ACCT 2301 Chapter Notes - Chapter 1: Financial Accounting, Income Statement, Financial Statement

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periwinkledinosaur391

8 Feb 2016

School

Northeastern University

Department

Accounting

Course

ACCT 2301

Professor

Ed Dinan

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Document Summary

Financial accounting used by external people such as creditors, investors, etc. Managerial accounting focuses on info used by people who work inside the business. Internal users need info to plan, direct, and control business operations. External users generally desire global info that reflects the performance of the company as a whole. Value added principle: management accountants are free to engage in any information gathering and reporting activity so long as the activity adds value in excess of its cost. Managerial accounting reports what is expected in the future. Financial accounting info is reported periodically normally at the end of a year. Managerial accounting is delivered on a continuous baiss. Product costing is used to control business operations. Consists of: material (used to make the product, labor (expended by employees, overhead (other resources such as utilities and equipment consumed in the direct labor costs. Depreciation on office furniture is expensed directly on the income statement.

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How to reply to the below Discussion response.

Managerial accounting provides internal managers the use ofaccounting to plan and control business operations(Pearsoncustom.com, n.d). The internal nature of managerialaccounting is opposite to financial accounting which is used inregards to external entities (investors, creditors and government).Management accounting focuses on the cost-benefit analysis tooperating procedures within an organization.

Associated with the two forms of accounting are two coststructures used in an income statement: absorption and variable.The two cost structures identify the cost of a product butabsorption costing includes the fixed manufacturing overhead.Variable costing identifies fixed manufacturing overhead as aperiod cost thus not including it in the price of a unit produced(EducationUnlocked, 2014). Absorption costing is typically utilizedin financial accounting for external entities. Variable costing istypically used in managerial accounting because they focus on onlyvariable costs which eliminate skewed results from fixed overheadin unused inventory. In the short-run managers donât need toinclude fixed costs because they are regarded as sunk costs nomatter how many units are produced or sold.

A variable costing income statement generates a contributionmargin. The contribution margin reflects the sale price of aproduct less all variable costs (EducationUnlocked, 2014). The contribution margin gains insight into costs thatcan be calculated in units. The contribution margin can helpmanagers understand profit per unit based on the variable expensesincurred. As the contribution margin doesnât include fixed expensesit can quickly identify if a company is going to be profited ableby subtracting the fixed expenses from the contribution margin.

olivebuffalo913

Managerial accounting information is restricted by which of the following authorities or principles?

	a.	Value Added Principle
	b.	Generally Accepted Accounting Principles
	c.	Securities and Exchange Commission
	d.	Financial Accounting Standards Board

Which of the following costs is not considered to be an inventory (product) cost?

	a.	Raw material
	b.	Production wages
	c.	Depreciation of delivery vehicles
	d.	Factory utilities

Which of the following is a characteristic of managerial accounting information?

	a.	It is historically based.
	b.	It is regulated by the SEC.
	c.	It is directed to external users.
	d.	It involves continuous reporting.

Carson Manufacturing Company recognized accrued compensation for sales staff. Which of the following choices accurately reflects how this event would affect the company's financial statements?

	a.	decrease one asset account and decrease an equity account.
	b.	increase one asset account and decrease another asset account.
	c.	increase one liability account and increase an asset account.
	d.	increase one liability account and decrease an equity account.

burgundyspider301

QUESTION 1 The knowledge of financial accounting can assist people with decisions such as whether to extend credit to a business. True False 0.2 points Saved QUESTION 2 Employees of a company would not have a reason to use the information provided by financial accounting. True False 0.2 points Saved

QUESTION 3 Financial accounting should be used for assessing the financial health of large organizations only. True False 0.2 points Saved

QUESTION 4 Financial accounting can be helpful for a job candidate who is assessing the financial future of a potential employer. True False 0.2 points Saved QUESTION 5 Lenders might use the information produced by financial accounting when making loan decisions. True False 0.2 points Saved

QUESTION 6 Credit analysts prefer not to use information provided by financial accounting, as it is not accurate. True False 0.2 points Saved

QUESTION 7 Financial accounting is helpful to investment advisors. True False 0.2 points Saved

QUESTION 8 Financial accounting is more useful than managerial accounting. True False 0.2 points Saved

QUESTION 9 The decision to buy or rent equipment is an example of a decision aided by managerial accounting. True False 0.2 points Saved

QUESTION 10 Which of the following statements is true of financial accounting? A. It is used by external parties to make investment decisions. B. It is used to make lease or purchase decisions. C. Managerial accounting is another name for financial accounting, D. It is primarily used to make internal decisions of a business. E. The effectiveness of advertising can be judged using financial accounting. 0.2 points Saved QUESTION 11 The charge for using money over time, often associated with long-term loans, is known as: A. interest. B. principal. C. distribution charge. D. cash dividend. E. preferred dividend. 0.2 points Saved QUESTION 12 Which of the following is a common feature of financial and managerial accounting? A. Both have same objectives B. Both are prepared according to U.S. GAAP C. Both are reported at year end in the annual report D. Both are analyzed by external users while making investment decisions E. Both are used by the management in making decisions 0.2 points Saved

QUESTION 13 Dividends are required to be paid to stockholders on an annual basis. True False 0.2 points Saved

QUESTION 14 An individual who owns one or more shares of stock in a corporation is an owner of that corporation. True False 0.2 points Saved

QUESTION 15 Corporations do not exist as separate legal entities apart from their owners. True False 0.2 points Save Answer

QUESTION 16 It is very difficult to buy or sell ownership shares of a corporation in a stock exchange. True False 0.2 points Saved

QUESTION 17 Stock markets match up investors who wish to buy shares with those who wish to sell them. True False 0.2 points Saved

QUESTION 18 Legal process by which owners of an organization apply to a state government to have it identified as an entity legally separate from its owners is called: A. stocking. B. filling. C. attributing. D. registration. E. incorporation. 0.2 points Saved

QUESTION 19 An advantage of ownership in a sole proprietorship over ownership in a corporation is: A. tax benefits. B. having a board of directors. C. the ability to raise capital through issuance of stock. D. separation of owner and business as legal entities. E. limited liability for debts. 0.2 points Saved

QUESTION 20 Who hires the management of a corporation? A. Stockholders B. Board of directors C. Creditors D. Government E. SEC 0.2 points Saved QUESTION 21 Inventory refers to the: A. excess amount paid for an asset over its fair value. B. intangible assets of a business. C. merchandise bought or manufactured for the purpose of selling. D. amount of net income reinvested by company for future operations. E. revenue generated from investment. 0.2 points Saved QUESTION 22 Investors use financial information to predict whether a: A. company will recruit more employees. B. company's stock price will increase C. company has invested in buildings. D. company will pay salaries. E. company's bond price will increase. 0.2 points Saved

QUESTION 23 Financial accounting can be compared to a portrait. True False 0.2 points Saved

QUESTION 24 Financial statements provide the form and structure for the conveyance of financial information that will create a likeness of the reporting organization. True False 0.2 points Saved

QUESTION 25 The information reported in financial statements must be exact for an investor to make any decision. True False 0.2 points Saved

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ACCT 2301 Chapter Notes - Chapter 1: Financial Accounting, Income Statement, Financial Statement

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