Appendix 2-A Accounting Fundamentals

Appendix 2-A Accounting Fundamentals - over a period of...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Appendix 2-A Accounting Fundamentals Objectives of Cost Accounting Systems: Determination of the actual cost of products or services Provision of a rational basis for pricing goods and services Provision of a means for allocating and controlling expenditures Provision of information on which operating decisions may be based and by means of which operating decisions may be evaluated Two primary types of financial statements are created: balance sheet and income statement (or profit-and-loss statement)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Balance Sheet Shows a breakdown of assets (cash, receivables, inventories, equipment, buildings land, etc.); liabilities (short and long term debt and payables); and equity (for example, capital stock and retained earnings) at a given point in time (snapshot) The following relationship holds: Assets = Liabilities + Owner’s Equity (Hence the name Balance Sheet) Example - p. 74
Background image of page 2
3 Income Statement Shows a breakdown of revenue and expenses
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: over a period of time The following relationship holds: Profits (Losses) = Revenues Expenses (Hence the name Profit-and-Loss Statement) Note for our purposes, revenue is recognized when it is earned, and expenses when they are incurred. (Sometimes other conventions are used.) Example - p. 74 4 General elements of cost Direct labor Direct materials Overhead Example: You have just received an order to manufacture 100 widgets. Each widget requires 2 hours of direct labor and $15 of material to make. Overhead is allocated to each widget at a rate of $25/direct labor hour. Employees earn $10/hour. a.) What is the cost of this job? b.) Suppose that you wish to earn a 20% profit on each job. What would be the selling price that you would quote the customer for this job? c.) Suppose that the customer is only willing to pay $9,000 for the job. What options would you explore?...
View Full Document

Page1 / 4

Appendix 2-A Accounting Fundamentals - over a period of...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online