Final Flashcards
A private, independent standard-setting body established by the accounting profession that has been delegated the authority by the SEC to establish most accounting rules and regulations for public financial reporting.
Financial Accounting Standard Board
Government agency responsible for overseeing the accounting rules to be followed by companies required to be registered with it.
Securities and Exchange Commission (SEC)
Rules and practices that accountants agree to follow in financial reports prepared for public distribution.
generally accepted accounting principles (GAAP)
The benefits attained (value added) from the process should exceed the cost of the process.
value-added principle
All costs related to obtaining or manufacturing a product intended for sale to customers; are accumulated in inventory accounts and expensed as the cost of goods sold at the point of sale.
product costs
Pricing strategy that sets the price at cost plus a markup equal to a percentage of the cost.
cost-plus pricing
Classification and accumulation of individual inputs (materials, labor, and overhead) for determining the cost of making a good or providing a service.
product costing
Costs associated with producing products that cannot be cost-effectively traced to products include indirect costs such as indirect materials, indirect labor, utilities, rent, and depreciation.
overhead
Asset account used to accumulate the product costs (direct materials, direct labor, and overhead) associated with completed products that have not yet been sold.
Finished Goods Inventory
The total cost of making products divided by the total number of products made.
average cost
Costs of raw materials used to make products that can be easily and conveniently traced to those products.
direct raw materials
Wages paid to production workers whose efforts can be easily and conveniently traced to products.
direct labor
All costs not associated with obtaining or manufacturing a product; sometimes called period costs because they are normally expensed in the period in which the economic sacrifice is incurred.
selling, general, and administrative costs (SG&A)
General, selling, and administrative costs that are expensed in the period in which the economic sacrifice is made.
period costs
Costs that cannot be easily traced to a cost object and for which the economic sacrifice to trace is not worth the informational benefits.
indirect costs
Production costs that cannot be traced directly to products.
manufacturing overhead
Process of dividing a total cost into parts and assigning the parts to relevant objects.
cost allocation
Costs incurred in the process of making products including direct materials, direct labor, and manufacturing overhead.
midstream costs
Costs incurred before the manufacturing process begins, for example, research and development costs.
upstream costs
Costs, such as delivery costs and sales commissions, are incurred after the manufacturing process is complete.
downstream costs
Asset account used to accumulate the costs of materials (such as lumber, metals, paints, chemicals) that will be used to make a company’s products.
Raw Materials Inventory
Asset account used to accumulate the product costs (direct materials, direct labor, and overhead) associated with incomplete products that have been started but are not yet completed.
work in process inventory
