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Accounting 2101 Chapter 1 Summary Notes

by: Audrey Broussard

Accounting 2101 Chapter 1 Summary Notes ACCT 2101

Marketplace > Louisiana State University > Accounting (ACCT) > ACCT 2101 > Accounting 2101 Chapter 1 Summary Notes
Audrey Broussard
GPA 3.64

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These notes are the notes the professor went over in class.
Introduction Managerial Accounting
J. Chenier
Class Notes
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This 6 page Class Notes was uploaded by Audrey Broussard on Monday August 29, 2016. The Class Notes belongs to ACCT 2101 at Louisiana State University taught by J. Chenier in Fall 2016. Since its upload, it has received 12 views. For similar materials see Introduction Managerial Accounting in Accounting (ACCT) at Louisiana State University.


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Date Created: 08/29/16
Chapter 1 Notes 8/22/16 & 8/24/16 Definitions : 1. Managerial Accounting – Provides useful information for management to make decisions 2. Managerial vs. Financial Managerial Financial a. Users driven Internal External b. Type of reports Internal reports as needed F/S and quarterly and annual reports c. Reason Specific General Contents Segments or units, Aggregated and in d. Relevant to operations accordance with GAAP e. Verification Non-audited Audited 3. Functions of Management a) Planning/Organizing: looking ahead by establishing company objectives and performing only activities that add value to the business. (CH 7-9 Budget) b) Directing/Leading: coordinating of human resources and directing detailed activities to run smoothly (CH 1,2,5,6) c) Controlling: measuring and monitoring, insuring that planned goals and activities are being followed or achieved by the use of budgets, responsibility reports and performance evaluations. (Chapters 10-13) 4. Types of Organizations a) Manufacturing Firms: purchase raw materials from suppliers and convert them into finished products. b) Merchandising Companies: sell the goods that manufacturers produce. Chapter 1 Notes 8/22/16 & 8/24/16 c) Wholesalers: merchandiser to other businesses d) Retailers: merchandiser to general public e) Service Companies: provide a service to customers or clients 5. Ethics and Internal Reporting a. Ethics: the standards of conduct for judging right from wrong. b. Sarbanes-Oxley Act of 2002 (SOX): top management must certify that the company maintains an adequate system of internal control, accurate financial reports or else there are severe penalties for misconduct. Ø Reduce Opportunities for error and fraud Ø Counteract the incentives to commit fraud with stiffer penalties. Ø Emphasize the importance of the character of managers and employees. 6. Cost Terminology a. Direct: costs that can be traced Example: the bottle & water b. Indirect: costs that cannot be easily traced or are not worth tracing Example: label & glue c. Variable: those that change in total, in direct proportion to changes in activity levels. However per unit or average variable remains the same (is set) for every unit d. Fixed: those that stay the same in total, regardless of activity level, but per unit, they vary inversely with the units of activity. Chapter 1 Notes 8/22/16 & 8/24/16 e. Manufacturing: represent all of the costs associated with producing a physical product • Direct Materials (DM) • Direct Labor (DL) • Manufacturing overhead (MOH): all of the manufacturing costs other than DM & DL, are incurred/spent inside the manufacturing facility DM+DL+MOH Memorize 10 MOH: 1. Indirect Materials 2. Indirect Labor 3. Factory Production Manager's Salary 4. Factory Rent 5. Factory Insurance 6. Factory Utilities 7. Factory Maintenance 8. Factory Depreciation 9. Factory Property Tax (real estate, not income tax) 10. Factory Licenses and Permits f. Non-Manufacturing: costs associated with running the business and selling the product (Office) Ø Marketing and Selling expenses Ø General and Administrative expenses g. Product: costs that are assigned to the product as it is being manufactured. Also called “Inventoriable Costs” (Capitalized asset as they occur) – (inventory; expensed at sale; COGS) Chapter 1 Notes 8/22/16 & 8/24/16 Product Costs = DM Used + DL + MOH h. Period: costs (non-manufacturing) that are expensed as they are incurred. No clear association with the timing of the making of the product i. Relevant: cost that has the potential to influence a decision. Must occur in the future and differ between alternatives j. Irrelevant: will not influence the decision at hand. k. Sunk: cost that has already been incurred. Never relevant. 7. Prime Costs The basic costs of a unit of product Direct Materials Used + Direct Labor 8. Conversion Costs The costs of transforming a raw material into a finished unit product Direct Labor + Manufacturing Overhead 9. Differences in Financial Statements a. Income Statement: Costs of Goods Purchased vs. Cost of Goods Manufactured b. Balance Sheet: Merchandise Inventory vs. Finished Goods, Work in Process Inventory & Raw Materials Inventory (for recording purposes only) Chapter 1 Notes 8/22/16 & 8/24/16 10. Cost of Goods Manufactured Schedule Short version (+) BWIP (what happened yesterday) (+) Current Manufacturing Costs (today) (DM used+DL+MOH) = Total Costs of Work in Process (BWIP + TCMC) (-)EWIP = Cost of Goods Manufactured 1 extended version (+) BWIP (what happened yesterday) Current Manufacturing Costs (today) +Direct Materials Used: +Direct labor +Manufacturing Overhead Applied =Subtotal Current Manufacturing Costs (today) (+)Total Costs of Work in Process (BWIP + TCMC) (-)EWIP =Cost of Goods Manufactured Chapter 1 Notes 8/22/16 & 8/24/16 Final extended version acct for raw materials & w/ inventory (+) BWIP (what happened yesterday) Current Manufacturing Costs (today) Direct Materials Used: Beginning Raw Materials + Purchases OF RM = Total Available OF RM (-)End Raw Materials (Indirect Material) (+) = DM Used (in Factory) (+)Direct labor (+)Manufacturing Overhead Applied = Subtotal Current Manufacturing Costs (+)Total Costs of Work in Process (BWIP + TCMC) (-) EWIP =Cost of Goods Manufactured 11. Cost of Goods Sold (section of IS) partial finished goods Beginning Finished Goods + Cost of Goods Manufactured = Available for Sale (-) Ending Finished Goods (-) Cost of Goods Sold (expense acct) (+ or – adjustment for under or over applied OH)


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