Summary containing all the relevant theory discussed during the course Accounting given in the first year of International Business Administration at the Vrije Universiteit Amsterdam. By learning this summary I personally passed the final exam.
Economic and financial information
Managers and other internal actors
Helpful for:
- Planning
o Maximize long-term profit
o Increase market share
o Commit to environmental protection programs
- Directing
o Coordinate how sales and production divisions collaborate
o Provide incentives to motivate employees
o Hire new managers
- Controlling
o Track the performance of some divisions
o Determine whether key goals are being met
o Implement systems to evaluate teams
Financial Managerial
primary external internal
users
frequency quarterly, yearly as needed
purpose general specific
content business as a whole business units
aggregated detailed
GAAP standards considered useful
verification audited no independent audits
Companies account for indirect materials as part of manufacturing overhead.
Assignment of costs to cost categories: Merchandising/ manufacturing balance:
Manufacturer
Period costs are
>> not included in COGS
>> included as selling or administrative expenses.
Merchandiser
They also have inventories.
COGP but not COGM (no WIP inventories, raw materials).
, Same logic.
Service industries
No inventories.
But they do have direct and indirect costs, etc.
Same logic.
Various costing systems:
Process costing
o Large volumes / continuous
o Time period costs
Job ordering costing
o Costs per job or batch
o Completed job costs
Sold inventory?
Credit finished goods inventory
Debit COGS
There are two major steps in the flow of costs: (1) accumulating the manufacturing costs
incurred, and (2) assigning the accumulated costs to the work done.
Purchase of raw materials on account
DR raw materials inventory
CR accounts payable
Record factory labor costs
DR factory labor
CR factory wages payable
CR employer payroll taxes payable
Record overhead costs
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