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SMG AC 222- Midterm Exam Guide - Comprehensive Notes for the exam ( 36 pages long!)


Department
Accounting
Course Code
SMG AC 222
Professor
Greg Sabin
Study Guide
Midterm

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BU
SMG AC 222
MIDTERM EXAM
STUDY GUIDE

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Chapter 1
1. What is a business?
a. Point of a business:
b. Strategy
i. Strategy: How you plan to achieve your goals
c. Characteristics of good goals
i. Good characteristics: objectives should be SMART specific, measurable,
attainable, realistic, timeliness
d. How do you know if
e. Measure Performance
f. Compensation
2. What is management accounting
a. The process of identifying, measuring, recording, organizing, analyzing, and
preparing financial and nonfinancial information
i. Nonfinancial information can include
b. Providing information to internal managers for planning, controlling, and
decision making
c. Financial accounting is essential for financial documents, mainly for investors
and outside sources. Management accountants provide measurements of
business events to inform, support and influence business decisions
i. Use information to make decisions about the way the business is
operated
3. Measuring Cost
a. Cost is a consumption of a scare resource
b. Variable Cost: Does the cost change when
c. Fixed Cost
d. Material: what goes into the product
e. Labor: people working
i. Direct and indirect: may or may not have first hand involvement in the
production of the product
f. Overhead: everything else
i. Ex/ insurance, rent, etc. If related explicitly to the production process
ii. Period cost: without respect to production (rent on HQ, SGA: sales
general administration)
g. Direct Cost: something that is explicitly involved with a product goes into the
product directly
h. Indirect Cost: Generally indirect material: i.e.
i. Flow of Cost:
i. Costs Balance sheet inventories Income statement expenses
ii. ** SLIDE 5**
iii. Cost of goods sold is reported in financial statements, cost of goods made
**FILL**
4. Financial Statements
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a. Retained earnings is the sum of the beginning earnings that are reinvested into
the company not payed out as dividends
b. Retained earnings is what ties various financial statements together
c. You can either retain earnings or pay them out as a dividend
d. Net income and profit are synonymous
e. Sales and revenue is generally synonymous
f. Wages payable is owed to employees
g. Capital stock is what investors put in
i. Usually what is initially invested
h. Assets on the left (what you own) liabilities and equity on the right (how you
paid for it)
i. Not bound by GAAP/IFRS or any prescribed format
5. Work of Managerial Accounting
a. Planning
i. Set goals
ii. Budgeting
1. Ex. How much should you plan to spend on occupational safety
training or employee recruitment advertising
b. Controlling
i. Measure performance
ii. Reward the right people and behaviors
iii. Were you right?
iv. Evaluating your plan
1. Ex. Is the budgeted price cut increasing unit sales as expects. Are
we accumulating too much inventory during the holiday season?
c. Decision Making*
i. Choosing between tradeoffs
ii. Scarce resources force you to make decisions
1. Ex. Should we transfer production of a component part to an
overseas supplier? Should we redesign our manufacturing process
to lower inventory levels?
6. Ethical Behavior
a. Confidentiality
i. Do not disclose confidential information unless legally obligated to do so
ii. Do not use confidential information fro unethical or illegal advantage
iii. Ensure that subordinates do not disclose confidential information
b. Integrity conflict of interest
i. Mitigate conflicts of interest and advise others of potential conflicts
ii. Refrain from conduct that would prejudice carrying out duties ethically
iii. Abstain from activities that might discredit the profession
c. Credibility***
i. Share information so that people are more comfortable with investments
and less risk adverse
ii. Communicate information fairly and objectively
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