CHAPTER 9
change in total as business activity
Merchandising company only
one inventory Merchandise
available for sale.
Manufacturing company :
Materials
Work in process
Finished Goods
Manufacturing Overhead
depreciation, maintenance on
machines, supervisors salary and
factory utility costs.
Manufacturing costs
terminologies
Direct material costs + Direct labor
costs = PRIME COST
Direct labor + Manufacturing
overhead = CONVERSION COST
NON-MANUFACTURING COSTS
are generally classified as either
selling costs or administrative
costs.
Selling costs (Marketing Cost)
are costs incurred to obtain
customer orders and get the
finished product into the
customers possession.
PERIODIC INVENTORY
PROCEDURE The accounts are
brought to their proper balances
only at the end of the accounting
period by taking a physical
inventory.
PERPETUAL INVENTORY
PROCEDURE The inventory
accounts are maintained at their
proper balances throughout the
period.
Fixed costs Are costs that do not
increases or decreases.
Variable costs are costs that
vary directly in total amount with
changes in the volume of
production activity or output.
Semi-variable costs (Mixed
costs) - has the characteristics of
both the fixed and variable costs.
Statement of cost of goods
manufactured used to support
the cost of goods sold figure on the
statement of recognized income
and expense.
Administrative costs (General
costs) are non- manufacturing
costs that include the costs of top
administrative functions and
various staff departments such as
accounting, data processing, and
personnel.
Product costs are costs incurred
in the manufacture of products and
are assigned to units of the product
produced by a manufacturing
company.
Period costs are not assigned to
unit or product; they are related
more closely to periods of time
rather than to products produce.
Labor costs accounting
involves determining which
accounts are to be charged with
what amount of labor costs.
Direct labor product being
manufactured goes to Work in
Process Inventory
Indirect labor costs Non-
traceable labor costs are
transferred to Manufacturing
Overhead.
CHAPTER 10 Cash and
internal control
Internal control encompasses
the policies and procedures used to
safeguard assets, ensure accurate
business information, and ensure
compliance with laws and
regulations.
Employee Fraud the intentional
act of deceiving an employer for
personal gain.
Objectives of Internal Control
The objectives of internal control
are to provide reasonable
assurance that:
1. Assets are safeguarded against
theft and waste.
2. Ensure compliance with
company policies.
3. Evaluate performance of all
personnel in the company so as to
promote efficiency of operations.
4. Ensure accurate and reliable
operating data and accounting
reports.
Elements of Internal Control
Control environment
Risk assessment
Control procedures
Monitoring
Information and
communication
Cash Controls over receipts
and payments
Cash coins, currency (paper
money), checks and money orders.
GENERAL LEDGER 3 cash accounts
(Cash on hand, Cash in Bank, and
Petty Cash)
Cash Most liquid asset and most
likely to be stolen or used
improperly in a business.
Business normally receive cash
from two main sources :
1. Sale of goods or service
2. Collection of receivables from
customers on account
Cash register an important
control to protect cash received in
over-the-counter sales.
Voucher system is a set of
procedures for authorizing and
recording liabilities and cash
payments. It is any document that
serves as proof of authority to pay
cash.
2 files maintained in the voucher
system :
1. Unpaid voucher file
2. Paid voucher file
Summary of all transactions
Bank statement
1. Bank reconciling items :
2. Deposit in transit
3. Outstanding checks
4. Service charges
5. NSF check
6. Notes collected by bank
7. Book error
8. Bank error
Bank reconciliation an analysis
of the items and amounts that
result in the cash balance reported
in the bank statement to differ
from the balance of the cash
account in the ledger.
Certified check check written or
drawn by a depositor and taken to
the depositors bank for
certification.
Cashiers check check drawn by
a bank made out to either the
depositor or a third-party after
deducting the amount of the check
from the depositors account or
receiving cash from the depositor.
Petty Cash fund is a fund set
aside to have small amount of cash
available for immediate payment of
items.
Voucher Register multicolumn
special journal; contains a record of
all vouchers prepared.
Check register is a special
journal showing all checks issued,
listed by date and check number.