Principles of Financial Accounting

As accounting is the language of business, Principles of Financial Accounting, 3rd edition, will
teach students the value of accounting information in business and its integral role in business
planning and growth. the third edition aligns to the Conceptual Framework for Financial Reporting
and financial reporting requirements under Australian and new Zealand Accounting Standards, as
well as presenting real company financial information from the Australasian region. throughout all
chapters, accounting processes and systems are applied and illustrated with either real businesses
or constructive hypothetical examples.

Students who study with this textbook will be equipped with knowledge and skills required for their
further accounting studies and eventual career as either an accounting or business professional.

New to this editioN
Consideration of sustainability and sustainable business practices
Updated in accordance with Australian and new Zealand accounting standards and the
Conceptual Framework for Financial Reporting
integration of current company financial information to illustrate or reiterate key accounting
processes and/or chapter content
thorough discussion of financial reporting requirements and presentation, income statements,
statements of financial position, statements of cash flow and statements of changes in equity
Assumes various end users of accounting information, discussing the impact of accounting on
various aspects of business
end–of–chapter problems and case studies align to the threshold Learning outcomes for
Accounting and aim to develop competencies in judgement, knowledge, application skills,
communication and teamwork, and self–management
Workbook examples are contained in the Before You Go on feature and require students to
complete the example by finishing general journals, trial balances and financial statements
General journal entries are presented as accounting equations to illustrate how debits and credits
affect assets, liabilities or the equity position of the business, and the inflow or outflow of cash.

We wish you every success with your studies.

Preface xi

How to use this book xii

Lecturer and student resource material xvi

Acknowledgements xviii

Chapter 1 Accounting in action 1

Chapter 2 The recording process 49

Chapter 3 Adjusting the accounts 91

Chapter 4 Completion of the accounting cycle 133

Chapter 5 Accounting for retail operations 179

Chapter 6 Inventories 229

Chapter 7 Accounting information systems 273

Chapter 8 Internal control and cash 323

Chapter 9 Accounting for receivables 363

Chapter 10 Property, plant and equipment; intangible assets and goodwill; mineral resources and biological assets 397

Chapter 11 Current liabilities and payroll accounting 447

Chapter 12 Accounting concepts and principles 483

Chapter 13 Accounting for partnerships 517

Chapter 14 Companies: share capital 561

Chapter 15 Companies: dividends, retained earnings and income reporting 601

Chapter 16 Non–current liabilities 631

Chapter 17 Investments 671

Chapter 18 The statement of cash flows 697

Chapter 19 Financial statement analysis 745

Appendix: Time value of money 793

Glossary 801

Index 813

Lorena Mitrione, BCom, MBus, CPA, joined Monash University, Department of Accounting and Finance, in 2009 as a lecturer. For 12 years prior to this, she worked at CPA Australia. Since 2001 she was the CPA Program Manager responsible for the development and maintenance of CPA Program materials and examinations. In this role Lorena developed a sound sense of the requirements for accounting learning materials while maintaining an up–to–date knowledge of accounting standards, accounting research, technical accounting matters and business practices.

Michaela Rankin, PhD (RMIT), MEc (UNE), GradCertHE (Monash), BBus(Hons) (USQ), CPA, is currently a senior lecturer in the Department of Accounting and Finance at Monash University, Melbourne. Prior to joining Monash, Michaela held positions at RMIT University and the University of Southern Queensland, where she was awarded the Institute of Chartered Accountants in Australia Award for Teaching Excellence in 1998. She teaches financial accounting and accounting theory at both undergraduate and postgraduate level. Michaela has a broad range of research interests, including financial reporting and governance, executive compensation, the regulation and practice of sustainability reporting, carbon emissions disclosure, and accounting education. She has published widely in international journals including Accounting, Auditing and Accountability Journal , British Accounting Review, Accounting and Finance,  Higher Education Research & Development and Australian Accounting Review.

Keryn Chalmers, BCom, Grad Dipl, PhD, joined Monash University in 2003, and is the Head of the Department of Accounting and Finance, Monash University. For 15 years prior to this, she was with the School of Accounting and Finance at Victoria University. Her teaching responsibilities at the undergraduate and postgraduate levels have primarily been in financial accounting and financial analysis. Keryn is an active researcher in the financial accounting and financial reporting area, specifically in relation to accounting policy and disclosure choices of management.