Exam 1 Man. Acc. (1, 12, 2, 3)

Chapter 1

Managerial vs Financial

• Managerial Accounting: Internal decisions makers, detailed, doesnt follow GAAP

• Financial Accounting: External decision makers, summarized info, financial statements ( income statement, statement of retained earnings, balance sheets,statement of cash flows,), adheres to GAAP

Information Produced

• takes past info to predict future performance ( budgets forecasts)

• frequency can vary; daily, weekly, monthly, yearly etc

• reviewed from within organization (managers, accountants, auditors) and is not available publicly

Functions of Management

• Planning: setting goals and objectives, requires lots of info (sales, products, market share, customers, employees)

• directing: day to day operations

• controlling: evaluating results of operations against plans and make adjustments

• decision making: occurs at all stages of planning directing and controlling, can be operational or stratig

Types of Info Needed

• requires inputs (data) and outputs (results)

• Operational managers: require current, frequent (possibly daily) info to make right now decisions

• Upper level managers: require summarized info, less frequent, long term goals and strategies

Uses of Info

• Product costing: finding true cost of products ( materials labor overhead)

• non routine decision making: can be many things (new product line, deciding on manufacturing vs outsourcing)

• planning and control: evaluating performance (ex budgeting and variance analysis)

Data Analytics

• structured data: easy to process and use (excel file with rows and columns)

• unstructured data: not standardized hard to capture (social media comments)

• descriptive analysis: summarizes past trends (what happened)

• diagnostic analysis: why it happened, uses non financial and financial

• predictive analysis: what could happen uses descriptive and diagnostic analysis

• prescriptive analysis: most complex, determines future actions (ex algorithms, modeling)

Code of Ethics

• competence:maintaining technical expertise IMPORTANT: any violation of the other three violent competence for violating cpa guidelines

• confidentiality: keeping company info secret from outside

• integrity: being honest and trustworthy

• credibility: presenting info fairly and without bias

Chapter 12

Financial Data Analysis

• Year to year

• against competitor

• against industry average

Horizontal Analysis

• year to year

• 1. find difference of dollar amounts between years

• 2. divide dollar amount by base year (previous year)

Vertical Analysis

• compares lines in the income statement to base amounts

• income statement: compared as a percentage of net sales

• balance sheet: assets accounts compared to total assets

• 1. difference in dollar amounts between account and base

• 2. divide amount by base

Common Ratio

• Liquidity Ratios

  • Working Capital: current assets - current liabilities

  • current ratio: current assets/ current liabilities

  • quick ratio: (cash + short term investments + net receivables)/ current liabilities

• Profitability

  • Return on Sales: net inc/ net sales

  • return on total assets: net inc + interest exp/ avg total assets IMPORTANT: averages are: beginning balance + ending balance / 2

  • return on equity: (net income - preferred dividends declared- appears on income statement)/ average common stockholders equity

  • earnings per share: (net income - preferred dividends declared)/ average # of common shares outstanding

Chapter 2

Types of Organizations

• service org: services (cpa, law firm, health care)

• merchandising org: resells goods purchased from manufacturers, one inventory account

• manufacturing org: converting raw materials into goods, three inventory accounts: raw materials, work in progress, finished goods

Costing

• prime costs: direct materials/ direct labor

• cost object: used separately measure costs (units, products, processes, customer)

Direct Costs

• traced directly to cost object

• direct materials: raw materials

• direct labor: involved directly to produce goods

• conversion costs: costs to convert direct materials into product( dl + oh)

Indirect Costs

• cant be traced to cost object

• overhead (indirect materials, indirect labor, depreciation on equip, factory insurance, factory utilities)

Value Chain

• research and dev, design, production (direct & indirect), marketing, distribution, customer service

Product vs Period

• product costs: only assigned goods used to produce product , asset

• period costs: anything not product cost, all value chain except production

Cost Flow

1. debit raw materials

2. credit dm used - rm

3. debit dm used - wip inv

4. debit direct labor - wip inv

5. debit overhead - wip inv

   1. debit indirect labor, indirect materials, electrictiy, taxes, depreciation etc - overhead IMPORTANT: must relate to manufacturing process

6. credit cogm - wip inv

7. debit cogm - fg inv

8. credit cogs - fg inv

Cost of Good Sold

• sales

• - COGS

• = Gross Profit

• - Selling general and admin exps (anything besides manufacturing production process)

• = Net Income

Chapter 3

Process vs Job

• relates to type of organization

• process costing: costs to products that are the same (ex coca cola), costs are averaged, assigned to units

• job costing: costs to products that pass through production for a specific job (ex construction) , specific goods (ex art work), costs are allocated to each job

• note for for service industries - no direct materials, includes direct labor & overhead

Job Costing

• job sheet: where manufacturers track dm, dl, overhead

• Cost flow step are similar, includes WIPs for each job

• Journal Entries

  • purchase raw materials - debit: rm inv, credit: acc pay

  • use direct materials - debit: wip job 1, credit: rm inv

  • use indirect materials - debit: overhead, credit: rm inv

  • direct labor - debit: wip job 1, credit: salaries payable

  • indirect labor - debit: overhead, credit: salaries payable

Overhead

• predetermined overhead rate: estimated overhead/ estimated allocation base

• estimate allocation base examples: machine hours

• allocated indirect cost = predetermined oh rate x actual allocated base

• overhead t accounts :debit actual amount, credit: allocated amount

• if debit is lesser: over allocated, if credit is lesser: under allocated

  • t account if over allocated: debit oh, credit cogs

  • if under: debit cogs, credit oh

Data Analytics

• establish prices

• analyze job profitability

• schedule jobs and employes

• monitering job completion

• vendor reliability

• improve process

• investigate error

Errors

• spoilage: doesn’t meet standard, discarded and reworked

• scrap: left over from manufacturing, no value discarded

• rework: spoilage that was fixed, costly