Chapter 1 Basic Cost Concepts Learning Objectives • To understand the meaning of different costing terms to understand different costing methods • To have a basic idea of different costing techniques • To understand the meaning of cost sheet In order to determine and take a dispassionate view about what lies beneath the surface of accounting figures‚ a financial analyst has to make use of different management accounting techniques. Cost techniques have a precedence over the other
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SOME OF THESE ANSWER ARE NO LONGER VALID AFTER THE END OF 2008. THOSE ITEMS ARE NOT ON OUR EXAM TOMORROW. 1. An audit of a government‚ conducted in accordance with generally accepted auditing standards (GAAS)‚ includes A. A determination of efficiency and effectiveness. B. An examination of financial statements and underlying records for conformance with generally accepted accounting principles (GAAP). It does this as well as generally accepted governmental auditing standards C. Tests
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Management Accounting PART-A Q. 1. State three points of similarities between financial accounting and cost accounting. Ans. Both financial and cost accounting are interdependent and their co-existence enables businesses to compute costs and sales realistically‚ properly and most importantly helps them to avoid loss some of similarities are mentioned below 1 Reports Financial accounting is used to produce reports that include financial statements‚ including the balance sheet‚ income
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conservation Prudence concept: revenue and profits are included in the balance sheet only when they are realized(or there is reasonable ’certainty ’ of realizing them) butliabilities are included when there is a reasonable ’possibility ’ of incurring them. Also called conservation concept. Du Pont analysis A type of analysis that examines a company ’s Return on Equity (ROE) by breaking it into three main components:profit margin‚ asset turnover and leverage factor. By breaking the ROE into
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Marginal Costing Introduction The Cost of a product of comprises of materials‚ labour‚ and over heads. On the basis of variability they can be broadly classified as fixed and variable costs. Fixed costs are those costs which remain constant at all levels of production within a given period of time. In other words‚ a cost that does not change in total but become. Progressively smaller per unit when the volume of production increases is known as fixed cost. it is also called period cost eg. Rent
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trucking and warehouse temporary labor cost) should be 100% assigned to SRB. With respect to indirect expenses‚ the information provided are not sufficient to assess the accuracy of cost allocation conclusively (why 50%‚ and not 20% or 30%‚ for overhead item such as office rent‚ office expenditure and so on). While it is correct that the organization should not spent an excessive amount of costs to obtain the absolute figure for allocation‚ we could achieve a quick and simple way by tagging allocation
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Q2. Distinguish between management accounting and financial accounting. | | Financial Accounting | Management Accounting | Format: | Financial accounts are supposed to be in accordance with a specific format by IAS so that financial accounts of different organizations can be easily compared. | No specific format is designed for management accounting systems. | Planning and control: | Financial accounting helps in making investment decision‚ in credit rating. | Management Accounting helps
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MB0041/MBABF –Financial and Management Accounting Assignment Q3. Draw the Balance Sheet for the following information provided by Sarawath Ltd.. a. Current Ratio : 2.50 b. Liquidity Ratio : 1.50 c. Net Working Capital : Rs.300000 d. Stock Turnover Ratio : 6 times e. Ratio of Gross Profit to Sales : 20% f. Fixed Asset Turnover Ratio : 2 times g. Average Debt collection period : 2 months h. Fixed Assets to Net Worth : 0.80 i. Reserve and Surplus to Capital : 0.50 | Balance Sheet Liabilities
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information for management use in planning‚ control and decision making (C2) 2. Explain and distinguish basic cost classifications‚ cost behaviour and appropriate accounting treatment of the three basic elements of cost; namely material‚ labour and overheads(C3) 3. Apply the various costing methods in product and service costing.(P3) 4. Apply the principles of variable costing‚ absorption costing‚ activity-based costing (ABC) in
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classifications‚ such as materials‚ labour‚ power‚ electricity‚ fuel etc. Cost assignment is a general term used to cover 1. Tracing of costs to cost objects‚ 2. Apportionment of costs to cost objects‚ and 3. Application of costs to cost objects often termed as cost absorption. 3. Define Cost apportionment and Cost absorption. Cost apportionment is “The allotment to two or more cost centres of proportions of the common items of cost on the estimated basis of benefit received.” Cost Absorption
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