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D196
Principals of Financial & Managerial Accounting
| Term | Definition |
|---|---|
| How does a classified balance sheet provide useful info to a decision maker? | It distinguishes b/w current & long term assets |
| Reported in income statement as part of cost of goods sold once the product is sold to customer | Product costs recorded |
| Manufacturing costs other than direct materials & labor, incurred in the upcoming production period. | Actual Manufacturing Overhead |
| Material, labor & overhead costs are added in each process, these costs are summed & averaged across units produced. Average cost of each items produced is then moved to next process where costs are summed & averaged. | Costs & Product Flow for Manufacturer in Process Costing |
| Amount of manufacturing overhead that is assigned to the goods produced. | Applied Manufacturing Overhead |
| Activity Rate * # of Cost of Driver Events | Overhead allocated in ABC system |
| In Job Order Costing system what is the proper accounting for a product cost? | Reported as part of Cost of Goods Sold |
| Short-term schedule of expected cash inflows & outflows during a period of time. Important tool in helping management plan its cash needs. | Cash Budgeting Process |
| Estimated Manufacturing Overhead/Estimate of Expected Level of Activity | Predetermined Overhead Rate |
| Allocating overhead assists in pricing a product or service accurately, too high drives customers away. Too low means too much unprofitable business. | Overhead of Products or Services using ABC system |
| Forces management to make many important decisions that guide a company toward its goals. Decisions involving scheduling, pricing, borrowing, investing & cost control. All budgets start w/ sales budget | Master Budgeting Process for Manufacturing Firm |
| Costs are accumulated by process & averaged over all products made during the period | Production Costs in a Process Costing System |
| Amount of Total Production Cost/ # of Units Completed during particular period of time | Production Cost per Unit in a Process Costing System |
| What info does a balance sheet provide to a decision maker? | Summary of the financial position of a company at a particular date |
| How could a period cost be reported in an income statement? | As Cost of Goods Sold |
| Why is the concept of relevant range important to a manager? | Outside the relevant range , variable cost per unit can change |
| Gathering & analysis of info for the purposes of internal decision making. Exists to serve competitive needs of organizations. | Managerial Accounting |
| Purpose is to help see how accounting process eventually turns transactions into financial statements & making data into useful info for decision-making by managers. | Purpose of Accounting Cycle |
| Costs that change in total in direct proportion to changes in activity level | Variable cost |
| Costs of manufacturing product, direct materials, direct labor & manufacturing overhead | Product Costs in a Manufacturing Business |
| Reports the amount of net income earned by a company during a period. "operations." Revenues-Expenses | Income Statement |
| Accounting organizations, technology, ethics & standards | Important influences on Accounting |
| Parts of an organization requiring separate reports for evaluation by management. Sometimes called groups, divisions, product lines | Organizational Segments |
| Analyzing results rewarding performance & identifying problems. Process of comparing actual performance against expected inputs of cost, outputs of quality & timelines | Evaluating for Decision-Making Process |
| Method of financial statement analysis in which each line item is displayed as a percentage of another item to allow for comparison to other companies within the same industry. | Vertical Analysis |
| Excess of actual manufacturing overhead costs over the applied overhead costs for a period | Underapplied Manufacturing Overhead |
| Reported immediately on the income statement in the period they are incurred | Period Costs Recorded |
| Paying wages, utilities & taxes, purchasing buildings & land, repaying loans & distributions to owners | Outflows of Cash Payments |
| Direct materials, direct labor, manufacturing overhead | Product Costs |
| Revenues(Increase Owners Equity)-Expenses(Reduce Owners Equity)= Net Income | Expanded Accounting Equation |
| Item that belongs under expenses | Cost of Goods Sold |
| Cash flow classification in the statement of cash flows, which item in an operating activity? | Paying Employees |
| What is an account payable? | Amount owed by a company that purchased goods or services from a supplier on credit |
| Total Estimated Manufacturing Overhead Cost for the year/ Total Estimated Machine Hours for the year | Overhead Expenses |
| Amount of the manufacturing overhead that is assigned to goods produced. Usually done by using a predetermined annual overhead rate | Applied Overhead |
| Tracking actual performance of a company | Controlling of Decision Making Process |
| Costs of providing services, including direct labor & service overhead | Product Costs in a Service Business |
| Assets= Liabilities + Owners Equity | Accounting Equation |
| Procedure for analyzing, recording, classifying, summarizing, & reporting transactions of a business, prepare reports | Accounting Cycle |
| Example: (B9-E9)/E9 | Horizontal Analysis |
| Method of product costing whereby costs are accumulated by process or work centers & averaged over all products manufactured in a center or department during a production period. Used by process centers. | Process Costing |
| Sales Revenue (or Price)-Variable Cost | Contribution Margin Formula |
| Collect & present info in a simple & functional way, focuses on line items of financial statements as a percentage of selected figure. Two types; horizontal & vertical analysis | Common-Size Financial Statements |
| Total Fixed Cost/Contribution Margin Ratio | Break-Even in Sales Formula |
| A quantitative expression of a plan that shows how a firm or organization will acquire & use resources over some specified period of time. | Budget |
| Selling goods, providing services, selling buildings & land, borrowing money, receive investments | Inflows of Cash Receipts |
| Overhead Cost Pool/ Cost Driver | Activity Rate Calculation using ABC system |
| Contribution Margin/ Sales (or Price) | Contribution Margin Ratio Formula |
| Balance sheet, income statement, statement of cash flows, statement of retained earnings | 4 Types of Financial Statements |
| Profits & loss statement that identifies costs directly chargeable to a segment & further divides them into variable & fixed cost behavior patterns | Segment Margin Statement |
| Costs incurred outside the production facility Ex: Company headquarters rent cost | Period Cost |
| Organizational unit in which a manager has control over & is held accountable for cost performance Ex: Department supervisor in a factory | Cost Center |
| Costs that contain both variable & fixed costs components Ex: phone bill | Mixed Costs |
| Organizational unit in which a manager has control over & is held accountable for both cost & revenue performance. Produce both goods or services Ex: Store manager of fast-food franchise | Profit Center |
| Overhead is allocated based on different activity levels | Activity Based Costing (ABC) |
| A method of costing that assigns costs to specific jobs or products | Job-Order Costing |
| Raw materials>Work in Progress Inventory>Finished goods inventory> Cost of Goods Sold | Costs & Products Flow in Manufacturer |
| Total Fixed Cost/ Contribution Margin per Unit | Break Even in Units Formula |
| Example: B9/$B$9 | Percentage of Sales |
| Reports a company's assets, liabilities, & owners equity at a particular date, summary of financial position at a particular date Uses ALE | Balance Sheet |
| Outlining activities needs to be performed for organization to achieve its objectives. Long-run & short-run | Planning for Decision Making |
| Future costs that change as a result of a decision; also called incremental or relevant costs | Differential Costs |
| Total cost being generated by a specific overhead cost activity | Cost Pool |
| Sales Revenue-Variable Cost-Fixed Cost=Profit (Net Income) | CVP Formula |
| Budgeted manufacturing overhead costs that are used to establish predetermined overhead rate | Estimated Manufacturing Overhead |
| Network of many separate schedules & budgets that together constitute the overall operating & financing plan for the coming operating period | Master Budget |
| Identifies changes in accumulated investments by owners & earnings or profits since day one. Links income statement & balance sheet together & kept in business. | Statement of Retained Earnings |
| Costs incurred in purchasing goods from suppliers | Product Costs in a Merchandising Business |
| Summary of significant accounting policies, additional info about the summary totals found in financial statements, disclosure of important info, supplementary infor required by FASB or SEC | Notes to Financial Statements |
| Excess of applied manufacturing overhead over the actual manufacturing overhead costs for a period. | Overapplied Manufacturing Overhead |
| Organizational unit in which a manager has control over & is responsible for its performance | Responsibility Centers |
| Variable Cost/ Sales (or Price) | Variable Ratio Formula |
| All cost incurred in manufacturing process other than direct materials & direct labor Ex: Miscellaneous materials | Manufacturing Overhead |
| Confidential internal document allows management to formulate & make strategic decisions | Product Line |
| Utilities expense, Salaries, Maintenance | Expenses |
| Service revenue, Fee Income, Sales | Revenues |
| Cash, Prepaid Expense, Patents, Inventory, Accounts Receivable, Buildings | Assets |
| Noters Payable, Taxes, Accounts Payable, Mortgage, Unearned Revenue | Liabilities |
| Retained Earnings, Capital Stock | Equity |
| Costs normally incurred for the benefit of several segments within the organization. | Indirect Costs |
| The company currently uses a traditional method to allocate overhead. Which type of costing system should the company use instead? | Activity-Based Costing (ABC) |
| The three general type of overhead cost activities in ABC systems are? | Unit-level, batch level, product line |
| Assembly line worker wages, rubber for making tires, depreciation on factory machinery, indirect materials, factory supervisors salary, factory repair & maintenance costs, factory supplies, insurance policy for factory building, indirect labor | Examples of Product Costs |
| Depreciation on office supplies, sales commissions, corporate office property taxes, insurance policy for office building, office managers salary, advertising expense, company president's salary | Examples of Period Costs |
| Shows the distribution of net income to the owners of a business | Dividends |
Created by:
Jwhee67
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