Key Concepts in Managerial Accounting

Cost of Goods Sold (COGS)

COGS = Beginning Inventory + Purchases - Ending Inventory

COGS Example

For Sweet Treats Beverage Company: COGS = $12,900 + $140,300 - $18,900 = $134,300

Managerial Accounting

Focuses on internal decision-making, emphasizing relevance and timeliness.

Financial Accounting

Focuses on external reporting, conforming to GAAP (Generally Accepted Accounting Principles).

Key differences between Managerial and Financial Accounting

Managerial accounting provides relevant, internal information (not audited, no fixed schedule); Financial accounting reports external financial performance (audited, follows GAAP, periodic reports).

Product Costs

Costs associated with manufacturing or purchasing inventory (e.g., direct materials, labor, overhead).

Period Costs

Expenses that are not tied to production but are necessary for running the business (e.g., selling, general, and administrative expenses).

Indirect Costs

Costs that cannot be directly traced to a cost object (e.g., factory supervisor's salary).

Direct Costs

Costs that can be directly traced to a specific cost object (e.g., raw materials for production).

Fixed Costs

Do not change with the level of production or sales (e.g., rent, salaries).

Variable Costs

Change with the level of production (e.g., raw materials).

Mixed Costs

Contain both fixed and variable components (e.g., utilities).

IMA Ethical Standards

Integrity: Act with honesty and fairness, avoid conflicts of interest; Confidentiality: Do not disclose sensitive information; Competence: Maintain knowledge and skills to perform professional duties; Credibility: Communicate information fairly and objectively.

Ethical Dilemmas in Accounting

Should be resolved by first following company policies for reporting unethical behavior.

External Users of Financial Information

Groups that use financial information but are not directly involved in day-to-day operations.

Potential Investors

Assess investment opportunities.

Customers

Evaluate the company's financial stability.

Vendors

Assess the company's ability to pay for goods/services.

ERP (Enterprise Resource Planning)

ERP systems help organizations manage and integrate various business processes (e.g., inventory, procurement, financials).

Benefits of Data Analytics

Improved decision-making, increased efficiency, faster decisions.

Data Analytics Limitations

Cannot predict exact profits for specific scenarios due to inherent uncertainties.

Value Chain Activities

Activities that add value to a company's product or service.

Distribution

Delivery of products to customers (e.g., shipping costs).

Customer Service

Support after sales, ensuring customer satisfaction.

Marketing

Activities to promote products and attract customers.

Administration

Management and support activities within the company.