lecture_1_ch1 - LectureOne:12/23/11

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Lecture One: 12/23/11 Financial Accounting: External users [look inside company from outside]; produces  financial statements - balance sheet, income statement, statement of cash flows,  statement of owner’s equity; past performance; GAAP [governed by this, format], only  verifiable info [company is trying to show itself, outsiders trying to know what is going on  inside [truthful, supported by info] Auditors assess and make sure company is not  cheating outsiders. But company hires auditors. So. ..they are probably looking at  company’s interests. Managerial Accounting - Internal users; future performance focus;  no rules [no specific  format]; rough estimates [ball park info] Example: Pizza store with two types of pizzas. We have all types of costs.  DMaterials 10,000 DLabor 20,000 Rent 30,000 Utilities 5,000 Total Cost: 65,000 Plain 5,000 Pepp 5,000 Cost per unit of pizza. ..? 65k/10k = 6.5 Average. But Plain should be less than Pepp  Price company should sell pizza. ..? Competitors: 10k for $10, 15k for for $12. What should we sell for?  Per unit rent? Depends on how much you end up making. It depends. Utilities?  Nobody knows per unit cost of making anything! SMart technique: Charge whatever the 
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market can bear. Suppose market is $6 for plain, $7 for pepperoni. .. you should move elsewhere! The more I know my cost, the more I can beat the competitors.
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This note was uploaded on 04/06/2012 for the course ACCT 272 taught by Professor Mensah during the Spring '08 term at Rutgers.

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lecture_1_ch1 - LectureOne:12/23/11

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