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BUS 215 (6)
Lecture 1

BUS 215 Lecture 1: BUS 215 Lecture 1 and 2: Differences Between Financial and Managerial Accounting, Types of Costs

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Cal Poly San Luis Obispo
BUS 215
Trisha Anderson

LECTURE ONE Financial Accounting:  For external users (banks, board of directors, creditors, shareholders etc)  Reports on past activities (transactions that have already occurred)  Company wide  Conforms to GAAP Managerial Accounting  For internal users (monitor internal operations)  Reports on future activities (budgeting)  Segment reporting  Do what we want - no conformity Managerial Accounting Purpose  Formulate Plan  Control Operations  Make Decisions Financial Accounting Review  Income Statement o Sales - COGS = Gross Profit o Gross Profit - Selling - Admin = Net Income o Reports Period of Time  Balance Sheet o Assets = Liabilities + Stockholders' Equity  Assets: cash, land, equipment, inventory, prepaid accounts, accounts receivable  Liabilities: accounts payable, notes payable, unearned revenue  Owners' Equity: common stock, retained earnings (beg RE + NI - Dividends) o One Point in Time  Statement of Retained Earnings  Statement of Cash Flows Managerial Accounting  Focus on Cost of Goods Sold and Inventory (three subcategories of inventory)  Inventory Accounts o Raw materials o Work in progress o Finished goods  Beginning Inventory + Purchases - End Inventory = Cost of Goods Sold LECTURE TWO Summary of the Types of Cost Classifications  Financial Reporting  Predicting Cost Behavior o Variable Cost: a cost that varies, in total, in direct proportion to changes in the level of activity  The variable cost per unit is constant  Rate stays constant, total increases  Ex: direct material and direct labor  Activity Base (Cost Driver): a measure of what causes the incurrence of a variable cost; explanatory variable o Fixed Cost: a cost that remains constant, in total, regardless of changes in the level of the activity 
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