Exam One Flashcards
highlights major activities that impact cash flows and overall cash balance
statement of cash flows
equation for COGS
beginning inventory+purchases-end inventory
activities that generate cash flow related to revenue and expense transactions that affect net income, receive dividends
operating activities
activities that generate cash flows related to acquiring or disposing of PP&E and long-term investments
investing activities
activities that generate cash flows related to borrowing from and repaying principal to creditors, selling or repurchasing shared of common stock, paying dividends
financing activities
income statement is reconstructed on a cash basis from top to bottom, cash receipts and cash disbursements
direct method
income statement has net income adjusted to a cash basis, removes items from net income that do not affect cash flow
indirect method
three steps of indirect method
- add depreciation expense back
- add/subtract changes in current assets and liabilities
- adjust for gains and losses
how to find dividends from retained earnings
beginning retained earnings+net income-dividends=ending retained earnings
what to do with gains
subtract them
what to do with losses
add them back
current assets move in what way
opposite of their account
current liabilities move in what way
same way as their account
last three lines of statement of cash flows
net change in cash/cash equivalents
beginning cash
end cash
what must the last three lines of the statement of cash flows match with
balance sheet
book value equation
cost-accumulated depreciation
PP&E equation
beginning balance+purchases-sale of PP&E=ending balance
accumulated depreciation equation
beginning balance-depreciation from sale+current depreciation=ending balance
provides accounting information to managers to use within the organization
managerial accounting
traditional income statement
sales
-COGS
=gross margin
-operating expenses
=net income
what does cost by function mean
product or period costs
another name for COGS
product costs
another name for operating expenses
period costs/selling and administrative expenses
product costs include
direct materials, direct labor, manufacturing costs
materials that can be traced directly to a product
direct materials
labor that can be traced directly to the making of a product
direct labor
what is included in manufacturing overhead
indirect costs
work that cannot be traced to the making of a product but is involved in the factory
indirect labor
materials that are integral to making a product but cannot be traced directly to it
indirect materials
conversion cost equation
direct labor+manufacturing overhead
prime cost equation
direct materials+direct labor
costs associated with general management and not a product
administrative cost
costs to secure customer orders and get products to customers
selling cost
income statement format that organizes cost by behavior
contribution approach
contribution approach income statement
sales
-variable costs
=contribution margin
-fixed costs
=net income
how a cost reacts to changes in the level of activity
cost behavior
organizational investments with a multiyear planning horizon that can’t be reduced at all without making fundamental changes
committed fixed cost
cost arising from annual decisions by management to spend on certain fixed cost items
discretionary fixed cost
contains both variable and fixed cost elements
mixed cost
mixed cost equation
Y=a+bX
range of activity within which the assumption is that cost behavior is linear
relevant range
increase in cost from one alternative to another
incremental cost
what are two names for product costs?
inventoriable cost and manufacturing cost
potential benefit that is given up when one alternative is selected over another
opportunity cost
cost that has already been incurred and that cannot be changed by any decision made now or in the future
sunk cost
amount remaining from sales revenue after all variable expenses have been deducted
contribution margin
what are the three classes of inventory?
raw materials, work in process, finished goods
goods that go into final product (direct and indirect)
raw materials
products partially completed that cannot be sold yet
work in process
products that have been finished but not sold
finished goods
cost by function
product and period costs
