Accounting Foundations
Define Accounting
An information and measurement system that identifies, records, and communicates an organization’s economic events to interested users.
"Book of original entry,” where we first record events.
The General Journal.
Name the three manufacturing/product cost components.
Direct Materials, Direct Labor, Manufacturing Overhead.
Name the three manufacturing inventory accounts.
Raw Materials, Work in Process, Finished Goods.
Pay $500 cash for office supplies.
Dr Supplies 500; Cr Cash 500.
Two types of users + which reports they mainly use.
Internal users (managers) → managerial reports; External users (investors/lenders) → general-purpose financial statements.
Which side is debit and which is credit?
Debit (DR) = left; Credit (CR) = right.
Classify factory rent.
Manufacturing Overhead.
Where are RM, WIP, and FG reported externally?
Balance Sheet (assets).
Complete $8,000 of services on account.
Dr A/R 8,000; Cr Service Revenue 8,000.
State the basic accounting equation.
Assets = Liabilities + Stockholders’ Equity.
Customer pays $1,000 on account. Make the entry.
Dr Cash 1,000; Cr Accounts Receivable 1,000.
The place where period costs are reported.
On the Income Statement as expenses in the period incurred.
Which report compiles DM used, DL, and FOH to arrive at COGM?
Schedule of Cost of Goods Manufactured.
Your company buys $2,400 of raw materials on account.
Dr Raw Materials 2,400; Cr Accounts Payable 2,400.
Name the four general-purpose financial statements.
Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flows.
What is posting?
Transferring data from the general journal to the general ledger to update account balances.
Define prime and conversion costs. (What is included in each)
Prime = DM + DL; Conversion = DL + MOH.
Compute COGM: TMC = $90,000; Beg WIP = $10,000; End WIP = $5,000.
COGM = $95,000 (90,000 + 10,000 − 5,000).
Mini COGM: DM used 20,000; DL 15,000; FOH 10,000; Beg WIP 5,000; End WIP 7,000. Find Total Manufacturing Costs and COGM.
TMC = 45,000; COGM = 43,000
Write the expanded accounting equation shown in class.
Assets = Liabilities + Common Stock + Revenues − Expenses − Dividends.
Buy $545 of supplies on account.
Dr Supplies 545; Cr Accounts Payable 545.
Compute total MOH. Indirect materials $800; factory utilities $600; assembly-line wages $1,900; advertising $500.
MOH = $1,400 ($800 + $600). DL = $1,900; Advertising = period cost.
One key difference between merchandisers' and manufacturers' income statements is.
Manufacturers include COGM/FG flow and often show manufacturing detail; merchandisers focus on Purchases → COGS
Revenues 100,000; Expenses 85,000; Dividends 5,000; Beg RE 20,000. Compute Net Income and Ending RE.
NI = 15,000; Ending RE = 30,000 (20,000 + 15,000 − 5,000).