Management Accounting
Activity Based Costing System A Tool for Management to Aid Decision Making: Learning Objectives: Define and explain activity based costing (ABC) system. How various manufacturing and non-manufacturing costs are treated under activity based costing system? What are advantages and disadvantages of ABC system Definition
Half-Year Convention Definition: A requirement under the Modified Accelerated Cost Recovery System (MACRS) that allows a company to take only a half year’s depreciation in the first and last years of an asset’s depreciation period.
Definition and Explanation of Horizontal or Trend Analysis: Comparison of two or more year’s financial data is known as horizontal analysis or trend analysis. Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form as has been done in the example below. Showing changes in dollar
Learning Objectives: Define and explain margin of safety. Calculate margin of safety ratio in Percentage. What is its significance/importance? Calculation of merging of safety in cost volume profit analysis Contents: Definition of Margin of Safety (MOS) Formula of MOS Example Review Problem Definition and Explanation:
Three Column Cash Book: Learning Objectives: Define and explain a three column cash book/treble column cash book. Prepare a three column cash book. What is the difference between a single column cash book, a double column cash book and a three column cash book?
Revenue Expenditures: Learning Objectives: Define and explain revenue expenditures. List of revenue expenditures. Definition and Explanation: Expenditures will be treated as revenue expenditures if it is incurred for the following purposes: Expenditure for purchasing floating assets i.e., assets meant for resale at a profit or for being converted
Petty Cash Book: Learning Objectives: Define and explain petty cash book. What is the imprest system of petty cash? What are the advantages of Imprest system? Prepare a petty cash book. Definition and Explanation: In almost all businesses, it is found necessary to keep small sums of
Activity Base Definition Activity base is a measure of whatever causes the incurrence of a variable cost. For example, the total cost of X-ray film in a hospital will increase as the number of X rays taken increases. Therefore, the number of X rays
Depreciation Methods: Learning Objectives: What are the various methods for depreciation? Fixed assets differ from each other in their nature so widely that the same depreciation methods cannot be applied to each. The following methods have therefore been evolved for depreciating various assets: Fixed
Cost Classifications on Financial Statements: Learning Objectives of this Article: Prepare a schedule of cost of goods manufactured. Prepare income statement including a schedule of cost of goods sold. Merchandising and manufacturing firms, both prepare financial statement reports for creditors, stockholders, and others to
Depreciation Fund Method or Sinking Fund Method of Depreciation: Learning Objectives: What is depreciation fund method or sinking fund method of depreciation? What are its advantages and disadvantages? Definition and Explanation: Depreciation fund method is also know as sinking fund method or amortization fund
By Products and Joint Products: After studying this chapter you should be able to: Many industrial concerns are confronted with the difficult and often rather complicated problem of assigning costs to their by-products and joint products. Chemical companies, coke manufacturers, refineries, flour mills, coal
Gross Profit Analysis Solved Problems: Learning Objective: Calculate sales price variance, sales volume variance, cost price variance, cost volume variance, sales mix variance, and final sales volume variance. Problem 1: A cost analyst of the Memphis Company has prepared a monthly gross profit analysis,
Cost Center Definition: A business segment whose manager has control over cost but has no control over revenue or the use of investment funds.
By-Products and Main Products: Learning Objectives: Define and explain By-Products. Definition and Explanation of By Products: The term “by product” is generally used to denote one or more products of relatively small total value that are produced simultaneously with a product of greater total
Gross Profit Analysis-Questions and Answers: Questions: Why is the gross profit figure significant? What causes changes in the gross profit? Explain “product mix” or “sales mix.” By what methods can a change in the gross profit figure be analyzed? Describe how the sales price
Cost Behavior Definition: Cost behavior is the way in which a cost reacts or responds to changes in the level of business activity.
Financial Statement Analysis Learning Objectives: Prepare and interpret financial statements in comparative and common-size form. Compute and interpret financial ratios that would be most useful to a common stock holder. Compute and interpret financial ratios that would be most useful to a short-term creditor
