m3l2 - Fall 2010 Module 3 Accounting & Finance Lecture 2:...

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David Robinson © D. Robinson, 2010 Fall 2010 Module 3 Lecture 2: Managerial Accounting
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Module Overview Accounting Managerial Financial Finance Auditing How investors use their money How firms raise money Three financial statements Forms of business
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Lecture Overview: Managerial Accounting • Overview of Terms Managerial Accounting: 3 Concerns t he question of costs • Cost/volume/profit relationships • Achieving “Break-even” • Costs relevant and not-relevant • Opportunity cost
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The Importance of Accounting • Good records reassure everyone that no one is “scamming” the business • Proper accounting is important when you have distant investors and remote firms 4
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Accounting Accounting versus Bookkeeping Accounting involves analysis ookkeeping just recording 5 Bookkeeping is just recording Accounting involves keeping track of: How much we have (money, inventory) How well we are doing What is owed to us, and what we owe
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Accounting: The Language of Business Two different styles of accounting: • Managerial Accounting 6 for internal users • Financial Accounting for external constituencies • Shareholders • Regulators
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Managerial Accounting 1. Reports are usually more frequent than those required for Financial Accounting 7 ( weekly is not unusual) 2. Often contain industry-specific measures (e.g. $ per transaction, total by store ) 3. Managerial Accounting is about measuring costs
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Accounting for Costs Costs are: Fixed or Variable, and Relevant or Sunk
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Costs are Fixed or Variable 1 . Fixed Cost: A cost that doesn’t change over a period of time oesn’t matter how much we sell, or 9 Doesn’t matter how much we sell, or How many we make Examples: Screen charge for printing t-shirts (one-time charge) Cost to hire a D-J for a party
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Costs are Fixed or Variable 2. Variable Cost: A cost that changes depending on the level of production or sales 10 Depends on how much we sell, or How many we make • Examples: Cost of blank t-shirts, Cost of each soda at a party
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This note was uploaded on 02/05/2011 for the course BUSINESS 10 taught by Professor Johnsmith during the Fall '10 term at UCLA.

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m3l2 - Fall 2010 Module 3 Accounting & Finance Lecture 2:...

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