Business Entity: we record transactions of different entities separately. Owners are
separate from their businesses, and each business is separate from all other
Cost: We record assets at their historical cost (the amount actually incurred whe
Selling Price $100
Variable Cost/Unit $35
Contribution Margin/Unit $65
2 Faucet ﬁlters for every 3 pitcher—cum—ﬁ Iters sold
($65 x 2) + ($90x 3) = $400
1. Break even point
[I 3,000 bundles
Georgia Groom, VP of Sales and Marketing
1. I believe Jim should be reported to the companys ethics board and reprimanded for
spending company dollars in order to obtain information unethically. He should be
Accounting Wizards 4
123 Main St.
Flint, MI 48504
7 November 2015
Ms. Janet Smythe
Vice President, Internal Audit and Risk Management
687 Main St.
Dear Ms. Smythe:
Upon reviewing the calculations and documents from
Know the relationships among the number of shares issued, outstanding, and in the
treasury and be able to compute any of these, given the other two.
1. Be able to record transactions issuing stock for cash or other assets.
Increase Cash under Assets ( # o
1. Be able to distinguish current liabilities from long-term liabilities.
Current Liabilities are due within one year.
Receive goods/services prior to payment (Accounts Payable).
Receive payment prior to delivery of goods/services. (Unearned Rent)
Sales on Account: The effect of sales on account is similar to that for cash sales except
that accounts receivable is increased instead of cash.
When the customer pays the amount, accounts receivable is decreased and cash is
Sales Discounts: Pr
Classified Balance Sheet
Current assets- The portion of assets that will be used to help generate revenue within a
year. Ex: cash, accounts receivable, inventory, supplies, prepaid expenses
Long term assets- The portion of assets that will be used to help
The ratio measures the overall stock markets opinion of a corporations future earning
power. It is the most popular common measure of corporate health.
Price-Earnings Ratio= Market price per share of common stock / Earnings per share of
1. Manufacturer: buys basic inputs from suppliers. Converts them into a finished product
for sale to merchandisers.
Merchandiser: Also called middlemen. Buys finished goods from manufacturers and
sells them to customers.
Service: Does not sell goods. Prov
Assets: resources owned by a business
Liabilities: legal obligation to repay the amount borrowed according to the terms of the
Equity: getting cash or other assets by either selling ownership shares (capital stock) in
the business, or by operati
Controls over the asset cash (in)
Cash short and over account
-reveals differences between recorded cash sales and actual cash in the register drawer
- cash short is a miscellaneous expense
- cash over is other income
Separation of duties when receiving c
1. Accrual accounting concepts are designed to reflect a companys financial
performance during a period and avoid misleading results that could arise form the
timing of cash receipts and payments.
Accrual accounting recognizes the importance of reporting
Your Solution Show all calculations:
a. Revenues Budget
c. Direct material usage budget in units and dollars
Regular (2,150 * 1.3 yards)
Deluxe (2,950 * 1.5