MGA 201 02/25

Understanding Concepts

  • Importance of deep learning and critical thinking over memorization.
  • Main accounting concepts focus on understanding rather than rote learning.

Accounting Basics

  • Debits and Credits

    • Debits go on the left side.
    • Credits go on the right side.

  • One central equation connects accounting concepts:

    • Develop critical thinking skills to navigate various problems associated with financial statements.

Midterm Preparation

  • Upcoming midterm will focus on the material covered in prior sessions.
  • Chapter 5 is not included on the midterm.
  • Practice exams and questions have been posted to give a feel of actual exam.
  • Advice for preparation:
    • Attempt questions before class without looking at answers.
    • Assess understanding based on correct and incorrect answers to focus study efforts.

Chapter Review and Quizzes

  • A quiz will take place after the review of materials from prior chapters.
  • Next class will be asynchronous (not in person) with a recorded session for review later.

Additional Resources

  • Accounting Resource Center (ARC) is available for extra help outside of office hours. Check UDLearns for the schedule.

Special Event Notification

  • An interesting event with George Butich from the Public Company Accounting Oversight Board (PCAOB) discussing AI's impact on accounting and auditing.

Adjustments and Monthly Adjustments

  • Practical Application Example: Adjusting for prepaid expenses (income recognition).

  • Example Problem: Prepaid rent and how to adjust for it.

    • Calculation:
    • Months to adjust: December - September = 4 months.
    • Example: June payment of $600 for 12 months, adjust for 7 months at $50/month.

  • Importance of recognizing adjustments for various accounts without financial transactions occurring.

Sales, Purchases, and Inventory Transactions

  • Merchandiser Transactions: Transactions for items received, returned, and sold.

  • Example Transaction Entries:

    • Inventory Increase: Debit Inventory, Credit Accounts Payable.
    • Fee Payment: Debit Inventory for delivery fees; Credit Cash.
    • Sale of Items: Two entries for recognizing profits and costs of goods sold.

Returns and Allowances

  • Framework for managing returns:
    • Create a Contra Revenue Account: Sales Returns and Allowances.
    • Reversal journal entries impact cash and inventory.

Multistep Income Statement Knowledge

  • Concept is about grouping different financial disclosures:
    • Net Sales Calculation: Total Revenue - Returns and Allowances.
    • Gross Profit: Net Sales - Cost of Goods Sold.
    • Further deductions lead to Income from Operations.

Shrinkage Discussion

  • Understanding reductions in inventory value due to loss (theft, spoilage).
  • Calculation: Comparing actual inventory against ideal stock.

Special Case Studies

  • Discusses the complexities in calculations when accounting scenarios change and pricing fluctuates through FIFO, LIFO, and Weighted Average.

Summary on Cost Flow Methods

  • FIFO: First in, first out.
  • LIFO: Last in, first out.
  • Weighted Average: Cost averaging for inventory sold.
    • Usually tied to the price and calculation for the reports at year-end.

Practical Example Walk-throughs

  • Analyze gains/losses based on estimated costs of goods sold using different methods.
  • Calculation techniques to assess how merchandise flow impacts financial statements during inflationary periods.

Real-Life Business Examples

  • Importance of being aware of financial reporting implications especially with the impacts of reporting frameworks on taxes and cash accumulation.
  • Discusses importance of the Lower of Cost or Market Principle in acknowledging financial health

Inventory Management and Ratios

  • Importance of inventory turnover ratio calculations to evaluate the efficiency of inventory management.
  • How to Calculate: Cost of Goods Sold / Average Inventory.
    • Example of fast food vs. manufacturing industry practices - comparison analysis.

Additional Reminders

  • Practice exams and preparation for upcoming quizzes.
  • Importance of problem-solving and proactive management adjustments when facing accounting discrepancies.
  • Encouragement for students to engage deeply with content and seek additional help if needed.