computation of Number of Shares
Primary Earnings per Share
Fully Diluted Earnings per Share
Computation of the Earnings
Summary
Selected Additional Reading on Chapter Topics
Chapter 19: Disclosure in Financial Reporting. 545-567.
The Nature of Disclosure
What Should be Disclosed?
Disclosure of Quantitative Data
Nonquantitative Information
Accounting Policies
Accounting Changes
Disclosure of Post-Statement Events
Disclosure of Segments of a Business Enterprise
Need for Segment Disclosures
Accounting Difficulties
Opposition to Segment Disclosures
Methods of Disclosure
Form and Arrangement of Formal Statements
Position Statement
Income Statement
Cash Flow and Funds Statements
Terminology and Detailed Presentations
Parenthetical Information
Footnotes
Nature and Purpose of Footnotes
Accounting Policy and Accounting Changes
Prior Rights of Creditors
Contingent Assets and Contingent Liabilities
Restrictions to Dividend Payments
Rights of Equity Holders
Executory Contracts
Supplementary Statements and Schedules
The Auditor's Certificate
The President's Letter
Summary of Disclosure Methods
Selected Additional Reading on Chapter Topics
Appendix: Selected CPA Examination Questions. 569-622.
Index: 623-636.
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Related summaries:
Backer, M. editor. 1966. Modern Accounting Theory: A Revision of Handbook of Modern Accounting Theory. Prentice-Hall, Inc. (Contents).
Covaleski, M. and M. Aiken. 1986. Accounting theories of organizations: Some preliminary considerations. Accounting, Organizations and Society 11(4-5): 297-319. (Summary).
Covaleski, M. A., M. W. Dirsmith and S. Samuel. 1996. Managerial accounting research: The contributions of organizational and sociological theories. Journal of Management Accounting Research (8): 1-35. (Summary).
Johnson, H. T. 1983. The search for gain in markets and firms: A review of the historical emergence of management accounting systems. Accounting, Organizations and Society 8(2-3): 139-146. (Summary).
Johnson, H. T. 1987. The decline of cost management: A reinterpretation of 20th-century cost accounting. Journal of Cost Management (Spring): 5-12. (Summary).
Martin, J. R. Not dated. 200 years of accounting history dates and events. Management And Accounting Web. Accounting History Dates and Events
Neimark, M. and T. Tinker. 1986. The social construction of management control systems. Accounting, Organizations and Society 11(4-5): 369-395. (Summary).
Tiessen, P. and J. H. Waterhouse. 1983. Towards a descriptive theory of management accounting. Accounting, Organizations and Society 8(2-3): 251-267. (Summary).