BUS 552 Managerial Accounting: 2011

Monday, 25 July 2011

Chapter 6 ideas

Gross Profit (Gross Margin, Gross Profit Margin) = Net Sales - Cost of Sales

Credit Card Sales 3% discount:

Sales Revenue $3000
Less: Credit Card Discount (3% x 3000) = $90
Net Sales = $2910

Sales Discount to Business

2/10, n/30
2 % discount if pay in 10 days
n = net (Total sales less returns)
30 = maximum credit period

Question to take or not for the discount

2/10, n/30 for $100 sales

amount saved / amount paid = interest rate for 20 days
2/98 = 2.04% for 20 days

annual interest rate is = interest rate for 20 days x 365 days / 20 days
2.04% x 365 days / 20 days = 37.23 %

As long as the bank's interest rate is less than the interest rate that associated with failing to take cash discounts, the customer will save by taking the cash discount.

Sales Return and Allowances

50 pairs shoes sales and return 10 pairs
Sales revenue = $2000
Less: Sales return and allowances (0.25 x $2000) = $500
Net sales ( report to income statement) = $1500

Net Sales:

Sales revenue = $6000
Less: Credit card discount (a contra-revenue) $90
Sales discount (a contra-revenue) $20
Sales return and allowances (a contra-revenue) $500
Net sales = $5390

Gross Profit Percentage:

Gross Profit Percentage = Gross Profit / Net sales

Measure and Reporting Receivables

Accounting for Bad debts

Control over Accounts Receivable to optimize bad debts:

Require approval of customers' credit history by a person independent of the sales
Age account receivable periodically and contact customers with overdue payments
Reward both sales and collections personal for speedy collections so that they work as a team

Receivables Turnover

Receivables Turnover = Net Sales / Average Net Trade Accounts Receivable
Average Collection Period = 365 / Receivable Turnover

Tuesday, 12 July 2011

Chapter 4 ideas

Adjusting Entries:

Because recording these and similar activities daily is often very costly, most company wait until the end of the period to make adjustments to record related revenue and expenses in the correct period.

At the end of the period:

Adjusting Revenues and Expenses
Preparing Financial Statements
Closing the Books

Accounting Cycle:

During the period: Analyze, Record, Post
At the end of the period: Adjust
Prepare, Disseminate
Close

Unadjusted Trial Balance:

is a list of individual accounts in one column, usually in financial statement order, with their ending debit or credit balance in the next two columns.

Contra-Account:

is an account that is an offset, or reduction of, the primary account.

Deferred revenues:

When cash is received prior to earning a revenue by delivering goods or performing services, the company records a journal entry.
During the period: Cash (+A) and Unearned fee revenue (+L)
End of period: Unearned fee revenue (-L) and Fee revenue (+R, +SE)

Accrued Revenues:

When revenues are earned but not yet record at the end of accounting period because cach changes hands after service in preformed or goods delivered.
End of period: Interest receivable (+A) and interest revenue(+R, +SE)
Next period: Cash (+A) and Interest receivable (-A)
Example: Interest Receivable / Rent Receivable
Adjusting Entry: Asset (Up) and Revenue (Up)

Deferred Expenses:

When cash is paid prior incurring an expense, the company records a journal entry to debit an asset account and credit cash.
During the period: Prepaid insurance(+A) and Cash (-A)
End of period: Insurance expense (+E, -SE) and Prepaid insurance (-A)
Expense (Up) and Asset (Dn)

Accrued Expenses:

When expenses are incurred in the current period but not billed or paid for until the next period.
End of period: Wages expense(+E, -SE) and Wages payable(+L)
Next period: Wages payable(-L) and Cash (-A)
Expense (Up) and Liability (Up)

Net Profit Margin = Revenues - Cost - Expenses

Net Gross Margin = Revenue - Cost

Net Income = Revenues - Expenses

Assets = Liabilities + Stockholders' Equity

Earnings per Share = Net Income Available to the Common Stockholders

/ Weighted Average Number of Shares of Common Stock Outstanding during the period

Tuesday, 21 June 2011

Chapter 2 Transaction Analysis

Transactions: Every translation has two sides:

You give something and
You receive something

The Account:

Assets = Liabilities + Stockholders' (Owners') Equity

Assets:

Cash
Accounts Receivable
Notes Receivable
Inventory
Prepaid Expenses
Land
Buildings
Equipment, Furniture, and Fixtures

Final Form of the Rules of Debit and Credit

Transaction Analysis

Chart of Accounts:

Balance sheet accounts: Assets, Liabilities, and Stockholders’ Equity
Income statement accounts: Revenues and Expenses

Sunday, 19 June 2011

Chapter 1 The Financial Statements

Two Kinds of Accounting:

Financial accounting provides information for people outside the firm.
Management accounting generates inside information for the managers.

AICPA:

American Institute of Certified Public Accountants

Organizing a Business: A business can take 1 of several forms:

proprietorship: A proprietorship has a single owner, called the proprietor.
partnership: A partnership has 2 or more persons as co-owners, and each owner is a partner (LLP).
limited-liability company (LLC):A limited-liability company is one in which the business (and not the owner) is liable for the company’s debts.
corporation: A corporation is a business owned by the stockholders, or shareholders.

GAAP: Generally A
ccepted Accounting Principles

Accountants followed professional guidelines.
In US, Financial Accounting Standards Board (FASB) formulates GAAP, provide information for making investment and credit decisions.

The Entity Concept

Organization stands apart from other economic unit.

The Reliability Principal

also call the objectivity principal.
accounting records are based on information supported by object evidence.

The Cost Principle

assets and services should be recorded at their actual
historical cost (not the market value).

The Going-Concern Concept

assumes that the entity will remain in operation long enough to use existing assets.

The Stable-Monetary-Unit Concept

accountants assume that the dollars purchasing power is stable and ignore inflation.

THE ACCOUNTING EQUATION

Assets = Liabilities + Owners’ equity (also called capital)

Assets:

Assets includes cash, merchandise inventory (or just inventory), property, plant, and equipment.
Land, buildings, and equipment are called property, plant, and equipment (abbreviated as PPE), plant assets, or fixed assets.

Liabilities include a number of payables, such as accounts payable and notes payable.