2_96_finacial_04

2_96_finacial_04 - 2.96 - Management in Engineering, Fall...

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Unformatted text preview: 2.96 - Management in Engineering, Fall 2004 Massachusetts Institute of Technology Department of Mechanical Engineering Instructors: Professor Jung-Hoon Chun and Professor Alexander d'Arbeloff To develop an understanding of financial statements to serve as a basis for all analysis of business situations. Objectives Financial Information Financial Statements Accounting Principles Ratio Analyses Outline Control Coordination Planning Need for Financial Information Financial Perspective Customer Perspective Internal Business Process Perspective Learning and Growth Perspective Financial Information Relationship of Financial Statements B/S t = t 1 RE 1 P/L t = t 2-t 1 B/S t = t 2 RE 2 P* RE 1 + P* = RE 2 Relationship of Financial Statements B/S t = t 1 Cash 1 Cash Flow t = t 2-t 1 B/S t = t 2 Cash 2 Cash Cash 1 + Cash = Cash 2 Typical Accounting Period: 1 yr Double Entry Bookkeeping Accounting Period Realization Matching (Accrual) Consistency Materiality Accounting Principles Bookkeeping 1000 Current Assets 1100 Cash 1110 Cash, Bank 1 1111 Cash, Bank 1, Account 1 5000 Property 5100 Land 5110 Land, Singapore The Chart of Accounts (multi-layered) Account debit + / - credit- / + Assets Cash Inventory Building Liabilities Accounts payable Bank loan Owners Equity Retained earnings Sales Expenses Debit & Credit Assets = Liabilities + Equity Cash (d) + (c)- A / P (d)- (c) + R / E (d)- (c) + Revenue (d) (c) + Expense (d) + (c) Accounting Record Example SMA 6307 - Business Fundamentals Starting Balance Accounts with Debit Balances Accounts with Credit Balances Cash (A) 30,000 Account Receivable (A) 63,000 Raw Materials Inventory (A) 10,000 Work-in-Process Inventory (A) 10,000 Merchandise Inventory (A) 175,000 Land (A) 100,000 Building and Equipment (A) 525,000 Accumulated Depreciation (XA) 85,000 Accounts Payable (L) 135,000 Bonds Payable (L) 100,000 Common Stock (SE) 250,000 Additional Paid-in Capital (SE) 200,000 Retained Earnings (SE) 143,000 Total 913,000 913,000 (A) Asset (XA) Contra Account (L) Liability (SE) Shareholders' Equity & King Shoe Store, Inc. Starting Balance 1-Jan-00 (1) The firm purchases shoe-making equipment in cash costing $10,000 (2) The firm sells merchandise during the year 2000 at a total selling price of $625,000. It receives $225,000 immediately, with the remainder sold on account (3.1) The firm purchases raw materials costing $25,000 on account (3.2) The firm issues raw materials costing $20,000 to producing department (3.3) Shoes completed and transferred to the finished goods storeroom have a manufacturing cost of $10,000 Transactions - 1 (3.4) The cost of merchandise sold during the year 2000 is $90,000 (4) The firm pays salaries in cash of $110,000 for employee services received during the year 2000 (5) The firm collects cash of $325,000 from customers who had purchased on account (6) The firm makes payments of $70,000 to merchandise supplies for purchases on...
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This note was uploaded on 03/24/2010 for the course ARCH 456 taught by Professor Arch during the Spring '10 term at MIT.

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2_96_finacial_04 - 2.96 - Management in Engineering, Fall...

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