Financial & Managerial Accounting for Decision Makers, 2e

by Dyckman, Magee, Pfeiffer, Hartgraves, Morse

ISBN: 978-1-61853-106-3 | Copyright 2015


Welcome to the second edition of Financial & Managerial Accounting for Decision Makers. We wrote this book to equip students with the accounting techniques and insights necessary to succeed in today’s business environment. It reflects our combined experience in teaching accounting to college students at all levels. For anyone who pursues a career in business, the ability to read, analyze, and interpret accounting information is an essential skill. Financial & Managerial Accounting for Decision Makers is written for future business leaders who want to understand how accounting information is prepared and how the information is used by investors, creditors, financial analysts, and managers. Our goal is to provide the most engaging, relevant, and accessible textbook available.

Target Audience

Financial & Managerial Accounting for Decision Makers is intended for use in an introductory accounting course that combines financial and managerial accounting concepts, at either the undergraduate or graduate level; one that balances the preparation of accounting information with its analysis. This book accommodates mini-courses lasting only a few days as well as extended courses lasting a full semester.

This book is real-world oriented and focuses on the most salient aspects of accounting. It teaches students how to read, analyze, and interpret accounting data to make informed business decisions. To that end, it consistently incorporates real company data, both in the body of each chapter and throughout the assignment material.

Real Data Incorporated Throughout

Today’s business students must be skilled in using real data to make business decisions. We feel strongly that the more exposure students get to real accounting information, the more comfortable they become using that information to make business decisions. We expose students to the analysis and interpretation of real company data and nonfinancial disclosures through the use of focus companies in each chapter, the generous incorporation of footnotes, financial analysis, and an abundance of assignments that draw on real company data and disclosures.

Focus Companies for Each Chapter

Each chapter’s content is explained through the accounting and reporting activities of real companies. Each chapter incorporates a "focus company" for special emphasis and demonstration. The enhanced instructional value of focus companies comes from the way they engage students in real analysis and interpretation. Focus companies were selected based on student appeal and the diversity of industries.

Module 1 Nike Module 13 ModCloth
Module 2 Walgreens Module 14 Square
Module 3 Walgreens Module 15 DuPont
Module 4 Golden Enterprises Module 16 Uber
Module 5 PepsiCo Module 17 Samsung
Module 6 Cisco Module 18 Unilever
Module 7 Home Depot Module 19 Whole Foods
Module 8 Procter & Gamble Module 20 Roku
Module 9 Verizon Module 21 Pinterest
Module 10 Delta Air Lines Module 22 Southwest Airlines
Module 11 Pfizer Module 23 Volkswagen
Module 12 Google Module 24 Amazon

Footnotes and Management Disclosures

We incorporate footnotes and other management disclosures, where appropriate, throughout the book. We explain the significance of the footnote and then demonstrate how to use the disclosed information to make managerial inferences and decisions. A representative sample follows.

footnotes and disclosures

Financial Analysis Discussions

Each financial accounting chapter includes a financial analysis discussion that introduces key ratios and applies them to the financial statements of the chapter's focus company. By weaving some analysis into each of these chapters, we try to instill in students a deeper appreciation for the significance of the accounting methods being discussed. One such analysis discussion follows.

financial analysis

Assignments that Draw on Real Data

It is essential for students to be able to apply what they have learned to real managerial decisions. Therefore, we have included an abundance of assignments in each chapter that draw on real data. A representative example follows.


Balanced Approach

As instructors of introductory financial accounting, we recognize that the first accounting course serves the general business students as well as potential accounting majors. Financial & Managerial Accounting for Decision Makers embraces this reality. This book balances reporting, analysis, interpretation, and decision making with the more standard aspects of accounting such as journal entries, T-accounts, and the preparation of financial statements.

3-step Process: Analyze, Journalize, Post

One technique we use throughout the financial accounting portion of the book to maintain a balanced approach is the incorporation of a 3-step process to analyze and record transactions. Step 1 analyzes the impact of various transactions on the financial statements using the financial statement effects template. Step 2 records the transaction using journal entries and Step 3 requires students to post the journal entries to T-accounts.

three step process

The template captures each transaction's effects on the four financial statements: the balance sheet, income statement, statement of stockholders’ equity, and statement of cash flows. For the balance sheet, we differentiate between cash and noncash assets to identify the cash effects of transactions. Likewise, equity is separated into the contributed and earned capital components (the latter includes retained earnings as its major element). Finally, income statement effects are separated into revenues, expenses, and net income (the updating of retained earnings is denoted with an arrow line running from net income to earned capital). This template provides a convenient means to represent financial accounting transactions and events in a simple, concise manner for assessing their effects on financial statements.

International Financial Reporting Standards

The convergence of U.S. GAAP and International Financial Reporting Standards (IFRS) is in process. Our introductory students should be prepared for this eventuality with a basic understanding of the similarities and differences in the current reporting requirements and methods under U.S. GAAP and IFRS. Consequently, we incorporate discussions that examine these similarities and differences where appropriate throughout the financial accounting portion of the book in Global Perspective boxes. See example on page 335. We also include exercises and problems, where appropriate, to stimulate a discussion of international reporting differences. Our approach is conceptual — we purposefully avoid the detailed mechanics that are more appropriate for an intermediate level accounting course at either the undergraduate or graduate level. We feel strongly that our IFRS coverage exposes students to the similarities and differences without overwhelming them.

Innovative Pedagogy

Business Insights

Students appreciate and become more engaged when they can see the real world relevance of what they are learning in the classroom. We have included a generous number of current, real world examples throughout each chapter in Business Insight boxes. The following is a representative example:

business insight

Decision Making Orientation

One primary goal of an accounting course is to teach students the skills needed to apply their accounting knowledge to solving real business problems. With that goal in mind, You Make the Call boxes in each chapter encourage students to apply the material presented to solving actual business scenarios. See example on page 380.

Mid-Chapter and Chapter-End Reviews

Accounting can be challenging — especially for students lacking business experience or previous exposure to business courses. To reinforce concepts presented in each chapter and to ensure student comprehension, we include mid-chapter and chapter-end reviews that require students to recall and apply the accounting techniques and concepts described in each chapter. See example on page 343.

Research Insights for Business Students

Academic research plays an important role in the way business is conducted, accounting is performed, and students are taught. It is important for students to recognize how modern research and modern business practice interact. Therefore, we periodically incorporate relevant research to help students understand the important relation between research and modern business. See example on page 180.

New to the 2nd Edition

Financial Accounting Chapters (1-12)

  • Chapter 4 on the statement of cash flows has been rewritten with a direct method focus company, Golden Enterprises. The chapter has a greater focus on the direct method and a new approach to facilitate students’ understanding of the adjustments needed for the indirect method.
  • We have expanded the discussion of International Financial Reporting Standards (IFRS) and incorporated Global Perspective boxes throughout the text to introduce students to the similarities and differences between U.S. GAAP and IFRS.
  • The Analyzing Financial Statements sections of chapters have been expanded and now conform to a consistent presentation throughout the text.
  • The real company data throughout the book has been updated to reflect the most current financial statements available at the time of publication.
  • Golden Enterprises replaces Walgreens as the focus company in Chapter 4, and Chapter 10 features Delta Air Lines instead of American Airlines.
  • The first edition introduced the financial calculator in Chapters 9 and 10 and Appendix A. This edition, we have added excel spreadsheets to the analysis. Appendix A now has an extensive discussion of using excel to calculate the time value of money problems.
  • In addition to the chapter specific changes, there have been several changes throughout the financial accounting portion of the book, including: updated numbers for examples, illustrations, and assignments that use real data; updated footnotes and other nonfinancial disclosures; updated excerpts from the business and popular press; numerous assignments in each chapter have been revised or replaced with new assignments; and a new, accessible design.

Managerial Accounting Chapters (13-24)

  • Many new Business Insight boxes have replaced older ones.
  • Several new Research Insight boxes have been incorporated.
  • Dozens of new, real company examples have been integrated throughout the chapters.
  • Over two-thirds of the exercises and problems have been revised.
  • All 12 Opening Vignettes have been replaced. New feature companies include Square, DuPont, Whole Foods and Pinterest.

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Expand/Collapse All
About the Authors (pg. iii)
Preface (pg. v)
Contents (pg. xi)
Chapter 01: Introducing Financial Accounting (pg. 3)
Chapter 02: Constructing Financial Statements (pg. 41)
Chapter 03: Adjusting Accounts for Financial Statements (pg. 97)
Chapter 04: Reporting and Analyzing Cash Flows (pg. 153)
Chapter 05: Analyzing and Interpreting Financial Statements (pg. 215)
Chapter 06: Reporting and Analyzing Revenues and Receivables (pg. 267)
Chapter 07: Reporting and Analyzing Inventory (pg. 317)
Chapter 08: Reporting and Analyzing Long-Term Operating Assets (pg. 365)
Chapter 09: Reporting and Analyzing Liabilities (pg. 405)
Chapter 10: Reporting and Analyzing Leases, Pensions, and Income Taxes (pg. 453)
Chapter 11: Reporting and Analyzing Stockholders’ Equity (pg. 507)
Chapter 12: Reporting and Analyzing Financial Investments (pg. 555)
Chapter 13: Introducing Managerial Accounting (pg. 615)
Chapter 14: Cost Behavior, Activity Analysis, and Cost Estimation (pg. 643)
Chapter 15: Cost-Volume-Profit Analysis and Planning (pg. 679)
Chapter 16: Relevant Costs and Benefits for Decision Making (pg. 719)
Chapter 17: Product Costing: Job and Process Operations (pg. 759)
Chapter 18: Activity-Based Costing, Customer Profitability, and Activity-Based Management (pg. 811)
Chapter 19: Additional Topics in Product Costing (pg. 851)
Chapter 20: Pricing and Other Product Management Decisions (pg. 881)
Chapter 21: Operational Budgeting and Profit Planning (pg. 913)
Chapter 22: Standard Costs and Performance Reports (pg. 959)
Chapter 23: Segment Reporting, Transfer Pricing, and Balanced Scorecard (pg. 1003)
Chapter 24: Capital Budgeting Decisions (pg. 1047)
Appendix A: Compound Interest and the Time-Value of Money (pg. 1092)
Glossary (pg. 1113)
INDEX (pg. 1133)
Thomas R. Dyckman

Thomas R. Dyckman

Thomas R. Dyckman is Ann Whitney Olin Professor Emeritus of Accounting and Quantitative Analysis at Cornell University’s Johnson Graduate School of Management.

In addition to teaching accounting and quantitative analysis, he has taught in Cornell’s Executive Development Program. He earned his doctorate degree from the University of Michigan. He is a former member of the Financial Accounting Standards Board Advisory Committee and the Financial Accounting Foundation, which oversees the FASB. He was president of the American Accounting Association in 1982 and received the association’s Outstanding Educator Award for the year 1987. He also received the AICPA’s Notable Contributions to Accounting Literature Award in 1966 and 1977.

Professor Dyckman has extensive industrial experience that includes work with the U.S. Navy and IBM. He has conducted seminars for Cornell Executive Development Program and Managing the Next Generation of Technology, as well as for Ocean Spray, Goodyear, Morgan Guaranty, GTE, Southern New England Telephone, and Goulds Pumps.

Professor Dyckman has coauthored eleven books and written over 50 journal articles on topics from financial markets to the application of quantitative and behavioral theory to administrative decision making. He has been a member of the editorial boards of The Accounting Review, The Journal of Finance and Quantitative Analysis, The Journal of Accounting and Economics, The Journal of Management Accounting Research, and The Journal of Accounting Education.

Robert P. Magee

Robert P. Magee

Robert P. Magee is Keith I. DeLashmutt Professor of Accounting Information and Management at the Kellogg School of Management at Northwestern University.

He received his A.B., M.S. and Ph.D. from Cornell University. Prior to joining the Kellogg faculty in 1976, he was a faculty member at the University of Chicago's Graduate School of Business. For academic year 1980-81, he was a visiting faculty member at IMEDE (now IMD) in Lausanne, Switzerland.

Professor Magee's research focuses on the use of accounting information to facilitate decision-making and control within organizations. He has published articles in The Accounting Review, the Journal of Accounting Research, the Journal of Accounting and Economics, and a variety of other journals. He is the author of Advanced Managerial Accounting and co-author (with Thomas R. Dyckman and David H. Downes) of Efficient Capital Markets and Accounting: A Critical Analysis. The latter book received the Notable Contribution to the Accounting Literature Award from the AICPA in 1978. Professor Magee has served on the editorial boards of The Accounting Review, the Journal of Accounting Research, the Journal of Accounting and Economics and the Journal of Accounting, Auditing and Finance. From 1994-96, he served as Editor of The Accounting Review, the quarterly research journal of the American Accounting Association. He received the American Accounting Association's Outstanding Accounting Educator Award in 1999 and the Illinois CPA Society Outstanding Educator Award in 2000.

Professor Magee teaches financial accounting to MBA and Executive MBA students. He has received several teaching awards at the Kellogg School, including the Alumni Choice Outstanding Professor Award in 2003.

Glenn M. Pfeiffer

Glenn M. Pfeiffer

Glenn M. Pfeiffer is Professor of Accounting at the George L. Argyros School of Business and Economics at Chapman University.

He received his M.S. and Ph.D. from Cornell University after he earned a bachelor's degree from Hope College. Prior to joining the faculty at the Argyros School, he held appointments at the University of Washington, Cornell University, the University of Chicago, the University of Arizona, and San Diego State University.

Professor Pfeiffer’s research focuses on financial reporting and capital markets. He has investigated issues relating to lease accounting, LIFO inventory liquidation, earnings per share, employee stock options, corporate reorganization, and technology investments. He has published articles in The Accounting Review, the Financial Analysts Journal, the International Journal of Accounting Information Systems, the Journal of Applied Business Research, the Journal of High Technology Management Research, the Journal of Accounting Education, and several other academic journals. In addition, he has published numerous case studies in financial accounting and reporting.

Professor Pfeiffer teaches financial accounting and financial analysis to undergraduate, MBA, and Executive students. He has also taught managerial accounting for MBAs. He has won several teaching awards at both the undergraduate and graduate levels.

Al L. Hartgraves

Al L. Hartgraves

Al L. Hartgraves is Professor Emeritus of Accounting at the Goizueta Business School at Emory University in Atlanta, Georgia. He has been a frequent Guest Professor at Johannes Kepler University in Linz, Austria and at the Helsinki School of Economics and Business Administration in Finland.

His published scholarly and professional articles have appeared in The Accounting Review, Accounting Horizons, Management Accounting, Journal of Accountancy, Journal of Accounting and Public Policy and many other journals. Students at Goizueta Business School have selected him on six occasions to receive the Distinguished Educator Award. In 2002 he received Emory University’s highest teaching award, The Scholar/Teacher Award, and in 2003 he was recognized as the Accounting Educator of the Year by the Georgia Society of CPAs. He has been recognized as an Outstanding Faculty Member in two editions of The Business Week Guide to the Best Business Schools. He is a Certified Public Accountant (inactive) and a Certified Management Accountant, having received the Certificate of Distinguished Performance on the CMA exam. He received his Ph.D. from Georgia State University.

Wayne J. Morse

Wayne J. Morse

Wayne J. Morse, a hiking and canoeing enthusiast, is Professor Emeritus at the Saunders College of Business at Rochester Institute of Technology.

An author or coauthor of more than fifty published papers, monographs, and textbooks, he was a founding member of the Management Accounting section of the American Accounting Association. His most notable writings are in the areas of learning curves, human resource accounting, and quality costs. He was a member of the IMA Committee on Research and an AICPA Board of Examiners subcommittee, and he has served on the editorial boards of Advances in Accounting, Trends in Accounting Education, Issues in Accounting Education, and Management Accounting Research. A Certified Public Accountant, he received his Ph.D. from Michigan State University. Prior to joining RIT, he was on the faculty of the University of Illinois, Duke University, the University of Tennessee, Clarkson University, and the University of Alabama-Huntsville.

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