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Classification of Accounts
BALANCE SHEET
A list of the assets, liabilities, and owner’s equity of a
business entity as of a specific date, usually at the close of
the last day of a month or a year.
11. Format for Bank Reconciliation: 16. Contribution Margin Ratio = Sales-Variable Costs
Sales
Cash balance according to bank statement…. $xxx
Add: Additions by depositor not on bank 17. Break-Even Sales (Units) = Fixed Costs_______
statement……………………… $xx Unit Contribution Margin
Bank errors………………………………... xx xx
$xxx 18. Sales (Units) = Fixed Costs + Target Profit
Deduct: Deductions by depositor not on Unit Contribution Margin
bank statement……………………. $xx
Bank errors………………………………. xx xx 19. Margin of Safety = Sales-Sales at Break-Even Point
Adjusted balance……………………………. $xxx Sales
Cash balance according to depositor’s records.. $xxx 20. Operating Leverage = Contribution Margin
Add: Additions by bank not recorded by Operating Income
depositor………………………………………. $xx
Depositor errors…………………………….. xx xx 21. Variances
$xxx
Deduct: Deductions by bank not recorded Direct Materials=Actual Price per Unit- x Actual Quantity
by depositor…………………………. $xx Price Variance Standard Price Used
Depositor errors…………………………….. xx xx
Adjusted balance……………………………… $xxx Direct Materials=Actual Quantity Used- x Standard Price
Quantity Variance Standard Rate per unit
12. Inventory Costing Methods
1. First-in, First-out (fifo) Direct Labor = Actual Rate Per Hour – x Actual Hours
2. Last-in, First-out (lifo) Rate Variance Standard Rate Worked
3. Average Cost
Direct Labor = Actual Hours Worked- x Standard Rate
13. Interest Computations: Time Variance Standard Hours per Hour
Interest = Face Amount (or Principal) x Rate x Time
Variable Factory Actual Budged Variable
14. Methods of Determining Annual Depreciation: Overhead Controllable=Variable Factory - Factory
STRAIGHT-LINE: Cost-Estimated Residual Value Variance Overhead Overhead for
Estimated Life Actual Amount
Produced
DECLINING-BALANCE: Rate*xBook Value at
Beginning of Period Fixed Factory 100% of Normal Std. Fixed
Overhead Volume = Capacity-Std. Capacity x Factory
*Rate is commonly twice the straight-line Variance for Amount Produced Overhead
rate (1 Estimated Life). Rate
15. Cash Provided by Operations on Statement of Cash 22. Rate of Return on = Controllable Operating Income
Flows (indirect method): Investment (ROI) Invested Assets
Net income, per income statement……………. $xx Alternative ROI Computation:
Add: Depreciation of plant assets…………….. $xx
Amortization of bond payable discount ROI = Controllable Operating Income x Sales____
and intangible assets…………………… xx Sales Invested Assets
Decreases in current assets (receivables,
inventories, prepaid expenses)………… xx 23. Capital Investment Analysis Methods:
Increases in current liabilities (accounts 1. Methods that Ignore Present Values:
and notes payable, accrued liabilities)… xx A. Average Rate of Return Method
Losses on disposal of assets and retirement B. Cash Payback Method
of debt………………………………….. xx xx 2. Methods That Use Present Values:
Deduct: Amortization of bond payable A. Net Present Value Method
premium…………………………… B. Internal Rate of Return Method
$xx
Increases in current assets (receivables,
24. Average Rate = Estimated Average Annual Income
inventories, prepaid expenses)……... xx of Return Average Investment
Decreases in current liabilities (accounts
and notes payable, accrued liabilities).. xx 25. Present Value Index =
Gains on disposal of assets and Total Present Value of Net Cash Flow
retirement of debt…………………….. xx xx Amount to be invested
Net cash flow from operating activities……….. $xx
26. Present Value Factor = Amount to Be Invested___
for an Annuity of $1 Equal Annual Net Cash Flows