erms

revenue (income) expense beginning capital change in capital assets - liablities

Definitions
=net profit(net loss) Income Statement = ending capital Statement of Owner's Equity = owner's equity Balance Sheet

Current assets

-cash -petty cash fund -accounts receivable -prepaid expenses -supplies -inventory

Fixed assets

-equipment -automobiles -furnishings -land and building

Tangible assets Intangible assets Liabilities/ Current liabilities

seen, touched, possessed evidence of ownership or rights of value -accounts payable -taxes payable -wages payable

Long term liabilities

-mortgage payable -notes payable -bonds payable

Owner's equity

-capital -withdrawls -revenues' -expenses

Expanded accounting equation Source documents

assets=liabilities+owner's equity-drawing accounts+revenue-expenses source information input in journal

-check stub -sales invoice -purchase invoice -cash register tape -ATM/POS receipts Accounting for cash cash on hand (has to match money on books) -cash -records of cash receipts and disbursements -petty cash fund -cash over and short Banking procedures -deposit -checks -bank statement Payroll Accounting Employee earnings and deductions-W2 Payroll taxes -Federal Insurance contributions Act (FICA -Federal unemployment Tax Act (FUTA) -State unemployment Tax Act (SUTA) The Accounting cycle (for service enterprise) -Journalizing transactions -Posting to the ledger -Preparing the trail balance "balanced" -Journalizing and posting adjusting entries -Preparing the adjusted trail balance -Preparing the financial statements -Journalizing the posting closing entries -Preparing the post-closing trail balance The Accounting Cycle (for merchandise sales) -purchases -sales -cash receipts journal -cash payments journal -cost of good sold -gross profit -uncollectible accounts receivable -prepaid expenses -depreciation of fixed assets -bank credit card expense Accounting for Notes interest=principle X rate X time

and Interest

-promissory note -formula for determining simple interest

ratio analysis (current ratio) ratio analysis (acid test ratio/quick ratio) account receivable turnover

current assets divided by current liabilities

quick assets(cash, securities,receivables) divided by current liabilities net credit sales divided by beginning account receivalbes + ending account receivables divided by 2

age of accounts receivable inventory turnover

365 divided by accounts receivable turnover

cost of goods sold divided by beginning inventory + ending inventory divided by 2

age of inventory profit margin gross profit percentage supplies account - cost of supplies on hand straight-line depreciation

365 divided by inventory turnover net income divided by net sales gross profit divided by net sales =amount of supplies used

cost-salvage value divided by years of depreciation

If Efficiency 0 - 80% then Normal Piece Rate = (Units Produced) x (Normal Piece Rate) + (Units Produced) x (Normal Piece Rate) If Efficiency 81 - 100% then 10 % of Normal Piece Rate = (Units Produced)x(Normal Piece Rate) + (Units Produced)x(0.10)x(Normal Piece Rate) If Efficiency 100% - Above% then 20 % of Normal Piece Rate = (Units Produced)x(Normal Piece Rate) + (Units Produced)x(0.20)x(Normal Piece Rate) 31. Cost Of Goods Manufactured & Sold Statement (Source: See Page 22 of PIPFA Cost Accounting Book) 32. Marginal Costing / Direct Costing Sales XXXX Less Variable Cost of Goods SoldOpening Stock (Opening Stock x Variable FOH Rate/unit)

XXXX+ Production (Produced Units x Variable FOH Rate/unit) XXXX(-) Closing Stock (Closing x Variable FOH Rate/unit) (XXXX)Variable COGS XXXX (XXXX) Gross Contribution Margin XXXX (Less) Variable Marketing Expenses (if any) (XXXX) Net Contribution Margin XXXX Less Fixed Costs (if any)Period Cost (Sales x Fixed FOH Rate) XXXX+ Fixed Marketing Expenses XXXXTotal Fixed Costs XXXX (XXXX) Net Profit by Marginal Costing XXXX Notes to Marginal Costing:a. Fixed Cost are for one month only then they will be treated as Period Cost.b.

Inventory is multiplied to only Variable FOH Rate per unit. c. Marginal Costing shows higher profits .

d. Marginal Costing leads to Contribution Margin (CM) then Net Profit. 33. Absorption Costing Sales XXXX Less Cost of Goods SoldOpening Stock XXXX {Opening Stock x (Fixed FOH Rate/unit +Variable FOH Rate/unit)} + Production XXXX {Units Produced x (Fixed FOH Rate/unit +Variable FOH Rate/unit)} (-) Closing Stock (XXXX) {Closing Stock x (Fixed FOH Rate/unit +Variable FOH Rate/unit)} Cost of Goods Sold XXXX +Under / (-)Over Applied FOH XXXXCost of Goods Sold at Actual XXXX (XXXX) Gross Profit XXXX Less Marketing Expenses (if any) Fixed Marketing Expenses XXXX+ Variable Marketing Expenses XXXXTotal Marketing Expenses XXXX (XXXX) Net Profit by Absorption Costing XXXX Notes to Absorption Costing:e. Over/Under Applied FOHBudgeted Production (Budgeted units x Fixed FOH Rate/unit) XXXX() Actual Production (Actual units x Fixed FOH Rate/unit) (XXXX)Over/Under Applied FOH XXXX

If Actual Production > Budgeted Production ^ Over Applied FOH

If Actual Production < Budgeted Production ^ Under Applied FOHf. If Over Applied FOH ^ Minus from COGS at Actualg. If Under

Applied FOH ^ Add in COGS at Actualh. Absorption Costing leads to Gross Profit (GP) then Net Profit . Confusing Terminologies of Cost Accounting 1.Inventory = Stock 2.Re-Order Period = Lead Time 3.EOQ = Re-Order Quantity 4.Standard = Budgeted 5.Marginal Costing = Direct Costing 6.Absorption Costing = Full Costing = Factory Cost = Production Cost7. Total Production Cost = Manufacturing Cost