Accounting KPIs

Performance Element: Classify, record, and summarize data to produce needed financial information.

Performance Indicators:

1. Discuss the nature of the accounting cycle (FI:342) (CS):
   The accounting cycle is the process through which a business collects, processes, and reports financial information. It includes steps such as journalizing transactions, posting to ledgers, preparing trial balances, adjusting entries, and preparing financial statements.

2. Distinguish among types of business transactions (FI:673) (CS):
   Business transactions are events that affect a company's financial position, such as purchases, sales, payments, and receipts. These can be classified into operating, investing, and financing activities.

3. Distinguish among types of business documentation (FI:674) (CS):
   Business documentation includes invoices, receipts, purchase orders, sales orders, and contracts that serve as evidence for transactions and support accounting entries.

4. Demonstrate the effects of transactions on the accounting equation (FI:378) (CS):
   The accounting equation is Assets = Liabilities + Equity. Every business transaction affects this equation. For example, purchasing an asset on credit increases both assets and liabilities.

5. Prepare a chart of accounts (FI:379) (CS):
   A chart of accounts is a list of all accounts used in the general ledger, organized by category (assets, liabilities, equity, revenues, expenses). It helps in classifying and recording financial transactions.

6. Explain the nature of special journals (FI:407) (CS):
   Special journals are used for specific types of transactions, such as sales journals, purchase journals, cash receipts journals, and cash payments journals. They streamline recording by categorizing similar transactions.

7. Journalize business transactions (FI:381) (CS):
   Journalizing refers to recording business transactions in a journal in chronological order. Each entry includes the date, accounts affected, amounts, and a brief description.

8. Post journal entries to general ledger accounts (FI:382) (CS):
   After transactions are journalized, the information is transferred to the general ledger. This is where each account's balance is updated to reflect all transactions affecting that account.

9. Prepare a trial balance (FI:383) (CS):
   A trial balance is a report that lists the balances of all general ledger accounts. It helps verify that the debits equal the credits, ensuring the ledger is balanced.

10. Journalize and post adjusting entries (FI:384) (CS):
    Adjusting entries are necessary at the end of a period to update accounts that were not recorded during the period. Examples include accrued revenues, prepaid expenses, or depreciation.

11. Journalize and post closing entries (FI:385) (CS):
    Closing entries are made to transfer the balances of temporary accounts (revenues, expenses, dividends) to the retained earnings account at the end of the period.

12. Prepare a post-closing trial balance (FI:386) (CS):
    After closing entries are made, a post-closing trial balance is prepared to ensure that all temporary accounts have been closed and that the general ledger is ready for the next period.

13. Identify and correct accounting errors (FI:675) (SP):
    Errors in the accounting records need to be identified and corrected. This may involve adjusting journal entries or reclassifying transactions.

14. Prepare worksheets (FI:387) (SP):
    Worksheets are used to organize adjustments and finalize financial statements. They may include trial balances, adjusted trial balances, and other necessary calculations for preparing financial reports.

Performance Element: Maintain cash controls to track cash flow.

Performance Indicators:

1. Explain cash control procedures (e.g., signature cards, deposit slips, internal/external controls, cash clearing, etc.) (FI:113) (CS):
   Cash control procedures ensure the accuracy and security of cash transactions. This includes measures such as verifying signatures, ensuring proper handling of deposits, reconciling accounts, and implementing internal and external checks.

2. Reconcile cash (FI:396) (CS):
   Cash reconciliation involves comparing the cash records in the accounting system with the bank statement to ensure that the company's cash balance matches the actual bank balance.

3. Account for petty cash (FI:676) (CS):
   Petty cash is a small amount of money kept on hand for minor business expenses. It must be tracked accurately, and any disbursements need to be recorded.

4. Account for cash receipts (e.g., record cash, record income) (FI:677) (CS):
   Cash receipts refer to money coming into the business, either from sales or other sources. These transactions must be recorded accurately and categorized appropriately.

5. Account for cash payments (e.g., record cash, record expenses) (FI:678) (CS):
   Cash payments include expenses such as bills, wages, and purchases. These should be properly recorded and matched with appropriate accounts (e.g., expenses, liabilities).

Performance Element: Perform accounts payable functions to record, control, and disburse payments to vendors.

Performance Indicators:

1. Explain the nature of accounts payable (FI:409) (CS):
   Accounts payable represents the amounts a company owes to suppliers for goods or services received. It is a liability account and is typically paid off over time.

2. Account for purchases (e.g., purchase requisitions, purchase orders, invoices, vouchers, etc.) (FI:679) (CS):
   Purchases refer to the acquisition of goods and services from suppliers. This involves tracking requisitions, orders, invoices, and vouchers to ensure accuracy in payments and inventory.

3. Process accounts payable (e.g., maintain vendor file, post to ledger, process invoices and checks) (FI:680) (SP):
   This includes maintaining a vendor list, posting purchases to the appropriate accounts, and processing payments to vendors by issuing checks or making electronic payments.

Performance Element: Perform accounts receivable functions to record, control, and collect payments due from the sale of goods and services.

Performance Indicators:

1. Explain the nature of accounts receivable (FI:424) (CS):
   Accounts receivable represents money owed to a company by customers for goods or services provided on credit. It is an asset account.

2. Account for sales (e.g., invoices, sales receipts, etc.) (FI:682) (CS):
   Sales transactions are recorded when products or services are delivered to customers. This involves creating invoices and receipts to document the transaction.

3. Process accounts receivable (e.g., post to ledger, process payment, process uncollectible account, etc.) (FI:683) (SP):
   This includes updating the accounts receivable ledger, processing payments, and dealing with uncollected amounts (e.g., bad debts).

Performance Element: Maintain inventory records to track the location, quantity, and value of goods and services.

Performance Indicators:

1. Record inventory transactions (FI:432) (CS):
   Inventory transactions include purchases, sales, and adjustments to inventory. These need to be recorded to reflect accurate stock levels and cost of goods sold.

2. Process inventory adjustments (e.g., shrinkage, obsolescence, returns, etc.) (FI:435) (CS):
   Inventory adjustments may be needed for reasons like stock shrinkage, obsolescence, or returns. These should be tracked and recorded to reflect accurate inventory valuation.

3. Explain methods used to value inventory (e.g., FIFO, LIFO, average cost, etc.) (FI:586) (CS):
   Inventory valuation methods determine how inventory costs are assigned to goods sold or remaining in stock:

   • FIFO (First-In, First-Out): Assumes the first items purchased are the first sold.

   • LIFO (Last-In, First-Out): Assumes the last items purchased are the first sold.

   • Average Cost: Assigns an average cost to all units in inventory.

4. Determine the cost/value of inventory (FI:436) (SP):
   Calculating inventory value involves using one of the methods mentioned above (FIFO, LIFO, average cost) and applying it to the physical count of inventory to determine its worth.

Performance Element: Complete payroll procedures to calculate, record, and distribute payroll.

Performance Indicators:

1. Explain the nature of payroll expenses (e.g., Social Security tax, Medicare tax, FUTA, SUTA, workers' compensation, etc.) (FI:638) (CS):
   Payroll expenses include taxes and other deductions employers are required to withhold, such as Social Security, Medicare, unemployment taxes (FUTA and SUTA), and workers' compensation insurance.

2. Maintain employee earnings records (e.g., timecards, time sheets, etc.) (FI:134) (CS):
   This refers to keeping accurate records of employees' working hours, wages, and other compensation details.

3. Calculate employee earnings (FI:438) (SP):
   This involves determining the gross wages for employees based on their hourly rates or salaries and the number of hours worked.

4. Calculate employee deductions (FI:439) (SP):
   Deductions include taxes, retirement contributions, insurance premiums, etc. These must be accurately calculated and subtracted from the employee's gross pay.

5. Calculate payroll taxes (FI:442) (SP):
   Payroll taxes include federal, state, and local taxes that must be withheld from employee paychecks and remitted to tax authorities.

6. Account for payroll transactions (e.g., earnings, taxes, benefits, other deductions) (FI:686) (SP):
   Payroll transactions must be recorded accurately, including employee earnings, deductions, benefits, and taxes.

7. Process payroll payments and remittances (e.g., employees, benefits, taxes) (FI:687) (SP):
   This includes distributing payroll payments to employees and remitting the appropriate taxes and benefit contributions to the relevant authorities.

8. Prepare federal, state, and local payroll tax returns and reports (FI:443) (SP):
   Preparing tax returns involves summarizing payroll data and reporting it to federal, state, and local tax authorities for tax purposes.

Performance Element: Perform specialized accounting procedures to track cash flow.

Performance Indicators:

1. Discuss the nature of long-term assets (e.g., tangible assets, intangible assets, natural resources, etc.) (FI:642) (SP):
   Long-term assets are resources that provide benefits for more than one year, such as property, plant, equipment, and intangible assets like patents.

2. Describe the methods used to value long-term assets (e.g., tangible assets, intangible assets, natural resources, etc.) (FI:690) (SP):
   Long-term assets are valued based on their cost (acquisition cost), less accumulated depreciation or amortization, depending on the asset type.

3. Account for long-term assets (e.g., record acquisition, record depreciation/amortization, record disposal) (FI:691) (SP):
   This involves recording the acquisition of long-term assets, calculating and recording depreciation or amortization, and tracking disposals of assets.

4. Account for long-term liabilities (e.g., bonds payable, notes payable, leases, etc.) (FI:692) (SP):
   Long-term liabilities are debts that are due after more than one year, including bonds, notes, and leases. Accounting involves recording these obligations and their associated interest payments.

5. Account for provisions (e.g., restructurings, warranties, customer refunds, etc.) (FI:693) (SP):
   Provisions are liabilities recognized for uncertain future expenses, such as warranty claims, customer refunds, or restructuring costs.

Performance Element: Perform tax accounting functions to lessen clients' tax burdens.

Performance Indicators:

1. Explain record keeping procedures for tax accounting (FI:484) (SP):
   Tax accounting requires maintaining accurate records of income, expenses, deductions, and other relevant financial data to comply with tax laws.

2. Calculate taxes owed by clients (i.e., individual and business) (FI:696) (SP):
   This involves calculating the amount of taxes due based on the income and applicable tax rates for individuals or businesses.

3. Account for taxes (FI:697) (SP):
   This refers to the accurate recording of tax-related transactions, including tax liabilities and tax payments.

4. Prepare tax returns for clients (i.e., individuals and businesses) (FI:698) (SP):
   Tax returns are prepared by compiling financial data and calculating taxes owed, ensuring compliance with federal, state, and local regulations.

5. Identify tax issues for clients (FI:485) (SP):
   Identifying potential tax issues involves understanding a client's financial situation to highlight tax planning opportunities or areas of concern.

Performance Element: Understand the fundamentals of managerial accounting to aid in financial decision-making.

Performance Indicators:

1. Differentiate among management accounting responsibility centers (i.e., cost, profit, investment, revenue) (FI:717) (SP):
   Responsibility centers are divisions within an organization that are responsible for controlling costs and revenues. The different types include cost centers (focus on controlling costs), profit centers (focus on both costs and revenues), investment centers (focus on ROI), and revenue centers (focus on generating revenues).

2. Discuss the use of cost-volume-profit analysis (FI:718) (SP):
   Cost-Volume-Profit (CVP) analysis helps managers understand how changes in costs, volume, and price affect a company's profit. It is useful for pricing decisions and break-even analysis.

3. Discuss cost accounting systems (e.g., job costing, process costing, standard costing, activity-based costing [ABC]) (FI:719) (SP):
   Different costing systems help businesses allocate costs:

   • Job costing: Used for unique, custom products.

   • Process costing: Used for continuous production of identical products.

   • Standard costing: Assigns expected costs to production.

   • Activity-based costing (ABC): Allocates costs based on activities that drive costs.

4. Distinguish between variable costing and absorption costing (FI:720) (SP):

   • Variable costing: Only variable costs (direct materials, labor, etc.) are included in product costs.

   • Absorption costing: Both variable and fixed costs are included in product costs.

5. Describe common management accounting performance measures (e.g., balanced scorecard, return on investment [ROI], customer profitability analysis, etc.) (FI:721) (SP):
   Performance measures help assess the success of a company. The balanced scorecard includes financial and non-financial metrics; ROI measures the profitability of investments; customer profitability analysis evaluates how much profit a customer generates.

6. Discuss the role of standard costing in the preparation and analysis of budgets (FI:722) (SP):
   Standard costing helps businesses prepare budgets by estimating costs and setting performance benchmarks, allowing for easier comparison between actual and budgeted figures.

7. Describe the nature of flexible budgets (FI:723) (SP):
   A flexible budget adjusts for different levels of activity, making it more adaptable than a static budget. It is used to evaluate performance based on actual output.

8. Explain the role of transfer pricing in managerial accounting (FI:724) (SP):
   Transfer pricing involves setting prices for transactions between divisions or subsidiaries of the same company. It affects profits and tax liabilities across jurisdictions.

9. Explain the impact of business operational practices (e.g., total quality management [TQM], lean production, just-in-time [JIT], etc.) on managerial accounting (FI:725) (SP):
   Operational practices like TQM, lean production, and JIT focus on reducing waste, improving quality, and enhancing efficiency, which can impact cost structures, budgets, and performance measurements.

Performance Element: Produce financial reports to communicate the results of accounting activities.

Performance Indicators:

1. Explain the importance of financial reports (FI:726) (SP):
   Financial reports are critical for communicating a company's financial health to stakeholders, including investors, creditors, and management.

2. Explain the differences between financial statements (e.g., income statement, balance sheet, cash flow statement) (FI:727) (SP):

   • Income statement shows profitability over a period.

   • Balance sheet shows financial position at a specific point in time.

   • Cash flow statement tracks cash inflows and outflows.

3. Prepare a budget (FI:728) (SP):
   A budget is a financial plan that estimates future income and expenses, serving as a guideline for financial management.

4. Prepare and interpret financial statements (FI:729) (SP):
   Financial statements summarize financial data for decision-making. Preparing and interpreting them involves understanding key figures and ratios (like profitability, liquidity, and solvency).