managerial accounting

what is management accounting?

The process of developing information and management tools to help an organization achieve its objectives

what are the primary function of managerial accounting?

Planning, measuring, evaluating, controlling/influencing

what is cost accounting?

A subset of managerial accounting relating specifically to cost within the organization

what is the difference between financial accounting and managerial accounting?

financial accounting: Balance sheet, income statement, statement of cash flow, statement of equity.

for external users (investors, creditors, regulators)

Reports our standardized

Governed by GAAP

publicly available

Primarily historical

MANAGERIAL ACCOUNTING

For internal users(managers, employees)

Reports are not standardized(based on company needs, management preferences, tradition)

Not governed by GAAP

Not publicly available

primarily forward looking (forecasts)

who is the “management account”

lots of people. ceos, managers, chief accounting officer, analysts…. and many more.

why does Costco accounting matter?

Financial reporting purposes:

To determine value values on the financial statement, for example, the cost of inventory on the balance sheet, the cost of good sold on the income statement

Managerial purposes:

To determine the cost probability of products, to determine which products empathize in marketing, to evaluate performance, to select products to sell, to set prices, to reduce cost, and more

what is a cost?

a sacrifice made to achieve some benefit. not expense. (memorize this)

what is a cost object?

anything to which costs are assigned

what is a product cost?

costs associated with making or buying a product

what are period costs

selling and administrative costs of operating a business

where are period costs tracked?

the income statement

where are product costs tracked?

on the balance sheet

eventually they end up in the income statement as the COGS expense

For merchandise companies, are property taxes period costs or product costs?

period

For merchandise companies, are utilities period or product costs?

product

true or false: all indirect labor and indirect materials fall under “overhead costs” for a company

true

OVERHEAD=INDIRECT

for service companies, where are product costs tracked?

tracked on the income statement as a cost as soon as it happens, tracked on the balance sheet if it takes more time

for service companies, what are period costs?

SG&A similar to manufacturing and merchandise companies

True or false: A cost is a specific type of expense defined and determined by GAAP.

false

for a retailer like Nike, is this a product or period cost?

cost of raw materials

product

for a retailer like Nike, is this a product or period cost?

cost of the salary of the CEO

period

for a retailer like Nike, is this a product or period cost?

cost of the salary of the worker in the assembly line

product

for a retailer like Nike, is this a product or period cost?

cost of utilities for the factory where the item is assembles

product

for a retailer like Nike, is this a product or period cost?

cost related to depreciation on a CEO company car

period

factory production line worker’s wage is a (period/product/direct/indirect/overhead…)

product (direct labor)

CEO salary (period/product/direct/indirect/overhead…)

period

does a service company have a finished good t account?

nope. it skips from work in progress to cogs

is work in progress a debit or credit account

debit

what happens in the T-accounts when manufacturing overhead is applied to a product.

debit WIP

credit overhead