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Heintz & Parry

James A. Heintz, DBA, CPA

Professor of Accounting
School of Business
University of Kansas
Lawrence, Kansas

Robert W. Parry, Jr., Ph.D.

Professor of Accounting
Kelley School of Business
Indiana University
Bloomington, Indiana

20e

Chapters 1-15

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd i 12/2/09 12:30:42 AM

James A. Heintz and Robert W. Parry, Jr. ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be
reproduced or used in any form or by any means—graphic, electronic, or mechanical, including
photocopying, recording, taping, Web distribution, information storage and retrieval systems,
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CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:ii 12/2/09 12:30:44 AM

Chapter 3 The Double-Entry Framework iii

Where Accounting Education and the

Real World Meet

Be your best in the classroom and in the workplace with the accounting skills and
confidence you’ll achieve with Heintz/Parry’s College Accounting, 20e!
The future belongs to those who possess the marketable skills learned from
studying Heintz/Parry. With unmatched clarity, accuracy, and technology, our text
provides you with the accounting knowledge you need to succeed. As you journey
through this text, you will gain confidence as you learn accounting, which is the lan-
guage of the business world.
Through 19 editions, we’ve fine-tuned the pedagogy in our text and supporting
materials. Our proven step-by-step approach and inviting narrative style focus on the
practical skills you’ll need to transition from the classroom to the workplace. We’ve
kept intact everything that has made College Accounting so successful and have added
new features and ancillary materials to ensure that it remains the best text on the
market.
We invite you to read the following preface, which serves as a guide to help you
gain the most knowledge from this text and its supporting materials.
Best wishes to you for a successful college experience and business career!
Jim Heintz and Rob Parry

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:iii 12/2/09 12:30:44 AM

P R E FAC E

COLOR CODING GUIDES YOU

Throughout the text, you will see special color coding used to help you quickly know
how accounts are classified and help you follow the key transactions presented. A
quick reference to these colors can be found on the second page of each part opener.
For example, page 2 shows the following chart for the chapters in Part 1:

Add Some Color to Your Learning!

Throughout the text, you will be introduced to many important terms and types of accounts. To help you learn
the different terms and types of accounts, we have coded many of them using the following color key in Part 1:

Assets

Contra-Assets

Liabilities

Capital

Drawing

Revenues

Expenses

Income Summary (Net Income/Net Loss)

As you move through the text, more color codes are added. So always check the
Add Some Color To Your Learning! chart when you start a new part.

CHAPTER OPENERS PROVIDE CLUES

Each chapter opens with
Chapter 4 a colorful image and a
description of a real com-
pany. By reading the open-
ing description, you will
find out why it’s important
Don’t miss the Learning to master the information
Objectives! These tell you that is covered in the chap-
COLEONG/DREAMSTIME

what you should know ter. The openers can help

when you’ve completed LEARNING OBJECTIVES
Journalizing and Posting
you visualize how account-
Careful study of this chapter should
studying the chapter. enable you to:
LO1 Describe the flow of data
Transactions ing is used in the business
from source documents
through the trial balance. C ampus Advantage (CA) provides a comprehensive range of world and, therefore,
student residential services in the following areas: management,
LO2 Describe the chart of accounts
as a means of classifying
financial information.
development, acquisition, and consulting. It specializes in the
creation of modern, full-service facilities that are secure, private,
and equipped with all of the tools that today’s students need for
why it’s known as the
LO3 Describe and explain the
purpose of source documents.
LO4 Journalize transactions.
success. Its communities are no-hassle alternatives to dorm living
with full dining service options. CA has facilities across the country,
but each student residence reflects the unique identity of the school
“language of business.”
LO5 Post to the general ledger and community it serves.
and prepare a trial balance. As with all businesses, CA relies on an accounting system to
LO6 Explain how to find and maintain a record of transactions from the source document
correct errors. through the preparation of the trial balance and financial state-
ments. In this chapter, we discuss source documents, the chart of
accounts, and the process used to journalize and post transactions.
And, just in case an error is made, we address how to find and
correct errors.

11/5/09 6:41:48 PM
11/5/09 6:41:48 PM

CHE-HEINTZ-09-0502-004.indd 86 11/9/09 4:31:56 PM

v
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

_Ch1 to 9.indd Sec1:iv

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:v 12/2/09 12:30:44 AM
vi Preface

LEARNING OBJECTIVES CONNECT THE CHAPTER

COVERAGE FROM BEGINNING TO END
By paying attention to the Learning Objectives, you can focus on what is important. The Learning Objectives appear
in many places throughout the chapter. Here’s where you will find the Learning Objectives (LOs):

CHAPTER OPENER PAGE LEARNING OBJECTIVES

The first page of the chapter lists all
Careful study of this chapter
of the Learning Objectives for the
should enable you to:
chapter.
LO1 Prepare financial statements
with the aid of a work sheet.
LO2 Journalize and post closing
entries.
LO3 Prepare a post-closing trial
balance.
LO4 List and describe the steps
in the accounting cycle.

MARGINS
THE FINANCIAL STATEMENTS
When the chapter is presenting
LO1 Prepare financial The work sheet prepared in Chapter 5 supplies most of the information needed to
coverage for a certain Learning statements with the prepare an income statement, a statement of owner’s equity, and a balance sheet. The
Objective, the LO is stated at the aid of a work sheet. statements and work sheet columns from which they are derived for Jessie Jane’s
Campus Delivery Service are shown in Figures 6-1 and 6-2.
beginning of the section. As you refer to the financial statements in Figures 6-1 and 6-2, notice the place-
ment of dollar signs, single rulings, and double rulings. Dollar signs are placed at the
top of each column and beneath rulings. Single rulings indicate addition or subtraction,
and double rulings are placed under totals. Notice that each statement heading con-
tains three lines: (1) company name, (2) statement title, and (3) period ended or date.

KEY POINTS TO REMEMBER

LEARNING OBJECTIVES Key Points to Remember
At the beginning of the Self-Study
section, each Learning Objective is LO1 Prepare financial statements with The work sheet is used as an aid in preparing:
the aid of a work sheet. 1. adjusting entries,
stated along with the most impor- 2. financial statements, and
3. closing entries.
tant information covered in the
The following classifications are used for accounts reported on
chapter. the balance sheet.
• Current assets include cash and assets that will be con-
verted into cash or consumed within either one year or
the normal operating cycle of the business, whichever is
CHE-HEINTZ-09-0502-006.indd 180
longer. An operating cycle is the time required to purchase
supplies and services and convert them back into cash.
• Property, plant, and equipment, also called plant assets
or long-term assets, represent assets that are expected to
serve the business for many years.
• Current liabilities are liabilities that are due within either
one year or the normal operating cycle of the business,
whichever is longer, and that are to be paid out of current
assets.
• Long-term liabilities, or long-term debt, are obligations
that are not expected to be paid within a year and do not
require the use of current assets.

U REVU BANNERS
U REVU Complete U REVU-1 on page 199 to test your basic understanding of LO1.
Inside the banner, the Learning
Objective number is indicated.
CHE-HEINTZ-09-0502-006.indd 181 11/18/09 4:09:07 PM

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:vi 12/2/09 12:30:47 AM

Preface vii

TRUE/FALSE AND SELF-ST UDY QUEST ION S A N D EXERCISES

MULTIPLE CHOICE True/False Questions
QUESTIONS AND 1. LO1 Expenses are listed on the income statement as they appear in the chart of accounts or in descending
order (by dollar amount).
U REVU EXERCISES 2. LO1 Additional investments of capital during the month are not reported on the statement of owner’s equity.
3. LO1 The income statement cannot be prepared using the work sheet alone.
Each of these Self-Study items 4. LO1 A classified balance sheet groups similar items, such as current assets together.
5. LO2 Temporary accounts are closed at the end of each accounting period.
indicates the related Learning Multiple Choice Questions

Objective number(s). If you need 1. LO2 Which of these types of accounts is considered a “permanent” account?
(a) Revenue (c) Drawing
to review the coverage in the (b) Asset (d) Expense
2. LO2 Which of these accounts is considered a “temporary” account?
chapter, use these LOs to (a) Cash (c) J. Jones, Capital
(b) Accounts Payable (d) J. Jones, Drawing
guide you to the right place. 3. LO2 Which of these is the first step in the closing process?
(a) Close revenue account(s). (c) Close the income summary account.
(b) Close expense accounts. (d) Close the drawing account.
4. LO3 The ________ is prepared after closing entries are posted to prove the equality of debit and credit balances.
(a) balance sheet (c) post-closing trial balance
(b) income statement (d) statement of owner’s equity
5. LO4 Steps that begin with analyzing source documents and conclude with the post-closing trial balance are
called the
(a) closing process. (c) adjusting entries.
(b) accounting cycle. (d) posting process.

CHE-HEINTZ-09-0502-006.indd 198 11/18/09 4:09:23 PM

REVIEW QUESTIONS, SERIES A EXERCISES

A & B EXERCISES, AND E 6-1A (LO1)
✓ Net income: $1,990
INCOME STATEMENT From the partial work sheet for Case Advising below, pre-
pare an income statement.
A & B PROBLEMS E 6-2A (LO1) STATEMENT OF OWNER’S EQUITY From the partial work sheet below, prepare a
✓ Capital 1/31: $5,190 statement of owner’s equity, assuming no additional investment was made by the
Each of these assignments indicates owner.

the related Learning Objective SERIES A PROBLEMS

number. If you need to review the P 6-7A (LO1) FINANCIAL STATEMENTS Page 203 shows a work sheet for Monte’s Repairs. No
✓ Net income: $1,400; Capital 1/31: additional investments were made by the owner during the month.
coverage in the chapter, use these $7,400; Total assets: $8,650
REQUIRED
LOs to guide you to the right 1. Prepare an income statement.

place. 2.
3.
Prepare a statement of owner’s equity.
Prepare a balance sheet.

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience.
CHE-HEINTZ-09-0502-006.indd 202 Cengage Learning reserves the right to remove additional content at any time if 11/18/09
subsequent
4:09:27 PM rights restrictions require it.

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:vii 12/2/09 12:30:54 AM

viii Preface

CALLOUTS AND ARROWS HELP YOU NAVIGATE

Along with color coding, callouts and arrows FIGURE 7-5 Checks and Check Stubs

Payee

help you quickly find important elements in

a figure and know how different parts of a
figure are connected.

Drawer

Drawee

THE STEPS LEAD THE WAY

CHE-HEINTZ-09-0502-007.indd Sec1:233 11/18/09 5:12:17 PM

Where it’s most helpful, we provide step-by- FIGURE 4-10 Posting a Credit

GENERAL JOURNAL PAGE 1

step instructions. Related figures guide you DATE DESCRIPTION
POST.
DEBIT CREDIT
REF.

visually through the steps to reinforce the 20--

1 June 1 Cash 101 2 0 0 0 00 1
2 Jessica Jane, Capital 311 2 0 0 0 00 2
process. When you see these, take the time 3 Owner’s original investment in 3
S
T
E

to “walk” through each step to strengthen S

T
E
4 delivery business
STEP 5
4
S
P
4
T
your understanding. P
1
ACCOUNT: Jessica Jane, Capital ACCOUNT NO. 311
E
P
2
POST. BALANCE
DATE ITEM DEBIT CREDIT
REF. DEBIT CREDIT
20-- STEP 3
June 1 J1 2 0 0 0 00 2 0 0 0 00

In the ledger account:

STEP 1 Enter the date of the transaction in the Date column. Enter the year, “20--,”
the month, “June,” and the day, “1,” in the Date column of the account
Jessica Jane, Capital.
STEP 2 Enter the credit. Copy the $2,000 credit to Jessica Jane, Capital in the jour-
nal to the Credit column in the ledger.
STEP 3 Enter the balance of the account. Enter the $2,000 balance in the Balance
columns under Credit. (If the balance of the account is zero, draw a line
through the Debit and Credit columns.)
STEP 4 Enter the journal page in the Posting Reference column. Enter “J1” in
the Posting Reference column since the posting came from page 1 of the
journal.

LEARNING KEYS AND MARGIN NOTES REINFORCE AND

EXPAND YOUR KNOWLEDGE
CHE-HEINTZ-09-0502-004.indd 97 11/9/09 4:32:19 PM

Watch for Learning Keys. Make sure you understand them.

LEARNING KEY
Learning Keys reinforce basic content as it’s covered in the
1. Find the row for wages. chapter.
2. Find the column for withhold-
ing allowances.

3. Find the amount where they

cross.

When the Social Security

Watch for the margin notes. They give you more information so
program was established in that you will have a greater understanding of the topic.
1937, the tax was 1% on
earnings up to $3,000 per
year!

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:viii 12/2/09 12:30:58 AM

Preface ix

A BROADER VIEW WIDENS YOUR HORIZON

Each chapter expands your understand-
ing by featuring a real situation or event. A BROADER VIEW Payroll Fraud—Paying for Ghosts
A Broader View puts accounting in A supervisor at Haas Transfer Warehouse embezzled $12,000
from the company by collecting paychecks for former
perspective. employees. When an employee left the company, the super-
visor continued to submit a department time report for the
employee. This caused a paycheck to be generated for the
“ghost” employee. The supervisor then simply kept this pay-
check when others were distributed to actual employees.
This fraud shows the importance of two procedures that
appear in this chapter: (1) a time card, plastic card, or badge
should be used for each employee to keep an accurate record
of time worked and (2) payment by direct deposit or electronic
funds transfer to the employee’s bank is a good internal
control.

PHOTODISC/GETTY IMAGES

PROFILES IN ACCOUNTING LET YOU SEE WHAT OTHERS ARE DOING

WITH THEIR ACCOUNTING EDUCATION
The individuals featured in Profiles in Accounting are real people who have learned the basics from the Heintz/Parry
College Accounting text, continued their accounting and business education, and are now pursuing successful careers
in the business world. As you will see, an accounting education can lead to a variety of careers.

Proﬁles in Michael Burdish graduated with an asso-

ciate degree in accounting with honors
that hire union members. The focus of
the audits is to ensure that the correct
Accounting from The College of Westchester. Michael amounts of benefits are paid. According
excelled in his studies in accounting to Michael he really enjoys his work.
Michael Burdish and knew this was the field for him. He especially likes meeting many new
Payroll Compliance After graduation, Michael was hired people and having new experiences.
Auditor as a payroll compliance auditor for an
CHE-HEINTZ-09-0502-008.indd 293
Michael intends to further his education 11/18/09 4:46:11 PM
accounting firm. He is part of the team and complete his baccalaureate degree
that audits companies and contractors in accounting.

SELF-STUDY QUESTIONS AND U REVU EXERCISES HELP

YOU CHECK YOUR UNDERSTANDING
CHE-HEINTZ-09-0502-009.indd 334 11/11/09 6:15:58 PM
If you want to know how well you understand the chapter’s information, watch for these banners and test yourself:

U REVU Complete U REVU-1 on page 154 to test your basic understanding of LO1
Throughout each chapter, the U REVU banners let
you know when to test your basic understanding of
the section you have completed.

SELF-STUDY QUESTIONS AND EXERCISES Find the true/false and multiple choice questions
and U REVU exercises section by looking for this
banner. Be sure to note the “LO” by each question/
CHE-HEINTZ-09-0502-005.indd 138 11/17/09 7:10:31 PM exercise. That will help you find the coverage in the
chapter.

AN S W E R S TO S EL F - S T U DY Q U E ST I O N S A N D E X E RCI SE S Once you have tested yourself using the Self-Study

Questions and Exercises, you will find the answers
under this banner at the end of the chapter.

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:ix 12/2/09 12:31:00 AM

x Preface

KEY POINTS TO REMEMBER HELP YOU REVIEW QUICKLY

In the end-of-chapter section, at the beginning
LEARNING OBJECTIVES Key Points to Remember
of the Self-Study content, each of the chapter’s
Learning Objectives is repeated along with the LO1 Describe the flow of data from
source documents through the
The flow of data from the source documents through the trial
balance is as follows:
core information covered in the chapter. This trial balance. 1. Analyze business transactions.
2. Journalize transactions in the general journal.
information will help you when you are work- 3. Post journal entries to the general ledger.
4. Prepare a trial balance.
ing on your assignments and when you are
INPUT PROCESSING
studying for a test. Analyze transactions Enter business Post the entries in the From the general
using transactions in the journal to the ledger, prepare a

SOURCE DOCUMENTS and GENERAL JOURNAL GENERAL LEDGER TRIAL BALANCE

CHART OF ACCOUNTS Journalizing Posting

COMPREHENSIVE PROBLEMS PULL CONTENT ALTOGETHER

Following Chapter 6, the first Comprehensive Problem gives you a chance to see how well you understand the cov-
CHE-HEINTZ-09-0502-004.indd 105 11/9/09 4:32:25 PM

erage of Part 1. After Chapter 15, the second Comprehensive Problem checks your understanding of the content in
Parts 1–3. Depending on whether or not you’ve studied special journals (Chapter 12), this second one gives you two
different choices for solving the problem.

CENGAGENOW HELPS YOU WORK AND LEARN MORE EFFICIENTLY

Ask your instructor about getting access to this powerful Web site.
CengageNOW for Heintz/Parry’s
College Accounting online learning
system helps you make the most of
every minute of study and handle
homework more efficiently. With
CengageNOW’s personalized study
plans, you focus only on the areas
of challenge to you with a vari-
ety of interactive learning tools to
ensure you are prepared with the
accounting skills most important
for your future. Homework man-
agement tools help you efficiently
complete homework assignments
necessary to earn a successful grade
in the course.

THE STUDY GUIDE PROVIDES MORE PRACTICE; WORKING PAPERS

SHORTEN YOUR HOMEWORK TIME
The Heintz and Parry 20e Study Guide and Working Papers for Chapters 1–15 and the Combination Journal Module
(ISBN-10: 0538737042, ISBN-13: 9780538737043) offers you the opportunity to reinforce your learning experience
with brief discussions of each chapter’s key points and learning objectives. In addition, the Study Guide provides a
third set of “C” assignments, which consists of review questions, exercises, and problems similar to those at the end

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:x 12/2/09 12:31:03 AM

Preface xi

of each chapter. (The solutions to the Study Guide assignments are available separately, at the discretion of your
instructor.) Included with the Study Guide are the Working Papers for the text’s end-of-chapter assignments. Journals,
ledgers, work sheets, and other documents are provided to make completing the assignments less time consuming for
you. Ask your instructor about this helpful resource.

OTHER SUPPLEMENTAL MATERIALS ENHANCE

YOUR UNDERSTANDING

Student Supplements and Resources ISBN Authors, Affiliations, Description

Student Web Site Now mastering accounting concepts is easier than ever with the rich
array of learning resources at the Heintz/Parry’s College Accounting,
20e interactive companion Web site. Designed specifically to help
you learn the most from your course and earn the grade you want,
this Web site’s interactive study center features chapter-by-chapter
PowerPoint® lecture presentation slides, online quizzes, flashcards,
outlines, key terms, and a final exam, as well as links to accounting
resources, and more. These resources will help you develop the skills
you need for progress now and success throughout the future!
Klooster & Allen General Ledger Software 0538750693 Gain first-hand experience in working with full-functioning general
and Data Files CD-ROM 9780538750691 ledger software. Use this proven software with selected problems in
the main text that are clearly identified by icons. You’ll learn to
work with opening balances, to interpret a chart of accounts, and to
set up functions to complete problems.
Peachtree and QuickBooks Data Files for 0538476168 These data sets allow you to complete the requirements of the
Comprehensive Problems CD-ROM 9780538476164 Comprehensive Problems using either Peachtree or QuickBooks soft-
ware. (The software is not included on this CD-ROM.)

Online Excel Spreadsheet Templates 0538753595 These new templates are provided for selected end-of-chapter exercises
9780538753593 and problems (designated by an icon in the text). They will assist you as
you set up and work the assignment. To help you stay on track, certain cells
are coded to display a red asterisk when an incorrect answer is entered.
Using Peachtree Complete for Accounting 0324665512 Glenn Owen, Allan Hancock College
(w/ CD-ROM) 9780324665512 The textbook takes a user perspective by illustrating how accounting
information is both used and created. In addition, the text uses prov-
en and successful pedagogy to demonstrate the software’s features
and elicit student interaction. The text’s foremost goal is to help you
learn fundamental accounting concepts through the use of Peachtree
and the analysis of business events. The content complements the
first course in accounting.
Using QuickBooks Pro for Accounting 0324664044 Glenn Owen, Allan Hancock College
(w/ CD-ROM) 9780324664041 Similar in description to the Peachtree text above, this book intro-
duces QuickBooks Pro.
Using Excel and Access for Accounting 0324594399 Glenn Owen, Allan Hancock College
9780324594393 This textbook teaches how businesses use spreadsheets and data-
bases in accounting. It serves as a primer explaining how to use these
tools in solving real accounting problems.

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xi 12/2/09 12:31:05 AM

xii Preface

Student Supplements and Resources ISBN Authors, Affiliations, Description

Trey’s Fast Cleaning Service Practice Set 0538753226 Toni R. Hartley, Laurel Business Institute
with Student CD (Appropriate for use 9780538753227 This practice set uses accrual-basis accounting and features a sole pro-
after Chapter 7) prietorship service business simulation. It reviews the accounting cycle
and accounting for cash. The practice set can be solved manually, with
Klooster & Allen General Ledger software, or with Peachtree software.
The Student CD includes the installation files for both software packages
as well as the relevant data files.
Coolspring Furnitue Practice Set with 053875074X Toni R. Hartley, Laurel Business Institute
Student CD (Appropriate for use after 9780538750745 Practice your accounting success, including working with payroll taxes,
Chapter 12) within this sole proprietorship merchandising business. The accom-
panying CD contains both Klooster & Allen General Ledger software,
Peachtree software, and the data files to complete the practice set using
either software program. The practice set may also be completed manually.

SPECIAL INFORMATION FOR INSTRUCTORS

In addition to the important pedagogical elements introduced to your students above, we have some new features and
key changes that will enhance your course. Overall, these are:

• A greater use of portrait FIGURE 6-2 Linkages Between the Work Sheet, Statement of Owner’s Equity, and Balance Sheet

presentation of figures Statement Heading

Name of company
Title of statement
wherever possible Accounting period ended
Current assets: cash and items that will be converted to cash or
consumed within a year.
Property, plant, and equipment: durable assets that will help
produce revenues for several years.
Current liabilities: amounts owed that will be paid within a
Note: The statement of owner’s equity is prepared before the balance sheet. year (will require the use of current assets).
The S.O.E. is shown below the B.S. to enhance the illustration of the linkages
between the work sheet and ﬁnancial statements. Jessie Jane’s Campus Delivery Service
Balance Sheet
Prepare BS Third
Jessie Jane’s Campus Delivery Service June 30, 20 --
Work Sheet (Partial)
Assets
For Month Ended June 30, 20 - -
Current assets:
BALANCE SHEET
ACCOUNT TITLE Cash $ 3 7 0 00
DEBIT CREDIT
Accounts receivable 6 5 0 00
1 Cash 3 7 0 00
Supplies 2 0 00
2 Accounts Receivable 6 5 0 00
Prepaid insurance 1 7 5 00
3 Supplies 2 0 00
Total current assets $ 1 2 1 5 00
4 Prepaid Insurance 1 7 5 00
Property, plant, and equipment:
5 Delivery Equipment 3 6 0 0 00
Delivery equipment $3 6 0 0 00
6 Accum. Depr.—Delivery Equip. 1 0 0 00
Less accumulated depreciation 1 0 0 00 3 5 0 0 00
7 Accounts Payable 1 8 0 0 00
Total assets $ 4 7 1 5 00
8 Wages Payable 5 0 00
Liabilities
9 Jessica Jane, Capital 2 0 0 0 00
Current liabilities:
10 Jessica Jane, Drawing 1 5 0 00
Accounts payable $1 8 0 0 00
11 Delivery Fees
Wages payable 5 0 00
12 Wages Expense
Total current liabilities $ 1 8 5 0 00
13 Rent Expense
Owner’s Equity
14 Supplies Expense
Jessica Jane, capital 2 8 6 5 00
15 Telephone Expense
Total liabilities and owner’s equity $ 4 7 1 5 00
16 Insurance Expense
17 Depr. Expense—Delivery Equip.
18 4 9 6 5 00 3 9 5 0 00 Jessie Jane’s Campus Delivery Service
Prepare SOE Statement of Owner’s Equity
19 Net Income 1 0 1 5 00 Second
For Month Ended June 30, 20 --
20 4 9 6 5 00 4 9 6 5 00
Jessica Jane, capital, June 1, 20-- $
21
Investments during June 2 0 0 0 00
Total investment $ 2 0 0 0 00
Net income for June $1 0 1 5 00
Less: withdrawals for June 1 5 0 00
Increase in capital 8 6 5 00
Jessica Jane, capital, June 30, 20-- $ 2 8 6 5 00

Ending capital is not taken from the work sheet. It is computed on the statement
of owner’s equity.
Dollar signs used at top of columns and under rulings.
Single rulings indicate addition or subtraction.
Double rulings indicate totals.

CHE-HEINTZ-09-0502-006.indd 183 11/18/09 4:09:08 PM

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xii 12/2/09 12:31:07 AM

Preface xiii

• Improved readability The adjustment for merchandise inventory is done in two steps.
(shorter paragraphs, more
1. Remove the beginning inventory from the merchandise inventory account by
listings/steps for easier
making the following entry:
understanding, etc.)
Income Summary old
Merchandise Inventory old
2. Enter the ending inventory in the merchandise inventory account by making the
following entry:
Merchandise Inventory new
Income Summary new

• The owner’s initial invest- Jessie Jane’s Campus Delivery Service

ment is now shown as an Statement of Owner’s Equity
For Month Ended June 30, 20 --
investment during the Jessica Jane, capital, June 1, 20 -- $ ———
Many companies use a dash (—) to
represent a zero on financial statements.
period, instead of the Investments during June 2 0 0 0 00
beginning of the period Total investment $2 0 0 0 00
Net Income for June Withdrawals are deducted from $1 2 5 0 00
Less Withdrawals for June net income in the first column. 1 5 0 00
The net increase in capital is
Increase in capital reported in the second column. 1 1 0 0 00
Jessica Jane, capital, June 30, 20 -- $3 1 0 0 00 $ on total

• New supplement—Excel E 2-3A (LO3/4) EFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) Alice Stern
✓ Assets following (d): $22,000 started a business. During the first month (February 20--), the following transactions
templates (related exercis- occurred. Show the effect of each transaction on the accounting equation: Assets =
es/problems are indicated Liabilities + Owner’s Equity. After each transaction, show the new totals.
by an icon in the text) (a) Invested cash in the business, $20,000.
(b) Bought office equipment on account, $3,500.
(c) Bought office equipment for cash, $1,200.
(d) Paid cash on account to supplier in transaction (b), $1,500.

By chapter:
Ch. 1—We have added brief • Forensic Accounting. Forensic accounting is a rapidly growing segment of
coverage of International accounting practice. It includes fraud detection, fraud prevention, litigation
Financial Reporting support, business valuations, expert witness services, and other investigative
Standards (IFRS) andCHE-HEINTZ-09-0502-002.indd
forensic activities. Public accounting firms offer forensic accounting services, but foren- 11/9/09 4:29:15 PM
32
accounting. sic accountants also work for insurance companies, banks, law enforcement 11/9/09 4:29:22 PM
CHE-HEINTZ-09-0502-002.indd 42
agencies, and other organizations. By meeting certain requirements, and passing
the Certified Fraud Examiner exam, a forensic accountant may earn a Certified
Fraud Examiner (CFE) designation.

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xiii 12/2/09 12:31:08 AM

xiv Preface

Ch. 2—Redesigned account- Assets = Liabilities + Owner’s Equity

(Items Owned) (Amounts Owed) (Owner’s Investment) + (Earnings)
ing equation clarifies the
Jessica Jessica
expanded owner’s equity Cash +
Accounts
Receivable
+
Delivery
Equipment
=
Accounts
Payable
+ Jane, – Jane, + Revenues – Expenses Description
Capital Drawing
after students gain an
$750 $2,100 $600 $2,000 $ 500 $250
understanding of the basic
(h) + $600 + 600 Deliv. Fees
equation (A = L + OE); new $750 + $600 + $2,100 = $600 + $2,000 + $1,100 – $250
color coding highlights key $3,450 = $3,450
accounts by category.

Ch. 3—Redesigned owner’s FIGURE 3-2 The Accounting Equation and the Owner’s Equity Umbrella
equity umbrella features
new color coding for greater Owner’s Equity
Assets = Liabilities + Jessica Jane, Capital
clarity.
Debit Credit Debit Credit Debit Credit
+ – – + – +
Expenses Revenues
Debit Credit Debit Credit
+ – – +

Drawing
Debit Credit
+ –

The color coding ties the Analysis. This payment decreases the asset, Cash, and decreases the liability, Accounts
narrative informationCHE-HEINTZ-09-0502-002.indd
with Payable. 27
Debit Accounts Payable and credit Cash for $300. 10/12/09 9:00:16 PM

the T account presentation.

FIGURE 3-8 Transaction (d): Payment on Account

Assets = Liabilities + Owner’s Equity

Debit Credit Debit Credit Debit Credit
+ – – + – +

Cash Accounts Payable Jessica Jane, Capital

Bal. 800 Bal. 900 Bal. 2,000
(d) 300 (d) 300
Bal. 500 Bal. 600

Delivery Equipment
Bal. 2,100

$2,600 = $600 + $2,000

$2,600 = $2,600

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xiv 12/2/09 12:31:10 AM

Preface xv

Ch. 4—Financial statement 4.

illustration has been added to
the demonstration problem.
George Fielding, Financial Planning Consultant
This helps students tie knowl- Income Statement
edge from earlier chapters For Month Ended December 31, 20 --
together with information pre- Revenue:
sented in the chapter. Proﬀessional fees $6 5 0 0 00
Expenses:
Wages expense $1 2 0 0 00
Rent expense 1 0 0 0 00
Telephone expense 1 0 0 00
Utilities expense 7 5 00
Charitable contributions expense 1 0 0 00
Automobile expense 6 0 00
Total expenses 2 5 3 5 00
Net income $3 9 6 5 00

George Fielding, Financial Planning Consultant

Statement of Owner’s Equity
For Month Ended December 31, 20 --
George Fielding, capital, December 1, 20 -- $
Investments during December 20 0 0 0 00
Total investment $20 0 0 0 00
Net income for December $3 9 6 5 00
Less withdrawals for December 1 1 0 0 00
Increase in capital 2 8 6 5 00
George Fielding, Capital, December 1, 20 -- $22 8 6 5 00

George Fielding, Financial Planning Consultant

Balance Sheet
December 31, 20 --

Assets Liabilities
Cash $22 7 6 5 00 Accounts payable $ 1 8 0 00
Oﬃce Supplies 2 8 0 00 Owner’s equity
George Fielding, capital 22 8 6 5 00
Total assets $23 0 4 5 00 Total liabilities and owner’s equity $23 0 4 5 00

CHE-HEINTZ-09-0502-004.indd 112 11/9/09 4:32:31 PM

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xv 12/2/09 12:31:12 AM

xvi Preface

Ch. 5—Journal entries for FIGURE 5-7 Adjustment for Unpaid Wages

the adjusting entries are Assets = Liabilities + Owner’s Equity

now shown with T account Debit Credit Debit Credit Debit Credit
+ – – + – +
presentations; chapter con-
Drawing Expenses Revenues
tent presentation has been Debit Credit Debit Credit Debit Credit
+ – + – – +
revised to cover posting of
adjusting entries before work Wages Payable Wages Expense

sheet coverage—this makes Adj. 50 TB 650

Adj. 50
skipping work sheet cover- Bal. 700
age easier for those wanting
to do so; for those using the GENERAL JOURNAL PAGE 3
POST
work sheet, we enhanced DATE DESCRIPTION
REF.
DEBIT CREDIT

1 Adjusting Entry 1
the linkage between work
8 Wages Expense 5 0 00 8
sheet adjustments and adjust- 9 Wages Payable 9
5 0 00
ing entries. In the appendix, 10 10
graphs have been added to
the depreciation method
examples to assist visual
learners.
Ch. 6—Illustration of the FIGURE 6-8 Closing Entries in Journal Form

closing process has been Jessie Jane’s Campus Delivery Service

Work Sheet (Partial)
enhanced. For Month Ended June 30, 20 - -
INCOME STATEMENT BALANCE SHEET
ACCOUNT TITLE STEP 1: Close revenue accounts to Income Summary.
DEBIT CREDIT DEBIT CREDIT

1 Cash 3 7 0 00 STEP 2: Close expense accounts to Income Summary.

2 Accounts Receivable 6 5 0 00
3 Supplies 2 0 00 STEP 3: Close Income Summary to the owner’s capital account.
4 Prepaid Insurance 1 7 5 00
STEP 4: Close Drawing to the owner’s capital account.
5 Delivery Equipment 3 6 0 0 00
6 Accum. Depr.—Delivery Equipment 1 0 0 00
7 Accounts Payable 1 8 0 0 00
8 Wages Payable 5 0 00 GENERAL JOURNAL PAGE 4
9 Jessica Jane, Capital 2 0 0 0 00 DATE DESCRIPTION
POST.
DEBIT CREDIT
REF.
10 Jessica Jane, Drawing 1 5 0 00 10
STEP 1
Closing Entries 1
11 Delivery Fees 2 1 5 0 00
20--
2
12 Wages Expense 7 0 0 00 June 30 Delivery Fees 401 2 1 5 0 00
13 Rent Expense 2 0 0 00 Income Summary 313 2 1 5 0 00 3
14 Supplies Expense 6 0 00 4
15 Telephone Expense 5 0 00 5
30 Income Summary 313 1 1 3 5 00
16 Insurance Expense 2 5 00 STEP 2
Wages Expense 511 7 0 0 00 6
17 Depr. Expense—Delivery Equipment 1 0 0 00
Rent Expense 521 2 0 0 00 7
18 1 1 3 5 00 2 1 5 0 00 4 9 6 5 00 3 9 5 0 00
Supplies Expense 523 6 0 00 8
19 Net Income 1 0 1 5 00 1 0 1 5 00
Telephone Expense 525 5 0 00 9
20 2 1 5 0 00 2 1 5 0 00 4 9 6 5 00 4 9 6 5 00
Insurance Expense 535 2 5 00 10
STEP 3 Depr. Expense—Delivery Equipment 541 1 0 0 00 11
12

LEARNING KEY 30 Income Summary 313 1 0 1 5 00 13

Jessica Jane, Capital 311 1 0 1 5 00 14
Each individual revenue, expense, 15
and drawing account must be STEP 4 30 Jessica Jane, Capital 311 1 5 0 00 16
CHE-HEINTZ-09-0502-005.indd 135 11/17/09 7:10:27 PM
closed. Jessica Jane, Drawing 312 1 5 0 00 17
18

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xvi 12/2/09 12:31:13 AM

Preface xvii

Comprehensive Problem—New data sets have been added so that students can complete the problem using either
Peachtree or QuickBooks software or the Klooster & Allen General Ledger software.

Ch. 7—Coverage of lapping and kiting has been added to the cash internal control section.

Ch. 8—Payroll information PAYROLL REGISTER (RIGHT SIDE) 20--

has been revised to be more FEDERAL SOCIAL MEDICARE HEALTH

DEDUCTIONS

UNITED NET PAY

OTHER TOTAL
current; to assist in under- INCOME TAX SECURITY TAX TAX INSURANCE WAY

standing the link between the 4 7 6 00 2 9 9 77 8 4 61 4 6 00 4 0 00 0 00 0 00 9 4 6 38 4 8 8 8 62

payroll register and related
journal entries, cross-reference (2) (3) (4) (5) (6) (7)

coding has been added.

POST
DATE DESCRIPTION DEBIT CREDIT
REF.

(1)
CHE-HEINTZ-09-0502-008.indd 293
5 Dec. 19 Wages and Salaries Expense 5 8 3 5 00 511/18/09 4:46:11 PM

(2) 6 Employee Income Tax Payable 4 7 6 00 6

(3) 7 Social Security Tax Payable 2 9 9 77 7
(4) 8 Medicare Tax Payable 8 4 61 8
(5) 9 Health Insurance Premiums Payable 4 6 00
9
(6) 10 United Way Contributions Payable 4 0 00 10
(7) 11 Cash 4 8 8 8 62 11
12 Payroll for week ended Dec. 19 12

Ch. 9—Payroll informa- FIGURE 9-10 Wage and Tax Statement (Form W-2)
tion has been revised to be Federal income tax
Total wages paid
more current; brief coverage withheld

of Form I-9 (Employment 22222 Void

a Employee’s social security number
393-58-8194
For Ofﬁcial Use Only
OMB No. 1545-0008

Eligibility Verification) has b Employer identification number (EIN)

43 0211630
1 Wages, tips, other compensation
27,645.00
2 Federal income tax withheld
528.00
Social security tax
withheld
been added; callouts have c Employer’s name, address, and ZIP code 3 Social security wages
27,645.00
4 Social security tax withheld
1,713.99
Westly, Inc.
been added to several forms 5221 Natural Bridge
St. Louis, MO 63115-8230
5 Medicare wages and tips
27,645.00
6 Medicare tax withheld
400.85 Medicare tax withheld

to enhance clarity. 7 Social security tips 8 Allocated tips

d Control number 9 Advance EIC payment 10 Dependent care benefits

e Employee’s first name and initial Last name Suff. 11 Nonqualified plans 12a See instructions for box 12
C
o
Ken M. Istone d
e
13 Statutory Retirement Third-party 12b
employee plan sick pay C
o
d
1546 Swallow Dr. e

St. Louis, MO 63144-4752 14 Other

C
12c
o
d
e
12d
C
o
d
e

f Employee’s address and ZIP code

15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name

W-2 Wage and Tax

20--
Department of the Treasury—Internal Revenue Service
Form Statement For Privacy Act and Paperwork Reduction
Copy A For Social Security Administration — Send this entire page with Act Notice, see back of Copy D.
Form W-3 to the Social Security Administration; photocopies are not acceptable. Cat. No. 10134D

Do Not Cut, Fold, or Staple Forms on This Page—DoNot Cut, Fold, or Staple Forms on This Page

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xvii 12/2/09 12:31:15 AM

xviii Preface

Ch. 10—Expanded coverage Figure 10-11 shows how (1) a sale on account followed by (2) collection with a
of sales discounts, including cash discount affects the accounts receivable, sales, and cash accounts.
a new figure illustrating the
concept and accounting for FIGURE 10-11 Sales on Account → Collection with Cash Discount
sales when there are sales
taxes and cash discounts. (1) (2)
Credit 2% Cash Cash
Sale – Discount = Collection

Net Sales = $100 – $2 = $98

ENTRY FOR CREDIT SALE
(1) Accounts Receivable 1 0 0 00
Sales 1 0 0 00

ENTRY FOR CASH COLLECTION

(2) Cash 9 8 00
Sales Discounts 2 00
Accounts Receivable 1 0 0 00

In a more realistic situation, we must compute net sales and cost of goods sold, in
order to compute gross profit. Multiple steps are involved. To illustrate, we use three
Ch. 11—Impact of sales dis- of the four new accounts described in Chapter 10, the four new accounts described in
counts has been added to the this chapter, and the merchandise inventory balances. Assume that Northern Micro
gross profit coverage. has the following sales, purchases, and merchandise inventory balances for the year
ended December 31, 20--:

Sales $201,500
From Chapter 10
{ Sales returns and allowances
Sales discounts
1,200
1,000

{
Purchases 105,000
Purchases returns and allowances 800
From Chapter 11
Purchases discounts 1,000
Freight-in 300
Merchandise inventory, January 1, 20-- 26,000
Merchandise inventory, December 31, 20-- 18,000
CHE-HEINTZ-09-0502-010.indd 361 11/9/09 11:09:17 PM

Figure 11-7 uses these balances to compute net sales, net purchases, cost of goods
sold, and gross profit. The following four steps in computing gross profit are labeled
in the figure:
STEP 1 Compute net sales.
(Sales – Sales Returns and Allowances – Sales Discounts)

Ch. 14—Cost of goods sold 3.

illustration has been added to 1 Cost of goods sold: 1

the demonstration problem. 2 Merchandise inventory, January 1 $19 0 0 0 00 2

3 Purchases $52 5 0 0 00 3
4 Less: Purchases returns and allowances $ 4 0 0 00 4
5 Purchases discounts 5 0 0 00 9 0 0 00 5
6 Net purchases $51 6 0 0 00 6
7 Add freight-in 1 5 0 00 7
8 Cost of goods purchased 51 7 5 0 00 8
9 Goods available for sale $70 7 5 0 00 9
10 Less merchandise inventory, December 31 15 0 0 0 00 10
11 Cost of goods sold $55 7 5 0 00 11

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xviii 12/2/09 12:31:17 AM

Preface xix

Ch. 15—Sales discounts has P 15-10A (LO5/6) WORK SHEET, ADJUSTING, CLOSING, AND REVERSING ENTRIES Ellis Fabric
✓ Net income: $10,610; Post-closing Store shows the trial balance on page 601 as of December 31, 20-1.
been added to the demon-
trial bal. col. totals: $79,650 At the end of the year, the following adjustments need to be made:
stration problem; unearned
revenue has been added to (a and b) Merchandise inventory as of December 31, $28,900.
(c) Unused supplies on hand, $1,350.
selected problems. (d) Insurance expired, $300.
(e) Depreciation expense for the year, $500.
(f) Wages earned but not paid (Wages Payable), $480.
(g) Unearned revenue on December 31, 20-1, $1,000.

Comprehensive Problem 2— COMPREHENSIVE PROBLEM 2: ACCOUNTING CYCLE

A significant reduction WITH SUBSIDIARY LEDGERS, PART 1
in number of transactions During the second half of December 20-1, TJ’s Specialty Shop engaged in the following
required has been made transactions:

in Part 1—thus decreasing Dec. 16 Received payment from Lucy Greene on account, $1,960.
redundancy. 16 Sold merchandise on account to Kim Fields, $160, plus sales tax of $8. Sale No. 640.
17 Returned merchandise to Evans Essentials for credit, $150.
18 Issued Check No. 813 to Evans Essentials in payment of December 1 balance of
$1,250, less the credit received on December 17.
19 Sold merchandise on account to Lucy Greene, $620, plus tax of $31. Sale No. 641.
22 Received payment from John Dempsey on account, $1,560.

CHE-HEINTZ-09-0502-015.indd 599
23 Issued Check No. 814 for the purchase of supplies, $120. (Debit Supplies) 11/12/09 9:51:20 PM
24 Purchased merchandise on account from West Wholesalers, $1,200.
Invoice No. 465, dated December 24, terms n/30.

Instructor Supplements and

Resources ISBN Authors, Affiliations, Description
CengageNOW NEW CengageNOW for Heintz/Parry’s College Accounting online teaching and learn-
ing system provides the ultimate in flexibility and ease of use with the results you
want NOW to ensure your students are building skills for the future. Save time as you
efficiently plan your course, teach and reinforce content with interactive learning
tools and personalized study plans, and grade results based on AACSB accreditation
standards.
Solutions Manual 053875088X James Heintz and Robert Parry
Chapters 1–15 + Combination Journal Module 9780538750882 This printed version contains the complete, carefully verified solutions for all text
assignments. Accounting rulings are used where appropriate. (Note: These are also
the solutions to the working papers.) The solutions manual is also available on the
Instructor’s Resource CD-ROM and the Instructor’s Web site, which are described below.
Study Guide Solutions James Heintz and Robert Parry
Chapters 1–9 + Combination Journal Module 0538750715 These solutions cover all set “C” assignments found in the Study Guide. These may
9780538750714 be packaged with the Study Guide at the instructor’s discretion.
Chapters 10-15 0538750723
9780538750721
Solution Transparencies 0538752521 James Heintz and Robert Parry
Chapters 1–15 + Combination Journal Module 9780538752527 Contains solutions for the Series A & B Exercises and Problems, Mastery Problems,
Challenge Problems, and Comprehensive Problems in the text. Where appropriate,
solutions appear on accounting rulings.

CHE-HEINTZ-09-0502-Pr2.indd 614 10/2/09 3:17:28 AM

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xix 12/2/09 12:31:20 AM

xx Preface

Instructor Supplements and

Resources ISBN Authors, Affiliations, Description
Test Bank 0538752548 Revised and verified to ensure accuracy, this printed version of the test bank includes
Chapters 1–15 + Combination Journal Module 9780538752541 questions clearly identified by Learning Objectives, level of difficulty, and AACSB stan-
dards to allow greater guidance in developing assessments and evaluating student prog-
ress. Question types include true/false, multiple choice, and problems. The complete test
bank in both the Microsoft Word and ExamView® testing software versions is available
on the Instructor’s Resource CD-ROM, which is listed below.

Instructor’s Resource Guide 0538754389 This guide contains a wealth of resources to help instructors create an exciting and produc-
Chapters 1–15 + Combination Journal Module 9780538754385 tive classroom experience. Included are enhanced chapter outlines and teaching tips; refer-
ences to exhibits, PowerPoint® slides, and teaching transparencies; suggested enrichments
and activities; check figures for text assignments; pretests tied to Learning Objectives; and
Ten Questions Your Students Will Always Ask to help anticipate student learning needs. This
guide is also available on the Instructor’s Resource CD-ROM, which is listed below.
Instructor’s Resource CD-ROM with 0538750650 This all-in-one tool places the resources you need to plan and teach at your fingertips in
ExamView® 9780538750653 one convenient CD-ROM. You’ll find the Solutions Manual, Test Bank in Microsoft Word
and Examview® testing software, PowerPoint® lecture presentation slides, Instructor’s
Resource Guide, Instructor’s solutions, Excel template solutions, Teaching Transparencies,
and Inspector software for checking solutions using the accompanying Klooster & Allen
General Ledger software.

Instructor’s Web Site Ensure a higher level of understanding and success with this comprehensive,
resource-rich text support site. An interactive student study center provides interac-
tive quizzes and online tools that encourage learning. Password-protected teaching
resources, including the Instructor’s Manual, Teaching Transparencies, PowerPoint®
lecture presentations, Test Bank, Instructor’s solutions Excel templates, and
Solutions Manual, are easy to download. You can link to Web Work assignments,
ideal for Internet research, assign online quizzes with solutions, or assign other
interactive assignments to help students test themselves during study. It’s every-
thing you need to deliver the skills your students need to enhance their future.
Trey’s Fast Cleaning Service Practice 0538753234 Toni R. Hartley, Laurel Business Institute
Set Key + Inspector CD-ROM 9780538753234 This Instructor’s Key for the Trey’s Fast Cleaning Service practice set includes the
inspector CD, which contains the Klooster & Allen General Ledger solutions software
for the practice set.
Coolspring Furniture Practice Set 0538752750 Toni R. Hartley, Laurel Business Institute
Key + Inspector CD-ROM 9780538752756 This Instructor’s Key for the Coolspring Furniture practice set includes the inspector
CD, which contains the Klooster & Allen General Ledger solutions software for the
practice set.

Additional Resources
Integrated Accounting for 0538747978 Dale Klooster and Warren Allen
Windows (and software) 9780538747974 Quite possibly the easiest-to-understand learning program on the market, this text-
book, with accompanying software, teaches students all the aspects of computerized
accounting and the operating procedures for all Windows-based programs at the
same time. The software was designed to be very similar to the commercial software
packages used in business, which will help students hit the ground running when
they get that first real job. With its updated design and improved directions, stu-
dents won’t become overwhelmed with the program.

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xx 12/2/09 12:31:22 AM

Preface xxi

DEDICATION
We are grateful to our wives, Celia Heintz and Jane Parry, and our children, Andrea
Heintz, John Heintz, Jessica Jane Parry, and Mitch Parry, for their love, support,
and assistance during the creation of this 20th edition. We especially appreciate
Jessie Parry’s willingness to let us use her name throughout the first six chapters.

ACKNOWLEDGMENTS
We thank the following individuals for their helpful contributions in assisting us in
this revision of College Accounting.

Allan N. Aspelund, Century College James Hurst, National College—Lexington

Lelia Austin, Lake City Community College Dieter M. Kiefer, American River College
Anne Bikofsky, The College of Westchester Susan S. Lafferty, National College of Business and
Juanita Garza Blankenship, Del Mar College Technology
Jane Bloom, Palm Beach Community College Sonja Lolland, Sierra College
Anna Boulware, St. Charles Community College Ted Lynch, Hocking College
Dan Carroll, Miami University—Hamilton and Alfonso J. Maldonado, Laredo Community College
Middletown Michael S. Manis, College of the Desert
Susan S. Davis, Green River Community College James Mann, Huntington Junior College
Judith A. Dixon, York Technical College Josephine M. Mathias, Mercer County Community
Sharon Doherty, Lincoln College of Technology College
Larry J. Dragosavac, Edison Community College Marc Newman, Hocking College
Richard Dugger, Kilgore College Sonia M. Gipson Rankin, IIA College
Charles D. Edwards, Miami University—Hamilton and Aaron Reeves, Saint Louis Community College—Forest
Middletown Park
Marina Grau, Houston Community College Carolyn M. Seefer, Diablo Valley College
Becky Hancock, El Paso Community College Tom Shaffer, Spencerian College—Louisville
Toni R. Hartley, Laurel Business Institute Judy Toland, Bucks County Community College
Patricia H. Holmes, Des Moines Area Community
College

Special recognition and thanks go to Anne Bikofsky, The College of Westchester,

who provided the all-new Profiles in Accounting, which feature five of her former
students. In addition, we express our appreciation to the following consultants for
their quality assistance in providing supporting materials: Alice Sineath of Forsyth
Technical Community College, Leonor Cabrera of Canada College of Business,
James Emig of Villanova University, Susan Jefferson, Patti Hudepohl, and Mark
Sears. We would also like to thank Richard Dugger of Kilgore College, Sheila Viel of
the University of Wisconsin—Milwaukee, Bruce Gunning of Kent State University
East Liverpool, and Robert Osborne of Ohio Dominican University for their dili-
gent verification of the supplements.

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xxi 12/2/09 12:31:22 AM

CO NT E NT S IN B R IE F

PART 1 ACCOUNTING FOR A SERVICE BUSINESS 1

Chapter 1 Introduction to Accounting 3
Chapter 2 Analyzing Transactions: The Accounting Equation 19
Chapter 3 The Double-Entry Framework 50
Chapter 4 Journalizing and Posting Transactions 86
Chapter 5 Adjusting Entries and the Work Sheet 130
Chapter 6 Financial Statements and the Closing Process 180
Comprehensive Problem 1: The Accounting Cycle 222

PART 2 ACCOUNTING FOR CASH AND PAYROLL 227

Chapter 7 Accounting for Cash 229
Chapter 8 Payroll Accounting: Employee Earnings and Deductions 280
Chapter 9 Payroll Accounting: Employer Taxes and Reports 315

PART 3 ACCOUNTING FOR A MERCHANDISING BUSINESS 351

Chapter 10 Accounting for Sales and Cash Receipts 353
Chapter 11 Accounting for Purchases and Cash Payments 397
Chapter 12 Special Journals 439
Chapter 13 Accounting for Merchandise Inventory 486
Chapter 14 Adjustments and the Work Sheet for a Merchandising Business 523
Chapter 15 Financial Statements and Year-End Accounting for a Merchandising Business 566
Comprehensive Problem 2: Accounting Cycle with Subsidiary Ledgers: Part 1 614
Comprehensive Problem 2: Accounting Cycle with Subsidiary Ledgers: Part 2 617

Module: Accounting for a Professional Services Business: The Combination Journal 619
Index 653

xxiii
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xxiii 12/2/09 12:31:23 AM

CON TEN TS

PART 1 ACCOUNTING FOR A SERVICE BUSINESS 1

Add Some Color to Your Learning! 2

Chapter 1 Introduction to Accounting 3

The Purpose of Accounting 4
The Accounting Process 4
Generally Accepted Accounting Principles (GAAP) 5
Three Types of Ownership Structures 6
Sole Proprietorship 6
Partnership 6
Corporation 7
Types of Businesses 7
Career Opportunities in Accounting 8
Accounting Clerks 8
Bookkeepers and Para-Accountants 8
Accountants 8
Job Opportunities 10
Key Points to Remember 14
Key Terms 15
Review Questions 16
Exercises 17
Managing Your Writing 18

Chapter 2 Analyzing Transactions: The Accounting Equation 19

The Accounting Elements 20
Assets 20
Liabilities 20
Owner’s Equity 20
The Accounting Equation 21
Analyzing Business Transactions 22
Effect of Transactions on the Accounting Equation 23
Expanding the Accounting Equation: Revenues, Expenses, and Withdrawals 24
Effect of Revenue, Expense, and Withdrawal Transactions on the Accounting Equation 26
Financial Statements 30
The Income Statement 33
The Statement of Owner’s Equity 33
The Balance Sheet 34
Overview of the Accounting Process 34
Key Points to Remember 35
Key Terms 39
Review Questions 42
Exercises and Problems 42
Managing Your Writing 47
Mastery Problem 47
Challenge Problem 48

Chapter 3 The Double-Entry Framework 50

The T Account 51
Balancing a T Account 51
Debits and Credits 52
Assets 52
Liabilities and Owner’s Equity 53

xxiv
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

CHE-HEINTZ-09-0502-0FM_Ch1 to 15.indd Sec1:xxiv 12/2/09 12:31:24 AM

Contents xxv

The Owner’s Equity Umbrella 53

Owner’s Capital 53
Drawing 53
Revenues 53
Expenses 53
Normal Balances 54
Transaction Analysis 54
Debits and Credits: Asset, Liability, and Owner’s Equity Accounts 55
Debits and Credits: Including Revenues, Expenses, and Drawing 57
Summary of Transactions 66
The Trial Balance 67
Key Points to Remember 69
Key Terms 73
Review Questions 75
Exercises and Problems 75
Managing Your Writing 83
Mastery Problem 83
Challenge Problem 84

Chapter 4 Journalizing and Posting Transactions 86

Flow of Data 87
The Chart of Accounts 87
Source Documents 88
The General Journal 90
Journalizing 90
The General Ledger 94
General Ledger Account 95
Posting to the General Ledger 96
The Trial Balance 102
Finding and Correcting Errors in the Trial Balance 103
Ruling Method 103
Correcting Entry Method 104
Key Points to Remember 105
Key Terms 113
Review Questions 115
Exercises and Problems 115
Managing Your Writing 125
Mastery Problem 125
Challenge Problem 127

Chapter 5 Adjusting Entries and the Work Sheet 130

End-of-Period Adjustments 131
Supplies 132
Prepaid Insurance 133
Wages Expense 134
Depreciation Expense 136
Expanded Chart of Accounts 138
Posting Adjusting Entries 138
The Work Sheet 140
The 10-Column Work Sheet 140
Preparing the Work Sheet 141
Journalizing Adjusting Entries from the Work Sheet 143
Methods of Accounting: Cash, Modified Cash, and Accrual 144

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xxvi Contents

Key Points to Remember 148

Key Terms 152
Review Questions 155
Exercises and Problems 156
Managing Your Writing 169
Mastery Problem 171
Challenge Problem 172

Appendix Depreciation Methods 175

Straight-Line Method 175
Sum-of-the-Years’-Digits 176
Double-Declining-Balance Method 177
Modified Accelerated Cost Recovery System 177
Key Points to Remember 178
Key Terms 178
Review Questions 179
Exercises and Problems 179

Chapter 6 Financial Statements and the Closing Process 180

The Financial Statements 181
The Income Statement 181
The Statement of Owner’s Equity 181
The Balance Sheet 182
Additional Investments by the Owner (Revisited) 184
The Closing Process 185
Steps in the Closing Process 187
Journalize Closing Entries 187
Post the Closing Entries 188
Post-Closing Trial Balance 191
The Accounting Cycle 192
Steps in the Accounting Cycle 192
Key Points to Remember 193
Key Terms 197
Review Questions 199
Exercises and Problems 200
Managing Your Writing 211
Mastery Problem 211
Challenge Problem 213

Appendix Statement of Cash Flows 216

Types of Business Activities 216
Preparing the Statement of Cash Flows 217
Key Points to Remember 219
Key Terms 220
Review Questions 220
Exercises and Problems 220

Comprehensive
Problem 1 The Accounting Cycle 222

Comprehensive
Problem 1 Period 2: The Accounting Cycle 224

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Contents xxvii

PART 2 ACCOUNTING FOR CASH AND PAYROLL 227

Add Some Color to Your Learning! 228

Chapter 7 Accounting for Cash 229

Checking Account 230
Opening a Checking Account 230
Making Deposits 231
Endorsements 231
Automated Teller Machines 232
Writing Checks 233
Bank Statement 234
Reconciling the Bank Statement 235
Deposits 235
Cash Payments 235
Reasons for Differences Between Bank and Book Balances 236
Steps in Preparing the Bank Reconciliation 236
Illustration of a Bank Reconciliation 237
Journal Entries 239
Electronic Funds Transfer 240
The Petty Cash Fund 241
Establishing a Petty Cash Fund 241
Making Payments from a Petty Cash Fund 241
Petty Cash Payments Record 242
Replenishing the Petty Cash Fund 242
The Change Fund and Cash Short and Over 244
Establishing and Operating the Change Fund 244
Cash Short and Over 245
Key Points to Remember 246
Key Terms 250
Review Questions 253
Exercises and Problems 253
Managing Your Writing 262
Ethics Case 262
Mastery Problem 263
Challenge Problem 264

Appendix Internal Controls 266

Importance of Internal Control 266
Key Components of Internal Control 267
Control Environment 267
Risk Assessment 268
Control Activities 268
Information and Communication System 269
Monitoring Processes 269
Internal Controls Over Cash Receipts 269
Internal Controls Over Cash Payments 271
Voucher System 271
The Purchasing Process 271
The Payment Process 273
Key Points to Remember 275
Key Terms 276

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xxviii Contents

Review Questions 276

Exercises and Problems 277

Practice Set: Trey’s Fast Cleaning Service

This set uses accrual-basis accounting and features a service business operating as a sole proprietorship. It
reviews the accounting cycle and accounting for cash, utilizing general journals. It can be solved manually, with
Klooster and Allen General Ledger software (provided), or with Peachtree software (provided). (Appropriate for
use after Chapter 7.)

Chapter 8 Payroll Accounting: Employee Earnings and Deductions 280

Employees and Independent Contractors 281
Employee Earnings and Deductions 281
Salaries and Wages 281
Computing Total Earnings 282
Deductions from Total Earnings 284
Computing Net Pay 288
Payroll Records 289
Payroll Register 289
Payroll Check 290
Employee Earnings Record 292
Accounting for Employee Earnings and Deductions 292
Journalizing Payroll Transactions 292
Wages and Salaries Expense 295
Employee Income Tax Payable 295
Social Security and Medicare Taxes Payable 296
Other Deductions 296
Payroll Record-Keeping Methods 296
Key Points to Remember 297
Key Terms 302
Review Questions 304
Exercises and Problems 304
Managing Your Writing 311
Ethics Case 311
Mastery Problem 311
Challenge Problem 313

Chapter 9 Payroll Accounting: Employer Taxes and Reports 315

Employer Payroll Taxes 316
Employer FICA Taxes 316
Self-Employment Tax 317
Employer FUTA Tax 317
Employer SUTA Tax 318
Accounting for Employer Payroll Taxes 319
Journalizing Employer Payroll Taxes 319
Payroll Taxes Expense 320
Social Security and Medicare Taxes Payable 320
FUTA Tax Payable 321
SUTA Tax Payable 321
Total Payroll Cost of an Employee 321
Reporting and Payment Responsibilities 322
Federal Income Tax Withholding and Social Security and Medicare Taxes 322
FUTA Taxes 324

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Contents xxix

SUTA Taxes 329

Employee Wage and Tax Statement 329
Summary of Employee Wages and Taxes 330
Employment Eligibility Verification 330
Summary of Taxes, Reports, and Payments 330
Workers’ Compensation Insurance 333
Key Points to Remember 335
Key Terms 338
Review Questions 340
Exercises and Problems 340
Managing Your Writing 348
Ethics Case 348
Mastery Problem 348
Challenge Problem 349

PART 3 ACCOUNTING FOR A MERCHANDISING

BUSINESS 351
Add Some Color to Your Learning! 352

Chapter 10 Accounting for Sales and Cash Receipts 353

Merchandise Sales Transactions 354
Retailer 354
Wholesaler 355
Credit Memorandum 356
Merchandise Sales Accounts 357
Sales Account 357
Sales Tax Payable Account 358
Sales Returns and Allowances Account 359
Sales Discounts Account 360
Journalizing and Posting Sales and Cash Receipts Transactions 362
Sales 362
Posting Sales to the General Ledger 362
Posting Sales to the Accounts Receivable Ledger 363
Sales Returns and Allowances 366
Cash Receipts 366
Journalizing Cash Receipts 368
Posting Cash Receipts to the General Ledger and Accounts Receivable Ledger 369
Schedule of Accounts Receivable 370
Key Points to Remember 372
Key Terms 379
Review Questions 382
Exercises and Problems 382
Managing Your Writing 391
Ethics Case 392
Mastery Problem 392
Challenge Problem 394

Chapter 11 Accounting for Purchases and Cash Payments 397

Merchandise Purchases Transactions 398
Purchase Requisition 398

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xxx Contents

Purchase Order 398

Receiving Report and Purchase Invoice 399
Cash and Trade Discounts 400
Merchandise Purchases Accounts 401
Purchases Account 401
Purchases Returns and Allowances Account 402
Purchases Discounts Account 403
Freight-In Account 404
Computation of Gross Profit 405
Journalizing and Posting Purchases and Cash
Payments Transactions 407
Purchases 407
Posting Purchases to the General Ledger 408
Posting Purchases to the Accounts Payable Ledger 408
Purchases Returns and Allowances 410
Cash Payments 411
Posting Cash Payments to the General Ledger and Accounts
Payable Ledger 411
Schedule of Accounts Payable 413
Key Points to Remember 414
Key Terms 420
Review Questions 422
Exercises and Problems 423
Managing Your Writing 432
Ethics Case 432
Mastery Problem 432
Challenge Problem 434

Appendix The Net-Price Method of Recording Purchases 436

Net-Price Method 436
Recording with the Net-Price Method 436
Key Points to Remember 437
Key Terms 437
Review Questions 438
Exercises 438

Chapter 12 Special Journals 439

Special Journals 440
Sales Journal 441
Posting from the Sales Journal 442
Cash Receipts Journal 445
Posting from the Cash Receipts Journal 446
Purchases Journal 450
Posting from the Purchases Journal 451
Cash Payments Journal 454
Key Points to Remember 458
Key Terms 467
Review Questions 469
Exercises and Problems 469
Managing Your Writing 481
Ethics Case 481
Mastery Problem 482
Challenge Problem 484

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Contents xxxi

Practice Set: Coolspring Furniture

This set is a merchandising business operating as a sole proprietorship. It includes accounting for payroll and can be
solved using either general journals or special journals. It can be solved manually, with Klooster and Allen General Ledger
software (provided), or Peachtree software (provided). Appropriate for use after Chapters 10 and 11, and Chapter 12 if
special journals are being covered. The practice set includes content covered through Chapter 15, where students will be
asked to prepare a simple income statement and balance sheet.

Chapter 13 Accounting for Merchandise Inventory 486

The Impact of Merchandise Inventory on Financial Statements 487
Types of Inventory Systems: Periodic and Perpetual 489
Assigning Cost to Inventory and Cost of Goods Sold 490
Taking a Physical Inventory 490
The Periodic Inventory System 492
The Perpetual Inventory System 496
Lower-of-Cost-or-Market Method of Inventory Valuation 496
Estimating Ending Inventory and Cost of Goods Sold 498
Gross Profit Method of Estimating Inventory 498
Retail Method of Estimating Inventory 499
Key Points to Remember 500
Key Terms 504
Review Questions 506
Exercises and Problems 507
Managing Your Writing 513
Ethics Case 514
Mastery Problem 514
Challenge Problem 515

Appendix Prepetual Inventory Method: LIFO and Moving-Average

Methods 517
Perpetual LIFO 517
Perpetual Moving-Average 518
Key Points to Remember 519
Key Terms 520
Review Question 520
Exercises and Problems 520

Chapter 14 Adjustments and the Work Sheet for a Merchandising Business 523
Adjustment for Merchandise Inventory: Periodic Inventory System 524
Adjustment for Unearned Revenue 526
Expanded Chart of Accounts 527
Preparing a Work Sheet for a Merchandising Business 528
Adjustments for Northern Micro 530
Preparing a Work Sheet for Northern Micro 530
Adjusting Entries 536
Adjusting Entries Under the Perpetual Inventory System 536
Key Points to Remember 538
Key Terms 543
Review Questions 545
Exercises and Problems 545
Managing Your Writing 558
Ethics Case 560

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xxxii Contents

Mastery Problem 560

Challenge Problem 561

Appendix Expense Method of Accounting for Prepaid Expenses 563

The Expense Method 563
Adjusting Entries Under The Expense Method 563
Key Points to Remember 564
Key Terms 565
Exercises 565

Chapter 15 Financial Statements and Year-End Accounting for a Merchandising

Business 566
The Income Statement 567
The Statement of Owner’s Equity 570
Balance Sheet 571
Current Assets 571
Property, Plant, and Equipment 572
Current Liabilities 573
Long-Term Liabilities 573
Owner’s Equity 573
Financial Statement Analysis 573
Balance Sheet Analysis 573
Interstatement Analysis 574
Closing Entries 576
Post-Closing Trial Balance 578
Reversing Entries 579
Key Points to Remember 582
Key Terms 590
Review Questions 594
Exercises and Problems 594
Managing Your Writing 608
Ethics Case 608
Mastery Problem 609
Challenge Problem 611

Comprehensive
Problem 2 Accounting Cycle with Subsidiary Ledgers, Part 1 614
Comprehensive
Problem 2 Accounting Cycle with Subsidiary Ledgers, Part 2 617

Module Accounting for a Professional Service Business: The Combination

Journal 619
The Modified Cash and Accrual Bases of Accounting 619
Accounting for a Professional Service Business 621
The Combination Journal 621
Journalizing in a Combination Journal 624
Proving the Combination Journal 625
Posting from the Combination Journal 625
Determining the Cash Balance 627

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Contents xxxiii

Performing End-of-Period Work for a Professional Service Business 627

Preparing the Work Sheet 627
Preparing Financial Statements 627
Preparing Adjusting and Closing Entries 631
Key Points to Remember 632
Key Terms 637
Review Questions 639
Exercises and Problems 639
Managing Your Writing 647
Ethics Case 648
Mastery Problem 648
Challenge Problem 650

Index 653

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Accounting for a Service Business

1
2
Introduction to Accounting
Analyzing Transactions: The Accounting Equation PART
3 The Double-Entry Framework

1
4 Journalizing and Posting Transactions
5 Adjusting Entries and the Work Sheet
6 Financial Statements and the Closing Process
MATS PERSSON/ISTOCKPHOTO.COM

CHE-HEINTZ-09-0502-001.indd 1 11/25/09 8:41:48 PM

Add Some Color to Your Learning!

Assets

Contra-Assets

Liabilities

Capital

Drawing

Revenues

Expenses

Income Summary (Net Income/Net Loss)

CHE-HEINTZ-09-0502-001.indd 2 11/25/09 8:41:52 PM

Chapter 1

IAN BRACEGIRDLE PHOTOGRAPHY/ISTOCKPHOTO.COM

LEARNING OBJECTIVES
Introduction to Accounting Careful study of this chapter should

N eed a private jet to get away for the weekend, attend a business
enable you to:
LO1 Describe the purpose
meeting, or visit Mom? Call Jets.com. Established in 1999, Jets.com
of accounting.
serves as a broker for private jet services. Call or go online, and its
technology will automatically send your trip request/itinerary to a LO2 Describe the accounting
process.
network of approved operators who will locate available aircraft.
Operators will competitively bid for your business, resulting in LO3 Define GAAP and describe
significant savings and increased aircraft options for you. the process used by
FASB to develop these
In addition to a system that links customers with private jet ser-
principles.
vice, Jets.com needs a system to account for its business transac-
tions. Thus, it employs accounting professionals who understand the LO4 Define three types of
business ownership
accounting process and generally accepted accounting principles.
structures.
Welcome to the world of accounting. We are delighted that you
have decided to join us. A solid foundation in accounting concepts LO5 Classify different types of
businesses by activities.
and techniques will serve you well. This is true whether you accept
a professional position in accounting, work for or own a business, LO6 Identify career opportunities
or simply seek a better understanding of your personal finances. in accounting.
Oh, and what does it cost to take a private jet to the Super Bowl?
Rates run from $2,000 to $7,000 per hour on the busiest weekend
of the year.

CHE-HEINTZ-09-0502-001.indd 3 11/25/09 8:41:52 PM

A ccounting is the language of business. You must learn this language to understand the impact
of economic events on a specific company. Common, everyday terms have very precise meanings
when used in accounting. For example, you have probably heard terms like asset, liability, rev-
enue, expense, and net income. Take a moment to jot down how you would define each of these
terms. After reading and studying Chapter 2, compare your definitions with those developed in
this text. This comparison will show whether you can trust your current understanding of account-
ing terms. Whether you intend to pursue a career in accounting or simply wish to understand the
impact of business transactions, you need a clear understanding of this language.

THE PURPOSE OF ACCOUNTING

LO1 Describe the purpose The purpose of accounting is to provide financial information about the current
of accounting. operations and financial condition of a business to individuals, agencies, and organiza-
tions. As shown in Figure 1-1, owners, managers, creditors, and government agencies
all need accounting information. Other users of accounting information include cus-
tomers, clients, labor unions, stock exchanges, and financial analysts.

FIGURE 1-1 Users of Accounting Information

USER INFORMATION NEEDED DECISIONS MADE BY USERS

Owners—Present and future Company’s profitability and current financial If business is good, owners may consider making addi-
condition. tional investments for growth. If business is poor, they
may want to talk to management to find out why and may
consider closing the business.
Managers—May or may not own Detailed measures of business performance. Managers need to make operating decisions. How much
business and what kinds of inventory should be carried? Is business
strong enough to support higher wages for employees?
Creditors––Present and future Company’s profitability, debt outstanding, Should a loan be granted to this business? If so, what
and assets that could be used to secure amount of debt can the business support, and what inter-
debt. est rate should be charged?
Government Agencies—National, Company’s profitability, cash flows, and overall The IRS will decide how much income tax the business
state, and local financial condition. must pay. Local governments may be willing to adjust
property taxes paid by the business to encourage it to stay
in town.

THE ACCOUNTING PROCESS

LO2 Describe the accounting Accounting is a system of gathering financial information about a business and report-
process. ing this information to users. The six major steps of the accounting process are analyz-
ing, recording, classifying, summarizing, reporting, and interpreting (Figure 1-2).
Computers are often used in the recording, classifying, summarizing, and reporting
steps. Whether or not computers are used, the accounting concepts and techniques
are the same. Information entered into the computer system must reflect a proper
application of these concepts. Otherwise, the output will be meaningless.

4 PART 1 Accounting for a Service Business

CHE-HEINTZ-09-0502-001.indd 4 11/25/09 8:41:56 PM

Chapter 1 Introduction to Accounting 5

FIGURE 1-2 The Accounting Process

Analyzing Recording Classifying Summarizing Reporting Interpreting

• Analyzing is looking at events that have taken place and thinking about how they
affect the business.
• Recording is entering financial information about events into the accounting
system. Although this can be done with paper and pencil, most businesses use
computers to perform routine record-keeping operations.
• Classifying is sorting and grouping similar items together rather than merely keep-
ing a simple, diary-like record of numerous events.
• Summarizing is the aggregation of many similar events to provide information
that is easy to understand. For example, a firm may buy and sell baseballs during
the year. Summarizing provides information on the total baseballs bought and
sold and the change in the number of baseballs held from the beginning to the
end of the period.
• Reporting is telling the results. In accounting, it is common to use tables of num-
bers to report results.
• Interpreting is deciding the meaning and importance of the information in various
reports. This may include ratio analysis to help explain how pieces of information
relate to one another.

GENERALLY ACCEPTED ACCOUNTING

PRINCIPLES (GAAP)
LO3 Define GAAP and Soon after the stock market crash of 1929, the federal government established the
describe the process Securities and Exchange Commission (SEC). The purpose of this government agency
used by FASB to is to help develop standards for reporting financial information to stockholders. The
develop these SEC currently has authority over 12,000 companies listed on the major stock
principles. exchanges (New York, American, and NASDAQ). It has the power to require these
firms to follow certain rules when preparing their financial statements. These rules are
referred to as generally accepted accounting principles (GAAP).
Rather than developing GAAP on its own, the SEC encouraged the creation of a
private standard-setting body. It did so because it believed the private sector had better
access to the resources and talent necessary to develop these standards. Since 1973,
the Financial Accounting Standards Board (FASB) has filled this role. In developing
accounting standards, FASB follows a specific process and relies on the advice of many
organizations. When an accounting issue is identified, the following steps are fol-
lowed:

1. The issue is placed on FASB’s agenda. This lets everyone know that the Board
plans to develop a standard addressing this issue.
2. After researching an issue, FASB issues a discussion memorandum. This
document identifies the pros and cons of various accounting treatments for
an event.
3. To gather additional views on the issue, the Board will often hold public
hearings around the country. Interested parties are invited to express their
opinions at these hearings.

CHE-HEINTZ-09-0502-001.indd 5 11/25/09 8:41:57 PM

6 PART 1 Accounting for a Service Business

4. Following these hearings, the Board issues an exposure draft. This document
explains the rules that FASB believes firms should follow in accounting for
this event.
5. After considering feedback on the exposure draft, the Board issues a final
statement of financial accounting standards (SFAS).
Throughout this process, many parties participate by testifying at public hearings
or by sending letters to the Board explaining why they agree or disagree with the pro-
posed standard. These parties include the American Institute of Certified Public
Accountants (AICPA), the American Accounting Association (AAA), the Institute of
Management Accountants (IMA), the Financial Executives Institute (FEI), corporate
executives and accountants, representatives from the investment community, analysts,
bankers, industry associations, and the SEC and other government agencies. Clearly,
FASB considers the views of a wide range of parties. By doing so, it maximizes the
likelihood of developing and gaining acceptance of the most appropriate accounting
and disclosure requirements.
The International Accounting Standards Board (IASB) issues accounting standards
followed by many firms in countries outside the United States. These are called
International Financial Reporting Standards (IFRS). In recent years, the IASB and
FASB have worked together to try to minimize the differences in these standards.
These standards may eventually converge into one set of standards used around the
world.

THREE TYPES OF OWNERSHIP STRUCTURES

LO4 Define three types of One or more persons may own a business. Businesses are classified according to who
business ownership owns them and the specific way they are organized. Three types of ownership struc-
structures. tures are (1) sole proprietorship, (2) partnership, and (3) corporation (Figure 1-3).
Accountants provide information to owners of all three types of ownership
structures.

FIGURE 1-3 Types of Ownership Structures—Advantages and Disadvantages

Most businesses in the TYPES OF OWNERSHIP STRUCTURES
United States operate as
Sole Proprietorship Partnership Corporation
sole proprietorships or • One owner • Two or more partners • Stockholders
partnerships. However, • Owner assumes all risk • Partners share risks • Stockholders have limited
• Owner makes all decisions • Partners may disagree on risk
corporations earn the how to run business • Stockholders may have
highest amount of revenue. little influence on business
decisions

SOLE PROPRIETORSHIP
The largest corporations A sole proprietorship is owned by one person. The owner is usually called a proprietor.
in the United States The proprietor often manages the business. The owner assumes all risks for the busi-
are known as the ness, and personal assets can be taken to pay creditors. The advantage of a sole pro-
“Fortune 500.” prietorship is that the owner can make all decisions.

PARTNERSHIP
A partnership is owned by more than one person. One or more partners may manage
the business. Like proprietors, partners assume the risks for the business, and their

CHE-HEINTZ-09-0502-001.indd 6 11/25/09 8:41:58 PM

Chapter 1 Introduction to Accounting 7

assets may be taken to pay creditors. An advantage of a partnership is that owners

share risks and decision making. A disadvantage is that partners may disagree about
the best way to run the business.

CORPORATION
A corporation is owned by stockholders (or shareholders). Corporations may have
many owners, and they usually employ professional managers. The owners’ risk is
usually limited to their initial investment, and they often have very little influence on
the business decisions.

TYPES OF BUSINESSES
LO5 Classify different Businesses are classified according to the type of service or product provided. Some
types of businesses by businesses provide a service. Others sell a product. A business that provides a service
activities. is called a service business. A business that buys a product from another business to
sell to customers is called a merchandising business. A business that makes a product
to sell is called a manufacturing business. You will learn about all three types of
businesses in this book. Figure 1-4 lists examples of types of businesses organized by
activity.

FIGURE 1-4 Types and Examples of Businesses Organized by Activities

SERVICE MERCHANDISING MANUFACTURING

Travel Agency Department Store Automobile Manufacturer

Computer Consultant Pharmacy Furniture Maker
Physician Grocery Store Toy Factory

A BROADER VIEW All Kinds of Businesses Need

Accounting Systems
Even small businesses like those that provide guided horse-
back tours of the Rocky Mountains need good accounting
systems. Proper records must be maintained for the cost of
the horses, feed, food served, tour guides’ salaries, and office
expenses. Without this information, the company would not
know how much to charge and whether a profit is made on
these trips.

DESIGN PICS INC/PHOTOLIBRARY

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8 PART 1 Accounting for a Service Business

CAREER OPPORTUNITIES IN ACCOUNTING

LO6 Identify career Accounting offers many career opportunities. The positions described below require
opportunities in varying amounts of education, experience, and technological skill.
accounting.

ACCOUNTING CLERKS
ACCOUNTING
CLERK I Businesses with large quantities of accounting tasks to perform daily often employ
Performs accounting accounting clerks to record, sort, and file accounting information. Often, accounting
activities such as main- clerks will specialize in cash, payroll, accounts receivable, accounts payable, inventory,
tenance of the general or purchases. As a result, they are involved with only a small portion of the total
ledger and preparation accounting responsibilities for the firm. Accounting clerks usually have at least one
of various accounting year of accounting education.
statements and finan-
cial reports. Requires a
high school diploma or
its equivalent with 0–2 BOOKKEEPERS AND PARA-ACCOUNTANTS
years of experience in
Bookkeepers generally supervise the work of accounting clerks, help with daily
the field or in a related
area. $27,000–$34,000 accounting work, and summarize accounting information. In small-to-medium-sized
businesses, the bookkeeper may also help managers and owners interpret the account-
ing information. Bookkeepers usually have one to two years of accounting education
and experience as an accounting clerk.
Para-accountants provide many accounting, auditing, or tax services under the
BOOKKEEPER direct supervision of an accountant. A typical para-accountant has a two-year degree
Maintains and records or significant accounting and bookkeeping experience.
business transactions.
Balances ledgers and
prepares reports. May
require an associate’s ACCOUNTANTS
degree or its equivalent The difference between accountants and bookkeepers is not always clear, particularly
with 2–4 years of expe-
rience in the field or in
in smaller companies where bookkeepers also help interpret the accounting informa-
a related area. $32,000– tion. In large companies, the distinction is clearer. Bookkeepers focus on the processing
$42,000 of accounting data. Accountants design the accounting information system and focus
on analyzing and interpreting information. They also look for important trends in the
data and study the impact of alternative decisions.
Most accountants enter the field with a college degree in accounting. In fact, since
many states require 150 credit hours to sit for the CPA exam, many students are also
BUDGET ANALYST I earning a master’s degree in accounting before entering the profession. Accountants
Analyzes accounting are employed in public accounting, private (managerial) accounting, and governmen-
records to determine
tal and not-for-profit accounting (Figure 1-5).
financial resources
required to implement
programs and makes
FIGURE 1-5 Accounting Careers
recommendations for
budget allocations to ACCOUNTING CAREERS
ensure conformance to
budgetary limits. Also Public Accounting Private Accounting Governmental and
responsible for review- • Auditing • Accounting Not-for-Proﬁt
ing operating budgets • Taxation information systems Accounting
periodically in order to • Management Advisory • Financial Accounting
analyze trends affecting services • Cost Accounting
budget needs. Requires • Budgeting
a bachelor’s degree and
• Tax Accounting
0–2 years of experience
in the field or in a related • Internal Auditing
area. $42,000–$54,000

CHE-HEINTZ-09-0502-001.indd 8 11/25/09 8:42:01 PM

Chapter 1 Introduction to Accounting 9

Public Accounting
ACCOUNTS
Public accountants offer services in much the same way as doctors and lawyers. The
PAYABLE MANAGER
Responsible for all activ- public accountant can achieve professional recognition as a Certified Public
ities in the accounts pay- Accountant (CPA). This is done by meeting certain educational and experience
able function. Ensures requirements as determined by each state and passing a uniform examination prepared
timely payments of ven- by the American Institute of Certified Public Accountants.
dor invoices and expense Many CPAs work alone, while others work for local, regional, or national
vouchers and maintains accounting firms that vary in scope and size. The largest public accounting firms in the
accurate records and United States are known as the “Big Four.” They are Deloitte, Ernst & Young, KPMG,
control reports. Reviews
applicable accounting
and PricewaterhouseCoopers.
reports and accounts Services offered by public accountants are listed below.
payable register to ensure • Auditing. Auditing involves the application of standard review and testing pro-
accuracy. May require cedures to be certain that proper accounting policies and practices have been
a bachelor’s degree in a
followed. The purpose of the audit is to provide an independent opinion that the
related area and at least
7 years of experience in financial information about a business is fairly presented in a manner consistent
the field. Familiar with with generally accepted accounting principles.
a variety of the field’s • Taxation. Tax specialists advise on tax planning, prepare tax returns, and repre-
concepts, practices, and sent clients before governmental agencies such as the Internal Revenue Service.
procedures. Relies on
experience and judgment • Management Advisory Services. Given the financial training and business experi-
to plan and accomplish ence of public accountants, many businesses seek their advice on a wide variety of
goals. Manages a staff managerial issues. Often, accounting firms are involved in designing computerized
of administrators/clerks accounting systems.
and typically reports to
the controller. $59,000– • Forensic Accounting. Forensic accounting is a rapidly growing segment of
$80,000 accounting practice. It includes fraud detection, fraud prevention, litigation
support, business valuations, expert witness services, and other investigative
activities. Public accounting firms offer forensic accounting services, but foren-
sic accountants also work for insurance companies, banks, law enforcement
agencies, and other organizations. By meeting certain requirements, and passing
TOP AUDIT
EXECUTIVE
the Certified Fraud Examiner exam, a forensic accountant may earn a Certified
Oversees all aspects Fraud Examiner (CFE) designation.
of an organization’s
auditing function.
In 2002, the Sarbanes-Oxley Act (SOX) was passed by Congress to help improve
Responsible for plan- reporting practices of public companies. The act was in response to accounting scan-
ning and directing all dals at firms like Enron, WorldCom, Cendant, Xerox, and others. Key provisions of
accounting and financial SOX are listed below.
data. Requires a bach-
• The Public Company Accounting Oversight Board (PCAOB) was created to
elor’s degree with at least
15 years of experience in enforce SOX rules and regulations. The PCAOB also has authority to set audit-
the field. Familiar with ing standards for public company audits and to perform inspections of auditing
a variety of the field’s firms.
concepts, practices, and • External auditors are required to report on the effectiveness of a public company’s
procedures. Relies on
accounting procedures.
extensive experience
and judgment to plan • Auditing firms are prohibited from offering many nonaudit services to their public
and accomplish goals. audit clients.
Performs a variety of
tasks. Leads and directs • Auditing firms must rotate audit partners off audit engagements every five years.
the work of others. A • The CEO and CFO must personally certify that the financial statements are
wide degree of creativity accurate.
and latitude is expected.
Typically reports to top It is difficult to guarantee that information provided in financial statements is always
management. $138,000– complete and accurate. These measures are a step in the right direction. If our economy
$200,000 and financial markets are to function properly, information provided in financial state-
ments must be reliable.

CHE-HEINTZ-09-0502-001.indd 9 11/25/09 8:42:03 PM

10 PART 1 Accounting for a Service Business

Private (Managerial) Accounting

CONTROLLER Many accountants are employees of private business firms. The controller oversees the
Responsible for direct- entire accounting process and is the principal accounting officer of the company.
ing an organization’s Private or managerial accountants perform a wide variety of services for the business.
accounting functions.
These functions include
These services are listed below.
establishing and main- • Accounting Information Systems. Accountants in this area design and implement
taining the organization’s manual and computerized accounting systems.
accounting principles,
practices, procedures, • Financial Accounting. Based on the accounting data prepared by the bookkeepers
and initiatives. Prepares and accounting clerks, accountants prepare various reports and financial state-
financial reports and ments and help in analyzing operating, investing, and financing decisions.
presents findings and
recommendations to top • Cost Accounting. The cost of producing specific products or providing services
management. Requires a must be measured. Further analysis is also done to determine whether the prod-
bachelor’s degree and at ucts and services are produced in the most cost-effective manner.
least 15 years of direct
experience in the field. • Budgeting. In the budgeting process, accountants help managers develop a finan-
Typically requires a CPA. cial plan.
Usually reports to top
financial officer or CEO. • Tax Accounting. Instead of hiring a public accountant, a company may have its
$135,000–$201,000 own accountants. They focus on tax planning, preparation of tax returns, and
dealing with the Internal Revenue Service and other governmental agencies.
© Salary.com 2009.
• Internal Auditing. Internal auditors review the operating and accounting control
procedures adopted by management to make sure the controls are adequate and
are being followed. They also monitor the accuracy and timeliness of the reports
provided to management and to external parties.
A managerial accountant can achieve professional status as a Certified Management
Accountant (CMA). This is done by passing a uniform examination offered by the
Institute of Management Accountants. An internal auditor can achieve professional
recognition as a Certified Internal Auditor (CIA) by passing the uniform examination
offered by the Institute of Internal Auditors.

Governmental and Not-for-Profit Accounting

Thousands of governmental and not-for-profit organizations (states, cities, schools,
churches, and hospitals) gather and report financial information. These organizations
employ a large number of accountants. Since these entities are not profit oriented, the
rules are somewhat different for governmental and not-for-profit organizations.
However, many accounting procedures are similar to those found in profit-seeking
enterprises.

JOB OPPORTUNITIES
Job growth in some areas will be much greater than in others. Newspaper advertise-
ments often indicate that accountants and accounting clerks are expected to have
computer skills. Computer skills definitely increase the opportunities available to you
in your career. Almost every business needs accountants, accounting clerks, and
bookkeepers. Figure 1-6 shows the expected growth for different types of businesses.
Notice that growth will be greatest in health care services. Chapters 2 through 9
introduce accounting skills that you will need to work in a service business, like
health care. Chapter 10 begins the discussion of merchandising businesses. Accounting
for manufacturing businesses is addressed in the last chapters of the book.
Figure 1-7 shows the expected demand for accounting skills. A 12.5% increase in
demand is expected for bookkeeping, accounting, and auditing clerks. These types of

CHE-HEINTZ-09-0502-001.indd 10 11/25/09 8:42:04 PM

Chapter 1 Introduction to Accounting 11

FIGURE 1-6 Expected Growth

Job Growth 2006–2016
35%
30% 27.0%
25% 23.3%
20.9%
20%
15%
10% 7.4% 7.3%
5% 4.5%
–3.8%
0%
–5%
–10%
–10.6%

Health Care Services Wholesale Merchandising

Professional and Business Services Retail Merchandising
Educational Services Federal Government
State and Local Government Manufacturing

The growth in the number of new jobs from 2006 to 2016 will vary according to industry. The major area of growth
will be in health care services. Businesses providing educational, health care, and professional/business services
are expected to have the strongest employment growth. Moderate growth is expected in merchandising
businesses and state and local governments. Employment in manufacturing and the federal
government is expected to decline. Total employment for all industry sectors will increase 10.4%.
Source: U.S. Department of Labor—Bureau of Labor Statistics (http://www.bls.gov/news.release/
ecopro.t01.htm) as of January 20, 2009.

FIGURE 1-7 Expected Demand

Accounting Job Opportunities from 2006 to 2016
2,400
2,377
2,200 2,114
2,000

1,800 2006

1,600 1,500 2016

1,400
Thousand

1,274
1,200

1,000

800

600 542 566

400

200
62 66
0
Bookkeeping, Accountants Billing and Budget Analysts
Accounting, and and Auditors Posting Clerks,
Auditing Clerks and Machine
Operators

The highest number of jobs available will be for bookkeepers, accounting and auditing clerks, and
accountants and auditors. The growth for each area shown from 2006 to 2016 will be as follows:

Thousands Percentage
Accountants and auditors 226 17.7%
Budget analysts 4 7.1%*
Bookkeeping, accounting, and auditing clerks 264* 12.5%*
Billing and posting clerks, and machine operators 24 4.4%
*Differences due to rounding.
Source: Arlene Dohm and Lynn Shniper, “Occupational Employment Projections to 2016,”
Monthly Labor Review, November 2007.

CHE-HEINTZ-09-0502-001.indd 11 11/25/09 8:42:05 PM

12 PART 1 Accounting for a Service Business

positions will offer the highest number of job opportunities over the next several years.
The next highest demand is for accountants and auditors, and this demand is expected
to increase by 17.7% over the next several years.
Regardless of the type of career you desire, writing skills are important in business
and your personal life. Becoming a good writer requires practice and a strategy for the
process used to prepare memos, letters, and other documents. On pages 12, 13, and
14, Ken Davis offers an excellent approach to managing your writing. Take a moment
to read Ken’s tips. Then, practice his approach by completing the writing assignments
as you finish each chapter.

File Edit View Go Tools Actions Help

Delete Save Reply Reply All Forward New Get Mail

Mail Type a contact to find ▼

▼
From: Ken Davis
Subject: Managing Your Writing
To: Accounting Students

Here’s a secret: the business writing that you and I do—the writing that gets the world’s work done—requires no special
gift. It can be managed, like any other business process.

Managing writing is largely a matter of managing time. Writing is a process, and like any process it can be done efficiently
or inefficiently. Unfortunately, most of us are pretty inefficient writers. That’s because we try to get each word, each sen-
tence, right the first time. Given a letter to write, we begin with the first sentence. We think about that sentence, write it,
revise it, even check its spelling, before going on to the second sentence. In an hour of writing, we might spend 45 or 50
minutes doing this kind of detailed drafting. We spend only a few minutes on overall planning at the beginning and only a
few minutes on overall revising at the end.

That approach to writing is like building a house by starting with the front door: planning, building, finishing—even
washing the windows—before doing anything with the rest of the house. No wonder most of us have so much trouble
writing.

Efficient, effective writers take better charge of their writing time. They manage their writing. Like building contractors,
they spend time planning before they start construction. Once construction has started, they don’t try to do all of the
finishing touches as they go.

As the following illustration shows, many good writers break their writing process into three main stages: planning, draft-
ing, and revising. They spend more time at the first and third stages than at the second. They also build in some “manage-
ment” time at the beginning and the end, and some break time in the middle. To manage your writing time, try the
following steps. ▼

CHE-HEINTZ-09-0502-001.indd 12 11/25/09 8:42:05 PM

Chapter 1 Introduction to Accounting 13

To Do List

✓ At the MANAGING stage (perhaps two or three minutes for a one-hour writing job), remind
yourself that writing can be managed and that it’s largely a matter of managing time. Plan your
next hour.
At the PLANNING stage (perhaps 20 minutes out of the hour):
1. Find the “we.” Define the community to which you and your reader belong. Then ask,
“How are my reader and I alike and different?”—in knowledge, attitudes, and circumstances.
2. Define your purpose. Remember the advice a consultant once gave Stanley Tool executives:
“You’re not in the business of making drills: you’re in the business of making holes.” Too
many of us lose sight of the difference between making drills and making holes when we
write letters and memos. We focus on the piece of writing—the tool itself—not its purpose.
The result: our writing often misses the chance to be as effective as it could be. When you’re
still at the planning stage, focus on the outcome you want, not on the means you will use to
achieve it.
3. Get your stuff together. Learn from those times when you’ve turned a one-hour home-im-
provement project into a three- or four-hour job by having to make repeated trips to the
hardware store for tools or parts. Before you start the drafting stage of writing, collect the
information you need.
4. Get your ducks in a row. Decide on the main points you want to make. Then, make a list or
rough outline placing your points in the most logical order.
At the DRAFTING STAGE (perhaps 5 minutes out of the hour):
5. Do it wrong the first time. Do a “quick and dirty” draft, without editing. Think of your
draft as a “prototype,” written not for the end user but for your own testing and improve-
ment. Stopping to edit while you draft breaks your train of thought and keeps you from
being a good writer. (Hint: If you are writing at a computer, try turning off the monitor
during the drafting stage.)
At the BREAK STAGE (perhaps 5 minutes):
6. Take a break and change hats. Get away from your draft, even if for only a few minutes.
Come back with a fresh perspective—the reader’s perspective.
At the REVISING STAGE (perhaps 25 minutes):
7. Signal your turns. Just as if you were driving a car, you’re leading your reader through new
territory. Use “turn signals”—and, in addition, but, however, or, therefore, because, for
example—to guide your reader from sentence to sentence.
8. Say what you mean. Put the point of your sentences in the subjects and verbs. For example,
revise “There are drawbacks to using this accounting method” to “This accounting method
has some drawbacks.” You’ll be saying what you mean, and you’ll be a more effective
communicator.
9. Pay by the word. Reading your memo requires work. If your sentences are wordy and you
are slow to get to the point, the reader may decide that it is not worth the effort. Pretend
you are paying the reader by the word to read your memo. Then, revise your memo to make
it as short and to the point as possible.
10. Translate into English. Keep your words simple. (Lee Iacocca put both these tips in one
“commandment of good management”: “Say it in English and keep it short.”) Remember
that you write to express, not impress.
▼

CHE-HEINTZ-09-0502-001.indd 13 11/25/09 8:42:05 PM

14 PART 1 Accounting for a Service Business

11. Finish the job. Check your spelling, punctuation, and mechanics.
Finally, at the MANAGING STAGE again (2 to 3 minutes):
12. Evaluate your writing process. Figure out how to improve it next time.
By following these 12 steps, you can take charge of your writing time. Begin today to manage your
writing. As a United Technologies Corporation advertisement in The Wall Street Journal admon-
ished, “If you want to manage somebody, manage yourself. Do that well and you’ll be ready to
stop managing and start leading.”

Dr. Kenneth W. Davis is Professor of English and Adjunct Professor of Communication Studies at
Indiana University-Purdue University, Indianapolis. He is also president of Komei, Inc., a
communication consulting and training company.

SELF -STUDY

LEARNING OBJECTIVES Key Points to Remember

LO1 Describe the purpose of The purpose of accounting is to provide financial information
accounting. about a business to individuals and organizations.

LO2 Describe the accounting process. The six major steps of the accounting process are analyzing,
recording, classifying, summarizing, reporting, and interpreting.

LO3 Define GAAP and describe the Generally accepted accounting principles (GAAP) are the rules
process used by FASB to develop that businesses must follow when preparing financial statements.
these principles. FASB takes the following steps to develop an accounting standard:
1. The issue is placed on the Board’s agenda.
2. After researching the issue, a discussion memorandum
is issued.
3. Public hearings are held.
4. An exposure draft is issued.
5. The statement of financial accounting standards is issued.

LO4 Define three types of business Three types of business ownership structures are the sole pro-
ownership structures. prietorship, the partnership, and the corporation.

LO5 Classify different types of Different types of businesses classified by activities are a
businesses by activities. service business, a merchandising business, and a manufacturing
business.

LO6 Identify career opportunities in Career opportunities in accounting include work in public
accounting. accounting, private accounting, and governmental and not-for-
profit accounting.

CHE-HEINTZ-09-0502-001.indd 14 11/25/09 8:42:06 PM

Chapter 1 Self-Study 15

KEY TERMS
accountant (8) Designs the accounting information system and focuses on analyzing
and interpreting information.
accounting (4) A system of gathering financial information about a business and
reporting this information to users.
accounting clerk (8) Records, sorts, and files accounting information.
accounting information systems (10) Accountants in this area design and implement
manual and computerized accounting systems.
analyzing (5) Looking at events that have taken place and thinking about how they
affect the business.
auditing (9) Reviewing and testing to be certain that proper accounting policies and
practices have been followed.
bookkeeper (8) Generally supervises the work of accounting clerks, helps with daily
accounting work, and summarizes accounting information.
budgeting (10) The process in which accountants help managers develop a financial
plan.
Certified Fraud Examiner (CFE) (9) A forensic accountant who has passed the
exam offered by the Association of Certified Fraud Examiners.
Certified Internal Auditor (CIA) (10) An internal auditor who has achieved profes-
sional recognition by passing the uniform examination offered by the Institute of
Internal Auditors.
Certified Management Accountant (CMA) (10) An accountant who has passed an
examination offered by the Institute of Management Accountants.
Certified Public Accountant (CPA) (9) A public accountant who has met certain
educational and experience requirements and has passed an examination pre-
pared by the American Institute of Certified Public Accountants.
classifying (5) Sorting and grouping similar items together rather than merely keep-
ing a simple, diary-like record of numerous events.
controller (10) The accountant who oversees the entire accounting process and is
the principal accounting officer of a company.
corporation (7) A type of ownership structure in which stockholders own the busi-
ness. The owners’ risk is usually limited to their initial investment, and they usu-
ally have very little influence on the business decisions.
cost accounting (10) Determining the cost of producing specific products or provid-
ing services and analyzing for cost effectiveness.
discussion memorandum (5) The first document issued by FASB when developing
an accounting standard. This document identifies the pros and cons of various
accounting treatments for an event.
exposure draft (6) This document explains the rules that FASB believes firms should
follow in accounting for a particular event. Based on the responses to the expo-
sure draft, the Board will decide if any changes are necessary before issuing a
final standard.
financial accounting (10) Includes preparing various reports and financial state-
ments and analyzing operating, investing, and financing decisions.
forensic accounting (9) A specialized field that combines fraud detection, fraud
prevention, litigation support, expert witnessing, business valuations, and other
investigative activities.

CHE-HEINTZ-09-0502-001.indd 15 11/25/09 8:42:07 PM

16 PART 1 Accounting for a Service Business

generally accepted accounting principles (GAAP) (5) Procedures and guidelines

developed by the Financial Accounting Standards Board to be followed in the
accounting and reporting process.
internal auditing (10) Reviewing the operating and accounting control procedures
adopted by management to make sure the controls are adequate and being
followed; assuring that accurate and timely information is provided.
interpreting (5) Deciding the meaning and importance of the information in various
reports.
management advisory services (9) Providing advice to businesses on a wide variety
of managerial issues.
manufacturing business (7) A business that makes a product to sell.
merchandising business (7) A business that buys products to sell.
para-accountant (8) A paraprofessional who provides many accounting, auditing, or
tax services under the direct supervision of an accountant.
partnership (6) A type of ownership structure in which more than one person owns
the business.
public hearing (5) Following the issuance of a discussion memorandum, public
meetings are often held by FASB to gather opinions on the accounting issue.
recording (5) Entering financial information about events affecting the company
into the accounting system.
reporting (5) Telling the results of the financial information.
Sarbanes-Oxley Act (SOX) (9) An act passed by Congress to help improve reporting
practices of public companies.
service business (7) A business that provides a service.
sole proprietorship (6) A type of ownership structure in which one person owns the
business.
statement of financial accounting standards (SFAS) (6) A standard issued by the
Financial Accounting Standards Board. These standards must be followed when
preparing financial statements.
summarizing (5) Bringing the various items of information together to determine a
result.
tax accounting (10) Services focused on tax planning, preparing tax returns, and
dealing with the Internal Revenue Service and other governmental agencies.
taxation (9) See tax accounting.

A P PLYI N G YOUR K NO WL E D GE

REVIEW QUESTIONS
LO1 1. What is the purpose of accounting?
LO1 2. Identify four user groups normally interested in financial information about a
business.

CHE-HEINTZ-09-0502-001.indd 16 11/25/09 8:42:07 PM

Chapter 1 Applying Your Knowledge 17

LO2 3. Identify the six major steps of the accounting process and explain each step.
LO3 4. What are generally accepted accounting principles (GAAP)?
LO3 5. Describe the steps followed by the Financial Accounting Standards Board
when developing an accounting standard.
LO3 6. What is the name of the organization that issues accounting standards
followed by many firms in countries outside the United States?
LO4 7. Identify the three types of ownership structures and discuss the advantages
and disadvantages of each.
LO5 8. Identify three types of businesses according to activities.
LO6 9. What are the main functions of an accounting clerk?
LO6 10. Name and describe three areas of specialization for a public accountant.
LO6 11. What is the purpose of the Sarbanes-Oxley Act?
LO6 12. Name and describe six areas of specialization for a managerial accountant.

SERIES A EXERCISES
E 1-1A (LO1) PURPOSE OF ACCOUNTING Match the following users with the information
needed.
1. Owners a. Whether the firm can pay its bills on time
2. Managers b. Detailed, up-to-date information to measure
3. Creditors business performance (and plan for future operations)
4. Government agencies c. To determine taxes to be paid and whether other
regulations are met
d. The firm’s current financial condition

E 1-2A (LO2) ACCOUNTING PROCESS List the six major steps of the accounting process in order
(1–6) and define each.
________ Recording
________ Summarizing
________ Reporting
________ Analyzing
________ Interpreting
________ Classifying

SERIES B EXERCISES
E 1-1B (LO1) PURPOSE OF ACCOUNTING Describe the kind of information needed by the
users listed.
Owners (present and future)
Managers
Creditors (present and future)
Government agencies

CHE-HEINTZ-09-0502-001.indd 17 11/25/09 8:42:08 PM

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muuan kauppias, tuli aluksellemme. Tom Butler oli miehen nimi. Hän
oli vakuuttava esimerkki siitä, millaiseksi Salomonin saaret voivat
muuttaa voimakkaan miehen. Hän lojui veneessään yhtä avuttomana
kuin kuoleva. Hänen kasvoillaan ei lois- tanut hymyä, niillä oli tuskin
älynkään leimaa. Ja hänelläkin oli yaw-ihottuma, isoja rupia. Meidän
piti nostaa hänet veneestä ja Snarkin laidan yli. Hän sanoi vointiaan
aivan hyväksi ja olevansa ihan terve ja reipas. Käsivartta
lukuunottamatta. Hänen käsivartensa näytti halvaantuneelta. Mutta
sellaiset luulot hän torjui ylenkatseellisesti. Se oli ollut sellainen
ennenkin, mutta oli taas parantunut. Moinen tauti oli tavallinen
Santa Annan alkuasukasten keskuudessa, sanoi hän, kun autoimme
häntä laskeutumaan jyrkkiä kajuutanportaita ja käsivarsi laahautui
hervottomana askelmalta toiselle. Hän oli kieltämättä kammottavin
Snarkilla milloinkaan käyneistä vieraistamme, ja kuitenkin luonamme
oli käynyt joitakuita spitaalin ja norsutaudin uhreja.

Martin teki hänelle yaw-ihottumaa koskevia kysymyksiä, sillä

tämän miehenhän toki piti tietää siitä jotakin. Ja totisesti hän tiesikin
päättäen arvista, mitkä uurtelivat hänen käsivarsiaan ja jalkojaan, ja
mätähaavoista, mitkä kukoistivat keskellä arpia. Oh, moiseen tottuu
kyllä, selitti Tom Butler. Moiset haavat eivät ole lainkaan vakavia
juttuja, ennenkuin ovat syöpyneet syvälle lihaan. Niillä oli tapana
hyökätä valtimojen seinämiin, ja pian olivat valtimot puhki, ja silloin
oli loppu käsissä — ei muuta kuin hommaa hautajaiset. Useita Santa
Annan asukkaita oli äskettäin kuollut sillä tavalla. Mutta mitä se
merkitsi? Kenellä ei ollut sitä sairautta, sillä oli jokin muu sellainen oli
Salomonin saarten luonnonlaki.
Huomasin, että siitä hetkestä alkaen Martinin mielenkiinto
haavojansa kohtaan rupesi nopeasti lisääntymään. Hän käytti kloridia
entistä ahkerammin, ja keskustellessamme hän alkoi kasvavalla
innolla puhua Kansasin puhtaasta ilmastosta ja muista erinomaisista
ominaisuuksista. Charmian ja minä ajattelimme kaikessa
hiljaisuudessa, että Kalifornia se sentään oli numero yksi joka
suhteessa. Henry vannoi, että Rapa oli parhain, Tehei piti Bora Boran
puolta, ja Wada ja Nakata ylistivät terveellistä Japania.

Eräänä iltana, Snarkin kiertäessä Ugin saaren eteläkärkeä ja

etsiessä erästä kiitettyä'satamapaikkaa, saapui muuan Englannin
kirkon lähetyssaarnaaja aluksellemme — eräs mr Drew, joka oli
veneellään matkalla San Cristovaliin — ja jäi luoksemme päivälliselle.
Martin, jonka jaloissa oli Punaisen ristin siteitä niin runsaasti, että ne
näyttivät kangaskääröiltä, johdatti keskustelun yaw-ihottumaan. Niin,
se sairaus oli hyvin tavallinen Salomonin saarilla, sanoi mr Drew.
Kaikki valkoiset miehet saivat sen.

"Onko se ollut teillä itsellännekin?" kysyi Martin — sielu ja sydän

ylösalaisin pelkästä ajatuksestakin, että Englannin kirkon
lähetyssaarnaaja saattaisi potea niin alhaista tautia.

Mr Drew nyökkäsi ja selitti, että hänellä ei ainoastaan ollut ollut

sanottua tautia, vaan että hänellä myös sillä hetkellä oli ruumiissaan
muutamia hoidonalaisia haavoja.

"Mitä käytätte niihin?" kysyi Martin nopeasti.

Sydämeni tuskin löi vastausta odottaessani. Siitä vastauksesta

riippui koko lääkärikunniani. Näin Martinista, että hän oli melkein
varma kunniani kukistumisesta. Ja sitten tuli vastaus — oi sitä
siunattua vastausta!
"Elohopeakloridia", sanoi mr Drew.

Tunnustan, että Martin kesti tappionsa kuin mies, ja olen

vakuuttunut siitä, että jos sinä silmänräpäyksenä olisin pyytänyt
saada vetää häneltä hampaan, hän ei olisi kieltänyt minua sitä
tekemästä.

Kaikki valkoiset miehet saavat sanotun kiusallisen ihotaudin

Salomonin saarilla, ja jok'ainoa naarmu muuttuu pian haavaksi.
Jok'ainoalla valkoisella, jonka tapasin, oli se tauti, ja yhdeksällä
kymmenestä se oli hyvin pahaluontoista. Oli yksi ainoa poikkeus —
nuori mies, joka oli ollut siellä viisi kuukautta, mutta sairastunut
kuumeeseen kymmenen päivää saapumisensa jälkeen ja sitten ollut
niin usein kuumeessa, ettei hänellä ollut ollut aikaa eikä tilaisuutta
saada yaw-ihottumaa.

Mutta koko Snarkin väki paitsi Charmian sai taudin. Ja hänen

olemuksestaan paistoi sama itsetyytyväisyys, mitä Japani ja Kansas
olivat osoittaneet. Hän selitti verensä puhtauden kunniaksi sen, että
pysyi terveenä, ja päivä päivältä hän yltyi yhä useammin ja
äänekkäämmin puhumaan verensä puhtaudesta. Minä ajattelin
hänen terveytensä syyksi sitä, että hän oli nainen ja sentähden
yleensä säästyi saamasta haavoja ja naarmuja, joille me miehet
olimme alttiina ankarassa työssämme Snarkia maapallon ympäri
kuljettaessamme. Mutta sitä en hänelle sanonut. En tahtonut
haavoittaa hänen itsetietoisuuttaan karkealla totuudella. Ja koska
olin lääketieteen tohtori — joskin vain omatekoinen maallikkotohtori
— tiesin taudista enemmän kuin hän ja tiesin myöskin, että aika oli
liittolaiseni. Mutta silti sadattelin liittolaistani, kun se sitten antoi
hänelle mitä sievimmän pikku näpsäyksen pohkeeseen. Käytin
antiseptistä hoitotapaani niin sukkelasti, että ihottuma parani ennen
kuin potilas ennätti ruveta uskomaan, että hänellä olikaan sellainen.
Ja sitten olin jälleen kunniaton lääketieteen tohtori omalla laivallani.
Olinpa pahempikin kuin sellainen, sillä minua syytettiin siitä, että olin
väärämielisesti koettanut käännyttää häntä uskomaan, että hänellä
oli yaw-ihottuma. Hänen verensä julisti puhtauden evankeliumiaan
hillittömämmin kuin milloinkaan ennen, ja minä painoin nenäni
merenkulkukirjoihini enkä luiskahtanutkaan mitään.

Mutta vihdoinkin se tuli toden teolla. Olimme silloin risteilemässä

Malaitan rannikolla.

"Mikä sinulla on pohkeessasi?" kysyin.

204

"Ei mikään", sanoi Charmian.

"Ali right", sanoin siihen. "Mutta nyt saatat joka tapauksessa

käyttää kloridisidettä. Ja parin, kolmen viikon perästä, kun haava on
parantunut ja sinulla on arpi, mikä seuraa sinua hautaan saakka, voit
oikein kernaasti lopettaa saarnaamiset veresi puhtaudesta ja esi-
isiesi elämänvaelluksesta sekä sanoa minulle sensijaan, mitä ajattelet
yaw-ihottumasta."

Hänen haavansa oli hopeadollarin kokoinen, ja kesti kokonaista

kolme viikkoa, ennenkuin se parantui. Oli päiviä, joina Charmian ei
kyennyt kävelemään haavan aiheuttamien tuskien takia, ja monta,
monta kertaa hän selitti, että juuri se paikka, missä hänen haavansa
oli, oli tuskallisin kipeän paikka. Selitin hänelle puolestani, että koska
minulla ei ollut ollut yawia sillä kohtaa, olin taipuvainen olettamaan,
että nilkan sisäsivulla rehoittava yaw oli tuskallisin. Vetosimme sitten
asiassamme Martiniin, joka selitti meidän kummankin olevan
väärässä ja julisti intohimoisesti, että tuskallisin paikka luonnollisesti
oli säären etusivu.

Mutta aikaa myöten se tauti-ilmiö kadotti ensiviehätyksensä.

Parhaillaan, tätä kirjoittaessani, minulla on viisi yaw-haavaa käsissäni
ja sitäpaitsi kolme toisen säären etusivulla. Charmianilla on yksi
kummallakin puolella oikeata nilkkaansa. Tehei kärsii sanomattomasti
omistaan. Martinin uusin yaw saattaa varjoon hänen tähänastisensa.
Ja Nakatalla on monia kymmeniä haavoja kiduttajinaan. Mutta samat
kohlut kuin Snark on jok'ainoa laiva saanut kokea Salomonin saarilla
näiden ensimmäisten löytäjien ajoista alkaen. Jäljennän tähän
sanatarkasti pari otetta "Merenkulkijan oppaasta":

"Aluksella, joka viipyy pitemmän aikaa Salomonin saarilla,

miehistön saamat naarmut ja nirhamat usein muuttuvat
pahaluontoisiksi mätähaavoiksi."

Kuumeestakaan "Merenkulkijan oppaassa" ei puhuta erikoisen

lohdullisesti:

205

"Vastatulleet voivat olla kutakuinkin varmoja siitä, että saavat

kuumeen. Alkuasukkaatkin sairastavat sitä. Vuonna 1895 kuoli 50
henkeä käsittävästä valkoisesta väestöstä 9."

Osa näistä kuolemantapauksista oli kuitenkin ollut tapaturmaisia.

Nakata sairastui meistä ensimmäisenä kuumeeseen. Se tapahtui

Penduffrynissä. Wadan ja Henryn vuoro tuli pian senjälkeen. Sitten
Charmianin. Minun onnistui säilyä pari kuukautta, mutta minun
lannistuessani Martin seurasi myötätuntoisesti esimerkkiä muutamaa
päivää myöhemmin. Meistä kaikista seitsemästä Tehei on ainoa
kuumeelta säästynyt, mutta kaksin verroin sitä pahemmin häntä on
kiduttanut koti-ikävä. Nakata noudatti tapansa mukaan pilkulleen
ohjeita, niin että hän kolmannen kuumekohtauksensa jälkeen hikoili
pari tuntia, nieli kolme-neljäkymmentä grammaa kiniiniä ja oli
heikko, mutta kunnossa jälleen vuorokauden kuluttua.

Vaikeammin hoidettavia potilaita olivat Wada ja Henry. Ensinnäkin

Wadan oli vallannut vihoviimeinen pelko. Hän oli varmasti
vakuuttunut siitä, että hänen tähtensä oli sammunut ja että
Salomonin saarista tulisi hänen hautapaikkansa. Hänhän näki, miten
halvassa hinnassa elämä oli hänen ympäristössään. Penduffrynissä
hän näki, miten punatauti teki tuhojaan, ja onnettomuudeksi hän
sattui näkemään, kun erästä ruumista kannettiin galvanoidulla
peltilevyllä ja kun se kirstutta ja ilman minkäänlaisia hautausmenoja
heitettiin maakuoppaan. Kaikilla oli kuumetta, kaikilla oli
mätähaavoja, kaikilla oli jos jonkinlaisia sairauksia. Kuolema vaani
joka taholla. Tänään elossa, huomenna vainajana — ja Wadalta
unohtui, että oli vielä tämä päivä, hän uskoi huomisen jo tulleen.
Hän jätti haavansa hoitamatta, ei käyttänyt niihin kloridia, ja
raapimalla hän sai ne leviämään kautta koko ruumiinsa. Yhtä vähän
hän noudatti kuumetta koskevia ohjeitani, ja seurauksena siitä oli,
että hän sai kestää sitä viisi vuorokautta yhteen menoon, kun se
muuten olisi mennyt ohi yhdessä päivässä. Ja Henryä, joka oli iso ja
voimakas kuin jättiläinen, oli yhtä vaikea hoitaa. Hän kieltäytyi
jyrkästi ottamasta kiniiniä, sen takia, että hän joitakuita vuosia
aikaisemmin kuumeessa ollessaan oli saanut lääkäriltä pillereitä,
mitkä sekä kooltaan että väriltään olivat toisenlaisia kuin minun
hänelle tarjoamani kiniinitabletit. Niinpä Henry siinä suhteessa olikin
yhtä mahdoton kuin Wada.
Mutta sain sentään salaa puijatuksi kummankin ja hoidin heitä
heidän omalla lääkkeellään — vetosin heidän mielikuvitukseensa.
Apeamielisyydessään he olivat lujassa uskossa, että kuolisivat.
Pakotin heidät nielemään annoksen kiniiniä ja mittasin heidän
kuumeensa. Käytin silloin lääkekirstussani ollutta Fahrenheit-
kuumemittaria, mikä oli aivan arvoton, valmistettu myyntiä, eikä
käyttö varten. Jos olisin ilmaissut potilailleni, että lämpömittari oli
ihan kelvoton, olisi aluksellamme pian ollut kaksi vainajaa. Voin
vannoa, että heillä oli 105°:n kuume. Annoin kuitenkin ensin toisen,
sitten toisen pitää hetken mittaria, tekeydyin sitä tarkastaessani
tyytyväisen näköiseksi ja selitin iloisella äänellä, että heidän
lämpönsä oli vain 94°. Sen jälkeen tyrkytin heille uuden
kiniiniannoksen ja sanoin, että jos he vielä tuntisivat heikkoutta tai
pahoinvointia, niin se aiheutui kiniinistä, minkä jälkeen jätin heidät
yksiksensä toipumaan. Ja he toipuivatkin, Wada melkein vasten
tahtoaan. Jos ihminen saattaa kuolla mielikuvituksensa takia — niin
onko moraalitonta pitää häntä hengissä mielikuvituksen avulla?

Valkoinen rotu on joka tapauksessa numero yksi, kun tulee

kyseeseen rohkeus ja elämänvoima. Toiselta kahdesta
japanilaisestamme ja molemmilta tahitilaisilta miehiltämme meltoni
mieli niin, että meillä oli täysi työ heitä piristäessämme ja että
meidän melkein väkivallalla piti palauttaa heidät elämään.
Charmianin ja Martinin sielua sairaus ei raskauttanut, he pitivät
mahdollisimman pientä ääntä sen olemassaolosta, ja he vaelsivat
levollisina ja rauhallisina parantumisen tietä. Kun Wada ja Henry
olivat vakuuttuneita kuolemastaan, vaikutti heidän
hautajaismielialansa niin valtavasti Teheihin, että mies itki ja rukoili
tuntikausia yhteen menoon. Martin sitävastoin makaili ja kiroili — ja
parani, ja Charmian valitteli — mutta suunnitteli samalla kertaa, mitä
kaikkea tekisi taas parannuttuaan.
Mutta Wada poloista! Häneltä murtui selkäranka silloin, kun
Charmian ja minä otimme hänet mukaamme Malaitan
ihmissyöjäsaarelle pienellä jahdilla, minkä kapteeni oli murhattu
siellä puoli vuotta aikaisemmin. Kai-kai merkitsee ruokaa, ja Wada oli
aivan varma siitä, että hänestä tulisi kai-kaita. Malaitalla olimme
hampaita myöten aseistettuina ja alituisesti varuillamme. Jos otimme
kylvyn jollakin jokisuulla, oli kivääreillä varustettuja mustia
vartiomiehiä läheisyydessä. Tapasimme englantilaisen sotalaivan,
joka poltti ja pommitti kyliä rangaistukseksi murhista. Henkipatoiksi
joutuneita alkuasukkaita pakeni aluksellemme turvaa etsimään.
Murhat olivat aivan jokapäiväisiä Malaitalla. Syrjäseuduilla saimme
varoituksia ystävällismielisiltä villeiltä, jotta osasimme välttää
vihollismielisten hyökkäyksiä. Aluksemme oli Malaitalle kaksi päätä
velkaa, ja se velka saatettiin periä meiltä milloin tahansa. Ja kaiken
kukkuraksi ajauduimme riutalle, missä meidän ampuma-aseet
toisessa kädessä täytyi pitää ryövärikanootteja loitolla, samalla kuin
toisella kädellä teimme työtä pelastaaksemme aluksemme
pirstaantumasta. Kaikki se meni yli Wadan voimien. Hän tuli hiukan
höperöksi, ja vihdoin hän pakeni Snarkilta Ysabelin saarella eräänä
rajusade- ja myrskypäivänä, uuden kuumekohtauksen ovella ja
keuhkokuumeen vaarassa ollessaan. Ellei hän joutunut kai-kaiksi ja
jos hän jaksoi läpäistä kuumeen ja ihotaudit, joita siellä raivoaa, hän
hyvällä onnella pääsi sieltä lähisaarelle kuuden tai kahdeksan viikon
kuluttua. Hän ei milloinkaan luottanut lääkärintaitooni, vaikka
menestyksellisesti jo ensimmäisellä otteella vedin häneltä kaksi
pakottavaa hammasta.

J.K. Snark on nyt ollut kuukausimääriä oikeana sairashuoneena, ja

alamme jo tottua siihen. Meringelaguunilla, missä kallistimme
Snarkin ja puhdistimme sen kupariosat, oli päiviä, joina vain yksi
ainoa miesjoukostamme kykeni menemään veteen töihin. Myös
plantaasin kolme valkoista makasivat kuumeessa.

Tätä kirjoittaessani olemme eksyneet merelle, jonnekin Ysabelin

saaren koillispuolelle, ja tähystelemme turhaan Lord Howen saarta,
mikä on kehäriutta eikä sitä sentähden havaitse ennen kuin on aivan
törmätä siihen. Kronometri on epäkunnossa. Aurinko ei paista, enkä
myöskään voi tehdä tähtihavaintoja yöaikaan — vuorokaudet
läpeensä on pelkkää myrskyä ja sadetta. Kokkimme on paennut.
Nakata on koettanut hoitaa sekä hänen että omat tehtävänsä, mutta
makaa nyt kuumeessa. Martin on vast'ikään päässyt
kuumekohtauksesta ja on saamaisillaan uuden. Charmianin kuume
on muuttunut jaksoittaiseksi, ja hän tarkastelee parhaillaan
muistikirjaansa arvioidakseen, milloin seuraava kohtaus tulee. Henry
on ruvennut syömään kiniiniä, mutta osoittaa epämieluisia
seurauksia. Ja minun kuumekohtaukseni ovat äityneet yhtä äkillisiksi
kuin nuijanisku, enkä milloinkaan tiedä, millä hetkellä joudun niiden
uhriksi. Vahingossa olemme antaneet kaikki jauhomme eräille niitä
vailla olleille valkoisille miehille, emmekä tiedä, milloin pääsemme
maihin. "Salomoninhaavamme" ovat pahempia kuin milloinkaan
ennen, ja niitä on paljon entistä enemmän. Kloridimme jäi pahaksi
onneksi Penduffrynille. Vetysuperoksidi on lopussa, ja kokeilen nyt
booraksiliuoksella, lysolilla ja antiphlogistiinilla. Ellen niitä laakereita
lääkärinä, niin ei se ainakaan johdu praktiikan puutteesta.

J. K. On kulunut kaksi viikkoa siitä, kun kirjoitin edellä olevan — ja

Tehei, joka aikaisemmin on ollut ainoa terve aluksellamme, on nyt
maannut kymmenen vuorokautta kuumeessa, mikä on paljon
kovempaa kuin meidän milloinkaan potemamme, ja hän makaa vielä
sen kourissa.
14 Kielämeren auringon alla

209

Hänen lämpötilansa on lakkaamatta noussut 104:°ään, ja hänen

valtimonlyöntinsä 115:een.

J. K. Merellä Tasmanin kehäriutan ja Manning Straitsin välillä.

Tehein kohtaus kehittyi mustaksi kuumeeksi — kovimmaksi

muodoksi malariaa, mikä lääkärikirjojen vakuutusten mukaan saattaa
aiheutua myöskin eräänlaisista ihotaudeista. Olen tosin saanut hänet
läpäisemään kuumeen, mutta nyt olen aivan neuvotonna, sillä hän
on tykkänään menettänyt järkensä.

Tämä on nyt toinen mielisairauskohtaus tällä lyhyellä

matkallamme.

J. K. Eivät edes lemmikkieläimemme ole säilyneet terveinä.

Saimme Meringe-laguunilta kaksi sellaista, irlantilaisen terrierin ja
valkoisen kakadun.

Terrieri putosi ensin portailta kajuuttaan, ja siltä herpaantui vasen

takajalka, sitten se teki toisen samanlaisen lentoretken, ja oikea
etujalka herpaantui. Tällä haavaa sillä on vain kaksi jalkaa, joilla
kulkea. Mutta onneksi ovat ne vastakkaisilla puolilla, niin että se voi
hypellä niiden varassa molempia muita laahaamalla. Kakadumme jäi
kajuutan kattoikkunan alle niin pahasti, että sen päivät piti päättää,
ensimmäinen kuolemantapaus aluksellamme lukuunottamatta
useiden laidan yli lentäneiden kanojemme hukkumista, jotka nyt
olisivat terveellistä ravintoa toipilaillemme. Torakkamme ovat ainoat,
jotka ovat aivan hyvässä voinnissa. Niihin ei tartu tauti, eikä niille
satu tapaturmia, ja ne kasvavat, ja niiden ruokahalu kasvaa päivä
päivältä — ne nakertavat nukkuessamme kynsiämmekin.

J.K. Charmianilla on uusi kuumekohtaus. Martin on kovassa

epätoivossaan ryhtynyt käyttämään hevoskuuria kuparisulfaattia
ihottumaansa, ja hän kiroaa Salomonin saaria. Minä puolestani
hoidan merenkulkuamme ja lääkärinammattiani, kirjoittelen välillä ja
olen kaikkea muuta kuin terve. Lukuunottamatta mielisairaitamme ei
aluksellamme ole kenellekään käynyt niin hullusti kuin minulle.
Matkustan ensimmäisellä höyrylaivalla, minkä tapaamme, Australiaan
leikattavaksi. Sairauksieni luetteloon minun on nyt lisättävä uusi ja
outo. Viime viikon aikana käteni ovat turvonneet kuin vesitautisella.
Saan ne nyrkkiin vain suurella vaivalla. Köysien haalaaminen
aiheuttaa sietämättömiä tuskia. Tuntuu alituisesti siltä, kuin käteni
olisivat täynnä pahoja kylmänhaavoja. Ja iho kesii kummastakin
kädestä aivan levottomuutta herättävässä määrässä, ja uusi alta
paljastuva muuttuu kovaksi ja paksuksi. Lääkärikirjoissani ei mainita
sanaakaan moisesta sairaudesta. Mitä se on?

J.K. Martin on vast'ikään tehnyt kokeen poltetulla alunalla — ja

hänen Salomonin saarille lausumansa siunaukset katkuavat entistä
pahemmin tulikiveltä.

J. K. Manning Straitsin ja Pavuvu-saarten välillä.

Henry on saanut reumatismin selkäänsä. Kymmenen ihokerrosta

on kesinyt käsistäni, ja yhdestoista kesii parhaillaan, ja Tehei on
entistä enemmän järjiltään. Hän rukoilee yötä päivää Jumalaa, ettei
tämä tappaisi häntä. Nakatalla ja minulla on jälleen kuumeen oireita.
Ja päälle päätteeksi Nakata sai eilen verenmyrkytyskohtauksen
teimme työtä puoliyöhön saadaksemme pahan hänestä poistumaan.
211

Jälkikatsaus

Snarkin pituus oli neljäkymmentäkolme jalkaa vesirajasta,

viisikymmentäviisi keulasta perään, leveys viisitoista jalkaa, ja se
kulki seitsemän jalkaa kahdeksan tuumaa syvässä. Se oli rikattu
ketchiksi. Kannen alla oli tilaa kuuden jalan korkeudelta, ja suurkansi
ja keulakansi olivat sileät. Siinä oli neljä "taatusti" vedenpitävää
kammiota. Seitsenkymmenhevosvoimainen bensiinimoottori antoi
toisinaan kulkuvoimaa suunnilleen kahdenkymmenen dollarin
peninkulmataksalla. Viisihevosvoimainen kone käytti pumppuja
silloin, kun sattui olemaan kunnossa, ja kaksi kertaa se osoitti
kykenevänsä käyttämään valonheittäjää. Akkumulaattoriparistot
toimittivat tehtävänsä neljä, viisi kertaa kahden vuoden kuluessa.
Suurveneen, mikä oli neljätoista jalkaa pitkä, väitettiin käyttäytyvän
aivan kunnollisesti toisinaan, mutta sen kone teki aina lakon heti,
kun minä siihen astuin.

Mutta Snark purjehti. Se oli ainoa tapa, millä se kykeni kunnolla

liikkumaan. Se purjehti kaksi vuotta eikä kertaakaan törmännyt
kariin, riuttaan tahi matalikkoon. Siinä ei ollut lainkaan painolastia,
sen rautaköli painoi viisi tonnia, mutta sen syväkulkuisuus ja
koholaidan korkeus tekivät sen hyvin vakavaksi. Kun se täysissä
purjeissa joutui troopillisiin myrskyihin, sen laita ja kansi
hautautuivat monta kertaa veden alle, mutta se pysyi itsepäisesti
pystyssä. Sitä oli helppo ohjata, ja se kykeni purjehtimaan liki
hankatuulta, laitamyötäistä ja poikkituulta yötä päivää kenenkään
tarvitsematta olla ruorissa. Loorinkituulessa ja tarkasti asetetuin
purjein se mutkitteli vain yhden piirun kummallekin puolelle
suunnastaan ja myötätuulessa vain puolitoista piirua — samoin
kenenkään olematta ruorissa.

Snark rakennettiin osaksi San Franciscossa. Sinä aamuna, jolloin

sen köli piti valaa, tapahtui suuri maanjäristys. Sitten vallitsi täysi
anarkia. Kun alusta oli rakennettu kuusi kuukautta yli määräajan,
purjehdin sillä, niin keskeneräinen kuin se olikin, Havaijille, kone
pohjalle köytettynä ja joukko rakennusaineita kannella. Jos olisin
jäänyt San Franciscoon työn valmistumista odottamaan, en olisi
päässyt lainkaan matkalle. Mutta vaikka alus ei ollut kaikin puolin
valmis, se maksoi neljä kertaa niin paljon kuin se oikeastaan olisi
maksanut täydessä kunnossa.

Snark tuntui tulleen tuhkimona tähän maailmaan. Se

takavarikoitiin San Franciscossa, sen paperit julistettiin vääriksi
Havaijilla, ja sitä sakotettiin karanteenimääräysten rikkomisesta
Salomonin saarilla. Sanomalehdet olisivat joutuneet kadotukseen, jos
olisivat edes siteiksi puhuneet siitä totta. Kun olin erottanut erään
kelvottoman kapteenin, ne sanoivat minun lyöneen murskaksi
miehen jok'ainoan luun. Kun muuan nuori mies — Roscoe — palasi
kotiin jatkamaan opintojaan yliopistossa, tiedotettiin, että olin oikea
Susi-Larsen ja että koko miehistöni oli paennut kovakätistä
kohteluani. Ainoat lyönnit, mitkä Snarkilla todella annettiin, sai
kokkimme kelvottomalta kapteenilta, joka pahoinpiteli häntä ja oli
päässyt palvelukseeni väärennettyjen todistusten nojalla. Erotin
kapteenin Fidzi-saarilla. Charmianilla ja minulla oli myös tapana
nyrkkeillä saadaksemme ruumiinliikuntoa — mutta kummallekaan ei
koitunut pahoja vammoja.

Retkemme oli huviretki. Minä rakennutin Snarkin ja maksoin sen ja

kaikki muut kustannukset. Sitouduin kirjoittamaan
kolmekymmentäviisituhatta sanaa käsittävän kuvauksen matkastani
erääseen aikakauslehteen, minkä piti maksaa minulle siitä saman
taksan mukaan kuin kotona kirjoittamistani kertomuksista. Heti
aikakauslehti ilmoitti yleisölle, että se lähettäisi minut kiertämään
maailman ympäri omalla kustannuksellaan. Aikakauslehti oli rikas, ja
jok'ainoa ihminen, joka jollakin tavalla joutui Snarkin kanssa
tekemisiin liikeasioissa, otti kolminkertaiset hinnat, sen tähden että
aikakauslehti luonnollisesti jaksoi ne maksaa. Sanottu satu oli
levinnyt kaukaisimmillekin Etelämeren saarille, ja sain maksaa
kaikesta sen mukaisesti. Tähän päivään saakka koko maailma on
uskonut, että aikakauslehti kustansi kaiken ja että minä ansaitsin
kokonaisen omaisuuden matkallani. Moisten tiedonantojen jälkeen
on vaikea saada ihmisiä vakuutetuiksi siitä, että retkemme oli
huviretki.

Matkustin tosiaankin Australiaan päästäkseni sairaalaan ja makasin

siellä viisi viikkoa. Viisi kuukautta makasin sitten kovasti sairaana
hotellissa. Käsissäni olevaa salaperäistä tautia ei ollut Australian
erikoislääkärien tietopiirissä. Se oli aivan tuntematon
lääketieteellisessä kirjallisuudessa. Sellaisista tapauksista ei ollut
milloinkaan kuultu puhuttavan. Vaiva pääsi myös jalkoihini, niin että
toisinaan olin yhtä avuton kuin lapsi. Väliin käteni saattoivat olla
kaksi kertaa luonnollista kokoaan isommat, ja seitsemän eri kerrosta
kuollutta ja kuolevaa ihoa kuoriutui niistä samalla kertaa. Tapahtui,
että varpaitteni kynnet vuorokaudessa paisuivat niin, että ne olivat
yhtä paksut kuin pitkät. Kun ne viilattiin pois, ne olivat vuorokauden
kuluttua taas yhtä paksut.

Australialaiset erikoislääkärit olivat yksimielisiä siitä, ettei tauti ollut

loistauti, ja sentähden sen piti olla hermotauti. Paha ei siitä
kuitenkaan parantunut, ja minun oli mahdotonta jatkaa matkaamme.
Ainoa tapa, millä se olisi käynyt päinsä, olisi ollut sitoa minut
vuoteeseen, sillä avuttomuudessani — en kyennyt tarttumaan
mihinkään käsilläni — en olisi voinut liikkua pienellä keikkuvalla
aluksellamme. Ja sitäpaitsi sanoin itselleni, että oli olemassa paljon
aluksia ja että saattoi tehdä paljon matkoja, mutta että minulla oli
vain yksi pari käsiä ja vain yhdet varpaankynnet. Aprikoin edelleen,
että omassa ilmastossani Kaliforniassa hermoni olivat aina pysyneet
terveellisessä tasapainossa.

Ja käännyin takaisin Kaliforniaan.

Kotiin palattuani olen tullut aivan entiselleni. Ja olen oppinut

sellaista, mitä en ennen tietänyt. Käsiini sattui kirja, minkä oli
kirjoittanut Yhdysvaltain armeijan eversti Charles E. Woodruff ja
minkä nimi oli "Troopillisen valon vaikutus valkoisiin". Siitä sain tietää
sairauteni laadun. Sittemmin olen tavannut eversti Woodruffin ja
kuullut, että hän on potenut samaa vaivaa kuin minä. Hän itse oli
sotilaslääkäri, ja seitsemäntoista hänen ammattiveljeään oli
Filippiineillä vaivannut päätään hänen taudillaan ja tehnyt
samantapaisia johtopäätelmiä kuin australialaiset erikoislääkärini.
Tiesin nyt, että olin erikoisen altis troopillisen valon tuhoisalle
vaikutukselle. Ultraviolettisäteet olivat olleet tuhota minut, aivan kuin
röntgensäteet ovat kokeiltaessa tuhonneet useita ihmisiä.

Sivumennen tahdon mainita, että muiden vaikeuksien joukossa,

mitkä pakottivat meidät keskeyttämään matkamme, oli tauti, mitä
milloin nimitetään "terveen taudiksi", milloin "eurooppalaiseksi
spitaaliksi" ja milloin "raamatulliseksi spitaaliksi". Tästä
salaperäisestä taudista, mikä ei ole "oikeata spitaalia", ei tiedetä
lainkaan mitään. Lääkärit eivät ole keksineet minkäänlaista
parannuskeinoa, mutta on kuultu puhuttavan, että sairaus on
parantunut itsestään. Mitenkä se tulee — ei tiedetä. Mitä se on — ei
tiedetä. Mistä syystä se katoaa — ei tiedetä. Mitään lääkkeitä
käyttämättä, pelkällä Kalifornian terveellisessä ilmastossa oleskelulla
hopeakiilto katosi ihostani. Lääkärit olivat antaneet minulle vain
yhden toiveen: että paha saattoi parantua itsestään, ja se paranikin.

Lopuksi yleisarvostelma matkastamme. Minun tai jonkun muun on

helppo sanoa, että se oli hauska. Mutta paremmankin todistuksen
siitä on antanut se nainen, joka oli mukana alusta loppuun. Kun
sairaalassa ilmoitin Charmianille, että minun täytyi keskeyttää matka
ja palata kotiin Kaliforniaan, täyttivät kyyneleet hänen silmänsä.
Kaksi päivää hän oli musertunut ja onneton sen tähden, että ihana,
ihana matkamme oli lopussa.

Glen Ellen, Kalifornia, 7.4.1911.

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