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b. Balance Sheet
i. As of a particular Date
ii. Assets
1. Cash
2. Accounts receivable
3. Notes receivable
4. Inventory
5. Land, buildings, and equipment
6. Accumulated depreciation
iii. Liabilities
1. Accounts payable
2. Notes payable
3. Equity
4. Common stock
5. Additional paid in capital
6. Treasury stock
7. # of shares issued and outstanding
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c. Statement of changes in equity
i. Common stock and preferred stock accounts
1. Beginning balance
2. Add: Additional investments
3. Ending balance
ii. Retained earnings
1. Beginning balance
2. Add: net income (revenue - expenses)
3. Less: dividends paid
4. Ending balance
X. Stock terminology
a. Shares issued
b. Treasury stock: Stock repurchased by a corporation
c. Shares outstanding = shares issued – treasury stock
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Managerial Accounting
I. Cost behavior
a. Fixed cost
i. Total cost remains constant
ii. Cost per unit deceases as volume increases
b. Variable cost
i. Total cost increases as volume increases
ii. Cost per unit remains constant
c. Mixed cost
i. A fixed cost plus a variable cost
ii. E.g., an electric bill might be $20 + $2 per kwh
d. Step cost
i. Cost remains constant for a short period, then increases when you get to a
certain volume.
ii. E.g., One inspector can inspect up to 100 units of inventory. If you produce
more than 100 units, you will have to hire a second inspector.
II. Cost classifications
a. Direct vs. indirect costs
i. Direct costs
1. Can be traced directly to a product, service, or activity
2. Direct materials (DM)
3. Direct labor (DL)
ii. Indirect costs (Overhead)
1. Cannot be traced (or not practical to be traced) to a specific product,
service, or activity
2. Indirect materials (e.g., glue & nails used to hold furniture together)
3. Indirect labor (e.g., production supervisor)
4. Factory overhead (O/H) E.g, utilities, building maintenance,
depreciation on building
V. Product costing
a. Job order costing—costs accumulated by project (could be a single unit or a small
batch of units)
b. Process costing—allocates total manufacturing costs equally to total units produced
i. Total cost / total equivalent units produced
X. Relevant costing
a. Only use costs that will change from one alternative to another
b. Additional revenue from order
c. Additional variable costs
d. Avoidable fixed costs
e. Sunk costs are not relevant. They occurred in the past and cannot be changed.
f. Types of relevant costing decisions
i. Special order (usually at less than the normal sales price)
ii. Make (product in-house) or buy (from a supplier)
iii. Add or delete a product line?
1. Using excess capacity (or space)
2. Creating excess capacity (or space)
iv. Jointly producing two or more products