Accounting
the recording of the day-to-day financial activities of a company and the organization of that information into summary reports used to evaluate the company’s financial status<\/p>\n\n\n\n
Bookkeeping
the preservation of a systematic, quantitative record of an activity<\/p>\n\n\n\n
accounting system
used by a business to handle routine bookkeeping tasks and to structure the information so it can be used to evaluate the performance and financial status of the business<\/p>\n\n\n\n
Accounting information
Info that is intended to be useful in making decisions about the future.<\/p>\n\n\n\n
The balance sheet, the income statement, and the statement of cashflows
What are the three primary financial statements?<\/p>\n\n\n\n
External Users
Who is financial accounting information primarily prepared for and used by?<\/p>\n\n\n\n
Managerial Accounting
the name given to accounting systems designed for internal users<\/p>\n\n\n\n
Balance Sheet
Reports a company’s assets, liabilities, and owners’ equity<\/p>\n\n\n\n
Income Statement
reports the amount of net income earned by a company during a period<\/p>\n\n\n\n
Net income
the excess of a company’s revenues over its expenses<\/p>\n\n\n\n
statement of cash flows
reports the amount of cash collected and paid out by a company in the following three types of activities: operating, investing, and financing<\/p>\n\n\n\n
FASB
Which private body establishes accounting rules in the U.S.?<\/p>\n\n\n\n
Financial Accounting Standards Board (FASB)
a private body established and supported by the joint efforts of the U.S. business community, financial analysts, and practicing accountants<\/p>\n\n\n\n
The Securities and Exchange Commission (SEC)
the organization that regulates U.S. stock exchanges and seeks to create a fair information environment in which investors can buy and sell stocks without fear that companies are hiding or manipulating financial data<\/p>\n\n\n\n
American Institute of Certified Public Accountants (AICPA)
the professional organization of certified public accountants (CPAs) in the United States<\/p>\n\n\n\n
Public Company Accounting Oversight Board (PCAOB)
the organization that inspects the audit practices of registered audit firms and has statutory authority to investigate questionable audit practices and to impose sanctions such as barring an audit firm from auditing SEC-registered companies<\/p>\n\n\n\n
Internal Revenue Service (IRS)
Gov’t agency that establishes rules to define exactly when income should be taxed. It has no role in setting financial accounting rules; and a company’s financial statements are not used in determining how much tax the company must pay<\/p>\n\n\n\n
The International Accounting Standards Board (IASB)
Organization that was formed to develop a common set of worldwide accounting standards. Its standards are increasingly accepted worldwide, but FASB rules are still the standard in the United States.<\/p>\n\n\n\n
Sarbanes-Oxley Act
A wave of accounting scandals starting in 2001 resulted in this act, which increases U.S. federal government scrutiny of the production of financial statements.<\/p>\n\n\n\n
Balance Sheet
reports a company’s financial position at a specified point in time and lists the company’s resources (assets), obligations (liabilities), and net ownership interest (owners’ equity).<\/p>\n\n\n\n
Assets
probable future economic benefits obtained or controlled by a company as a result of past transactions or events<\/p>\n\n\n\n
Liabilities
probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services in the future as a result of past transactions or events<\/p>\n\n\n\n
Owners’ equity
the residual interest in the assets of a company that remains after deducting its liabilities<\/p>\n\n\n\n
Assets = Liabilities + Owners’ Equity
What is the accounting equation?<\/p>\n\n\n\n
By order of liquidity
In what order are assets typically listed on the balance sheet?<\/p>\n\n\n\n
Current and Long-term
Liabilities are divided into which 2 categories on the balance sheet?<\/p>\n\n\n\n
states that the financial results of an economic entity should be reported separately from the financial results of other entities, even though all those entities may be controlled by the same person
What is the entity concept?<\/p>\n\n\n\n
(revenues-expense= net income)
Equation to calculate net income<\/p>\n\n\n\n
When work has been done and collectability of cash can be reasonably assured
According to accounting rules, when should revenue be recognized?<\/p>\n\n\n\n
Operating activities
those activities that comprise the day-to-day operations of a business.<\/p>\n\n\n\n
Investing activities Financing activities information on the accounting assumptions used in preparing the statements and supplemental information not included in the statements themselves Conservatism Materiality Articulation Debt Ratio<\/p>\n\n\n\n Total Liabilities\/ Current Ratio<\/p>\n\n\n\n Current Assets\/ Return on Sales Ratio<\/p>\n\n\n\n Net Income\/ Asset Turnover<\/p>\n\n\n\n Sales\/ Return on Equity<\/p>\n\n\n\n Net Income\/ Price-earnings Ratio<\/p>\n\n\n\n Market Value of Shares\/ 1) to predict a company’s future profitability and cash flows financial ratios financial docs that allow comparison of financial statements across years and between companies and are prepared by dividing all financial statement numbers by sales for the year Return on sales is computed as net income divided by sales Asset turnover is computed as sales divided by assets and is interpreted as the number of dollars in sales generated by each dollar of assets Assets-to-equity ratio is computed as assets divided by equity and is interpreted as the number of dollars of assets a company is able to acquire using each dollar invested by stockholders the profitability of each dollar in sales and turnover is the degree to which assets are used to generate sales NOTE: Companies with a low margin can still earn an acceptable level of return on assets if they have a high turnover.<\/p>\n\n\n\n current asset cash, accounts receivable, and inventory Property, plant, and equipment (PPE) companies report the intangibles that they have purchased from other companies but not the intangibles that they have developed themselves current liability long-term bank loans, mortgages, and bonds Common stockholders are the true owners of a business; Preferred stockholders give up some of the rights of ownership enjoyed by common stockholders in exchange for some of the safety promised to creditors Retained Earnings treasury stock 2 years, Comparative side-by-side format Cash Long-term assets working capital Recognition (In terms of accounting) disclosure Transaction Analysis Asset Mix Income from Continuing Operations Gross Profit Operating Income Income from Continuing Operations Net Income Comprehensive Income Gains, Losses, Revenues, and Expenses selling goods, providing services, Earning interest by providing loans cost of goods sold; selling, general, and administrative expense, depreciation expense, income tax expense, and interest expense External Income from discontinued operations and extraordinary items Earnings per Share (EPS) When value has been delivered to customers (typically only after the required work has been performed and after the collection of cash is reasonably assured) matching Inside, Internal True. Financial accounting is only outside. Managerial accounting can be inside AND outside. Outside, External, includes lenders and investors Balance sheet, income statement, and statement of cash flows Balance Sheet Income Statement Statement of Cash flows Balance sheet equation Revenue equation Operating, investing, and financial activities FASB: Financial accounting standards. Private, no government involvement. It is a public process, includes individuals experienced in business and accounting (7 members). GAAP: General accepted accounting principles comparability SEC: Security and exchange commission. Located in Article 1, Sec 8, Clause 3 Registration statements (prospectus), Form 10-K, Form 10-Q, and schedule 14A (proxy statement). These are all publicly viewable. Oversees stock exchanges, can suspend a company, investigate and suspect violations of the SEC rules. YES. The SEC has legal authority to establish accounting rules and disclosure requirements. USA congress->SEC->FASB FASB: Financial accounting standards board GAAP (has no legal authority) AIPCA: American INSTITUTE of certified public accountants. Only CPA’s: Certified public accountants. PCAOB: Public company accounting oversight board. Under supervision of the SEC. PCAOB: Public Company Accounting OVERSIGHT Board. U.S. Gov agency that collects and regulates income taxes. Their primary goal is to collect revenue. Economic income and accounting income books. & Tax income, and cash flow books. Similar to the FASB, but not 100% the same. It is international, everywhere but the U.S. Who enforces and national policies. Condorsement The SEC, SOX, and PCAOB. Reduce uncertainty and allows lenders and investors to target their financing and investing to the level of risk they are willing to take. Adudit Income Statement Balance sheet Accounting equation Assets (resoures) Liabilities (obligations) Equity 1 paid in capital, 2 retained earnings, 3 treasure stock, 4 accumulated other comprehensive income. PIC: Paid in capital Retained earnings Treasury stock AOCI: Accumulated other comprehensive income.Market related gains and losses that are not included on the income statement. Classified balance sheet Entity Concept International Property rules NO Revenue, expenses, and net income. Income statement equation Revenue (gains) Expenses (losses) NEVER. Divedends are not expenses. Net income Never Never Earnings per share (EPS) Revenue recognition Operating, investing, and financing activities Operating activities Investing activities Financing activities Summary of significant accounting policies, additional info about summary totals, disclosure of info not recognized, and supplementary info. The SEC External. But, private companies who want to provide assurance to a banker or new investor may do an external audit too. Become a CPA (certified public accountant), CE, CPA exam, and be completely INDEPENDENT to any company you audit. General accepted accounting principles (GAAP), and General accured auditory standards (GAAS). Certifies that the companies information is not misleading. NO. An audit does NOT certify that a company is good or not good to invest in. It does certify that a company is following GAAP, and GAAS. Relevance: FAST, but not precise\/certain. Reliability: Can count on it. Slow, carefully verified, precise, historically in the past, this was used most often. Comparability Conservatism Materiality Never Articulation Statement of cash flows. Income statement, combined with amount of dividends declared during the year. The accounting adjustments applied to the raw cash flow date. Diagnos existing problems and to foreceast how a company will perform it he future. Financial ratios Common size financial statement (subcategory of financial ratios) The Dupont Framework Cash flow ratios Financial statement analysis Equation for common size financial statements Liquidity The 6 most widely used financial ratios Amount to buy the company Debt ratio Current ratio Return on sales Asset Turnover Return on equity (ROE) Mother of all financial ratios. if you are an investor, you want to know the ROE, the number tells you as the investor how much money you will make per year. Price earning ratio Price earnings ratio Common size financial statement Common size balance sheet Sale Assets mix Common size income statement Ratio Framework, 1st step. Assets-to-equity ratio Profitability, efficiency, and leverage Profitability ratios Efficiency ratios Leverage ratio Average collection period Number of days sale in inventory Fixed Asset Turnover Leverage ratios Debt ratio No, they are two different things, they are not to be compared. Debt to equity ratio Time interest earned Cash flow to net income Indicates how well a companies cash flow from operations does at covering the company acquisition and fixed asset additions. Indicates a companies ability to meet its interest payments and its cash flow from operations. Cash from from operations and cash paid for interest and taxes\/ cash paid for interest and taxes. Inapproproate to compare two companies The total of assets in each asset category and is largely determined by the industry in which the company operates. the result of management decisions Expected to be used, sold, or replaced with in one year. Ex: Cash, accounts receivable, inventory, prepaid expenses, investment securities. Credit arrangement, OLD sales technology. It is an asset. The amount collected. Expenses paid in advance. NOT an expense, it IS an asset. Stocks and bonds Trademarks, brand names, copyrights, franchise, Good will (relationships). Recorded ONLY when purchased from another company. NOT recorded on balance sheet. Borrow Money (called liability) OR the money can be invested by business owners in various ways (called equity) Accounts payable, accured liabilities, short term loans payable, current portion of long term debt, unearned revenue. Wages, taxes, utilities, interest. OBLIGATION to deliver services for which customers have already paid for Common stock, preferred stock, retained earnings, treasury stock Market related gains and losses that are not included on the income statement Total amount invested to acquire part ownership interest in a corperation Equipment, accounts recievable, prepaid expenses. NOT ACCOUNTS PAYABLE. Notes payable how close is something to cash. balance sheet If it satisfies the definition of an asset or a liability, and is measurable, reliable, and quantifiable Recognition Disclosure Fair value Dividing each asset item on the balance sheet by the total assets. the companies industry The degree to which a company finances assets using liabilities or owners equity Income from continuing operations Expenses (losses) and Revenues (gains) when value has been delivered to a customer, which is typically only after the required work has been performed and after the collection of cash is reasonably assured Increase in dollar amount of equity (excluding effects of new investments or investment withdraws). Ex: bought for 200,000, sold for 220,000-gain of 20,000. Increase in physical resources, productive capacity (excluding effects of new investments or investment withdrawals). The previous example, that 20,000 had to be used to buy the next house, so therefore, no income. Gross profit, operating income, income from continuing operations, net income, comprehensive income. Sales-Cost of goods sold=GP Gross profit-operating expenses\/all expenses EXCEPT interest\/income tax=operating income It is the “pie” eaten by lenders (interest), Government (income tax), and owners (net income). Operating EBIT income (interest expenses +\/- miscellaneous revenues, expenses, gains, losses (income tax expenses). The value of the goods or services provided TO CUSTOMERS as part of normal business operations. *The amnt generated through normal operations. SALES, SERVICES, INTEREST, and other revenues. Value of resources consumed in generating revenues. The amount of assets consumed through normal operations PROBABLE future economic benefit POSSIBLE future economic benefit Bad debt expense Keeps 3 books. 1. Financial reporting, 2. income tax reporting, 3. Internal managerial accounting system. Decrease in the recorded amount of an asset bc it has declined in value. Impairment losses and estimated severance costs. “the line” is income from continuing operations. Reported “net of taxes” Market related gains and losses that are NOT included on the income statement Always at the bottom of the income statement. Net income\/outstanding number of shares of stock EPS Basic EPS Diluted Single Step=All revenue-All expenses=net income Cost of goods sold Highlights important measures, same net outcome. Income from discontinued operations and extraordinary items point of sale Sales forecast generating a realistic and reliable sales forecast Forecasting cash receipts Allows a company to anticipate financing needs Operating. Investing. Financing. Provides info that is not apparent by looking at the balance sheet or income statement When net income does not give an accurate reflection of a companies performance Reports cash inflow and outflow during the period with an emphasis on the amount of cash GENERATED BY OPERATIONS More retained earnings Less retained earnings Less retained earnings The amount of assets consumed or liabilities created through doing business. Expenses = decrease $ Amount of cash generated or liabilities satisfied through doing business. Revenues = increase $ an operating cost. Ex: Collection on account, paid for investors, paid investor on debt, paid miscellaneous expense, paid income tax\u2026these are operating, NOT financial as one would assume Six steps. 1. Compute change in cash balance. 2. Convert income statement form accrual to cash. 3. Analyze changes in long term assets, INVESTING. 4. Analyze phage in debt and equity, FINANCING. 5. Reconcile to the computed change cash, then prepare a Formal statement of cash flows. 6. Disclose non cash items. Yes, because it is a non cash item Increase in cash Increase in cash Decrease in cash Increase in cash, because you kept your cash, you didn’t pay your interest. Increase in cash, bc you didn’t pay, you kept your cash Start with net income and show the adjustments Show the line by line cash flows SUBTRACT (uses cash) ADD (preserves cash) ADD Subtract You subtract, this uses cash You add, saves cash Increase in net income and decrease in dividends Beginning retained earnings + net income – dividends= ending retained earnings Cash paid for interest and cash paid for interest in taxes Misappropriation of assets (stealing) and fraudulent financial reporting (lying) Unintentional error, disagreement in judgment and or fraud PCAOB, it increased auditor rules, made senior executives take personal responsibility and sign reports, enhance financial disclosures, increase penalty for white collar crime. The strategic choice of accounting estimates and judgments in orders to meet pre determined financial statement targets To meet internal targets, meet external expectations, income smoothing, and window dressing for an initial public offering (IPO) or a loan Registration statment, form 10-k, 10-Q, and 8k Summary data, outside company for ppl who are making occasional decisions Detailed, for inside company, making daily decisions, it is a COMPETITIVE Tool. 1. Plan. 2. Control. 3. Evaluate. Proprietary (secret), strategic and capital budgeting Production and process prioritizing, operational budget (profit planning) Measuring ACTUAL performance. Assess importance of VARIANCE (differences ) Analyze results, provide feedback, reward performance, identify problems Capital budgeting Aspects of management accounting that deal with issues as what additional major resources (PPE) are needed to meet a companies long run goals Preparing operational budgets “Break even analysis” Costs that increase the more you make sell Costs that stay the same the more you make or sell Incurred INSIDE the production facility, ex: rent, product to make the inventory, direct labor, manufacturing overhead. Incurred OUTSIDE the productive facility, ex:marketing cost, CEO payroll, interest. Direct and indirect costs, differential and sunk costs, out of pocket and opportunity cost Provides\/establishes professional standards for accountants INSIDE a company. Requires CMA certification It is also a competitive tool just like good management accounting Focused on overhead only (not materials or labor), trying to find better ways to assign overhead ACTIVITIES consume overhead costs PRODUCTS consume overhead costs Operating, producing, servicing, keeping factory open Is an activity that affects a particular cost. It is a numerical measure that reflects the amount of an overhead cost caused by a particular activity. cost drivers No cost driver should be selected, the cost should be treated as common cost Motivates correct behavior and reflects economic reality It would consume the highest amount of overhead cost per unit How much is needed to be sold to break even Controlling decisions, evaluating decisions, and planning PLANNING Mixed and variable costs, sales, revenue, and the # of product sold Fixed and variable components. The mixed costs must be separated into their fixed and variable costs in order to do the CVP Regression line=straight line that best fits amon all of the data points Slope of total cost line The y-intercept for the total cost line rise\/run ($\/hr) Increase in cost, increase in activity. Total cost Fixed cost. on the graph, fixed cost is located at the horizontal point (x-axis) of zero units, and the vertical axis (y-axis) start of the line. both high and low and scattergraph. Constant Decrease (cost less to make mass amounts) Will provide a profit if fixed costs are lowered. It contributes to making the fixed costs contribution margin Contribution margin-total fixed cost Shows total profit (not total revenue and cost) y-axis= money, x-axis= level of actions. Profit is plotted at 2 points. Stepped costs Proportion of sales revenue represented by each of a companies products contribution margin contribution margin ratios Increase advertising of the product the more money a company looses Decreases fixed cost and increases variable costs Fixed and variable costs Have larger losses below the breakeven point A measure of rise Accounts receivable Accounts payable asset (capital equipment). Means that the company is running its operations efficiently and responsibly managing its investing and financing activities. Also may reflect that the management is getting lazy about investing in the company. May be concurrent with a major investment in the companies future growth. May indicate problems with the companies operating, investing or financing activities. They go in the equity section of the balance sheet. IT IS WHAT YOU OWN. Revenue and expenses. Revenue=sales (cash coming in through operations). Expenses=Cash spent to generate sales. Revenue-Expenses=Profit. Owners equity section on balance sheet Sales, cost of sales, gross profit (sales-cost of sales), expenses, profit. Retained earnings, paid in capital, preferred stock, common stock Dividends (money given to share holders-distributions of equity into hands of shareholders) Companies raise money through the sale of debt (bonds or acquiring bank loans) and equity (stock). Companies pay off debt and distribute dividends to shareholders which decreases cash. Indirect method. The Direct method is organized into the 3 activities. (operating, investing, financing). Both methods start and end with the same numbers. (Most companies use indirect method). income (money) coming in. Disbursement is money going out Assets up=Cash down. Liabilities up=Cash up It is a subtraction from net income on the cash flow statement. If the change is a decrease, it is an addition to net income. It is an addition from net income on the cash flow statement. If the change is a decrease, it is a subtraction to net income on the cash flow statement. Subtract the increase Add the decrease Add the increase Subtract the decrease Process of determining the cost of a particular object by accumulating many individual costs into a single total cost. Object for which managers need to know the cost; can be products, processes, departments, services, activities, and so on. Any factor, usually some measure of activity, that causes cost to be incurrent. Examples are labor hours, machine hours, or some other measure of activity who’s change causes corresponding changes in the cost object. Support multiple objects but cannot be directly traced to any specific object. Costs tha can be influenced by a mangers decisions and actions Dividing a total cost into parts and assigning the parts to designated cost object. Yes, indirect costs (overhead) are lumped together. ex: direct labor, direct materials. Activity cost pools. YES, used as a planning tool for a manufacturing facility or a product line. it begins on a unit basis, and when volume is applied, describes profitability potential. Total fixed cost = Contribution margin. When the contribution margin is lower than fixed cost you’re loosing money. When the contribution margin is higher than fixed cost you’re making money. When contribution margin is the same as the fixed cost you break even-which is the goal of CVP. The difference between total sales an variable costs; the portion of sales revenue available to cover fixed costs and provide profit. The extent to which fixed costs replace variable costs as part of a companies cost structure; the higher the proportion of fixed costs to variable costs, the faster income increases or decreases with change in sales volume. Range of activity over which the definitions of fixed and variable costs are valid Accounts payable, accounts receivable, and inventory Determining the best use of financial resources is an aspect of: Providing information for planning, controlling, and evaluating is a function of: The process of making decisions about future operations is called: The aspect of management accounting that deals with such issues as what additional major resources (e.g., plant and equipment) are needed to meet a company’s long-run goals is called: Short-run planning involves which one of the following processes? The only kind of costs that do NOT involve any outlay of cash are: When calculating manufacturing overhead you add: Future costs that change as a result of a decision are What is NOT reported on a financial statement? Costs that are directly traceable to a unit of business or segment being analyzed are called: The top accountant in most large organizations is usually called the: The three Management functions are: Long run planning includes: Short run planning includes Uniform across companies (generally accepted accounting principles) Unique competitive tool Costs are all costs incurred that are not closely associated with a specific product or service are? Example are the presidents salary, advertising, and office costs. Costs closely associated with the products or services offered are called? Costs associated with products or services offered. Examples are cost of product, wages of product workers, salary of store manager, and rent on store location. Direct materials Product costs: A cost incurred outside the factory or production facility. These costs are reported as an expense in the period in which they are incurred. A cost that changes directly with changes in the level of sales or production. Examples are materials costs and sales commissions. A cost that doesn’t change based on changes in the level of sales or production. Examples are building rent and executive salaries. The cost of the primary raw materials used in production. In producing french fries, the direct materials cost is the cost of the potatoes. The cost of the wages of the workers who are assembling the direct materials into the finished product. In producing an automobile, the direct labor cost is the compensation cost of the auto workers on the assembly line. All factory costs that are not direct materials or direct labor. Examples are factory supervisor salaries, factory building depreciation, and miscellaneous indirect materials such as glue or screws. The costs that are created by a particular product or segment that is being analyzed. If a product or segment is dropped, the direct costs created by that product or segment will disappear. The costs that are assigned to a particular product or segment but that are not actually caused by that product or segment. If a product or segment is dropped, the indirect costs assigned to that product or segment will remain A future cost that can be changed by a decision made now. An example is monthly rent for an apartment. A past cost that cannot be changed by any decision made now. An example would be last month’s paid rent. Costs that involve the outlay of cash or the use of some other asset (like equipment). The benefits not received because of actions NOT taken. For example, the opportunity cost of going to a basketball game is the increased points that you could have received on the next day’s accounting exam if you had spent that time studying. Guidance on ethical professional practice to help professionals involved in management accounting processes. The recording of the day-to-day financial activities of a company and the organization of that information into summary reports used to evaluate the company’s financial status. The three primary financial statements: the balance sheet, the income statement, and the statement of cash flows. lenders, investors, company management, suppliers, customers, employees, competitors, government agencies, politicians, and the press. FASB SEC, the AICPA, the PCAOB, the IRS, and the IASB. The three factors are the rapid advance in information technology, the international integration of worldwide business, and the increased scrutiny associated with the large corporate accounting scandals. A system for providing quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions. Communicating economic information about organizations, Measuring economic information about organizations, Accumulating economic information about organizations. Businesses use accounting systems to Which financial statement reports a company’s resources, obligations, and owner’s equity? Which financial statement reports the excess of a company’s revenues over its expenses? Which financial statement reports the amount of cash collected and paid out by a company? According to U.S. law, companies selling stock to the public must provide potential investors with? The emphasis in financial accounting is on which external user groups? The primary internal group that uses accounting information is The FASB Standards established by the International Accounting Standards Board are referred to as the Which organizations has specific legal authority to establish accounting standards for publicly held companies? What NOT a service typically provided by large public accounting firms? Reasons for the integration of worldwide accounting standards? True or false? The International Accounting Standards Board (IASB) is charged with developing worldwide accounting practices? Increased federal oversight of the audit process resulted from the passage of the following act of Congress: For a corporation, owners’ equity is called: Stockholders can invest in a corporation in two ways. First, they can directly invest cash or other assets as paid-in capital. Second, they can allow the corporation to keep a portion of the profits for reinvestment in the business; these profits are called? Revenues are the amount of assets generated in the normal course of business; expenses are the amount of assets consumed in doing business. An income statement also reports gains and losses that result from activities outside a company’s normal business operations. An additional number reported in the income statement is? Financial statement notes are of four general types: Relevant information is information that is: Makes financial statement information more useful because it allows a company’s financial statements to be analyzed in light of the company’s own performance in prior years or other companies’ performance. Is the practice of recognizing all losses but not recognizing gains until they are certain. As a practical matter, accounting conservatism is a counterbalance to the naturally optimistic estimates made by management. Refers to the concept that weighs whether a certain dollar amount is large enough to make a difference to anyone. For small amounts, convenient accounting often is preferred over elaborate, theoretically correct treatment. Is the idea that the three primary financial statements are interrelated Analysis of financial statement numbers can be used to diagnose existing problems and Common-size financial statements allows The DuPont framework Cash flow ratios are frequently overlooked because Analysis of financial statements can be misleading if statements are not External users of financial statements use financial statement analysis for Financial statement analysis is greatly enhanced when financial ratios are compared wit Which ratio is calculated using only balance sheet numbers? The ability a company has to pay its debts in the short run is its Stock holders equity includes A common-size balance sheet is often prepared using total ? Which generally is the most useful in analyzing companies of different sizes? In a common-size balance sheet, using the percent of sales method, each item on the balance sheet is typically expressed as a percentage of In a common-size income statement, each item on the statement is expressed as a percentage of The Dupont framework include what 3 things Which cash flow ratio reflects the extent to which accrual accounting adjustments and assumptions have been included in net income? The particular analytical measures chosen to analyze a company may be influenced by: Benchmarking problems that arises when analyzing financial statements Return on sales. It is interpreted as the number of pennies in profit generated from each dollar of sales. Asset turnover. It is the number of dollars in sales generated by each dollar of assets. Assets-to-equity ratio. It is the number of dollars of assets a company is able to acquire using each dollar invested by stockholders. A company’s asset mix is: The total amount invested to acquire an ownership interest in a corporation is called Which of the following types of accounts show how resources came into a firm? What is generally considered to be a liability? Long term asset: Current assets are: Current assets usually are listed on a balance sheet in This is sometimes done in place of recognition when the effects of an event cannot be quantified with any degree of certainty. The process of valuation involves computing numbers that are both The process of determining the dollar value to assign to an item that is to be recognized in the financial statements is called Reporting the details of a transaction in the notes to the financial statements is called The process of formally recording an item in the accounting records so that it will be reflected in the financial statements is called The process of formally recording an item in the accounting records so that it will be reflected in the financial statements is called When an investor pays cash into a business to become a part owner, the effect on the accounting equation for the business will be to When a company rents a warehouse by paying for the first six month’s rent in advance, the effect on the accounting equation on the day of payment would be to When a company buys a warehouse by using a mortgage with a local bank, the effect on the accounting equation for the company will be to When a company purchases equipment on credit, the effect on the accounting equation will be to A company’s asset mix is strongly influence by Financing mix is a measure of: The concept that income is defined as the excess of net assets at the end of an accounting period over the net assets at the beginning of the accounting period, excluding effect of transactions with owners is called – The proper order on an income statement for the various measures of income is – A measure of a company’s performance that includes all items that are expected to continue into the future is A measure of a company’s performance that is intended to summarize in one number the overall economic performance of a company in a given period is – When a company determines to get out of a specific line of business Under the general rule of revenue recognition, revenue is recognized when When revenue and expense items are arranged to highlight important profit relationships, the resulting income statement format is called a – True or false:With a single-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two. Which principles best describes the rationale for matching administrative and selling expenses with revenues of the current period? Which of the following is NOT an acceptable basis for the recognition of expenses? Which of the following categories of expenses is subject to immediate recognition on the income statement? Most forecasting exercises begin with a forecast of If a company anticipates a 40% increase in sales volume, then it is most likely that the company will need about a 40% increase in The statement of cash flows provides information that is not readily apparent by looking at just\u2026 Cash flows are partitioned into three categories \u2014 When detailed cash flow information is not available, a statement of cash flows can be prepared using: Purposes of the statement of cash flows? Significant noncash financing transactions Those transactions and events that enter into the determination of net income are reported under which section of the statement of cash flows? What would be reported as a financing activity on a statement of cash flows? What would be reported as an investing activity on a statement of cash flows? Calculating operating activities: Which of the following would be deducted from net income on a statement of cash flows prepared using the indirect method? Operating. The primary investing activities are the purchase and sale of land, buildings, and equipment. Financing. Financing activities involve the receipt of cash from, and the repayment of cash to, owners and creditors. the purchase of long-term assets in exchange for the issuance of debt or stock. If a company does NOT record accrued wages expense at the end of the year, how does this affect the year-end financial statements? Which one of the following errors causes net income to be overstated? If the total amount for Rent Expense is inadvertently posted to Prepaid Rent at the end of the year, what will be the effect on the year-end financial statements? If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements? To provide accurate accounting records and financial statements. To safeguard assets and records. Most companies think of their assets as including their: A company’s internal control structure can be divided into five basic categories Authorizing and approving the execution of transactions; for example, approving the sale of a building or land. Recording the transactions in the accounting records. Having physical possession of or control over the assets involved in transactions, including operational responsibility; for example, having the key to the safe in which cash or investment securities are kept or, more generally, having control over the production function Which are the three functions that should be performed by separate departments or individuals? What the major safeguards in the financial reporting process? What are considered components of a company’s control environment Earnings management through deceptive accounting is best exemplified by items of the earnings management continuum is in the correct order Recording as an asset expenditures that have no future economic benefit is an example o Fraud is Constraints on auditors PCAOB According to Sarbanes-Oxley, which services is an accounting firm permitted to provide to its audit client? What does Sarbanes-Oxley NOT require management to do? What does Sarbanes-Oxley require management to do? The Public Company Accounting Oversight Board Which audit processes is used primarily by external auditors and not by internal auditors? What activities would internal auditors NOT typically perform in a large company? What are incentives that influences auditors to remain independent and to provide fair and reliable financial information? Which statement best describes the role of external auditors when auditing a large public company? When does the Securities and Exchange Commission (SEC) typically require a company to submit a registration statement to the SEC for approval? The effects that the Securities Exchange Act of 1934 had on accountants? Unintentional mistakes that can enter the accounting system at the transaction and journal entry stage or when journal entries are posted to accounts. Intentional misrepresentations in the financial statements Differences in opinion about what numbers should be reported in the financial statements based on different estimates The three basic internal control structure categories are The five types of control procedures are Reasons for earnings management<\/p>\n\n\n\n Techniques of earnings management<\/p>\n\n\n\n Public Company Accounting Oversight Board (PCAOB)<\/p>\n\n\n\n Constraints on auditors<\/p>\n\n\n\n Constraints on management<\/p>\n\n\n\n Internal auditors<\/p>\n\n\n\n External auditors The SEC adds credibility to financial statements by Good management accounting is motivated by: Management accounting Financial accounting The allocation of which of the following can cause the greatest errors when computing product costs? ABC assume that: Traditional product costing systems (e.g. job order costing and process costing) usually assume that: 5 steps of ABC system Machine depreciation. Building depreciation. Building insurance. Security guards. Unit\u2014 Batch Product line\u2014 Facility support\u2014 The total cost identified as being generated by a specific overhead cost activity is called the If activity-based costing is used, property taxes would be classified as a: If activity-based costing is used, assembly would be classified as a: Tracing overhead costs to activities involves dividing overhead costs into: A more accurate allocation of manufacturing overhead and product costing can take place when costs are assigned on the basis of: The first three steps in implementing an ABC system are: To then assign overhead costs to production, the necessary steps are: If the fixed costs relative to a specific product increase while the variable costs and sales price remain constant, the break-even point will: A company’s break-even point would change if there were an increase in: Total contribution margin will increase in a two-product firm if total units sold remain the same and: Operating leverage is Operating leverage deals primarily with the relationship between: Maintaining low fixed costs and high variable costs rather than high fixed costs and low variable costs: As compared to a company with a low operating leverage, a company with a high operating leverage will: Accountingthe recording of the day-to-day financial activities of a company and the organization of that information into summary reports used to evaluate the company’s financial status Bookkeepingthe preservation of a systematic, quantitative record of an activity accounting systemused by a business to handle routine bookkeeping tasks and to structure the information so it can be 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The purchase and sale of long-term assets such as land and equipment are known as ___<\/em><\/strong><\/em><\/strong>.<\/p>\n\n\n\n
those activities through which cash is obtained from, or repaid to, creditors and investors<\/p>\n\n\n\n
What information do the notes to accounting statements provide?<\/p>\n\n\n\n\n
What are the 4 general types of accounting notes?<\/li>\n<\/ol>\n\n\n\n
the practice of recognizing all losses but not recognizing gains until they are certain<\/p>\n\n\n\n
the concept that weighs whether a certain dollar amount is large enough to make a difference to anyone<\/p>\n\n\n\n
the idea that the three primary financial statements are interrelated<\/p>\n\n\n\n
Total Assets
Percentage of funds needed to purchase assets that were obtained through borrowing<\/p>\n\n\n\n
Current Liabilities
Measure of liquidity; number of times current assets could cover current liabilities<\/p>\n\n\n\n
Sales
Number of pennies earned during the year on each dollar of sales<\/p>\n\n\n\n
Total Assets
Number of dollars of sales during the year generated by each dollar of assets<\/p>\n\n\n\n
Stockholder’s Equity
Number of pennies earned during the year on each dollar invested<\/p>\n\n\n\n
Net Income
Amount investors are willing to pay for each dollar of earnings; indication of growth potential<\/p>\n\n\n\n
2) to identify and improve potential problem areas
What are the two main purposes of financial statement analysis?<\/p>\n\n\n\n
relationships between two financial statement numbers and are often used in analyzing and describing a company’s performance<\/p>\n\n\n\n
Common-size financial statements<\/p>\n\n\n\n
In terms of ROE, define profitability.<\/p>\n\n\n\n
In terms of ROE, define efficiency.<\/p>\n\n\n\n
In terms of ROE, define leverage.<\/p>\n\n\n\n
Margin<\/p>\n\n\n\n
an asset that is expected to be used within one year of the balance sheet date<\/p>\n\n\n\n
What are the most common current assets?<\/p>\n\n\n\n
What are the primary long-term assets?<\/p>\n\n\n\n
Which intangible assets are reported on the balance sheet?<\/p>\n\n\n\n
those obligations that are expected to be paid or otherwise satisfied within one year<\/p>\n\n\n\n
What are 3 common sources of long-term debt?<\/p>\n\n\n\n
What is the difference between a common stockholder and a preferred stockholder?<\/p>\n\n\n\n
the cumulative amount of corporate profits that have been retained within the business rather than being paid out to stockholders as dividends<\/p>\n\n\n\n
the amount the corporation has spent to buy back its own shares from stockholders<\/p>\n\n\n\n
How many years worth of balance sheets does a company usually provide and how are they typically formatted?<\/p>\n\n\n\n
What is the first item that is usually listed on a U.S. balance sheet?<\/p>\n\n\n\n
What is the first item that is usually listed on a non-U.S. balance sheet?<\/p>\n\n\n\n
The difference of current assets-current liabilities<\/p>\n\n\n\n
the process of condensing all estimates and judgments into one number and reporting that one number in the formal financial statements<\/p>\n\n\n\n
An alternative way to report information, describing details in a narrative note<\/p>\n\n\n\n
is the process of determining how an economic event impacts financial statements<\/p>\n\n\n\n
the proportion of total assets in each asset category that is largely determined by the industry in which the company operates<\/p>\n\n\n\n
What is the best measure of sustainable profitability?<\/p>\n\n\n\n
the difference between the selling price of a product and the cost of the product<\/p>\n\n\n\n
gross profit minus all other expenses except for interest and taxes; measures the performance of the fundamental business operations conducted by a company<\/p>\n\n\n\n
operating income minus interest expense, minus income tax expense, and plus or minus other miscellaneous revenue and expense items, and gains and losses from peripheral transactions and events<\/p>\n\n\n\n
income from continuing operations plus or minus the results of discontinued operations and extraordinary items, net of their respective income tax effects<\/p>\n\n\n\n
net income plus or minus adjustments for changes in company wealth stemming from changes in certain exchange rates, interest rates, or financial instruments’ values<\/p>\n\n\n\n
What are the 4 primary item categories listed on the income statement?<\/p>\n\n\n\n
What are some common business activities that generate revenue?<\/p>\n\n\n\n
What are the key expense items commonly found on the income statement?<\/p>\n\n\n\n
Do gains\/losses reported on the income statement arise from internal or external activities?<\/p>\n\n\n\n
Which items are considered “below-the-line” items?<\/p>\n\n\n\n
the amount of net income associated with each share of stock<\/p>\n\n\n\n
When should revenue be recognized on an income statement?<\/p>\n\n\n\n
the concept that states that an expense should be recognized in the same period in which the revenue it was used to generate is recognized<\/p>\n\n\n\n\n
Accounting steps.<\/li>\n<\/ol>\n\n\n\n
Managerial info is inside or outside the business?<\/p>\n\n\n\n
True or false, managerial accounting uses BOTH managerial and financial accounting?<\/p>\n\n\n\n
Financial is inside or outside the business?<\/p>\n\n\n\n
The financial statement includes what 3 documents<\/p>\n\n\n\n
Point in time, Assets (resources) and liabilities (obligations)<\/p>\n\n\n\n
Period of time (usually 1 year), amount of profit made<\/p>\n\n\n\n
Period of time, where money came from, and where it went. Inflow and outflow of cash (Cash Flows). Change in money for the period.<\/p>\n\n\n\n
Assets= liabilities + equity<\/p>\n\n\n\n
Net income=Revenue – Expenses<\/p>\n\n\n\n
The statement of cash flows includes what three activities<\/p>\n\n\n\n
The decision makers in the U.S. (accounting rules)<\/p>\n\n\n\n
Developed by accounting rule makers. No Legal authority.<\/p>\n\n\n\n
We need accounting rules for\u2026<\/p>\n\n\n\n
U.S. gov agency responsible for ensuring that investors, creditors, and other financial statement users are provided with reliable information. It watches behavior in financial markets.<\/p>\n\n\n\n
What forms do the SEC regulate?<\/p>\n\n\n\n
What does the SEC do?<\/p>\n\n\n\n
Does the SEC have legal authority?<\/p>\n\n\n\n
Financial accounting rule per the US constitution<\/p>\n\n\n\n
The SEC created the<\/p>\n\n\n\n
FASB created<\/p>\n\n\n\n
What sets auditory standards, continue education credits, CPA exam, and is the code of professional conduct?<\/p>\n\n\n\n
Who is the only person who can sign audit reports?<\/p>\n\n\n\n
The Sarbanes-Oxley Act “SOX” created?<\/p>\n\n\n\n
PCAOB is under supervision of?<\/p>\n\n\n\n
Who appoints members, approves actions, gov standards, inspections, and investigations? It is a private group and OVERSEES. AUDITORS?<\/p>\n\n\n\n
IRS<\/p>\n\n\n\n
There are two sets of books. Tax Books and Financial accounting books.<\/p>\n\n\n\n
IASB: Internatonal Accounting Standard Board<\/p>\n\n\n\n
Barriers to international convergence are?<\/p>\n\n\n\n
Rules set centrally, but legally adopted and enforced locally?<\/p>\n\n\n\n
To increase government regulation, one would use:<\/p>\n\n\n\n
Financial statements<\/p>\n\n\n\n
A financial statement that furthermore decreases uncertainty.<\/p>\n\n\n\n
Provides accountants the best attempt at measuring the economic performance of a company.<\/p>\n\n\n\n
Mother of all financial statements.<\/p>\n\n\n\n
Assets=liabilities+equity<\/p>\n\n\n\n
Resources owned or controlled by a company that will provide probable future economic benefit.<\/p>\n\n\n\n
Obligations that require the probable future sacrifice of economic benefits in the form of the transfer of assets or the providing of services.<\/p>\n\n\n\n
Investment amount in the business PLUS how much profit they have left in the business. L-A=E<\/p>\n\n\n\n
Owners Equity<\/p>\n\n\n\n
The amount originally paid in exchange for share of stock<\/p>\n\n\n\n
CUMMULATIVE earnings that have been retained in the business<\/p>\n\n\n\n
Company buys back its own shares of stock, shown as a subtraction from equity.<\/p>\n\n\n\n
MARKET EVENTS that result in an increase or decrease in equity are:<\/p>\n\n\n\n
Breaking items down into current and long term results (current=with in one year)<\/p>\n\n\n\n
small and large businesses<\/p>\n\n\n\n
What allows property, plant, and equipment (PPE) to be reported at CURRENT APPRISED VALUE rather than historical cost?<\/p>\n\n\n\n
Are assets recorded at liquidity prices?<\/p>\n\n\n\n
The income statement contains what three things?<\/p>\n\n\n\n
Revenue-Expenses=Net Income<\/p>\n\n\n\n
Amount of assets created from the sale of goods or services. Also, REVENUE CAN BE GENERATED BY SATISFYING LIABILITIES. One SOURCE of an asset.<\/p>\n\n\n\n
Amnt of ASSETS CONSUMED in generating revenues. Expenses are also used when liabilities are created in generating revenues. one USE of an asset. It is ONE way to create a liability.<\/p>\n\n\n\n
Are Dividends located on the income statement?<\/p>\n\n\n\n
Overall measure of a companies economic performance during a period of time.<\/p>\n\n\n\n
Are revenues assets?<\/p>\n\n\n\n
Are expenses liabilities?<\/p>\n\n\n\n
Net income \/ outstanding number of share stock.<\/p>\n\n\n\n
Recognize revenue when value has been delivered to the customers. Not before or after.<\/p>\n\n\n\n
Statement of cash flows. Inflow of cash comes from what three activities.<\/p>\n\n\n\n
Things that a business does every day hundreds of times<\/p>\n\n\n\n
NOT investing in stock or bonds. It is investing in the productive capacity of the business. Time to time things, not usually daily, Ex: buying, selling long term assets such as buildings, equipment, land.<\/p>\n\n\n\n
Obtaining the capital or financing that a business requires to buy needed resources. Time to time things, not every day. Ex: Borrowing, repaying, receiving cash invested by shareholders, and paying dividends.<\/p>\n\n\n\n
Notes to the financial statement:<\/p>\n\n\n\n
The external audit is enforced by what?<\/p>\n\n\n\n
Public companies by law have to do what kind of audit?<\/p>\n\n\n\n
To become an external auditor you have to?<\/p>\n\n\n\n
An audit certifies what two things?<\/p>\n\n\n\n
Does an audit ensure that a company is a good investment for a possible investor?<\/p>\n\n\n\n
Relevance Vs. Reliability<\/p>\n\n\n\n
Across time for the same company and across company at same point. Subcategory is consistency.<\/p>\n\n\n\n
Telling bad news immediately, wait on good news till you are positive about it. Lenders encourage this.<\/p>\n\n\n\n
size of the thing that makes a difference and could impact decisions. Important to auditors. If an item is material, it equals or exceeds 2% of the sales, or 5% of owners equity, or 10% of net income.<\/p>\n\n\n\n
Does materiality replace accounting judgment?<\/p>\n\n\n\n
Details. All three financial statements are not isolated but rather an integrated set of reports on a companies financial status.<\/p>\n\n\n\n
What contains detailed explanation of why the balance sheet cash amount changed form beginning to end of the year?<\/p>\n\n\n\n
This explains the change of retained earnings shown on the balance sheet.<\/p>\n\n\n\n
cash from operations on the statement of cash flows is transformed into net income through?<\/p>\n\n\n\n
Analysis of financial statement of numbers can be used to do what?<\/p>\n\n\n\n
This ratio is the relationships between two financial statement numbers and is often used in analyzing and describing a companies performance<\/p>\n\n\n\n
This allows comparison of financial statements across years and between companies. They are prepared by dividing all financial staement numbers by the sales for the year.<\/p>\n\n\n\n
Decomposes return on equity into profitability, efficiency, and leverage components.<\/p>\n\n\n\n
Frequently overlooked bc of traditional analysis models are based on the balance sheet and the income statement.<\/p>\n\n\n\n
The examination of RELATIONSHIPS among financial statements numbers over time for the same company and compared to other companies in the same industry. External users use this for investing decisions.<\/p>\n\n\n\n
Dividing all financial statement numbers by the total sales for the year.<\/p>\n\n\n\n
ability of a company to pay it’s debt in the short run<\/p>\n\n\n\n
Debt ratio, return on sales, return on equity, current ratio, asset turnover, and price earnings ratio<\/p>\n\n\n\n
What is market value of equity?<\/p>\n\n\n\n
Total liabilities\/total assets. It is a measure of leverage.<\/p>\n\n\n\n
Current assets\/current liabilities. Measure of liquidity. Calculated using the balance sheet.<\/p>\n\n\n\n
Net income\/sales. A measure of the amount of profit per dollar of sales. PROFITABILITY.<\/p>\n\n\n\n
Sales\/total assets. A measure of a companies efficiency. This number can be understated and can be misleading. IT is the number of dollars in sales generated by each dollar of asset.<\/p>\n\n\n\n
Net income\/Stockholder equity. A measure of the amount of profit earned per dollar of investment.<\/p>\n\n\n\n
ROE<\/p>\n\n\n\n
Market value of shares\/net income. A measure of growth potential earnings stability, and management capabilities.<\/p>\n\n\n\n
Reflects market expectations of growth and earnings of the company in the future. Company with P\/E ratio of 10-25 is normal. Netflix was 679 in 2012!<\/p>\n\n\n\n
Solution to comparing two companies that are not the same size. DIVIDE ALL NUMBERS BY SALES FOR THE YEAR.<\/p>\n\n\n\n
Divide balance sheet items by either sales or assets. For EFFICENCY.<\/p>\n\n\n\n
How efficiently are assets generating sales dollars. EFFICIENCY. Sales revenue.<\/p>\n\n\n\n
the proportion of assets in each asset category.<\/p>\n\n\n\n
Each item on the statement is expressed as a % of revenue<\/p>\n\n\n\n
Dupont framework-used to examine financially statements of any company<\/p>\n\n\n\n
The number of dollars of assets acquired for each dollar invested by stockholders. LEVERAGE. Assets\/equity<\/p>\n\n\n\n
3 ways to improve low return on equity<\/p>\n\n\n\n
Common size income statement<\/p>\n\n\n\n
Average collection period, days of sales inventory, fixed asset turnover are:<\/p>\n\n\n\n
Debt ratios, debt to equity ratios times interest earned.<\/p>\n\n\n\n
Average number of days that elapse between the sale and cash collection. AVERAGE ACCOUNTS RECEIVABLE\/ AVERAGE DAY OF SALES. Add all up and divide by 2.<\/p>\n\n\n\n
The average number of days of sales that can be made, using only the supply of inventory at hand<\/p>\n\n\n\n
Number of dollars in sales generated by each dollar of assets. Sales\/Avg fixed assets. Whole sale numbers. (Land, trucks, equipment, plant).<\/p>\n\n\n\n
The higher leverage increases return on equity through: more Money borrowing, more assets, more sales, more net income<\/p>\n\n\n\n
The % of total funds, both borrowed and invested, that a company acquires through borrowing.<\/p>\n\n\n\n
Should you compare debt to debt ratio and debt to equity ratio?<\/p>\n\n\n\n
The number of dollars of borrowing for each dollar of equity investment. Total liabilities\/stockholders equity.<\/p>\n\n\n\n
indication of a companies ability to meet interest payments<\/p>\n\n\n\n
reflects the extent to which accrual accounting assumptions and adjustments have been included in computing net income. Cash flow from operations\/net income<\/p>\n\n\n\n
Cashflow adequacy ratio<\/p>\n\n\n\n
Cash times interest earned<\/p>\n\n\n\n
Lack of compatibility in accounting numbers make it\u2026<\/p>\n\n\n\n
A companys asset mix<\/p>\n\n\n\n
Financing Mix<\/p>\n\n\n\n
Current assets<\/p>\n\n\n\n
Accounts receivable<\/p>\n\n\n\n
Prepaid expenses<\/p>\n\n\n\n
investment securities<\/p>\n\n\n\n
Intangible assets<\/p>\n\n\n\n
Where do you get money to buy assets?<\/p>\n\n\n\n
Examples of current liabilities<\/p>\n\n\n\n
Accrued liabilities<\/p>\n\n\n\n
Unearned revenue<\/p>\n\n\n\n
Stock holders equity<\/p>\n\n\n\n
AOCI: Accumulated other comprehensive income<\/p>\n\n\n\n
Common and preferred stock<\/p>\n\n\n\n
Assets<\/p>\n\n\n\n
Liabilities<\/p>\n\n\n\n
Liquidity<\/p>\n\n\n\n
First thing listed on this document is cash. this document goes in order of liquidity<\/p>\n\n\n\n
An item can ONLY be reported on the balance sheet if\u2026<\/p>\n\n\n\n
Summarizes the complexity of an event in ONE single number.<\/p>\n\n\n\n
Not included in the financial statment<\/p>\n\n\n\n
Price that would be received from selling an asset in an orderly transaction.<\/p>\n\n\n\n
Asset mix is determined by<\/p>\n\n\n\n
A companies asset mix is highly influenced by:<\/p>\n\n\n\n
Financing mix measures<\/p>\n\n\n\n
The best measure of a companies sustainability<\/p>\n\n\n\n
Primary categories of income statement items<\/p>\n\n\n\n
Revenue should be recognized when:<\/p>\n\n\n\n
Financial capital maintenance<\/p>\n\n\n\n
Physical capital maintenance<\/p>\n\n\n\n
Practical measure of income<\/p>\n\n\n\n
Gross Profit (where the income statement starts)<\/p>\n\n\n\n
Operating income<\/p>\n\n\n\n
Operating income<\/p>\n\n\n\n
Income from continuing operations<\/p>\n\n\n\n
Revenues<\/p>\n\n\n\n
Expenses<\/p>\n\n\n\n
Assets<\/p>\n\n\n\n
Expenses<\/p>\n\n\n\n
Sell on credit to increase sales, cost of selling on credit is not paying.<\/p>\n\n\n\n
Income tax expenses<\/p>\n\n\n\n
Impairment losses<\/p>\n\n\n\n
Restructuring charge<\/p>\n\n\n\n
Below the line items<\/p>\n\n\n\n
OIC: Other comprehensive income<\/p>\n\n\n\n
EPS: Earnings per share<\/p>\n\n\n\n
Net income\/shares outstanding<\/p>\n\n\n\n
Net income\/actual and potential shares<\/p>\n\n\n\n
Format of income statement<\/p>\n\n\n\n
Gross profit<\/p>\n\n\n\n
Multiple step format<\/p>\n\n\n\n
below the line items<\/p>\n\n\n\n
Revenue is recognized at the:<\/p>\n\n\n\n
Pro Forma<\/p>\n\n\n\n
What is the most difficult part of creating a pro forma?<\/p>\n\n\n\n
What is the first step in developing a cash budget?<\/p>\n\n\n\n
What is the benefit of a cash budget for a company<\/p>\n\n\n\n
O.I.F.<\/p>\n\n\n\n
Statement of cash flows<\/p>\n\n\n\n
Operating cash flow is particularly useful when<\/p>\n\n\n\n
Purpose of statement of cash flows<\/p>\n\n\n\n
More revenue=<\/p>\n\n\n\n
More expenses=<\/p>\n\n\n\n
More dividends=<\/p>\n\n\n\n
Expenses<\/p>\n\n\n\n
Revenues<\/p>\n\n\n\n
By definition, anything that is an expense is\u2026<\/p>\n\n\n\n
Deductive reasoning is a how many step process? what are the steps?<\/p>\n\n\n\n
If you deduct $(500.00) due to depreciation of an item o the income statement, do you add that $500.00 back?<\/p>\n\n\n\n
Decrease in accounts receivable=increase or decrease in cash?<\/p>\n\n\n\n
Decrease in investing= increase or decrease in cash?<\/p>\n\n\n\n
decrease in accounts payable= increase or decrease in cash<\/p>\n\n\n\n
Increase in interest payable=increase or decrease in cash<\/p>\n\n\n\n
Increase in income tax payable=decrease or increase in cash?<\/p>\n\n\n\n
Cash flow indirect method=<\/p>\n\n\n\n
Cash flow direct method=<\/p>\n\n\n\n
If current assets are up you<\/p>\n\n\n\n
If current assets are down you<\/p>\n\n\n\n
If current liabilities are up you<\/p>\n\n\n\n
if current liabilities are down you<\/p>\n\n\n\n
If inventory goes up\u2026<\/p>\n\n\n\n
If accounts payable goes up\u2026<\/p>\n\n\n\n
What causes retained earnings to change<\/p>\n\n\n\n
Retained earnings equation<\/p>\n\n\n\n
What requires a disclosure?<\/p>\n\n\n\n
What are the two types of fraud?<\/p>\n\n\n\n
Inaccurate financial reports can result from:<\/p>\n\n\n\n
The sarbane-oxley act created? What did this do?<\/p>\n\n\n\n
Earnings management:<\/p>\n\n\n\n
Managers manage earnings to<\/p>\n\n\n\n
Required filings for when auditors audit<\/p>\n\n\n\n
Financial accounting<\/p>\n\n\n\n
Management accounting<\/p>\n\n\n\n
Long run planning<\/p>\n\n\n\n
Short run planning<\/p>\n\n\n\n
Controlling<\/p>\n\n\n\n
Evaluating<\/p>\n\n\n\n
Determining the best use of financial resources is:<\/p>\n\n\n\n
Capital Budgeting<\/p>\n\n\n\n
Short run planning involves:<\/p>\n\n\n\n
Cost Volume profit analysis (CVP)<\/p>\n\n\n\n
Variable costs<\/p>\n\n\n\n
Fixed costs<\/p>\n\n\n\n
Product cost (material)<\/p>\n\n\n\n
Period cost<\/p>\n\n\n\n
Decision making includes what kind of costs<\/p>\n\n\n\n
Institute of management accountants (IMA)<\/p>\n\n\n\n
Product costing<\/p>\n\n\n\n
Activity based costing (ABC)<\/p>\n\n\n\n\n
5 steps in the activity based costing (ABC)<\/li>\n<\/ol>\n\n\n\n
ABC system assumes that:<\/p>\n\n\n\n
Traditional product costing systems assume that:<\/p>\n\n\n\n
Things that cause overhead cost=<\/p>\n\n\n\n
Cost Driver:<\/p>\n\n\n\n
A More accurate allocation of manufacturing overhead and product costing can take place when costs are assigned on the basis of:<\/p>\n\n\n\n
If a cost activity has no production related cost drivers =<\/p>\n\n\n\n
Good management accounting ABC=<\/p>\n\n\n\n
A low volume unique product would consume low or high overhead costs?<\/p>\n\n\n\n
Cost Volume Profit Analysis (C-V-P) most fundamental question is?<\/p>\n\n\n\n
CVP is useful to managers in<\/p>\n\n\n\n
CVP is primarily useful in:<\/p>\n\n\n\n
C-V-P key factors<\/p>\n\n\n\n
Mixed costs:<\/p>\n\n\n\n\n
3 approaches to do the CVP:<\/li>\n<\/ol>\n\n\n\n
On the scattergraph (which is a historical method\/approach) what does regression line mean?<\/p>\n\n\n\n
Scattergraph variable cost\/hr=<\/p>\n\n\n\n
Scattergraph fixed cost=<\/p>\n\n\n\n
Slope=<\/p>\n\n\n\n
Variable cost + fixed cost =<\/p>\n\n\n\n
Total cost – variable =<\/p>\n\n\n\n
Common method of analyzing mixed costs<\/p>\n\n\n\n
Fixed cost increased, decreased, or is constant as the number of units sold increases?<\/p>\n\n\n\n
Fixed costs increase or decrease as the number of units increase?<\/p>\n\n\n\n
Contribution margin<\/p>\n\n\n\n
Sales-variable costs<\/p>\n\n\n\n
net income=<\/p>\n\n\n\n
Profit graph<\/p>\n\n\n\n
Costs that would not be graphed on a straight line=<\/p>\n\n\n\n
Sales Mix<\/p>\n\n\n\n
Change in sales mix can affect profit because not all products have the same\u2026<\/p>\n\n\n\n
Managers should put greater emphasis on the sales of a product with higher\u2026<\/p>\n\n\n\n
A multi product firm can do what to promote a high contribution margin of a product?<\/p>\n\n\n\n
The higher the operating leverage\u2026<\/p>\n\n\n\n
conservative cost structure=<\/p>\n\n\n\n
Operating leverage=<\/p>\n\n\n\n
A Company with high operating leverage will<\/p>\n\n\n\n
Operating leverage is=<\/p>\n\n\n\n
Money owed to the company for goods and services (this will be a subtraction -, b\/c people owe it to you, but you do not have it).<\/p>\n\n\n\n
Money the company owes to pay its creditors. (this will be an addition +, b\/c you owe this amount, but still have it)<\/p>\n\n\n\n
When a company purchases equipment, it exchanges one asset (cash) for another\u2026<\/p>\n\n\n\n
Cash flow statement shows a net increase in cash:<\/p>\n\n\n\n
Cash flow statement shows a net decrease in cash:<\/p>\n\n\n\n
What section do retained earnings go on the balance sheet?<\/p>\n\n\n\n
Income statement are transactions regarding?<\/p>\n\n\n\n
What section does profit (rev-expenses=profit) go in on the balance sheet?<\/p>\n\n\n\n
Income statement structure=<\/p>\n\n\n\n
Shareholders equity=<\/p>\n\n\n\n
What reduces retained earnings?<\/p>\n\n\n\n
The financing activities in statement of cash flows (includes investing, operating, and financing) what are some ways that increase cash? What decreases cash?<\/p>\n\n\n\n
In calculating statement of cash flows, does the indirect or direct method use the balance sheet to arrive at the change in cash?<\/p>\n\n\n\n
Receipts =<\/p>\n\n\n\n
On the statement of cash flows, if Assets go up, cash goes?
If Liabilities go up, cash goes?<\/p>\n\n\n\n
If the change of an asset on the balance sheet from last year to this year increases:<\/p>\n\n\n\n
If the change of a liability the balance sheet form last year to this year increases:<\/p>\n\n\n\n
Account: Current Asset. Direction of change: Increase. Necessary adjustment:\u2026<\/p>\n\n\n\n
Account: Current Asset. Direction of change: Decrease. Necessary adjustment:\u2026<\/p>\n\n\n\n
Account: current liability. Direction of change: increase. Necessary adjustment:\u2026<\/p>\n\n\n\n
Account: Current Liability. Direction of change: decrease. Necessary adjustment:\u2026<\/p>\n\n\n\n
Cost accumulation<\/p>\n\n\n\n
Cost Object :<\/p>\n\n\n\n
Cost Driver:<\/p>\n\n\n\n
Common Cost:<\/p>\n\n\n\n
Controllable costs:<\/p>\n\n\n\n
Cost Allocation:<\/p>\n\n\n\n
Does traditional costing include both direct and indirect components?<\/p>\n\n\n\n
Activity Based Costing ABC utilizes direct costs like traditional costing, but breaks down the overhead costs into pieces called:<\/p>\n\n\n\n
Is C-V-P a planning tool?<\/p>\n\n\n\n
in C-V-P break even point is when what equals what?<\/p>\n\n\n\n
Contribution Margin:<\/p>\n\n\n\n
Operating Leverage:<\/p>\n\n\n\n
Relevant range:<\/p>\n\n\n\n
Typical cash budgeting accounts that are allocated:<\/p>\n\n\n\n
Capital Budgeting<\/p>\n\n\n\n
Manegement Accounting<\/p>\n\n\n\n
Planning<\/p>\n\n\n\n
Capital Budgeting<\/p>\n\n\n\n
Preparing operational budgets<\/p>\n\n\n\n
Opportunity costs<\/p>\n\n\n\n
Indirect materials, indirect labor, factory utilities bill, depreciation of equipment, and taxes. You do not add direct materials or labor, delivery expenses or advertising costs.<\/p>\n\n\n\n
Differential costs<\/p>\n\n\n\n
Opportunity costs<\/p>\n\n\n\n
Direct costs<\/p>\n\n\n\n
Controller<\/p>\n\n\n\n
Planning, Controlling, and Evaluating<\/p>\n\n\n\n
Capital budgeting and strategic planning<\/p>\n\n\n\n
Production and process prioritizing, operational budgeting (profit planning)<\/p>\n\n\n\n
Restricted to financial data
Data often made public
Used primarily by investors and creditors in deciding whether to provide capital to the company
Financial Accounting<\/p>\n\n\n\n
Both financial and nonfinancial data
Usually kept secret within the company
Used for internal planning, control, and evaluation
Management Accounting<\/p>\n\n\n\n
Period costs<\/p>\n\n\n\n
Product costs:<\/p>\n\n\n\n
Direct labor
Manufacturing overhead
Direct materials, direct labor, and manufacturing overhead.<\/p>\n\n\n\n
A cost incurred as part of the production process. Operationally, these are the costs incurred in the factory. These costs are first reported as an asset (inventory) and then as an expense (cost of goods sold) when the product is sold.<\/p>\n\n\n\n
Period costs:<\/p>\n\n\n\n
Variable costs<\/p>\n\n\n\n
Fixed costs<\/p>\n\n\n\n
Direct materials<\/p>\n\n\n\n
Direct labor:<\/p>\n\n\n\n
Manufacturing overhead:<\/p>\n\n\n\n
Direct costs:<\/p>\n\n\n\n
Indirect costs:<\/p>\n\n\n\n
Differenital costs:<\/p>\n\n\n\n
Sunk Costs:<\/p>\n\n\n\n
Out of pocket costs:<\/p>\n\n\n\n
Opportunity costs:<\/p>\n\n\n\n
The Institute of Management Accountants (IMA) provides:<\/p>\n\n\n\n
Accounting is:<\/p>\n\n\n\n
The focus on accounting is:<\/p>\n\n\n\n
Among the users of financial accounting information are<\/p>\n\n\n\n
The practice of accounting involves adherence to duplicate the system throughout the United States. established accounting rules as well as the use of judgment. U.S. accounting rules are established by the:<\/p>\n\n\n\n
In addition to the FASB, other important accounting-related organizations are the<\/p>\n\n\n\n
Three factors have combined to make right now a time of significant change in accounting.<\/p>\n\n\n\n
Definition of accounting:<\/p>\n\n\n\n
Functions of accounting:<\/p>\n\n\n\n
Analyze transactions ,Handle routine bookkeeping tasks, Evaluate the performance and health of the business.<\/p>\n\n\n\n
Balance sheet<\/p>\n\n\n\n
Income statement<\/p>\n\n\n\n
Statement of cash flows<\/p>\n\n\n\n
Financial statements<\/p>\n\n\n\n
Investors and creditors<\/p>\n\n\n\n
Management<\/p>\n\n\n\n
It seeks consistency for its proposed standards, It is not a government agency, It consists of seven full-time members, It has no legal power to enforce the standards it sets. Is the current standard-setting board for accounting in the private sector.<\/p>\n\n\n\n
International financial reporting standards<\/p>\n\n\n\n
The SEC<\/p>\n\n\n\n
Making management decision. What is typical is :Redesigning operating procedures, Performing audits, Establishing accounting systems.<\/p>\n\n\n\n
the need to evaluate investments across the world, the integration of the global economy, the increased efficiency of financial markets.<\/p>\n\n\n\n
TRUE<\/p>\n\n\n\n
SOX<\/p>\n\n\n\n
Stockholders equity<\/p>\n\n\n\n
Retained Earnings<\/p>\n\n\n\n
Earnings per share, which is the amount of net income divided by the number of shares of stock outstanding.<\/p>\n\n\n\n
a summary of accounting policies, additional information about summary totals in the statements, disclosure of important information not in the statements, and supplemental disclosure required by the FASB or SEC<\/p>\n\n\n\n
provided on a timely basis and can be used to assess the past and to project the future for decision making.<\/p>\n\n\n\n
Comparability:<\/p>\n\n\n\n
Conservatism:<\/p>\n\n\n\n
Materiality:<\/p>\n\n\n\n
Articulation:<\/p>\n\n\n\n
To forecast how a company will perform in the future.<\/p>\n\n\n\n
Comparison of financial statements across years and between companies and are prepared by dividing all financial statement numbers by sales for the year.<\/p>\n\n\n\n
decomposes return on equity into its profitability, efficiency, and leverage components.<\/p>\n\n\n\n
traditional analysis models are based on the balance sheet and the income statement.<\/p>\n\n\n\n
comparable or if statements exclude significant information. In addition, analysis of historical data may distract one’s attention from relevant current information.<\/p>\n\n\n\n
investing decisions<\/p>\n\n\n\n
Past values and values of other firms in the same industry<\/p>\n\n\n\n
current ratio<\/p>\n\n\n\n
Liquidity<\/p>\n\n\n\n
Common stock, Paid in capital, and retained earnings<\/p>\n\n\n\n
assets to standardize each amount instead of using total sales, in which case the asset percentages are a good indication of the company’s asset mix.<\/p>\n\n\n\n
Common sized financial statements<\/p>\n\n\n\n
Sales revenue<\/p>\n\n\n\n
Revenue<\/p>\n\n\n\n
Efficiency, profitability, and leverage<\/p>\n\n\n\n
Cash flow to net income<\/p>\n\n\n\n
Industry type, Diversity of business operations, or capital structure. NOT Product quality or service effectiveness.<\/p>\n\n\n\n
Reported financial statement numbers may actually be a measurement of different things,
Companies that are being compared may be conglomerates,
Not all companies use the same accounting practices.<\/p>\n\n\n\n
Profitability<\/p>\n\n\n\n
Efficiency<\/p>\n\n\n\n
Leverage<\/p>\n\n\n\n
the proportion of total assets in each asset category and is largely determined by the industry in which the company operates. Financing mix is the result of management decisions.<\/p>\n\n\n\n
Common stock and preferred stock<\/p>\n\n\n\n
Liabilities and owners equity<\/p>\n\n\n\n
Notes payable<\/p>\n\n\n\n
Land. Short term: Accounts receivable, accounts payable, inventory<\/p>\n\n\n\n
Accounts receivable, inventory, cash. NOT Equipment<\/p>\n\n\n\n
Decreasing order if liquidity<\/p>\n\n\n\n
Disclosure<\/p>\n\n\n\n
Relevant and reliable<\/p>\n\n\n\n
Valuation<\/p>\n\n\n\n
Disclosure<\/p>\n\n\n\n
Recognition<\/p>\n\n\n\n
Increase in building and decrease in cash<\/p>\n\n\n\n
Increase in cash and increase in paid in capital<\/p>\n\n\n\n
Increase in prepaid rend and decrease in cash<\/p>\n\n\n\n
Increase in buildings and increase in mortgage payable<\/p>\n\n\n\n
Increase equipment and increase liability<\/p>\n\n\n\n
the companies industry<\/p>\n\n\n\n
The degree to which a company finances assets using liabilities or owners’ equity<\/p>\n\n\n\n
Financial capital maintenance<\/p>\n\n\n\n
gross profit, operating income, income from continuing operations, net income, comprehensive income<\/p>\n\n\n\n
income from continuing operations<\/p>\n\n\n\n
Net income<\/p>\n\n\n\n
Revenues and expenses from that line of business are excluded from the company’s recurring revenues and expenses when preparing an income statement.<\/p>\n\n\n\n
the earnings process is complete, and a valid promise of payment has been received.<\/p>\n\n\n\n
Multiple step income statement<\/p>\n\n\n\n
True<\/p>\n\n\n\n
Immediate recognition<\/p>\n\n\n\n
Cash Disbursement. What are acceptable: Immediate recognition, Direct matching, Systematic and rational allocation<\/p>\n\n\n\n
The salary of the company president<\/p>\n\n\n\n
Sales<\/p>\n\n\n\n
Accounts payable<\/p>\n\n\n\n
he balance sheet and the income statement. Operating cash flow is particularly useful in selected cases when net income does not give an accurate reflection of a company’s performance.<\/p>\n\n\n\n
operating, investing, and financing. In normal circumstances, a company has positive cash from operations and negative cash from investing activities. Whether cash from financing activities is positive or negative typically depends on how fast a company is growing.<\/p>\n\n\n\n
knowledge of how the three primary financial statements articulate. Operating cash flow can be reported using either the direct or the indirect method.<\/p>\n\n\n\n
It highlights changes in managerial strategy regarding investments and finances.
It provides investors with information about the investing and financing activities of an entity.
It provides information about an entity’s cash receipts and payments over a period of time. It does NOT measure profitability.<\/p>\n\n\n\n
Should not be disclosed in the body of a statement of cash flows but should appear elsewhere<\/p>\n\n\n\n
Operatig activities<\/p>\n\n\n\n
Purchase of treasury stock<\/p>\n\n\n\n
Extending loans to other entities, Sale of a building, Collection of a long-term note receivable.
Amounts borrowed would NOT be reported as an investing activity.<\/p>\n\n\n\n
Add Accounts receivable, payments for salary\/wages, interest revenue, subtract payments for inventory.<\/p>\n\n\n\n
A gain from the sale of equipment<\/p>\n\n\n\n
For purposes of preparing a cash flow statement, operating activities are those activities that enter into the calculation of net income. Net cash provided by operating activities is the “bottom line” of the cash flow statement.<\/p>\n\n\n\n
investing<\/p>\n\n\n\n
Financing<\/p>\n\n\n\n
Non-cash investing and financing transactions include<\/p>\n\n\n\n
Overstates owners equity<\/p>\n\n\n\n
Failure to record depreciation expense<\/p>\n\n\n\n
Revenues will be correctly stated<\/p>\n\n\n\n
Owners equity will be overstated<\/p>\n\n\n\n
To effectively and efficiently run their operations, without duplication of effort or waste. To follow management policies.To comply with the Foreign Corrupt Practices and Sarbanes-Oxley acts, which require companies to maintain proper record-keeping systems and controls.
Most companies have the following five concerns in mind when they are designing internal controls<\/p>\n\n\n\n
financial assets (such as cash or property), their employees, their confidential information, and their reputation and image.<\/p>\n\n\n\n
The control environment
Risk assessment
Control activities
Information and communication
Monitoring<\/p>\n\n\n\n
Authorization.<\/p>\n\n\n\n
Record keeping.<\/p>\n\n\n\n
Custody of assets.<\/p>\n\n\n\n
Authorization, record keeping, and custody of assets<\/p>\n\n\n\n
External auditors, Internal auditors, Internal controls.
NOT Earnings management<\/p>\n\n\n\n
Management’s philosophy and operating style
The organizational structure
The audit committee<\/p>\n\n\n\n
Changing the interest rate used in accounting for leases without describing the change in the notes to the financial statements.<\/p>\n\n\n\n
strategic matching, change in methods or estimates with full disclosure, change in methods or estimates with little or no disclosures, non-GAAP accounting, fictitious transactions<\/p>\n\n\n\n
Non GAAP accounting<\/p>\n\n\n\n
Both the deceptive concealment of transactions and the creation of fictitious transactions<\/p>\n\n\n\n
Constraints on company management
Independent oversight of auditors
SOX<\/p>\n\n\n\n
Conduct inspections of accounting firms, Register all public accounting firms that provide audits for public companies, Establish standards relating to the preparation of audit reports for public companies. Does NOT Enforce compliance with the Foreign Corrupt Practices Act.<\/p>\n\n\n\n
Opinions about the reliability of internal controls<\/p>\n\n\n\n
Make loans to executive officers and directors<\/p>\n\n\n\n
Develop and enforce an officer code of ethics, Support a much stronger board and audit committee in each public company, Prepare a statement to accompany the audit report<\/p>\n\n\n\n
Conducts inspections of accounting firms<\/p>\n\n\n\n
confirmation. Internal auditors use: interviewing, sampling, and observation<\/p>\n\n\n\n
Prepare the primary financial statements. It would typically perform: Detect fraud, Assist with increasing the efficiency of operations, Evaluate internal controls.<\/p>\n\n\n\n
Auditors have a reputation to protect.
Management would be taking a large legal risk if they interfere with the auditors.
External auditors are taking a large legal risk if they allow their independence and integrity to be compromised<\/p>\n\n\n\n
Examine the organization’s accounting for a sample of business transactions to provide reasonable assurance that the financial statements are presented fairly<\/p>\n\n\n\n
When the company issues new debt or stock securities to the public<\/p>\n\n\n\n
Accountants must audit all 10-K reports, Accountants’ work is subject to approval by the SEC.<\/p>\n\n\n\n
Errors<\/p>\n\n\n\n
Fraud<\/p>\n\n\n\n
Disagreements in judgment<\/p>\n\n\n\n
The control environment
The accounting systems
The control procedures<\/p>\n\n\n\n
Segregation of duties
Procedures for authorizations
Documents and records
Physical safeguards
Independent checks<\/p>\n\n\n\n\n
\n
register all public accounting firms.<\/p>\n\n\n\n\n
\n
\n
\n
Gather evidence to be able to certify the fairness of the financial statements through:<\/p>\n\n\n\n\n
Requiring independent audits
Requiring independent audits
Reviewing financial statements itself
Sanctioning firms that violate its standards<\/p>\n\n\n\n
Management desire to improve<\/p>\n\n\n\n
Unique competitive tool, Both financial and non financial data, Data usually kept secret within the company,Used for internal planning, control, and evaluation<\/p>\n\n\n\n
Uniform across companies (generally accepted accounting principles), Restricted to financial data, data is made public,Used primarily by investors and creditors in deciding whether to provide capital to the company.<\/p>\n\n\n\n
Manufacturing overhead<\/p>\n\n\n\n
Activities that consume overhead cost<\/p>\n\n\n\n
Products consume overhead costs.<\/p>\n\n\n\n
Identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and use the cost data to make decisions<\/p>\n\n\n\n
A unit-level item associated with the overhead cost activity “operating the ice cream production process.”<\/p>\n\n\n\n
A facility support item associated with the overhead cost activity “keeping the factory open.”<\/p>\n\n\n\n
Building insurance. A facility support item associated with the overhead cost activity “keeping the factory open.<\/p>\n\n\n\n
Security guards. A facility support item associated with the overhead cost activity “keeping the factory open.”<\/p>\n\n\n\n
activities that take place each time a unit of product is produced. Examples:\u2022 Machine maintenance<\/p>\n\n\n\n\n
activities that take place in order to support a batch or production run, regardless of the size of the batch. Examples:\u2022 Inspections<\/p>\n\n\n\n\n
activities that take place in order to support a product line, regardless of the number of batches or individual units actually produced. Examples:\u2022 Engineering product design<\/p>\n\n\n\n\n
activities necessary to have a production facility in place. However, these activities are not related to any particular line of products or services. Examples: Property taxes<\/p>\n\n\n\n\n
COST POOL<\/p>\n\n\n\n
Facility support activity<\/p>\n\n\n\n
Unit level activity<\/p>\n\n\n\n
Cost pool<\/p>\n\n\n\n
Cost drivers<\/p>\n\n\n\n
Identify the key cost activities.
Analyze each overhead cost in terms of these activities in order to compute the cost pools.
Specify numerical cost drivers that can be used to assign the overhead costs to production.<\/p>\n\n\n\n
Gather the overhead cost and numerical cost driver data.
Compute the amount of overhead cost per cost driver event.
Use these data to assign overhead to production<\/p>\n\n\n\n
Increase<\/p>\n\n\n\n
Total fixed costs due to a plant addition<\/p>\n\n\n\n
More products with the highest contribution margin are sold<\/p>\n\n\n\n
a measure of risk<\/p>\n\n\n\n
Fixed costs and variable costs<\/p>\n\n\n\n
Conservative cost structure<\/p>\n\n\n\n
Have a larger loss below the breakeven point<\/p>\n","protected":false},"excerpt":{"rendered":"