accounting p2

4 step process of closing entries

1. dr sales revenue cr income summary

2. cr expenses dr income summary

3. dr income summary cr retained earrings (owners capital)

4. dr retained earnings cr dividends (owners drawing)

retained earrings statement

1. retained earrings

2. net income/ loss

3. dividend

4. ending

total shareholders quality =

share capital + share premium + retained earnings

gross profit =

revenue - cogs

income stamens

revenue

cogs

gross profit

expenses and incomes

income from operations

financing costs/ interest expense

income before tax

income tax

net income

assets, equity and liabilities

non-current assets - equipment + property

assets- cash, inventory, accounts receivable

shareholders equity- share capital + retained earrings

non - current liabilities- bank loan

current liabilities - accounts payable + unearned revenues

working capital

assets + liability

closing entry t-accounts

• retained earrings

• income summary

• revenue

• cogs

• expenses

cost of goods sold tip

always pair with inventory unless you are buying inventory

retained earrings statement

start + net income- dividend = final

dividend payable

beginning dividend + dividend declared - dividend payable = final

product costs

machinery, labour and material

period costs

building, selling and distribution costs, admin

discounts

7/5 = 7 percent in 5 data

n/30 =total amount due in 30 days

net method accounting

dr purschases cr account payable ( discounted amount)

dr accounts payable cr cash ( if discount used)

dr accounts payable dr discount lost cr cash ( discount not used)

net method account tip

value the goods at discounted values for all operations

gross method

dr purchases cr accounts payable ( full amount

dr accounts payable cr cash cr purchase discount

how to record dividends when declared -

dr retained earrings

cr dividends payable

how to record shareholder

dr cash

cr share capital

cr share premium

how to record dividend (when declared)

dr retained earrings

cr dividends payable

how to record prepaid expenses

dr expense

cr prepaid

how to calculate nrv

sales price- cost to compete- cost to sell

costs of goods sold and lrncv

cogs + lcnrv

how to record gross method

dr cost of sale (nrv)

cr allowance to reduce inventory (nrv)

loss method

dr loss due to decline in inventory

cr allwonce to reduce inventory

using loss value for inventory revalue

dr allowance to reduce

cr recovery of inventory loss

inventory turnover

cogs/ average inventory

avg days to sell inventory

365/ inventory turnover

return liability recording

dr accounts receivable

cr revenue

cr return liability

actual loss entry

dr bad debt expense

cr accounts receivable

allowance for bad debt

dr bad debt expense

cr allowance for uncollectable

how to record write off

dr allowance for uncountable

cr accounts receivable

bad debt expense forumla

credit sales (previous) + credit sales (new)- receivable - write-off= x

x times percentage = answer

how to record new equipment and sale of old

dr fixed assests

dr accumulated depression

dr losses on assets disposal

cr cash

cs fixed assets

straight line depreciation formula

cost - residual / useful life

how to record depreciation

dr deprecation expense

cr accumulated depreciation

sum of year depreciation method

(cost - residual) x (remaining life at beginning of year/ sum of years)

double declining

carrying amount equation

cost of equipment - accumulated depreciation

what is a impairment

this happens when carrying value is higher then gain from selling or use

how to calculate impairment

recoverable - carry amount = x

x= positive (no impairment)

x = negative ( impairment)

change is depreciation base

remains life + extended life also carrying amount + investment

what counts in assets disposal + acquisition

cost + brokerage + tax+ fees + demolition

all cost to make ready for use

assest disposal entry

dr loss on assets disposal (cost - depreciation)

dr accumalated depreciation

cr assest

selling old assets how to record

dr cash

dr accumalted depreciation

dr new assets

dr loos on assist diposal ot cr gain on assest dissposal

cr non currest assest

cr account payable

gain or loss

cost of assets - cash earned on sale + accumulated deprecation

who is it for?

company management

direct vs indirect cost

direct = direct

indirect - cost for more than one good

product cost

dm + dl, moh

prime costs

dm + dl

conversion cost

dl + moh

income statement

cogs

operating expenses

period cost

budgeted overhead

budgeted manufacturing overhead / budgeted activity

allocated moh

budgeted oh x actual activity

standard cost equation

total cost = fixed + ( variable x units)

blanket overhead

total budgeted overhead/ total budgeted allocation base

profit

prime costs + moh - selling price

arbitrary allocation

using a allocation base that is mot a significant determinant of the cost

cogs

direct costs + allocated moh

gross profit statement

revenue

cogs

period cost

under / over absorbed

= gross profit

how to calculate actual overhead

all indirect manufacturing costs

how to record overhead

dr underralloacted

cr factory overhead

dr factory overhead

cr over allocated

what is not the same

over/uder recovered is not the same as over/under absorbed

how to record allocating to job

dr wip

cr dm inventory

cr wages payable

cr factory overhead

how to record completion

dr inventory

cr wip

eu

equivalent units in terms of completion

formula eu

physical units x degree of completion

fifo inventory

• add costs for pervious months after cacladting the avg of the month

• do not considering pervious costs associated with the products for avg calc

wa inventory steps

1. calc units completed

2. calculate eu ( wa just use info given)

3. calc avg dm and cc costs

4. calc cost per unit

5. assign costs

normal + abnormal gains and loses

calculate everything with normal loss before considering abnormal loss

product cost

(cost of input formula - scrap value) / normal output

net value abnormal loss

loss x (avg loss - cost to sell=

how to compute joint production

dr inventory good a

dr inventory good b

cr wip - joint production

gross profit margin

cogs/ 100- margin = sales revenue

not for sales value

use if given

joint costs incurred in previous moth

dr wip

cr invetory

cr wage payable

cr factory overhead

nrv formula

(price to - production) x q

by product

joint cost - nrv of by product

unit contribution margin

selling - variable cost

(no fixed costs r needed)

contribution margin

total contribution / revenue

unit contribution / unit selling price

margin of safety

sales units - bep units / sales in units

bep

foxed costs / unit contribution margin

bep sales

bep x selling price

cvp graph

steepest line- revenue

paroled line = costs variable and fixed

shares issued

ending - beginning balance - net income + shares repurchased - dividend

when does depreciation start

the minute purchases so don’t forget to count year purchased

note expenses

anything that is prepaid can not be an expense

how to record salaries and interest

dr expense

cr payable

adjusted trial balance

• copy down the information given

• add any new process that have taken place

what is overhaul

• major repairs that cause some assest to increase the life

• small repairs do not matter or affect the calculations

how to recalculate depreciation

1. depreciation before overhaul

2. calculate book value before overhaul

3. book value after overhaul (book value + improvement costs)

4. recalculate depreciation

gross profit

net revenue - cost of sale

or revenue - sales discount - cost of sale

t- account allowance of uncollectible

dr write off

cr beginning balance

cr recovery

cr bad debt expense

cr ending balance

accounts recoverable

ending = beginning + credit sales - cash collection - write off

bad debt expense formula

= final ar (times percentage) + writeoff - opening balance

note for bad debt expense

• compute ar before doing anything

how to record impairment

dr impairment loss

cr accumulated depreciation

note computing value of assets

always consider impairment with which ever value is higher ( value is use or value to dispose)

managerial profit

only consider profit in terms of goods sold