Chapter 2
BASIC ACCOUNTING CONCEPTS: THE BALANCE SHEET

Changes from Tenth Edition

The Chapter has been updated.

Approach

It is helpful if students understand from the outset that financial accounting is being discussed in two cycles. In the first cycle, Chapters 2 through 4, we go through the entire accounting process quickly, to establish an overview. We then go through the process a second time, in Chapters 5 through 14, and go into the same topics in much greater depth. Thus, students should not be concerned if they do not understand all the fine points in Chapters 2-4, for these will be discussed again in subsequent chapters. Neither should they be permitted to belabor questions that involve fine distinctions; the objective here is to get the broad, overall picture.

Our experience invariably has been that beginning students find the introduction to accounting quite confusing. Although they may be able to do the work assigned each day, they are unable to visualize the whole structure of accounts. This leads to a feeling of frustration that may last several weeks. Then, all of a sudden, the pieces fall into place. From that time forward they have no special trouble and can fit each new concept into its proper place without difficulty. Usually, the “great awakening” comes by Chapter 6, but it may not come until even later. We do not know of any way of eliminating this initial frustration.

We go through the text briefly, mostly to encourage questions that will help clear up obscure points. We usually explain that we do not expect that all matters discussed in this chapter will immediately be clear. For this reason, students may wish to refer back to this and to other chapters in Part 1, as the need arises.

Many instructors like to emphasize the notion of balance sheet changes, and this can be done by adding more transactions to Music Mart.