Accounting Chapter Notes

Accounting Chapter Notes - AccountingChapter1Notes...

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Accounting Chapter 1 Notes 24/01/2008 10:12:00 1) Comparison of Financial and Managerial Acct. 2) CostsClassifications 3) Cost flows; Schedules of Costs of Goods Sold, Cost of goods manufactured. Managerial Accounting: Users: Managers who plan for and control an organization Time focus: future on emphasis Verifiability vs. relevance: Emphasis on relevance for planning and control Precision vs timeliness: emphasis on timliness Subject: Focus on segments of an orgnization GAAP: Need not to follow GAAP or any prescribed format Requirement: not mandatory Decision making: The numbers need to be relevant for the decisions that you are making. The numbers all need to precise however that takes time and it is time wasted  for the manager. Cost classifications Financial reporting o Manufacturing costs
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Direct materials (DM): Raw materials that become and integral  part of the product and that can be conveniently traced directly  to it. Direct labor (DL): Those labor costs that can be easily traced to  individual units of product. Manufacturing overhead (MO): Manufacturing costs cannot be  traced directly to specific units produced. Electricity to power the assembly line, factory insurance,  water, rent, depreciation of factory equipment. Supervisor has to oversee everything that is going on in  the factory. Something to ask when determining what kind of  cost it is: Is the cost related to factory or  production? Predicting cost behavior Assigning Costs to Cost Objects Decision Making Prime cost: direct materials plus direct labor
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Conversion cost: direct labor plus manufacturing overhead Non-manufacturing costs Marketing and selling costs: The costs of advertising, promoting the product,  making sales calls, order taking, delivering the project. Administrative costs: Executives, human resources (payroll), and other costs  not related to production or marketing. More definitions Period costs: Costs that are expensed in the period in which they are  incurred. Included selling and administrative costs. o Appear on income statement in the period that they are incurred. Product costs: Costs that are recorded as inventory as they are incurred. Also  called inventoriable costs, since the costs remain in inventories and on the  balance sheet until the products are sold. For manufacturing firm, product  costs are the same as manufacturing costs. Includes DM, DL and MO. Product (manufacturing) Costs
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Accounting Chapter Notes - AccountingChapter1Notes...

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