Chapter 2 Accounting Systems for Recording Business Transactions

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Chapter 2 Accounting Systems for Recording Business Transactions Powered By Docstoc
					Transparency Master 16(1)-1



  FINANCIAL ACCOUNTING AND
   MANAGERIAL ACCOUNTING
Financial Accounting
   1. External Focus: Primarily reports results of
      business operations to persons "outside" the
      company
   2. Reports historical data
   3. Must follow             generally   accepted   accounting
      principles

Managerial Accounting
   1. Internal Focus: Reports information used by
      management in overseeing daily operations of
      company
   2. Reports historical data and budgets or estimates
      for the future
   3. Reports more detailed information
   4. Not restricted by generally accepted accounting
      principles
   5. Usefulness to management is guiding principle
Transparency Master 16(1)-2



               WRITING EXERCISE
Why is it permissible to violate generally ac-
cepted accounting principles when prepar-
ing reports used strictly by company man-
agement?
Transparency Master 16(1)-3



CERTIFICATE IN MANAGEMENT
    ACCOUNTING (CMA)
Professional credential available to management
accountants with a bachelor's degree and 2
years of work experience in managerial account-
ing. An accountant with an associate’s degree
may take the CMA exam by earning a score of
50% or better on the Graduate Records Examina-
tion (GRE).

Must complete a 2-day examination covering the
following:
   1. Economics, finance, and management
   2. Financial accounting and reporting
   3. Management reporting, analysis, and behav-
      ioral issues
   4. Decision analysis and information systems.
Must earn 30 hours of continuing professional
education credit every year to maintain certifi-
cate.
Transparency Master 16(1)-4



          MANUFACTURING COSTS
Direct Materials—materials and component parts that be-
come an integral part of the final product. These materials
can be traced directly to a finished unit of product.
Direct Labor—cost of wages paid to employees who work di-
rectly on the product.
Factory Overhead—all other costs incurred in making the
product. These costs include the following:
  1. General manufacturing costs that cannot be traced di-
     rectly to the product:
        Utilities (heating, lighting)
        Depreciation on machines
        Property taxes
        Insurance
  2. Indirect Labor—wages/salaries paid to workers who are
     necessary to keep the factory running, but do not work
     directly on the product:
        Maintenance workers
        Janitorial staff
        Factory personnel department
        Plant manager and supervisors
  3. Indirect Materials—materials used in the manufacturing
     process that do not end up in the final product:
        Materials used to test machines
        Lubrication used on machines
NOTE: Direct materials and direct labor costs may be treated
as factory overhead costs if they are insignificant.
Transparency Master 16(1)-5



       MANUFACTURING COSTS

                          Product Costs



 Direct                       Direct       Factory
Materials                     Labor       Overhead


                               Conversion Costs
Transparency Master 16(1)-6



  COSTS INCURRED BY A MANUFACTURING
              COMPANY

                  Product Costs               Period Costs


     Direct            Direct    Factory    Selling     Administrative
    Materials          Labor    Overhead   Expenses       Expenses


                        Conversion Costs
Transparency Master 16(1)-7
                    Statement of Cost of Goods Manufactured
Work in process inventory, beginning of period                       $XXX
Direct Materials:
  Materials Inventory, Beginning of period          $XXX
  Purchases                                         XXX
  Cost of materials available for use               $XXX
   Less materials inventory, Ending                  XX
    Cost of Materials placed in production                    $XXX
Direct Labor                                                  XXX
Factory Overhead:
  Indirect Labor                             $XXX
  Depreciation on factory equipment          XXX
  Factory Utility Expenses                   XXX
    Total Factory overhead                                    XXX
Total manufacturing costs added                                      XXX
Total manufacturing cost                                             $XXX
Less work in process inventory, Ending                                XX
Cost of goods manufactured
$XXX
Transparency Master 16(1)-8


                              Income Statement


Sales                                                   $XXX
Cost of Good Sold:
  Finished goods inventory, Beginning            $XXX
  Cost of goods manufactured                     XXX
  Cost of finished goods available for sale      XXX
   Less finished goods inventory, ending         XXX
        Cost of goods sold                               XXX
Gross profit                                             $XXX
Operating expenses:
   Selling expenses                              $XXX
   Administrative expenses                       XXX
         Total Operating expenses                         XXX
Net Income                                               $XXX

				
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