Final Accounting Exam 3

Partnership - A business owned by two or more people who share profits.
General Partnership - All partners share management, profits, and unlimited liability.
Limited Partnership - Includes at least one general partner and one limited partner.
Partner - An individual or organization in a partnership.
Low Cost - Cheaper and easier to start than a corporation.
Less Regulation - Fewer government rules than corporations.
No Double Taxation - Income passes through to partners’ personal tax returns.
Mutual Agency - One partner can make decisions that bind the entire partnership.
Unlimited Liability - Partners are personally responsible for partnership debts.
Flow-Through Entity - Income goes directly to partners’ tax returns, not taxed at the partnership level.
Capital Account - Shows a partner’s share in the partnership’s assets.
Capital Account Increases - Investments and income allocations.
Capital Account Decreases - Withdrawals and net losses.
Capital Account Format - Partner name followed by “, Capital” (e.g., Alex, Capital).
Partnership Agreement - Contract between partners that outlines operations and rules.
Income Statement (Partnership) - Same as a corporation’s income statement.
Balance Sheet (Partnership) - No stock or retained earnings; uses partner capital accounts.
Statement of Changes in Capital - Tracks beginning capital, investments, income, withdrawals, and ending capital.
Fixed Ratio - Income/loss is split in a set proportion.
Interest Allowance - Extra allocation for partners who invested more money.
Salary Allowance - Extra allocation for partners doing more work.
Bonus - Extra income based on specific terms, like a percentage of profit.
New Partner by Purchase - Buys interest from existing partner; no change in total capital.
New Partner by Investment - Adds assets to the partnership; may create a bonus.
Bonus to Existing Partners - New partner invests more than the capital they receive.
Bonus to New Partner - New partner invests less than the capital they receive.
No Bonus - New partner’s investment equals capital given.
Withdrawal by Sale - Partner sells interest to someone else; no change in partnership assets.
Withdrawal by Payment - Partner receives assets from the partnership to leave.
Bonus to Retiring Partner - Assets received > capital account balance.
Bonus to Remaining Partners - Assets received < capital account balance.
No Bonus on Withdrawal - Assets received = capital account balance.
Managerial Accounting - Accounting focused on internal users, helping managers plan, control, and make decisions.
Financial Accounting - Accounting aimed at external users like stockholders and creditors, focused on historical performance.
Direct Materials - Raw materials used directly in the production of a product.
Direct Labor - Labor costs directly tied to the production of a product.
Manufacturing Overhead - All manufacturing costs other than direct materials and direct labor.
Variable Costs - Costs that change in total with changes in activity level but remain constant per unit.
Fixed Costs - Costs that remain constant in total regardless of activity level but change per unit.
Mixed Costs - Costs with both variable and fixed components.
Relevant Range - The activity range within which cost behavior assumptions are valid.
Cost Behavior - How a cost reacts to changes in activity level.
High-Low Method - Separates mixed costs into fixed and variable components using high and low activity levels.
Contribution Margin - Sales revenue minus variable costs; the amount available to cover fixed costs and profit.
Contribution Margin Per Unit - Selling price per unit minus variable cost per unit.
Contribution Margin Ratio - Contribution margin divided by sales revenue, expressed as a percentage.
Break-Even Point - Sales level at which total revenue equals total costs, resulting in zero profit.
CVP Analysis - Cost-volume-profit analysis; shows how changes in costs and volume affect profit.
Traditional Income Statement - Separates costs by function (COGS and operating expenses).
Contribution Income Statement - Separates costs by behavior (variable and fixed).
Variable Cost Ratio - Variable costs divided by sales revenue; percentage of sales consumed by variable costs.
Fixed Costs in High-Low - Total cost at either activity level minus (variable cost × units).
Target Profit Analysis - Determines the sales needed to achieve a specific profit.
Manufacturing Costs - Direct materials, direct labor, and manufacturing overhead.
Indirect Materials - Materials used in production that cannot be traced directly to a product; included in overhead.
Indirect Labor - Factory labor not directly tied to product; included in overhead.
Non-Manufacturing Costs - Selling and administrative expenses.
S&A Costs - Selling and administrative costs; non-manufacturing.
Product Costs - DM, DL, and OH; recorded as inventory then expensed as COGS.
Period Costs - Non-manufacturing; expensed as incurred.
Direct Costs - Costs easily traced to a product (e.g., DM, DL).
Indirect Costs - Costs not easily traced to a product (e.g., OH).
Pre-Determined Overhead Rate (PDR) - Estimated OH / Estimated activity level.
Estimated Activity Level - Expected base to apply OH (e.g., DL hours, machine hours).
Applied Overhead - OH applied using PDR and actual activity.
Actual Activity - Actual amount of the activity base used.
Actual Overhead - Total OH actually incurred.
Under-Applied Overhead - Applied OH < Actual OH.
Over-Applied Overhead - Applied OH > Actual OH.
Overhead T-Account - Visual showing actual vs. applied OH.
Cost of Goods Manufactured (COGM) - Total cost of goods completed; includes DM, DL, OH.
Cost of Goods Sold (COGS) - Cost of goods sold during a period; includes COGM and OH variance.
Prime Costs - Direct materials + Direct labor.
Conversion Costs - Direct labor + Overhead.
Raw Materials Inventory - Materials available for use.
Work in Process Inventory - Partially completed goods.
Finished Goods Inventory - Completed goods awaiting sale.
Direct Materials Used - Beginning raw materials + Purchases - Ending raw materials.
COGM Equation - Beginning WIP + DM used + DL + OH - Ending WIP.
COGS Equation - Beginning FG + COGM - Ending FG = Unadjusted COGS.
Cost Accounting - Tracks product cost info.
Job-Order Costing - Costing for unique jobs; costs tracked per job.
Budget - A financial plan for achieving goals.
Planning - Developing objectives for resource use.
Control - Steps to ensure objectives are met.
Master Budget - Summary of all budgets.
Sales Budget - Expected sales in dollars and units.
Sales Forecast - Predicted future sales.
Schedule of Expected Cash Collections - Breakdown of cash collections.
Accounts Receivable - Sales not yet collected.
Production Budget - Units needed to meet sales and ending inventory.
Ending Inventory (FG) - Desired inventory at end of period.
Beginning Inventory (FG) - Inventory from previous period.
Production Budget Formula - Budgeted sales + Ending inventory - Beginning inventory = Units to produce.
DM Purchases Budget - Shows DM needed for production and inventory.
DM Needs per Unit - DM required per unit.
Ending Inventory (DM) - Based on % of next month’s production.
Beginning Inventory (DM) - Prior period’s ending inventory.
DM Purchases Formula - (Units × DM per unit + Desired ending - Beginning) × Cost = DM to purchase.
Operating Expense Budget - Estimates variable, fixed, and mixed operating costs.
Cash Budget - Forecast of cash inflows/outflows.
Cash Collections - Cash from customers.
Cash Payments - Cash outflows (inventory, expenses, etc.).
Excess of Cash - Inflows > Outflows.
Deficiency of Cash - Outflows > Inflows.
Borrowings - Loans taken out.
Repayments - Paying off borrowings.
Non-Cash Expenses - Expenses like depreciation.
Cash Budget Formula - Beginning cash + Collections - Payments + Borrowings - Repayments = Ending cash.