{"appState":{"pageLoadApiCallsStatus":true},"categoryState":{"relatedCategories":{"headers":{"timestamp":"2022-05-17T12:31:23+00:00"},"categoryId":34230,"data":{"title":"General (Accounting)","slug":"general-accounting","image":{"src":null,"width":0,"height":0},"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"parentCategory":{"categoryId":34226,"title":"Accounting","slug":"accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"}},"childCategories":[],"description":"What's the relationship between Cost of Equity and Cost of Capital? How do mergers and acquisitions work? No matter what your question, we've got the info you'll need to make sense of any accounting issue.","relatedArticles":{"self":"https://dummies-api.dummies.com/v2/articles?category=34230&offset=0&size=5"}},"_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"relatedCategoriesLoadedStatus":"success"},"listState":{"list":{"count":10,"total":679,"items":[{"headers":{"creationTime":"2016-03-27T16:47:48+00:00","modifiedTime":"2022-03-25T20:03:40+00:00","timestamp":"2022-03-26T00:01:04+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Accounting For Canadians For Dummies Cheat Sheet","strippedTitle":"accounting for canadians for dummies cheat sheet","slug":"accounting-for-canadians-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Read an easy introduction into the key functions and responsibilities of the accounting department in any organization.","noIndex":0,"noFollow":0},"content":"Every business and not-for-profit entity needs a reliable accounting system to facilitate day-to-day operations and to prepare financial statements, tax returns, and internal reports to managers. The <a href=\"https://www.wiley.com/en-ca/Accounting+For+Canadians+For+Dummies%2C+3rd+Edition-p-9781119575863\" target=\"_blank\" rel=\"noopener\"><em>Accounting For Canadians For Dummies</em></a> Cheat Sheet provides a quick and easy introduction into the key functions and responsibilities of the accounting department in any organization.","description":"Every business and not-for-profit entity needs a reliable accounting system to facilitate day-to-day operations and to prepare financial statements, tax returns, and internal reports to managers. The <a href=\"https://www.wiley.com/en-ca/Accounting+For+Canadians+For+Dummies%2C+3rd+Edition-p-9781119575863\" target=\"_blank\" rel=\"noopener\"><em>Accounting For Canadians For Dummies</em></a> Cheat Sheet provides a quick and easy introduction into the key functions and responsibilities of the accounting department in any organization.","blurb":"","authors":[],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General (Accounting)","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":281921,"slug":"accounting-for-canadians-for-dummies-3rd-edition","isbn":"9781119575832","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119575834/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119575834/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119575834-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119575834/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119575834/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/accounting-for-canadians-for-dummies-3rd-edition-cover-9781119575832-203x255.jpg","width":203,"height":255},"title":"Accounting For Canadians For Dummies, 3rd Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"\n <p><b data-author-id=\"9472\">John A. Tracy</b>, CPA, is professor of accounting, emeritus, at the University of Colorado in Boulder. Cécile Laurin, CPA, CA, is a professor of accounting at Algonquin College of Applied Arts and Technology in Ottawa. She has been chief financial officer for three engineering firms and a law firm.</p>","authors":[{"authorId":9472,"name":"John A. Tracy","slug":"john-a-tracy","description":"John A. Tracy, CPA, is professor of accounting, emeritus, at the University of Colorado in Boulder.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9472"}},{"authorId":34419,"name":"Cecile Laurin","slug":"cecile-laurin","description":"Cécile Laurin, CPA, CA, is a professor of accounting at Algonquin College of Applied Arts and Technology in Ottawa. She has been chief financial officer for three engineering firms and a law firm.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34419"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119575832&quot;]}]\" id=\"du-slot-623e57c0e380c\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119575832&quot;]}]\" id=\"du-slot-623e57c0e4338\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":183461,"title":"What Does an Accountant Do?","slug":"what-does-an-accountant-do","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183461"}},{"articleId":183460,"title":"<b>Transactions and Balance Sheets in Accounting</b>","slug":"transactions-and-balance-sheets-in-accounting","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183460"}},{"articleId":148396,"title":"<b>The Basic Steps of Bookkeeping</b>","slug":"the-basic-steps-of-bookkeeping","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148396"}}],"content":[{"title":"What does an accountant do?","thumb":null,"image":null,"content":"<p>Most people don’t realize the importance of the accounting department in keeping a business operating without hitches and delays. That’s probably because accountants oversee many of the back-office functions in a business — as opposed to sales, for example, which is front-line activity, out in the open and in the line of fire. Go into any retail store, and you’re in the thick of sales activities. But have you ever seen a company’s accounting department in action?</p>\n<p>The following list gives you a pretty clear idea of the back-office functions that accountants perform:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Payroll:</b> The total wages and salaries earned by every employee every pay period, which are called gross wages or gross earnings, have to be calculated. Based on detailed private information in personnel files and earnings-to-date information, the correct amounts for income taxes and several other deductions from gross wages have to be determined.</p>\n<p class=\"child-para\">Stubs, which report various information are produced each pay period and given to the employee. The total amounts of withheld income taxes, Canada or Quebec Pension Plans, and Employment Insurance premiums imposed on the employee and employer have to be paid to the federal or provincial government on time. Retirement, vacation, sick pay, and other benefits that employees earn have to be updated every pay period.</p>\n<p class=\"child-para\">Payroll is a complex and critical function that the accounting department performs. Many businesses outsource payroll functions to companies or banks that specialize in this area.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cash collections:</b> All cash received from sales and from all other sources has to be carefully identified and recorded, not only in the cash account but also in the appropriate account for the source of the cash received. The accounting department makes sure that the cash is deposited in the appropriate business chequing accounts and that the business keeps an adequate amount of coin and currency on hand for making change for customers.</p>\n<p class=\"child-para\">Accountants balance the business’s chequebook and control access to incoming cash receipts. In larger organizations, the treasurer may be responsible for some of these cash flow and cash-handling functions.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cash payments (disbursements):</b> A business writes many cheques during the course of a year. The accounting department prepares all these cheques for the signatures of the business officers who are authorized to sign cheques. The accounting department keeps all the supporting business documents and files to know when the cheques should be paid, makes sure that the amount to be paid is correct, and forwards the cheques for signature.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Procurement and inventory:</b> Accountants usually are responsible for keeping track of all purchase orders that have been placed for inventory (products to be sold by the business) and all other assets and services that the business buys. A typical business makes many purchases during the course of a year, many of them on credit. This area of responsibility includes keeping files on all liabilities that arise from purchases on credit so that cash payments are processed on time.</p>\n<p class=\"child-para\">The accounting department also keeps detailed records on all products that the business holds for sale and, when the products are sold, records the cost of the goods sold.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Property accounting:</b> A typical business owns many different substantial long-term assets called property, plant, and equipment — including office furniture and equipment, retail display cabinets, computers, machinery and tools, vehicles (autos and trucks), buildings, and land.</p>\n<p class=\"child-para\">Except for relatively small-cost items, a business maintains detailed records of its property, both for controlling the use of the assets and for determining the appropriate amount of depreciation for accounting and tax calculations. The accounting department keeps these property records.</p>\n</li>\n</ul>\n"},{"title":"Transactions and balance sheets in accounting","thumb":null,"image":null,"content":"<p>A balance sheet is a snapshot of the financial condition of a business at an instant in time — the most important moment in time being at the end of the last day of the income statement period. The balance sheet is unlike the income and cash flow statements, which report flows over a period of time. The balance sheet presents the balances (amounts) of a company’s assets, liabilities, and owners’ equity at an instant in time.</p>\n<p class=\"TechnicalStuff\">Notice the two quite different meanings of the term balance. As used in balance sheet, the term refers to the equality of the two opposing sides of a business — total assets on the one side and total liabilities and owners’ equity on the other side, like a scale with equal weights on both sides. In contrast, the balance of an account (asset, liability, owners’ equity, revenue, and expense) refers to the amount in the account after recording increases and decreases in the account — the net amount after all additions and subtractions have been entered.</p>\n<p>The activities, or transactions, of a business fall into three basic types:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Operating activities:</b> This category refers to making sales and incurring expenses, and also includes the allied transactions that are part and parcel of making sales and incurring expenses. For example, a business records sales revenue when sales are made on credit, and then, later, records cash collections from customers. Keep in mind that the term operating activities includes the allied transactions that precede or are subsequent to the recording of sales and expense transactions.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Investing activities:</b> This term refers to making investments in long-term assets and (eventually) disposing of the assets when the business no longer needs them. The primary examples of investing activities for businesses that sell products and services are capital expenditures, which are the amounts spent to modernize, expand, and replace the long-term operating assets of a business.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Financing activities:</b> These activities include securing money from debt and equity sources of capital, returning capital to these sources, and making distributions from profit to owners. Note that distributing profit to owners is treated as a financing transaction, not as a separate category.</p>\n</li>\n</ul>\n<p>An accountant can prepare a balance sheet at any time that a manager wants to know how things stand financially. Some businesses — particularly financial institutions such as banks, mutual funds, and securities brokers — need balance sheets at the end of each day, in order to track their day-to-day financial situation.</p>\n<p>For most businesses, however, balance sheets are prepared only at the end of each month, quarter, and year. A balance sheet is always prepared at the close of business on the last day of the profit period. In other words, the balance sheet should be in sync with the income statement.</p>\n"},{"title":"The basic steps of bookkeeping","thumb":null,"image":null,"content":"<p>Bookkeeping can be made simpler if you follow a logical set of steps. Here are three fundamental concepts that can help keep things in order when handling the books for a business.</p>\n<ol class=\"level-one\">\n<li>\n<p class=\"first-para\">Prepare source documents for all transactions, operations, and other business events; source documents are the starting point in the bookkeeping process.</p>\n<p class=\"child-para\">When buying products, a business gets a purchase invoice from the supplier. When borrowing money from the bank, a business signs a promissory note payable, a copy of which the business keeps. When a customer uses a credit card to buy the business’s product, the business gets the credit card slip as evidence of the transaction. When preparing payroll cheques, a business depends on salary rosters and time cards.</p>\n<p class=\"child-para\">All of these key business forms serve as sources of information into the bookkeeping system — in other words, information the bookkeeper uses in recording the financial effects of the business’s activities.</p>\n</li>\n<li>\n<p class=\"first-para\">Determine and enter in source documents the financial effects of the transactions and other business events.</p>\n<p class=\"child-para\">Transactions have financial effects that must be recorded — the business is better off, worse off, or at least “different off” as the result of its transactions. Examples of typical business transactions include paying employees, making sales to customers, borrowing money from the bank, and buying products to sell to customers.</p>\n<p class=\"child-para\">The bookkeeping process begins by determining the relevant information about each transaction. The business’s chief accountant establishes the rules and methods for measuring the financial effects of transactions. Of course, the bookkeeper should comply with these rules and methods.</p>\n</li>\n<li>\n<p class=\"first-para\">Make original entries of financial effects into journals and accounts, with appropriate references to source documents.</p>\n<p class=\"child-para\">Using the source document(s) for every transaction, the bookkeeper makes the first, or original, entry into a journal and then into the business’s accounts. Only the official, established chart of accounts should be used in recording transactions.</p>\n<p class=\"child-para\">A journal is a chronological record of transactions in the order in which they occur — like a very detailed personal diary. In contrast, an account is a separate record, or page as it were, for each asset, each liability, and so on. One transaction affects two or more accounts. The journal entry records the whole transaction in one place; then each piece is recorded in the two or more accounts that are affected by the transaction.</p>\n<p class=\"child-para\">Entering transaction data correctly and in a timely manner is critically important. The prevalence of data entry errors was one important reason why most retailers started to use cash registers that read barcode information on products, which more accurately captures the necessary information and speeds up the data entry.</p>\n</li>\n<li>\n<p class=\"first-para\"><b></b>Perform end-of-period procedures — the critical steps for getting the accounting records up-to-date and ready for the preparation of management accounting reports, tax returns, and financial statements.</p>\n<p class=\"child-para\">A period is a stretch of time — from one day to one month to one quarter (three months) to one year — that is determined by the business’s needs. A year is the longest period of time that a business would wait to prepare its financial statements. Most businesses need accounting reports and financial statements at the end of each quarter, and many need monthly financial statements.</p>\n</li>\n<li>\n<p class=\"first-para\">Compile the adjusted trial balance for the accountant, which is the basis for preparing reports, tax returns, and financial statements.</p>\n<p class=\"child-para\">After all the end-of-period procedures have been completed, the bookkeeper compiles a complete listing of all accounts, which is called the adjusted trial balance. Modest-sized businesses maintain hundreds of accounts for their various assets, liabilities, owners’ equity, revenue, and expenses.</p>\n<p class=\"child-para\">Larger businesses keep thousands of accounts, and very large businesses may keep more than 10,000 accounts. In contrast, external financial statements, tax returns, and internal accounting reports to managers contain a relatively small number of accounts. For example, a typical external balance sheet reports only 25 to 30 accounts (maybe even fewer), and a typical income tax return contains a relatively small number of accounts.</p>\n<p class=\"child-para\">The accountant takes the adjusted trial balance and groups similar accounts into one summary amount that is reported in a financial report or tax return. For example, a business may keep hundreds of separate inventory accounts, every one of which is listed in the adjusted trial balance. The accountant collapses all these accounts into one summary inventory account that is presented in the business’s external balance sheet. In grouping the accounts, the accountant should comply with established financial reporting standards and income tax requirements.</p>\n</li>\n<li>\n<p class=\"first-para\">Close the books — bring the bookkeeping for the fiscal year just ended to a close and get things ready to begin the bookkeeping process for the coming fiscal year.</p>\n<p class=\"child-para\">Books is the common term for a business’s complete set of accounts. A business’s transactions are a constant stream of activities that don’t end tidily on the last day of the year, which can make preparing financial statements and tax returns challenging. The business has to draw a clear line of demarcation between activities for the year (the 12-month accounting period) ended and the year yet to come by closing the books for one year and starting with fresh books for the next year.</p>\n</li>\n</ol>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-03-25T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207626},{"headers":{"creationTime":"2016-03-27T16:56:22+00:00","modifiedTime":"2022-02-28T17:17:34+00:00","timestamp":"2022-02-28T18:01:08+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Accounting Workbook For Dummies Cheat Sheet","strippedTitle":"accounting workbook for dummies cheat sheet","slug":"accounting-workbook-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Keep track of these formulas and ways to present information as you're preparing financial statements while handling accounting.","noIndex":0,"noFollow":0},"content":"As a business manager, taking care of your company’s accounting needs is top priority. Correctly preparing a financial statement involves knowing all the information that needs to appear on the statement. Making a profit keeps you in business, so follow the financial statements closely, make adjustments if needed, and follow some basic rules for presenting accounting information to your business’s managers.","description":"As a business manager, taking care of your company’s accounting needs is top priority. Correctly preparing a financial statement involves knowing all the information that needs to appear on the statement. Making a profit keeps you in business, so follow the financial statements closely, make adjustments if needed, and follow some basic rules for presenting accounting information to your business’s managers.","blurb":"","authors":[{"authorId":9472,"name":"John A. Tracy","slug":"john-a-tracy","description":"John A. 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If you don’t prepare them correctly, they won’t reflect a true picture of your business’s financial status. Keep the following important rules and points in mind as you prepare and use your business’s financial statements.</p>\n<h2>Accounting equation</h2>\n<p>Assets = Liabilities + Owners’ Equity</p>\n<p>Liabilities and owners’ equity are the two basic types of claims on the assets of an entity. The two-sided nature of the accounting equation is the basis for double entry accounting that records both sides of the entity’s transactions — what is received and what is given in the economic exchange.</p>\n<h2>Rules for debits and credits</h2>\n<p>Use the following figure for credit and debit basics:</p>\n<p><img loading=\"lazy\" src=\"https://www.dummies.com/wp-content/uploads/194324.image0.jpg\" alt=\"image0.jpg\" width=\"535\" height=\"212\" /></p>\n<h2>Financial effects of revenues and expenses</h2>\n<p>Revenue = Asset increase (debit) or Liability decrease (debit)<br />\nExpense = Asset decrease (credit) or Liability increase (credit)</p>\n<h2>Connections between income statement and balance sheet accounts</h2>\n<p>Sales revenue → Cash and Accounts receivable</p>\n<p>Cost of goods sold expense ← Inventory</p>\n<p>Operating expenses → Cash</p>\n<p>Operating expenses ← Prepaid expenses</p>\n<p>Operating expenses → Accounts payable</p>\n<p>Operating expenses → Accrued expenses payable</p>\n<p>Depreciation expense ← Fixed assets</p>\n<p>Interest expense → Accrued expenses payable</p>\n<p>Income tax expense → Accrued expenses payable</p>\n<h2>Bookkeeping cycle</h2>\n<p>Transactions (and certain other events) → Original Entries in Journals → Postings in General Ledger Chart of Accounts → End-of-Period Adjusting Entries → Preparation of Financial Statements, Tax Returns, and Internal Accounting Reports → Closing Entries at End of Year</p>\n"},{"title":"Making accounting adjustments to reach profit potential","thumb":null,"image":null,"content":"<p>Having your business reach a profit is important; if it doesn’t, sooner or later the business will fail. As a business manager, you want to keep a close eye on the financial statements and make the necessary (and legal) accounting adjustments to your financial records as needed. These helpful tips can help you make the necessary adjustments to your business’s net income, eye two different profit analysis models, and communicate the reports to your managers.</p>\n<h2>Adjustments to net income for determining sash flow from operating activities</h2>\n<p>Accounts receivable, inventory, and prepaid expenses are operating assets used in the profit-making process.</p>\n<p>Accounts payable and accrued expenses payable are operating liabilities used in the profit-making process.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Operating asset increases and operating liability decreases are negative adjustments (decrease cash flow from operating activities)</p>\n</li>\n<li>\n<p class=\"first-para\">Operating asset decreases and operating liability increases are positive adjustments (increase cash flow from operating activities)</p>\n</li>\n<li>\n<p class=\"first-para\">Depreciation and amortization expenses are positive adjustments (increase cash flow from operating activities)</p>\n</li>\n</ul>\n<p><b>Cardinal Rule:</b> Make all cash flow adjustments to net income; do not simply add back depreciation and amortization, which could be seriously misleading.</p>\n<h2>Two profit analysis models for management decision making</h2>\n<p><b>Contribution margin minus fixed expenses model</b><b>:</b></p>\n<table>\n<tbody>\n<tr>\n<td>Sales price</td>\n<td>$100</td>\n</tr>\n<tr>\n<td>Less variable costs per unit</td>\n<td><u>$60</u></td>\n</tr>\n<tr>\n<td>Equals contribution margin per unit</td>\n<td>$40</td>\n</tr>\n<tr>\n<td>Times annual sales volume, in units</td>\n<td><u>120,000</u></td>\n</tr>\n<tr>\n<td>Equals total contribution margin</td>\n<td>$4,800,000</td>\n</tr>\n<tr>\n<td>Less fixed operating expenses</td>\n<td><u>$3,000,000</u></td>\n</tr>\n<tr>\n<td>Equals operating profit</td>\n<td>$1,800,000</td>\n</tr>\n</tbody>\n</table>\n<p><b>Excess of sales over breakeven model:</b></p>\n<p>$3,000,000 annual fixed operating expenses ÷ $40 contribution margin per unit = 75,000 units breakeven point (volume)</p>\n<table>\n<tbody>\n<tr>\n<td>Annual sales volume for year, in units</td>\n<td>120,000</td>\n</tr>\n<tr>\n<td>Less annual breakeven volume, in units</td>\n<td><u>75,000</u></td>\n</tr>\n<tr>\n<td>Equals excess over breakeven, in units</td>\n<td>45,000</td>\n</tr>\n<tr>\n<td>Times contribution margin per unit</td>\n<td><u>$40</u></td>\n</tr>\n<tr>\n<td>Equals operating profit</td>\n<td>$1,800,000</td>\n</tr>\n</tbody>\n</table>\n<h2>Guidelines for internal accounting reports to managers</h2>\n<p>When you’re preparing financial information for your business’s managers, follow these tips:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Follow the organizational structure (responsibility accounting)</p>\n</li>\n<li>\n<p class=\"first-para\">Orient your report based on whether organization unit is a profit center or a cost center</p>\n</li>\n<li>\n<p class=\"first-para\">Know the mind of the manager</p>\n</li>\n<li>\n<p class=\"first-para\">Highlight significant factors and deemphasize non-significant factors</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-02-28T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":209042},{"headers":{"creationTime":"2016-03-27T16:47:33+00:00","modifiedTime":"2022-02-28T16:44:23+00:00","timestamp":"2022-02-28T18:01:08+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"1,001 Accounting Practice Problems For Dummies Cheat Sheet","strippedTitle":"1,001 accounting practice problems for dummies cheat sheet","slug":"1001-accounting-practice-problems-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Sharpen your math skills and study up on some of the most important formulas you'll need for accounting practice.","noIndex":0,"noFollow":0},"content":"Accounting, as you may guess, involves a lot of math. As you practice various types of accounting problems, and when you begin doing accounting work for real, you will need to utilize various formulas to calculate the information you need.","description":"Accounting, as you may guess, involves a lot of math. As you practice various types of accounting problems, and when you begin doing accounting work for real, you will need to utilize various formulas to calculate the information you need.","blurb":"","authors":[{"authorId":9050,"name":"Kenneth Boyd","slug":"kenneth-boyd","description":"Ken Boyd, a former CPA, has more than 37 years of experience in accounting, education, and financial services. He is the owner of Accounting Accidentally (<a href=\"https://www.accountingaccidentally.com/\" target=\"_blank\" rel=\"noopener\">www.accountingaccidentally.com</a>), which provides written and video content on accounting, personal finance, and entrepreneurship topics. His YouTube channel (<a href=\"https://www.youtube.com/user/kenboydstl\" target=\"_blank\" rel=\"noopener\">kenboydstl</a>) has hundreds of videos on accounting and finance.\r\n\r\nIn recent years, Boyd has served as an adjunct professor of accounting at the Cook School of Business at St. Louis University. He has written hundreds of articles for QuickBooks, Investopedia, and a number of other publications.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9050"}},{"authorId":9051,"name":"Kate Mooney","slug":"kate-mooney","description":"Kate Mooney, CPA, teaches accounting to both undergraduates and MBA students at St. Cloud State University. 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He provides online tutoring in accounting and finance. Kenneth has worked as a CPA, Auditor, Tax Preparer, and College Professor. He is the author of <i>CPA Exam For Dummies</i>. <b data-author-id=\"9360\">Kate Mooney</b> has been teaching accounting to both undergraduates and MBA students at St. Cloud State University since 1986, after earning her PhD from Texas A &amp; M University. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy. </p>","authors":[{"authorId":9360,"name":"","slug":null,"description":null,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9360"}},{"authorId":9051,"name":"Kate Mooney","slug":"kate-mooney","description":"Kate Mooney, CPA, teaches accounting to both undergraduates and MBA students at St. Cloud State University. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9051"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118853283&quot;]}]\" id=\"du-slot-621d0de411800\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118853283&quot;]}]\" id=\"du-slot-621d0de4121b3\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":145405,"title":"10 Useful Accounting Formulas","slug":"10-useful-accounting-formulas","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/145405"}},{"articleId":145404,"title":"Financial Statement Formulas","slug":"financial-statement-formulas","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/145404"}},{"articleId":145398,"title":"More Financial Analysis Formulas","slug":"more-financial-analysis-formulas","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/145398"}}],"content":[{"title":"10 useful accounting formulas","thumb":null,"image":null,"content":"<p>The following are some of the most frequently used accounting formulas. This list is not comprehensive, but it should cover the items you’ll use most often as you practice solving various accounting problems.</p>\n<h2>Balance sheet formula</h2>\n<p>Assets – liabilities = equity (or assets = liabilities + equity)</p>\n<p>This basic formula must stay in balance to generate an accurate balance sheet. This means that all accounting transactions must keep the formula in balance. If not, the accountant has made an error.</p>\n<h2>Retained earnings formula</h2>\n<p>Beginning balance + net income – net losses – dividends = ending balance</p>\n<h2>Income statement formula</h2>\n<p>Revenue (sales) – expenses = profit (or net income)</p>\n<p>Keep in mind that revenue and sales may be used interchangeably. Profit and net income may also be used interchangeably. The income statement is also referred to as a <i>profit and loss statement.</i></p>\n<h2>Gross margin</h2>\n<p>Sales – cost of sales</p>\n<p>Gross margin is not a company’s net income or profit. Other expenses, such as selling, general, and administrative (SG and A) expenses, are subtracted to arrive at net income.</p>\n<h2>Operating income (earnings)</h2>\n<p>Gross profit – selling, general, and administrative (SG and A) expenses</p>\n<h2>Statement of cash flows formula</h2>\n<p>Beginning cash balance + cash flow sources (uses) from operations + cash flow sources (uses) from financing + cash flow sources (uses) from investing = ending cash balance</p>\n<p>This formula adds cash sources and subtracts cash uses.</p>\n<h2>Inventory formula</h2>\n<p>Beginning inventory + purchases – cost of sales = ending inventory (or beginning inventory + purchases – ending inventory = cost of sales)</p>\n<h2>Net sales formula</h2>\n<p>Gross sales – sales discounts – sales returns and allowances</p>\n<h2>Book value of fixed (depreciable) assets</h2>\n<p>Original cost – accumulated depreciation</p>\n<h2>Straight line depreciation</h2>\n<p>(Original cost – salvage value) / number of years in useful life</p>\n<p><i>Salvage </i><i>value </i>is the dollar amount that the owner can receive for selling the asset at the end of its useful life.</p>\n"},{"title":"Financial statement formulas","thumb":null,"image":null,"content":"<p>After you create financial statements, you need some tools to analyze a company’s results. Following are the most frequently used formulas to analyze financial statements. Get familiar with them so that you can analyze statements with confidence.</p>\n<h2>Components of work-in-process</h2>\n<p>Direct materials + direct labor + factory overhead applied</p>\n<p>Work-in-process (WIP) represents cost incurred in production for partially completed goods. WIP is a subaccount within inventory. When goods are completed, they are moved to finished goods (another inventory account).</p>\n<h2>Current ratio</h2>\n<p>Current assets ÷ current liabilities</p>\n<p>The current ratio illustrates how easily a company can cover its current bills.</p>\n<h2>Quick ratio</h2>\n<p>(Current assets less inventory) ÷ current liabilities</p>\n<p>The quick ratio excludes inventory from current assets. The rationale is that inventory is the current asset that will take the longest time to convert into cash. Other current assets, such as collecting accounts receivable, may be converted into cash more quickly.</p>\n<h2>Asset turnover ratio</h2>\n<p>Revenue (or sales) ÷ assets</p>\n<p>This ratio explains how much profit a company generates for every dollar of assets.</p>\n<h2>Return on equity</h2>\n<p>Net income ÷ equity</p>\n<p>This ratio explains how much profit a company generates for every dollar of equity.</p>\n<h2>Debt to equity ratio</h2>\n<p>Debt ÷ equity</p>\n<p>This ratio measures what percentage of a firm’s total capitalization is debt. Capitalization refers to all funds raised by the company to operate the business.</p>\n<h2>Contribution margin</h2>\n<p>Sales less variable costs</p>\n<p>Contribution margin represents the amount that will be used to cover fixed costs. Any dollars remaining after paying fixed costs is considered profit.</p>\n<h2>Return on capital</h2>\n<p>Operating profit ÷ capital</p>\n<p>Capital is similar to equity. It represents funds raised to operate a business. Operating profit refers to profit generated from normal business activity.</p>\n<h2>Break-even formula</h2>\n<p>Sales – variable costs – fixed costs = $0 profit</p>\n<p>The break-even formula calculates the level of sales that will generate a profit of $0.</p>\n<h2>Formula to assign overhead costs</h2>\n<p>Total overhead costs incurred ÷ activity level</p>\n<p>Overhead costs, such as a factory’s utility costs, can’t be directly traced to a product. Instead, overhead costs are allocated based on an activity level. The activity level chosen should impact the amount of overhead costs incurred. For example, the number of machine hours used drives machinery repair costs. Machine hours should be the activity level for machine repair costs.</p>\n"},{"title":"More financial analysis formulas","thumb":null,"image":null,"content":"<p>After you create financial statements, you need some tools to analyze the company’s results. Following are some additional formulas accountants use to analyze financial statements. Become familiar with these formulas, and use them as you practice various accounting problems.</p>\n<h2>Burden rate</h2>\n<p>Fixed manufacturing costs ÷ units produced</p>\n<p>Fixed costs can’t be directly traced to a unit produced. For example, a $50,000 monthly factory lease must be paid, regardless of the number of units produced in a given month. To assign fixed cost to each unit of product, companies used the burden rate.</p>\n<h2>Cost of idle capacity</h2>\n<p>Percentage of available capacity unused × fixed manufacturing overhead costs</p>\n<p><i>Idle capacity</i> refers to unused capacity. Assume you could produce 20% more baseball gloves this month, using your existing factory costs (materials, labor, and overhead). Say that the factory pays a foreman $50,000 in salary and benefits to supervise production. The cost of idle capacity is 20% multiplied by $50,000, or $10,000. The firm is paying an extra $10,000 for production capacity it’s not using.</p>\n<h2>Calculating loan interest</h2>\n<p>Interest rate for period × principal amount of loan</p>\n<p>Interest can be compounded (computed) annually, monthly, or even daily. Pay attention to the stated annual interest rate on the loan and how often interest is compounded. If a 12% loan is compounded monthly, the monthly interest rate is 12% ÷ 12 months, or 1%.</p>\n<h2>Effective interest rate</h2>\n<p>Interest paid ÷ principal amount owed</p>\n<p>Because of the effects of compounding, the actual interest paid on a loan may be different from the stated interest rate on the note multiplied by the principal.</p>\n<h2>Present value and future value factors</h2>\n<p>Present value factor less than 1; future value factor more than 1</p>\n<p>A present value factor discounts a cash flow to its present value. To calculate the present value, you multiply the factor times the cash flow amount. A present value factor will be less than 1. The future value of a cash flow adjusts the cash flow to its future value, given an interest rate. A future value factor will always be more than 1.</p>\n<h2>Return on investment (ROI)</h2>\n<p>Profit (net income) from investment ÷ cost of investment</p>\n<p>A more complex version of the formula is operating income divided by operating assets. Operating assets represent an investment in a project or business. The purpose of this formula is to determine the profitability of a given project.</p>\n<h2>Return on investment (DuPont model)</h2>\n<p>Profit margin × asset turnover</p>\n<p>This is a more complex formula that’s used for ROI. Profit margin is operating profit divided by sales. Asset turnover is calculated as sales divided by average assets. Average assets refers to assets at beginning of period + assets balance at end of period ÷ 2.</p>\n<h2>Return of investment to shareholders</h2>\n<p>Retained earnings balance – payments to shareholders</p>\n<p>A <i>dividend</i> is a payment of retained earnings to shareholders (investors). If a company makes payments to shareholders that are greater than the balance of retained earnings, those payments are a return of the investors’ original investment.</p>\n<h2>Rule of 72</h2>\n<p>72 ÷ rate of return on investment</p>\n<p>The <i>rule of 72</i> states how many years it will take for a sum of money to double, given a rate of return that is compounded each year. If, for example, the rate of return is 8%, a sum of money will double in 72÷8, or 9 years.</p>\n<h2>Weighted average cost of capital (WACC)</h2>\n<p>Annual cost to obtain financing ÷ capital balance</p>\n<p>Companies can raise funds by issuing debt or equity. Outstanding debt requires annual interest payments. Shareholders who purchase equity may also insist on required annual dividend payments. Interest payments on debt and dividend payments to shareholders are both considered financing costs. The annual cost of financing divided by the funds raised to operate the business (capital) is WACC.</p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-02-15T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207571},{"headers":{"creationTime":"2016-03-27T16:57:15+00:00","modifiedTime":"2022-02-25T16:04:45+00:00","timestamp":"2022-02-25T18:01:13+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Understanding Business Accounting For Dummies Cheat Sheet","strippedTitle":"understanding business accounting for dummies cheat sheet","slug":"understanding-business-accounting-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Make sense of your accounts, balance your budgets, and boost your profit margin with these tips for understanding business accounting.","noIndex":0,"noFollow":0},"content":"Want to get seriously savvy with your business accounting, but don’t know where to start? You don’t need to be a professional accountant to decode the jargon. Use these pointers to find out how to make sense of your accounts, balance your budgets, and boost your profit margin.","description":"Want to get seriously savvy with your business accounting, but don’t know where to start? You don’t need to be a professional accountant to decode the jargon. Use these pointers to find out how to make sense of your accounts, balance your budgets, and boost your profit margin.","blurb":"","authors":[],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General (Accounting)","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282649,"slug":"understanding-business-accounting-for-dummies-uk-4th-uk-edition","isbn":"9781119413530","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119413532/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119413532/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119413532-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119413532/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119413532/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/understanding-business-accounting-for-dummies-4th-uk-edition-cover-9781119413530-203x255.jpg","width":203,"height":255},"title":"Understanding Business Accounting For Dummies - UK, 4th UK Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"\n <p><b data-author-id=\"9484\">Colin Barrow</b> was head of the Enterprise Group at Cranfield School of Management for ten years and is the best-selling author of Starting a Business For Dummies. He launched the Business Growth Program, the UK's most successful and longest-running training program for business managers. Since that time, Barrow has taught at business schools across the US and Europe. <b data-author-id=\"9472\">John A. Tracy</b>, CPA, is professor of accounting, emeritus, at the University of Colorado in Boulder.</p>","authors":[{"authorId":9484,"name":"Colin Barrow","slug":"colin-barrow","description":"Colin Barrow was head of the Enterprise Group at Cranfield School of Management for ten years and is the best-selling author of Starting a Business For Dummies. He launched the Business Growth Program, the UK's most successful and longest-running training program for business managers. Since that time, Barrow has taught at business schools across the US and Europe.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9484"}},{"authorId":9472,"name":"John A. Tracy","slug":"john-a-tracy","description":"John A. Tracy, CPA, is professor of accounting, emeritus, at the University of Colorado in Boulder.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9472"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119413530&quot;]}]\" id=\"du-slot-6219196951b70\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119413530&quot;]}]\" id=\"du-slot-6219196952544\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":193904,"title":"Six Groups That Do Business with a Business","slug":"six-groups-that-do-business-with-a-business","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/193904"}},{"articleId":193883,"title":"Main Tasks of Business Accounting","slug":"main-tasks-of-business-accounting-2","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/193883"}},{"articleId":193902,"title":"Primary Financial Statements of a Business","slug":"primary-financial-statements-of-a-business-2","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/193902"}},{"articleId":193879,"title":"Understanding Accounting Values on the Balance Sheet","slug":"understanding-accounting-values-on-the-balance-sheet","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/193879"}},{"articleId":193884,"title":"The Basic Steps of the Business Accounting Cycle","slug":"the-basic-steps-of-the-business-accounting-cycle","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/193884"}}],"content":[{"title":"Six groups that do business with a business","thumb":null,"image":null,"content":"<p>Six main groups are intimately connected to the life of a business. Knowing who they are, what they expect and how you’re interacting with each of them is essential.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Customers,</b> who buy the products and services that the business sells.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Employees,</b> who provide services to the business; they are paid wages and salaries and are provided with a broad range of benefits such as a pension plan and paid holidays.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Suppliers</b> and <b>vendors,</b> who sell a wide range of things to the business such as legal advice, electricity and gas, telephone service, computers, vehicles, tools and equipment, furniture and even audits.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Debt sources of capital,</b> who loan money to the business, charge interest on the amount loaned and have to be repaid at specific dates in the future.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Equity sources of capital,</b> the individuals and financial institutions including private equity firms who invest money in the business and expect the business to earn profit on the capital they have invested.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Government</b> agencies that collect income taxes, payroll taxes, value-added tax and excise duties from the business, or who provide support and grants to encourage business expansion and international trade.</p>\n</li>\n</ul>\n"},{"title":"Main tasks of business accounting","thumb":null,"image":null,"content":"<p>As someone concerned with business accounting, you have a lot to know and to remember. To help you, this list explains the main tasks and processes.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Payroll:</b> Based on several collections of data: detailed private information in personnel files and earnings-to-date information, the correct amounts of income tax and social security tax. Several other deductions from wages also have to be calculated. NI contributions, PAYE payments, retirement and holiday pay have to be updated every pay period.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cash inflows:</b> All cash received from sales and all other sources has to be carefully identified and recorded, not only in the cash account but also in the appropriate account for the source of the received cash.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cash payments:</b> In addition to payroll checks, a business writes many other checks during the course of a year to pay for a wide variety of items including local business taxes, paying off loans and the distribution of some of its profit to the business owners.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Purchases and stock:</b> Accounting departments are usually responsible for keeping track of all purchase orders that have been placed for stock (products to be sold by the business) and all other assets and services that the business buys. The accounting department also keeps detailed records on all products held for sale by the business and, when the products are sold, records the cost of the goods sold.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Capital accounting:</b> A typical business holds many different assets called <i>capital</i>,<i> </i>including office furniture and equipment, retail display cabinets, computers, machinery and tools, vehicles, buildings and land. Apart from relatively small-cost items, a business has to maintain detailed records of its capital items, both for controlling the use of the assets and for determining taxes.</p>\n</li>\n</ul>\n"},{"title":"Primary financial statements of a business","thumb":null,"image":null,"content":"<p>This list gives details of the three primary financial statements in the running of a business. These statements record your business’s performance, letting you analyze and identify where you’re strong and not-so-strong in your finances:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Balance sheet:</b> A summary of the business’s financial position at the end of the accounting period.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Profit and loss account:</b> A summary of sales revenue and expenses that determines the profit (or loss) for the period that has just ended. The profit and loss account also summarizes the outflow of assets for expenses during the period leading down to the well-known <i>bottom line</i>, or final profit, or loss, for the period.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cash flow statement:</b> The cash flow statement summarizes the business’s cash inflows and outflows during the period. The first part of this statement calculates the net increase or decrease in cash during the period from the profit-making activities that are reported in the profit and loss account.</p>\n</li>\n</ul>\n"},{"title":"Understanding accounting values on the balance sheet","thumb":null,"image":null,"content":"<p>Your balance sheet is one of three primary financial statements in the running of a business. It gives an overview of the business’s total assets and liabilities at a particular date, and is an important statement of your financial affairs. So understanding what it means it crucial. This list breaks down each of the values you’re likely to encounter:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Cash:</b> Amounts of money on hand in coin and currency; money on deposit in bank accounts</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Debtors:</b> Amounts not yet collected from credit sales to customers</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Stock:</b> Amounts of purchase costs or production costs for products that haven’t sold yet</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Fixed assets (or Property, Plant, and Equipment):</b> Amounts of costs invested in long-life, tangible, productive operating assets</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Creditors</b> <b>and</b> <b>accrued liabilities:</b> Amounts for the costs of unpaid expenses</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Overdrafts and loans:</b> Amounts borrowed on interest-bearing liabilities</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Capital stock:</b> Amounts of capital invested in the business by owners (shareholders). This can be either by way of the initial capital introduced by them or through profits left in the business after trading gets under way</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Retained earnings (or reserves):</b> Amounts remaining in the owners’ equity account</p>\n</li>\n</ul>\n"},{"title":"The basic steps of the business accounting cycle","thumb":null,"image":null,"content":"<p>This flowchart gives an overview of the business accounting cycle, mapping the entire bookkeeping process with aspects of the accounting system side-by-side. The bookkeeping stages are on the left-hand side and the respective accounting processes are on the right.</p>\n<p><img loading=\"lazy\" src=\"https://www.dummies.com/wp-content/uploads/174527.image0.jpg\" alt=\"image0.jpg\" width=\"540\" height=\"640\" /></p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-02-25T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":209225},{"headers":{"creationTime":"2016-03-27T16:48:23+00:00","modifiedTime":"2022-02-24T21:45:02+00:00","timestamp":"2022-02-25T00:01:05+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Accounting All-In-One For Dummies Cheat Sheet","strippedTitle":"accounting all-in-one for dummies cheat sheet","slug":"accounting-all-in-one-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Refer to this handy accounting Cheat Sheet for the basics of cash flow and profit, cost-accounting formulas, and financial statement fraud.","noIndex":0,"noFollow":0},"content":"The accounting field covers a lot of ground, from setting up accounts and producing financial reports to budgeting for a business and preventing and detecting fraud.\r\n\r\nQuickly get up to speed on the basics with tips for controlling cash in a business, an overview of cash flow and profit, quick access to essential cost-accounting formulas, and the red flags of financial statement fraud.","description":"The accounting field covers a lot of ground, from setting up accounts and producing financial reports to budgeting for a business and preventing and detecting fraud.\r\n\r\nQuickly get up to speed on the basics with tips for controlling cash in a business, an overview of cash flow and profit, quick access to essential cost-accounting formulas, and the red flags of financial statement fraud.","blurb":"","authors":[{"authorId":8993,"name":"Joseph Kraynak","slug":"joseph-kraynak","description":"Joseph Kraynak is a writer who's contributed to several Dummies books, including Flipping Houses For Dummies, Oceans For Dummies, and Selling on Amazon For Dummies.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8993"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General (Accounting)","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":281920,"slug":"accounting-all-in-one-for-dummies-with-online-practice-2nd-edition","isbn":"9781119453895","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119453895/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119453895/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119453895-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119453895/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119453895/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/accounting-all-in-one-for-dummies-2nd-edition-cover-9781119453895-203x255.jpg","width":203,"height":255},"title":"Accounting All-in-One For Dummies with Online Practice, 2nd Edition","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"\n <p><b data-author-id=\"9360\">Kenneth W. Boyd</b> has 30 years of experience in accounting and financial services. He is a four-time Dummies book author, a blogger, and a video host on accounting and finance topics. </p>","authors":[{"authorId":9360,"name":"","slug":null,"description":null,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9360"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119453895&quot;]}]\" id=\"du-slot-62181c414c035\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119453895&quot;]}]\" id=\"du-slot-62181c414c9b9\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":156779,"title":"4 Tips for Controlling Your Business Cash","slug":"4-tips-for-controlling-your-business-cash","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/156779"}},{"articleId":156778,"title":"The Relationship between Cash Flow and Profit in Business","slug":"the-relationship-between-cash-flow-and-profit-in-business","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/156778"}},{"articleId":156776,"title":"9 Must-Know Formulas for Cost Accounting","slug":"9-must-know-formulas-for-cost-accounting","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/156776"}},{"articleId":156777,"title":"13 Ways to Spot Fraud in Business Financial Statements","slug":"13-ways-to-spot-fraud-in-business-financial-statements","categoryList":["business-careers-money","business","accounting","audits"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/156777"}}],"content":[{"title":"4 tips for controlling your business cash","thumb":null,"image":null,"content":"<p>Although bookkeepers typically are the ones who record what happens to your business&#8217;s cash, they aren&#8217;t the only ones who control where that cash goes. Controlling your company&#8217;s money is important: A business&#8217;s cash can be a tempting siren for employees who aren&#8217;t accountable to the right checks and balances.</p>\n<p>Safeguard your company&#8217;s money by following these suggestions to limit any one person&#8217;s access to cash:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Separate cash handlers from recordkeeping. </b>Be sure that the person who accepts cash isn&#8217;t also recording the transaction.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Separate authorization responsibilities from cash handlers. </b>Be sure that the person who authorizes a payment isn&#8217;t also signing the check or dispersing the cash.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Segregate the duties of your bookkeeping staff to ensure a good system of checks and balances.</b> Don&#8217;t put too much trust in one person — unless that one person is you.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Separate operational responsibility (actual day-to-day transactions) from record-keeping responsibility (entering transactions in the books).</b></p>\n</li>\n</ul>\n"},{"title":"The relationship between cash flow and profit","thumb":null,"image":null,"content":"<p>Making profit generates cash flow. Any business owner knows that. But the actual increase in cash during a given period is invariably lower or higher than the profit number. The following points illustrate how cash flow relates to profit:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">The amounts of cash flows during the period rarely are equal to the revenue and expense numbers in the P&amp;L (profit and loss) report for the period.</p>\n</li>\n<li>\n<p class=\"first-para\">Actions that <i>lower</i> cash flow: increasing accounts receivable and inventory; decreasing accounts payable and accrued expenses payable.</p>\n</li>\n<li>\n<p class=\"first-para\">Actions that <i>raise</i> cash flow: decreasing accounts receivable and inventory; increasing accounts payable and accrued expenses payable.</p>\n</li>\n<li>\n<p class=\"first-para\">Depreciation expense is not a cash outlay in the period recorded; neither is amortization expense; unusual losses recorded in the period may not involve cash outlay but rather be write-downs of assets or write-ups of liabilities.</p>\n</li>\n</ul>\n"},{"title":"9 must-know formulas for cost accounting","thumb":null,"image":null,"content":"<p>To reduce and eliminate costs in a business, you need to know the formulas that are most often used in cost accounting. When you understand and use these foundational formulas, you&#8217;ll be able to analyze a product&#8217;s price and increase profits.</p>\n<p><b>Breakeven</b><b> </b><b>Formula</b><b>:</b></p>\n<blockquote><p><i>Profit ($0) = Sales – Variable costs – Fixed costs</i></p></blockquote>\n<p><b>Target Net Income</b><b>:</b></p>\n<blockquote><p><i>Target net income = Sales – Variable costs – Fixed costs</i></p></blockquote>\n<p><b>Gross Margin</b><b>:</b></p>\n<blockquote><p><i>Gross margin = Sale price – Cost of sales (material and labor)</i></p></blockquote>\n<p><b>Contribution Margin</b><b>:</b></p>\n<blockquote><p><i>Contribution margin = Sales – Variable costs</i></p></blockquote>\n<p><b>Pre-Tax Dollars Needed for Purchase</b><b>:</b></p>\n<blockquote><p><i>Pre-tax dollars needed for purchase = Cost of item ÷ (1 – Tax rate)</i></p></blockquote>\n<p><b>Price Variance</b><b>:</b></p>\n<blockquote><p><i>Price variance = (Actual price – Budgeted price) × (Actual units sold)</i></p></blockquote>\n<p><b>Efficiency Variance</b><b>:</b></p>\n<blockquote><p><i>Efficiency variance = (Actual quantity – Budgeted quantity) × (Standard price or rate)</i></p></blockquote>\n<p><b>Variable Overhead Variance</b><b>:</b></p>\n<blockquote><p><i>Variable overhead variance = Spending variance + Efficiency variance</i></p></blockquote>\n<p><b>Ending Inventory</b><b>:</b></p>\n<blockquote><p><i>Ending inventory = Beginning inventory + Purchases – Cost of sales</i></p></blockquote>\n"},{"title":"13 ways to spot fraud in business financial statements","thumb":null,"image":null,"content":"<p>Financial statement fraud, commonly referred to as &#8220;cooking the books,&#8221; involves deliberately overstating assets, revenues, and profits and/or understating liabilities, expenses, and losses. When a forensic accountant investigates business financial fraud, she looks for red flags or accounting warning signs that indicate suspect business accounting practices.</p>\n<p>These red flags include the following:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Aggressive revenue recognition practices, such as recognizing revenue in earlier periods than when the product was sold or the service was delivered</p>\n</li>\n<li>\n<p class=\"first-para\">Unusually high revenues and low expenses at period end that can&#8217;t be attributed to seasonality</p>\n</li>\n<li>\n<p class=\"first-para\">Growth in inventory that doesn&#8217;t match growth in sales</p>\n</li>\n<li>\n<p class=\"first-para\">Improper capitalization of expenses in excess of industry norms</p>\n</li>\n<li>\n<p class=\"first-para\">Reported earnings that are positive and growing but operating cash flow that&#8217;s declining</p>\n</li>\n<li>\n<p class=\"first-para\">Growth in revenues that&#8217;s far greater than growth in other companies in the same industry or peer group</p>\n</li>\n<li>\n<p class=\"first-para\">Gross margin or operating margins out of line with peer companies</p>\n</li>\n<li>\n<p class=\"first-para\">Extensive use of off–balance sheet entities based on relationships that aren&#8217;t normal in the industry</p>\n</li>\n<li>\n<p class=\"first-para\">Sudden increases in gross margin or cash flow as compared with the company&#8217;s prior performance and with industry averages</p>\n</li>\n<li>\n<p class=\"first-para\">Unusual increases in the book value of assets, such as inventory and receivables</p>\n</li>\n<li>\n<p class=\"first-para\">Disclosure notes so complex that it&#8217;s impossible to determine the actual nature of a particular transaction</p>\n</li>\n<li>\n<p class=\"first-para\">Invoices that go unrecorded in the company&#8217;s financial books</p>\n</li>\n<li>\n<p class=\"first-para\">Loans to executives or other related parties that are written off</p>\n</li>\n</ul>\n<p class=\"Warning\">A business that engages in such fraudulent practices stands to lose a tremendous amount of money when penalties and fines, legal costs, the loss of investor confidence, and a tarnished reputation are taken into account.</p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-01-31T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207757},{"headers":{"creationTime":"2016-03-27T16:50:14+00:00","modifiedTime":"2022-02-22T21:02:11+00:00","timestamp":"2022-02-24T17:07:36+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Managerial Accounting For Dummies Cheat Sheet","strippedTitle":"managerial accounting for dummies cheat sheet","slug":"managerial-accounting-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Master the basic concepts and principles of managerial accounting to make sound business decisions.","noIndex":0,"noFollow":0},"content":"Managerial accounting helps managers and other decision-makers understand how much their products cost, how their companies make money, and how to plan for profits and growth. To use this information, company decision-makers must understand managerial-accounting terms. When planning for the future, they follow a master budgeting process. To prepare this budget, and to understand how costs behave, the decision-makers should understand cost-volume-profit relationships, which explain how changes in volume or price affect profits.","description":"Managerial accounting helps managers and other decision-makers understand how much their products cost, how their companies make money, and how to plan for profits and growth. To use this information, company decision-makers must understand managerial-accounting terms. When planning for the future, they follow a master budgeting process. To prepare this budget, and to understand how costs behave, the decision-makers should understand cost-volume-profit relationships, which explain how changes in volume or price affect profits.","blurb":"","authors":[{"authorId":9468,"name":"Mark P. Holtzman","slug":"mark-p-holtzman","description":"Mark P. Holtzman, PhD, CPA, is chair of the Department of Accounting and Taxation at Seton Hall University in South Orange, New Jersey. He has taught accounting at the college level for 17 years and runs the Accountinator website at accountinator.com, which gives practical accounting advice to entrepreneurs.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9468"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General (Accounting)","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":204528,"title":"Scattergraph to Separate Mixed Costs into Variable and Fixed Components","slug":"scattergraph-to-separate-mixed-costs-into-variable-and-fixed-components","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/204528"}},{"articleId":204527,"title":"Analyze Accounts to Separate Mixed Costs into Variable and Fixed Components","slug":"analyze-accounts-to-separate-mixed-costs-into-variable-and-fixed-components","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/204527"}},{"articleId":204526,"title":"Activity-Based Costing for Overhead Allocation","slug":"activity-based-costing-for-overhead-allocation","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/204526"}},{"articleId":204525,"title":"An Example of Accounting for the Job Order Costing System","slug":"an-example-of-accounting-for-the-job-order-costing-system","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/204525"}},{"articleId":204523,"title":"Managerial Accounting: Types of Responsibility Centers","slug":"managerial-accounting-types-of-responsibility-centers","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/204523"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282372,"slug":"managerial-accounting-for-dummies","isbn":"9781118116425","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1118116429/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1118116429/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1118116429-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1118116429/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1118116429/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/managerial-accounting-for-dummies-cover-9781118116425-202x255.jpg","width":202,"height":255},"title":"Managerial Accounting For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"\n <p><b data-author-id=\"9468\">Mark P. Holtzman, PhD, CPA</b>, is Chair of the Department of Accounting and Taxation at Seton Hall University. He has taught accounting at the college level for 17 years and runs the Accountinator website at www.accountinator.com, which gives practical accounting advice to entrepreneurs.</p>","authors":[{"authorId":9468,"name":"Mark P. Holtzman","slug":"mark-p-holtzman","description":"Mark P. Holtzman, PhD, CPA, is chair of the Department of Accounting and Taxation at Seton Hall University in South Orange, New Jersey. He has taught accounting at the college level for 17 years and runs the Accountinator website at accountinator.com, which gives practical accounting advice to entrepreneurs.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9468"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118116425&quot;]}]\" id=\"du-slot-6217bb588be78\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118116425&quot;]}]\" id=\"du-slot-6217bb588c81f\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":170691,"title":"Key Costs Related to Managerial Accounting","slug":"key-costs-related-to-managerial-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170691"}},{"articleId":170682,"title":"Budgets that Go into Creating a Master Budget","slug":"budgets-that-go-into-creating-a-master-budget","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170682"}},{"articleId":170694,"title":"Cost-Volume-Profit Relationships for Managerial Accounting","slug":"cost-volume-profit-relationships-for-managerial-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170694"}}],"content":[{"title":"Key costs related to managerial accounting ","thumb":null,"image":null,"content":"<p>In accounting, a <i>cost</i> measures how much you pay/sacrifice for something. Managerial accounting must give managers accurate cost information relevant to their management decisions. Here are several cost-related terms you encounter in managerial accounting:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Direct cost:</b> Cost that you can trace to a specific product</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Indirect cost:</b> Cost that you can&#8217;t easily trace to a specific product</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Materials:</b> Physical things you need to make products</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Labor:</b> Work needed to make products</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Overhead:</b> Indirect materials, indirect labor, and other miscellaneous costs needed to make products</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Variable costs:</b> Costs that change in direct proportion with activity level</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Fixed costs:</b> Costs that don&#8217;t change with activity level</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Mixed costs:</b> Combination of fixed and variable costs</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Contribution margin:</b> Sales less variable costs</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Product costs:</b> Costs needed to make goods; considered part of inventory until sold</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Period costs:</b> Costs not needed to make goods; recorded as expenses when incurred</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Work-in-process cost:</b> How much you paid for goods that are started but not yet completed</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Finished goods cost:</b> How much you paid for goods completed but not yet sold</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cost of goods manufactured:</b> The cost of the goods completed during a period</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cost of goods sold:</b> The cost of making goods that you sold</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Controllable costs:</b> Costs that you can change</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Noncontrollable costs:</b> Costs that you can&#8217;t change</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Conversion costs:</b> Direct labor and overhead</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Incremental costs:</b> Costs that change depending on which alternative you choose; also known as <i>relevant costs</i> and <i>marginal costs</i></p>\n</li>\n<li>\n<p class=\"first-para\"><b>Irrelevant costs:</b> Costs that don&#8217;t change depending on which alternative you choose</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Opportunity costs:</b> Costs of income lost because you chose a different alternative</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Sunk costs:</b> Costs you&#8217;ve already paid or committed to paying</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Historical cost:</b> How much you originally paid for something</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cost per unit:</b> Cost of a single unit of product</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Expense:</b> Costs deducted from revenues on the income statement</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cost driver:</b> Factor thought to affect costs</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Process cost:</b> Cost of similar goods made in large quantities on an assembly line</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Job order cost:</b> Cost of a batch of specially made goods</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Absorption cost:</b> Cost that includes fixed and variable product costs</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Target cost:</b> Cost goal set for engineers designing a product</p>\n</li>\n</ul>\n"},{"title":"Budgets that go into creating a master budget ","thumb":null,"image":null,"content":"<p>A <i>master budget</i> is a plan created to manage a company&#8217;s manufacturing and sales activity to meet profit and cash flow goals. Creating a master budget requires careful coordination of several smaller budgets covering all parts of the organization; that way, the master budget is realistic but not complacent.</p>\n<p>The master budget contains the following elements:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Sales budget</p>\n</li>\n<li>\n<p class=\"first-para\">Production budget</p>\n</li>\n<li>\n<p class=\"first-para\">Direct materials budget</p>\n</li>\n<li>\n<p class=\"first-para\">Direct labor budget</p>\n</li>\n<li>\n<p class=\"first-para\">Manufacturing overhead budget</p>\n</li>\n<li>\n<p class=\"first-para\">Selling and administrative budget</p>\n</li>\n<li>\n<p class=\"first-para\">Capital acquisitions budget</p>\n</li>\n<li>\n<p class=\"first-para\">Cash budget</p>\n</li>\n<li>\n<p class=\"first-para\">Budgeted financial statements</p>\n</li>\n</ul>\n"},{"title":"Cost-Volume-Profit Relationships for Managerial Accounting ","thumb":null,"image":null,"content":"<p>Managerial accounting provides useful tools, such as cost-volume-profit relationships, to aid decision-making. Cost-volume-profit analysis helps you understand different ways to meet your company’s net income goals. This image describes the relationship among sales, fixed costs, variable costs, and net income:</p>\n<div class=\"img-div\"><img loading=\"lazy\" src=\"https://www.dummies.com/wp-content/uploads/354897.image0.jpg\" alt=\"image0.jpg\" width=\"535\" height=\"367\" /></div>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">The bottom axis indicates the <em>level of production</em> — the number of units you make.</p>\n</li>\n<li>\n<p class=\"first-para\">The left axis indicates <em>value in dollars</em>.</p>\n</li>\n<li>\n<p class=\"first-para\">Where total sales equals total costs, the company breaks even (which is why that’s called the <em>break-even point</em>).</p>\n</li>\n<li>\n<p class=\"first-para\">The shaded area to the upper right of this break-even point is <em>profit.</em></p>\n</li>\n<li>\n<p class=\"first-para\">The shaded region to the lower left is <em>net loss.</em></p>\n</li>\n<li>\n<p class=\"first-para\"><em>Total variable costs</em> are a diagonal line because the higher the production, the greater the variable costs.</p>\n</li>\n<li>\n<p class=\"first-para\">The <em>total fixed costs</em> line is horizontal because regardless of the production level, fixed costs stay the same.</p>\n</li>\n<li>\n<p class=\"first-para\"><em>Total costs</em> equal the sum of total variable costs and total fixed costs.</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-02-22T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208085},{"headers":{"creationTime":"2016-03-27T16:52:18+00:00","modifiedTime":"2022-02-22T19:45:36+00:00","timestamp":"2022-02-24T17:07:36+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Intermediate Accounting For Dummies Cheat Sheet","strippedTitle":"intermediate accounting for dummies cheat sheet","slug":"intermediate-accounting-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Go beyond basic accounting scenarios with intermediate accounting by learning to prepare financial statements and much more.","noIndex":0,"noFollow":0},"content":"Intermediate accounting builds on basic financial accounting skills. It's still all about generally accepted accounting principles (GAAP) and preparing financial statements. The material that intermediate accounting covers, however, goes beyond basic accounting scenarios. Think of financial accounting as the appetizer and intermediate accounting as the main course. Hope you're ready to chow down (Number Munchers, anyone?)!","description":"Intermediate accounting builds on basic financial accounting skills. It's still all about generally accepted accounting principles (GAAP) and preparing financial statements. The material that intermediate accounting covers, however, goes beyond basic accounting scenarios. Think of financial accounting as the appetizer and intermediate accounting as the main course. Hope you're ready to chow down (Number Munchers, anyone?)!","blurb":"","authors":[{"authorId":9470,"name":"Maire Loughran","slug":"maire-loughran","description":"Maire Loughran is a self-employed certified public accountant who has prepared compilation, review, and audit reports for 15 years. She is also a university professor of undergraduate- and graduate-level accounting classes. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9470"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General (Accounting)","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":176844,"title":"What Does Intermediate Accounting Cover?","slug":"what-does-intermediate-accounting-cover","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/176844"}},{"articleId":176843,"title":"Important Differences between U.S. and International Accounting Standards","slug":"important-differences-between-u-s-and-international-accounting-standards","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/176843"}},{"articleId":175445,"title":"What Is the Securities and Exchange Commission (SEC)?","slug":"what-is-the-securities-and-exchange-commission-sec","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175445"}},{"articleId":175443,"title":"Corporations and Equity Accounts","slug":"corporations-and-equity-accounts","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175443"}},{"articleId":175441,"title":"Current and Noncurrent Liabilities on the Balance Sheet","slug":"current-and-noncurrent-liabilities-on-the-balance-sheet","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175441"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282300,"slug":"intermediate-accounting-for-dummies","isbn":"9781118176825","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1118176820/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1118176820/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1118176820-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1118176820/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1118176820/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/intermediate-accounting-for-dummies-cover-9781118176825-203x255.jpg","width":203,"height":255},"title":"Intermediate Accounting For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"\n <p><b data-author-id=\"9470\">Maire Loughran</b> is a certified public accountant who has prepared compilation, review, and audit reports for fifteen years. A member of the American Institute of Certified Public Accountants, she is a full adjunct professor who teaches graduate and undergraduate auditing and accounting classes. </p>","authors":[{"authorId":9470,"name":"Maire Loughran","slug":"maire-loughran","description":"Maire Loughran is a self-employed certified public accountant who has prepared compilation, review, and audit reports for 15 years. She is also a university professor of undergraduate- and graduate-level accounting classes. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9470"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118176825&quot;]}]\" id=\"du-slot-6217bb58503e0\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118176825&quot;]}]\" id=\"du-slot-6217bb5850d63\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":176844,"title":"What Does Intermediate Accounting Cover?","slug":"what-does-intermediate-accounting-cover","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/176844"}},{"articleId":176843,"title":"Important Differences between U.S. and International Accounting Standards","slug":"important-differences-between-u-s-and-international-accounting-standards","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/176843"}}],"content":[{"title":"What does intermediate accounting cover?","thumb":null,"image":null,"content":"<p>Intermediate accounting delves into the more complex, more challenging aspects of accounting practices. It covers topics and accounting situations that go beyond the basics, including the following:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Time value of money: </b>Intermediate accounting involves advanced time value issues, such as deferred annuities and long-term bonds. <i>Annuities</i> are multiple payments over a period of time that you either make or receive. <i>Deferred annuities</i> are a type of annuity contract that delays payments to the investor until the investor elects to receive them. <i>Long-terms bonds</i> are bonds a business holds in another company that extends out more than twelve months into the future.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Accounting for retail inventory: </b>Inventory cost-flow assumptions, which are how the cost of inventory expenses on the income statement, are a big topic in financial accounting. An interesting expansion on this topic in intermediate accounting is accounting for retail inventory.</p>\n<p class=\"child-para\">The <i>retail inventory method</i> uses a cost ratio to convert the ending inventory valued at retail to cost. Basically, this works by taking goods available for sale at cost and dividing them by goods available for sale at retail. You can then multiply sales by the resulting percentage to come up with ending inventory at cost.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Accounting for property, plant, and equipment: </b>Intermediate accounting gets into the nitty-gritty of accounting for an involuntary conversions such as theft. When this happens, a company has to record the difference between insurance proceeds and the asset&#8217;s net book value as gain or loss on disposal of asset.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Research and development expenses (R&amp;D): </b>This thorny topic is rarely discussed in your financial accounting class. Intermediate accounting shows you how to handle the costs of R&amp;D, such as when a drug company is developing a product to bring to market.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Accounting for income taxes:</b> No one likes income taxes, and your financial accounting textbook discusses this topic minimally. Intermediate accounting to the rescue! Intermediate accounting covers how to calculate the difference between financial and tax accounting. A major difference between the two is financial and tax depreciation. Financial depreciation takes the long-way home while tax depreciation takes the short cut through the vacant lot! So net income between the two will differ.</p>\n</li>\n</ul>\n"},{"title":"Important differences between US and international accounting standards","thumb":null,"image":null,"content":"<p>Your intermediate accounting textbook homes in on generally accepted accounting principles (GAAP) in the United States, but, where applicable, points out international perspectives for accounting for the same events. Both positions are noted because GAAP and international accounting standards are on the road toward convergence, and one set of global accounting standards could evolve.. Here are some key differences between U.S. and international accounting standards:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Extraordinary items: </b>These items are unusual in nature and infrequent in occurrence. An example could be losses resulting from a major casualty such as a fire. US GAAP allows special financial reporting for these types of events while international standards do not.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Accounting for leases: </b>Whether a company expenses lease payments or treats them like loan payments divvying up the payment between principle and interest under US GAAP depends on GAAP capitalization rules. International standards are more user-friendly, and look at the basic facts and circumstances of the lease to determine whether lease payments are expensed or capitalized.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Tax deferrals: </b>Deferrals arise on the balance sheet because of the difference between financial and tax income. US GAAP allows for the classification of the deferrals as current or non-current, depending on the situation. International standards only allows for non-current treatment of these deferrals.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Balance sheet preparation: </b>It&#8217;s Financial Accounting 101 knowledge that current accounts show up on the balance sheet before non-current ones. For example, current assets like cash list before property, plant, and equipment. However, companies using international standards often list non-current liabilities before current ones.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Monetary assumptions: </b>US GAAP ignores the effect of inflation and deflation for accounting measurement and analysis. Using international accounting standards, countries with persistent inflation will general a price-index to adjust for inflation&#8217;s effect on their financial reporting.</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-02-22T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208338},{"headers":{"creationTime":"2016-03-27T16:50:21+00:00","modifiedTime":"2021-12-15T18:58:56+00:00","timestamp":"2022-02-24T17:07:17+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Cost Accounting For Dummies Cheat Sheet","strippedTitle":"cost accounting for dummies cheat sheet","slug":"cost-accounting-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"","noIndex":0,"noFollow":0},"content":"Cost accounting is a valuable tool you use to reduce and eliminate costs in a business. You also use cost accounting to determine a price for your product or service that will allow you to earn a reasonable profit.\r\n\r\nFamiliarize yourself with the most important formulas, terms, and principles you need to know to apply cost accounting. You'll also want to get the scoop on text-taking strategies for cost accounting students.","description":"Cost accounting is a valuable tool you use to reduce and eliminate costs in a business. You also use cost accounting to determine a price for your product or service that will allow you to earn a reasonable profit.\r\n\r\nFamiliarize yourself with the most important formulas, terms, and principles you need to know to apply cost accounting. You'll also want to get the scoop on text-taking strategies for cost accounting students.","blurb":"","authors":[{"authorId":9050,"name":"Kenneth Boyd","slug":"kenneth-boyd","description":"Ken Boyd, a former CPA, has more than 37 years of experience in accounting, education, and financial services. He is the owner of Accounting Accidentally (<a href=\"https://www.accountingaccidentally.com/\" target=\"_blank\" rel=\"noopener\">www.accountingaccidentally.com</a>), which provides written and video content on accounting, personal finance, and entrepreneurship topics. His YouTube channel (<a href=\"https://www.youtube.com/user/kenboydstl\" target=\"_blank\" rel=\"noopener\">kenboydstl</a>) has hundreds of videos on accounting and finance.\r\n\r\nIn recent years, Boyd has served as an adjunct professor of accounting at the Cook School of Business at St. Louis University. He has written hundreds of articles for QuickBooks, Investopedia, and a number of other publications.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9050"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General (Accounting)","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":171024,"title":"Must Know Formulas for Cost Accounting","slug":"must-know-formulas-for-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171024"}},{"articleId":171019,"title":"Avoiding Pitfalls on Cost Accounting Exams","slug":"avoiding-pitfalls-on-cost-accounting-exams","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171019"}},{"articleId":171020,"title":"Important Terms and Principles Cost Accountants Should Know","slug":"important-terms-and-principles-cost-accountants-should-know","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171020"}},{"articleId":166827,"title":"Analyze in Material Price and Efficiency Variances in Cost Accounting","slug":"analyze-in-material-price-and-efficiency-variances-in-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/166827"}},{"articleId":166828,"title":"Accrual Accounting in Cost Accounting","slug":"accrual-accounting-in-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/166828"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual 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Accounting For Dummies, 2nd Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":null,"authors":[{"authorId":9360,"name":"","slug":null,"description":null,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9360"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119856023&quot;]}]\" id=\"du-slot-6217bb45cfc79\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" 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Know","slug":"important-terms-and-principles-cost-accountants-should-know","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171020"}},{"articleId":171019,"title":"Avoiding Pitfalls on Cost Accounting Exams","slug":"avoiding-pitfalls-on-cost-accounting-exams","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171019"}}],"content":[{"title":"Must-know formulas for cost accounting","thumb":null,"image":null,"content":"<p>To reduce and eliminate costs in a business, you need to know the formulas that are most often used in cost accounting. When you understand and use these foundational formulas, you’ll be able to analyze a product’s price and increase profits.</p>\n<blockquote><p><b>Breakeven </b><b>Formula</b></p></blockquote>\n<blockquote><p>Profit ($0) = sales – variable costs – fixed costs</p></blockquote>\n<blockquote><p><b>Target Net Income</b></p></blockquote>\n<blockquote><p>Target net income = sales – variable costs – fixed costs</p></blockquote>\n<blockquote><p><b>Gross Margin</b></p></blockquote>\n<blockquote><p>Gross margin = sale price – cost of sales (material and labor)</p></blockquote>\n<blockquote><p><b>Contribution Margin</b></p></blockquote>\n<blockquote><p>Contribution margin = sales – variable costs</p></blockquote>\n<blockquote><p><b>Pre-Tax Dollars Needed for Purchase</b></p></blockquote>\n<blockquote><p>Pre-tax dollars needed for purchase = cost of item ÷ (1 &#8211; tax rate)</p></blockquote>\n<blockquote><p><b>Price Variance</b></p></blockquote>\n<blockquote><p>Price variance = (actual price &#8211; budgeted price) × (actual units sold)</p></blockquote>\n<blockquote><p><b>Efficiency Variance</b></p></blockquote>\n<blockquote><p>Efficiency variance = (Actual quantity – budgeted quantity) × (standard price or rate)</p></blockquote>\n<blockquote><p><b>Variable Overhead Variance</b></p></blockquote>\n<blockquote><p>Variable overhead variance = spending variance + efficiency variance</p></blockquote>\n<blockquote><p><b>Ending Inventory</b></p></blockquote>\n<blockquote><p>Ending inventory = beginning inventory + purchases – cost of sales</p></blockquote>\n"},{"title":"Important terms and principles cost accountants should know","thumb":null,"image":null,"content":"<p>Many accountants will tell you that cost accounting is the most difficult accounting subject to learn. That&#8217;s because cost accounting has many terms that are not used in other areas of accounting (financial accounting and management accounting, to name a few). If you&#8217;re looking for an overview of the most important terms and principles for this subject, you&#8217;ve found it! These concepts provide a foundation for learning cost accounting.</p>\n<h3>Reviewing accounting basics</h3>\n<p>Accountants use many principles to guide their decision-making process, such as the matching principle and the principle of conservatism.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Matching principle:</b> This principle states that your company’s revenue should be matched with the expenses that relate to that revenue. If you sell lamps in May, you create revenue for that month. The May revenue should be matched with the expenses you incurred for the lamps sold in May. So, the cost of the lamp is matched with the sales proceeds for the lamp’s sale.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Principle of conservatism:</b> Accountants often need to make judgments. <i>Conservatism</i> means that the decision should generate the least attractive financial result. If there’s a decision about revenue, the conservative choice is to delay recognizing revenue in the financial statements. Expenses should be posted to the financial statements sooner rather than later. These choices generate financial statements that are less optimistic, which is why the approach is called <i>conservative</i>.</p>\n</li>\n</ul>\n<p>There are four basic types of cost that accountants need to keep in mind — direct, indirect, fixed, and variable costs. They are defined as follows:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Direct costs</b>: <i>Direct cost</i>s can be directly traced to the product. Material and labor costs are good examples.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Indirect costs: </b>These can’t be directly traced to the product; instead, these costs are <i>allocated</i>, based on some level of activity. For example, overhead costs are considered indirect costs.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Fixed costs</b>: Fixed costs don’t vary with the level of production. A good example is a lease on a building.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Variable costs:</b> Unlike fixed costs, variable costs change with the level of production. For example, material used in production is a variable cost.</p>\n</li>\n</ul>\n<p>Every cost can be defined with two of these four costs. For example, the cost to repair machinery is an <i>indirect variable cost</i>. You decide if the cost is direct or indirect, <i>and</i> if the cost is fixed or variable.</p>\n<h3>Checking out cost accounting basics</h3>\n<p>Just like in any discipline, you use specific cost accounting terms and ideas to communicate meaning and understand procedures. Understanding basic concepts in crucial, so to start using cost accounting analysis, you should be familiar with these terms:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Contribution margin</b>: This term is defined as sales minus variable cost. When you subtract your fixed costs from contribution margin, the amount left over is your profit.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Breakeven point formula</b>: The <i>breakeven point</i> is the level of sales where your profit is zero. The breakeven formula is sales minus variable cost minus fixed cost. You multiply your sales per unit by units sold. You also multiply the variable cost per unit by the <i>same</i> units sold. The sales level that makes the formula equal to zero is the breakeven point.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Relevant range</b>: <i>Relevant range </i>is a term that relates to machinery, equipment, or vehicles in your business. Think of relevant range as the maximum level of use for the item you operate in your business. Say you use a sewing machine. As long as you operate the machine at or below the relevant range, it should operate normally. The machine’s cost should come in at the level you expect. If you operate above the relevant range, the machine won’t operate as you expect. You need to invest in a second machine to operate above the relevant range.</p>\n</li>\n</ul>\n<h3>Digging deeper into cost accounting analysis</h3>\n<p>As you further your study, you use more complex cost analysis tools. From job costing to variances, the more involved the job, the more involved your cost accounting tools become. Here are some important tools you’ll use:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Job costing:</b> This method of costing assumes that every customer job is different. Plumbers and carpenters are good examples of businesses that use cost accounting. Because every job is different, each customer job is assigned material, labor, and overhead costs.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Process costing</b>: Companies use process costing when partially completed units are moved from one production area to another. Process costing assumes that the products you produce are similar or even identical.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Activity-based costing (ABC)</b>: ABC costing can be used for both job costing and process costing analysis. You use ABC costing to assign costs to your product more specifically. ABC costing analyzes the <i>activities</i> that cause you to incur costs; you then connect the cost to the activity.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Variance</b>: A <i>variance</i> is a difference between your planned or budgeted cost and your actual results. A <i>favorable variance</i> occurs when your actual costs are less than your budgeted or planned cost. An unfavorable variance is when actual costs are higher than planned.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Inventoriable costs</b>: These are costs that are directly related to the product. Production costs are inventoriable costs for a manufacturer. If you are a retailer, your cost to purchase inventory is also an inventoriable. Other costs you incur for goods are included, such as shipping and storage costs.</p>\n</li>\n</ul>\n"},{"title":"Avoiding pitfalls on cost accounting exams","thumb":null,"image":null,"content":"<p>Cost accounting is a great tool to improve the profitability in any business. It’s a critical subject that accounting students need to learn to be successful in their careers. However, some cost accounting concepts are easily misunderstood and therefore difficult to address correctly on exams. These test-taking strategies will help you succeed on a cost accounting exam by clarifying what is truly being asked in each question.</p>\n<p class=\"Tip\">Read the last sentence first.<b> </b>Cost accounting questions often provide lots of data, but not all of that information is needed to answer the question. Test item writers refer to that data as <i>distractors</i>. If you start at the top and read down, you read a lot of unneeded data. Read the last sentence first. That strategy gets you to what the question is truly asking. Then you can read the rest of the question — and pull out only the data you need to answer the question.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Absorption costing vs. variable costing: </b>The only difference between these two costing methods is how they address fixed manufacturing costs. A typical question on this topic lists variable manufacturing costs, or fixed selling and administrative costs. Don’t be fooled! Absorption and variable costing treat these other costs in the same way, so ignore them.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Favorable vs. unfavorable variances: </b>Of course, the word <i>favorable</i> means better or preferred. However, in cost accounting, favorable has a different meaning, depending on whether you’re talking about a cost or revenue. <i>Less</i> actual costs than budgeted is a favorable variance. However, <i>more</i> actual revenue than planned is a favorable variance. In both cases, your actual profit is more than planned. Unfavorable variances are the reverse: More actual costs and less actual revenue is unfavorable.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Production costs: </b>Many cost accounting questions relate to production of a physical product (rather than a service). Make sure you’re clear on whether the question is asking about units of a product, or an amount of material needed per unit. For example, one bicycle (one unit) requires two wheels. Be clear on which item (units or wheels) you’re using when you calculate costs.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Total fixed costs vs. fixed costs per unit: </b>Some cost accounting questions provide you with a fixed cost per unit. If you determine that you need fixed costs to answer the question, pause for a minute. Try to find <i>total</i> fixed costs in the question and use that number. Fixed costs per unit should be avoided. That’s because, at some point, you sell enough to cover your costs. As a result, the additional units you produce don’t have any fixed costs attached to them. Fixed cost per unit is misleading.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Process costing: </b>Process costing questions often address how costs move from one production department to another. Keep in mind that, almost always, material costs are put into production before labor costs. If you’re making leather baseball gloves, you need material (leather) in production before you can do anything to it (cut, sew, treat the leather, and so on). If you keep that in mind, computing material and labor costs may be easier.</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2021-12-09T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208104},{"headers":{"creationTime":"2016-03-27T16:50:32+00:00","modifiedTime":"2021-12-07T22:09:12+00:00","timestamp":"2022-02-24T17:07:14+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Corporate Finance For Dummies Cheat Sheet","strippedTitle":"corporate finance for dummies cheat sheet","slug":"corporate-finance-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"","noIndex":0,"noFollow":0},"content":"Corporate finance is the study of how groups of people work together as a single organization to provide something of value to society. It’s the job of those in corporate finance to manage the organization so that resources are efficiently utilized, the most valuable projects are pursued, the corporation can remain competitive, and everyone gets to keep their job.","description":"Corporate finance is the study of how groups of people work together as a single organization to provide something of value to society. It’s the job of those in corporate finance to manage the organization so that resources are efficiently utilized, the most valuable projects are pursued, the corporation can remain competitive, and everyone gets to keep their job.","blurb":"","authors":[{"authorId":9764,"name":"Michael Taillard","slug":"michael-taillard","description":"Michael Taillard, PhD, MBA, owns and operates OPII Schools, an award-winning national private school and tutoring company designed as a philanthropic experiment in macroeconomic cash flows as a form of urban renewal. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9764"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General (Accounting)","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":171480,"title":"Corporate Finance: Calculating Assets","slug":"corporate-finance-calculating-assets-2","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171480"}},{"articleId":171478,"title":"Pursuing Corporate Finance Professionally","slug":"pursuing-corporate-finance-professionally-2","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171478"}},{"articleId":171477,"title":"Understanding How Behavior Affects Corporate Finance","slug":"understanding-how-behavior-affects-corporate-finance","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171477"}},{"articleId":169321,"title":"The Gross Profit Portion of the Corporate Income Statement","slug":"the-gross-profit-portion-of-the-corporate-income-statement","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/169321"}},{"articleId":169320,"title":"How Corporate Finance Rules Your Life","slug":"how-corporate-finance-rules-your-life","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/169320"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282117,"slug":"corporate-finance-for-dummies","isbn":"9781119850311","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119850312/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119850312/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119850312-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119850312/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119850312/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/9781119850311-1-203x255.jpg","width":203,"height":255},"title":"Corporate Finance For Dummies, 2nd Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"\n <p><b data-author-id=\"9764\">Michael Taillard</b>, PhD, MBA, owns and operates OPII Schools, an award-winning national private school and tutoring company designed as a philanthropic experiment in macroeconomic cash flows as a form of urban renewal.</p>","authors":[{"authorId":9764,"name":"Michael Taillard","slug":"michael-taillard","description":"Michael Taillard, PhD, MBA, owns and operates OPII Schools, an award-winning national private school and tutoring company designed as a philanthropic experiment in macroeconomic cash flows as a form of urban renewal. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9764"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119850311&quot;]}]\" id=\"du-slot-6217bb427a1fb\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119850311&quot;]}]\" id=\"du-slot-6217bb427ab7f\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":171478,"title":"Pursuing Corporate Finance Professionally","slug":"pursuing-corporate-finance-professionally-2","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171478"}},{"articleId":171480,"title":"Corporate Finance: Calculating Assets","slug":"corporate-finance-calculating-assets-2","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171480"}},{"articleId":171477,"title":"Understanding How Behavior Affects Corporate Finance","slug":"understanding-how-behavior-affects-corporate-finance","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171477"}}],"content":[{"title":"Pursuing corporate finance professionally","thumb":null,"image":null,"content":"<p>You’ve decided that a career in corporate finance is absolutely your life’s calling, so what do you do next? You need to bone up on some essential mathematical and computer skills that not everyone warns you about when you first begin your journey into corporate finance.</p>\n<p>Whether you’re pursuing your college degree or a professional certification, these skills tend to be sorely neglected, leaving many completely unprepared for the workplace. Going to college can give you the research and problem-solving skills you’ll need, but it frequently doesn’t give you the specific applied skills needed for the labor market.</p>\n<h3>Math skills</h3>\n<p>Corporate finance uses, more than anything else, a lot of math. The majority of it is quite simple, but it’s still math, so corporate finance is particularly ideal for those who are numerically inclined. Specifically, you need to excel at a few fields of math:</p>\n<ul>\n<li><strong>Arithmetic:</strong> You’ll constantly use addition, subtraction, multiplication, and division.</li>\n<li><strong>Algebra: </strong>You need to be able to find X, because you’ll need to do so quite frequently.</li>\n<li><strong>Statistics and Probability:</strong> Be certain you know this stuff — the math of uncertainty — if you want any hope of analyzing investments or risk.</li>\n<li><strong>Calculus:</strong> You’ll see calculus less frequently than the other fields, but it’s a crucial component to maximization and optimization equations, plus many forecasting analyses. In other words, you’ll need calculus if you plan to become an analyst.</li>\n</ul>\n<h3>Computer skills</h3>\n<p>Even if you become the best mathematician in the world, unless you have some specific computer skills, you’re still useless in the field of corporate finance. Pretty much every finance job on the planet requires you to have a minimum of specific computer skills.</p>\n<p>You should know how to use all of the following:</p>\n<ul>\n<li>Microsoft PowerPoint</li>\n<li>Microsoft Word</li>\n<li>Any internet browser</li>\n<li>Any email client</li>\n</ul>\n<p>You also need to learn at least one software package of the following types:</p>\n<ul>\n<li>Data analytics software (SPSS, SAS, and Microsoft Excel)</li>\n<li>Accounting software (Quicken, Sage, and Peachtree)</li>\n<li>Financial management software (JD Edwards and Hyperion)</li>\n<li>Database software (SQL, Access, and Oracle)</li>\n</ul>\n"},{"title":"Understanding how behavior affects corporate finance","thumb":null,"image":null,"content":"<p>Very broadly speaking, behavioral finance looks at the actions and reactions made by people in order to determine how to better understand them and make better decisions.</p>\n<p>Here are few behaviors to keep in mind:</p>\n<p><strong>Making financial decisions is rarely entirely rational.</strong> Most economic models, financial and otherwise, assume that people act unemotionally and with a certain degree of competence, but in reality, people are emotional, illogical, impulsive, and ignorant. Behavioral finance defines what’s rational, identifies the causes of irrational financial behavior, and measures the financial impact of irrational behavior.</p>\n<p><strong>Making sound financial decisions involves identifying logical fallacies.</strong> Logic can be really complicated. When you rely on faulty logic, you’re relying on a fallacy. Logical fallacies can be based on flawed logic structure, distractions, emotional response, or any number of other factors that use information not related to the decision at hand.</p>\n<p><strong>Getting emotional about financial decisions can leave you crying.</strong> In the world of corporate finance, you’re typically dealing with someone else’s (the company’s) money, so you may think emotions run low in corporate finance. But no matter how far removed you are from the person who actually owns the money you’re working with, when you’re forced to make a decision, your mood and emotions will influence the decision you make to some extent.</p>\n<p><strong>Financial stampeding can get you trampled.</strong> As soon as some trend begins to occur, financial investors start to follow that trend as quickly as possible, often without even fully knowing why. Like some other forms of behavioral anomalies, this stampeding scenario is influenced by the imperfect distribution of information.</p>\n<p><strong>Letting relationships influence finances can be ruinous.</strong> Avoid showing favoritism based on personal relationships rather than merit or qualifications. This form of favoritism is called cronyism (or nepotism, when you’re dealing with relatives). Preventing cronyism from occurring in a company is relatively simple at all levels of management except the highest. You just have to require individuals to use predetermined evaluation criteria when making important decisions and then hold them accountable for proper recording and analysis using that criteria.</p>\n<p><strong>“Satisficing” can optimize your time and energy.</strong> People naturally apply a value to their time. This value isn’t so much about money as it is about using your limited amount of time doing things you either need to do or would rather be doing. For a simple example, imagine that you’re spending your day off playing video games, and you just can’t take time away to go cook dinner. So you decide to order a pizza. You could probably make something healthier, cheaper, and more delicious, but you settle for something that’s <em>good enough</em> and doesn’t require any additional time or effort on your part. In corporate finance, the application and measurement of what’s “good enough” is called <em>satisficing.</em></p>\n<p><strong>Prospect theory explains life in the improbable.</strong> People’s financial decisions are influenced by a behavioral fluke described as the <em>prospect theory,</em> which basically says this:</p>\n<p>When making financial decisions that aren’t certain (meaning that the outcomes aren’t certain but the probability of success can be estimated), people look at the potential for gain or loss instead of relying on rational thinking using the probable outcomes.</p>\n<p><strong>People are subject to behavioral biases. </strong>When you’re dealing with corporate finance, you rely on the collection and analysis of data to help you answer questions and make decisions. Even though all the data you need to make the best decision may be available, how you actually perceive and use that data can be an erroneous process thanks to statistical bias and cognitive bias.</p>\n<p><strong>Analyzing and presenting information can be an erroneous process. </strong>How a person processes available data is subject to behavioral errors based on the context in which the data are presented. The process of introducing your own interpretation of a subjective measure or event is called <em>framing.</em> These frames will cause you to understand and interpret things in a different manner from the people around you and, as a result, alter how you each respond.</p>\n<p class=\"article-tips remember\">Framing can influence all sorts of financial decisions. You have to be very careful to apply relevant contextual information along with any analysis you give and ensure that the manner in which you present information remains objective, neutral, and free of judgments that contribute to framing.</p>\n<p><strong>Measuring irrationality in finance is rational behavioral finance.</strong> Understanding how irrational financial behavior works is only half the job. You also have to determine the value of irrationality. That is to say, you must figure out how much your own inherent irrationality costs you (and your company) financially.</p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2021-12-03T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208127},{"headers":{"creationTime":"2016-03-27T16:49:45+00:00","modifiedTime":"2021-11-12T15:26:30+00:00","timestamp":"2022-02-24T17:07:10+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General (Accounting)","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Accounting For Dummies Cheat Sheet","strippedTitle":"accounting for dummies cheat sheet","slug":"accounting-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"","noIndex":0,"noFollow":0},"content":"Accountants keep the books of businesses, not-for-profits, and government entities by following systematic methods of recording all financial activities. If you invest your hard-earned money in a private business or a real estate venture, save money in a credit union, or are a member of a nonprofit association or organization, you likely receive regular financial reports. You should read these financial reports carefully, but if you don’t — or if you do but don’t understand what you’re reading — this Cheat Sheet can help you understand the language and necessity of accounting.","description":"Accountants keep the books of businesses, not-for-profits, and government entities by following systematic methods of recording all financial activities. If you invest your hard-earned money in a private business or a real estate venture, save money in a credit union, or are a member of a nonprofit association or organization, you likely receive regular financial reports. You should read these financial reports carefully, but if you don’t — or if you do but don’t understand what you’re reading — this Cheat Sheet can help you understand the language and necessity of accounting.","blurb":"","authors":[{"authorId":9472,"name":"John A. Tracy","slug":"john-a-tracy","description":"John A. Tracy, CPA, is professor of accounting, emeritus, at the University of Colorado in Boulder.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9472"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General (Accounting)","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":226420,"title":"10 Tips for Reading a Financial Report","slug":"10-tips-reading-financial-report","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/226420"}},{"articleId":226417,"title":"Accounting and the Theory of Financial Reporting","slug":"accounting-theory-financial-reporting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/226417"}},{"articleId":226414,"title":"Beware of Accounting Tricks: Smoothing the Rough Edges Off Year-to-Year Profit Fluctuations","slug":"beware-accounting-tricks-smoothing-rough-edges-off-year-year-profit-fluctuations","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/226414"}},{"articleId":226410,"title":"Beware of Window Dressing in Accounting: Pumping Up the Ending Cash Balance and Cash Flow","slug":"beware-window-dressing-accounting-pumping-ending-cash-balance-cash-flow","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/226410"}},{"articleId":226406,"title":"Using Accounting Information to Make Investment Choices","slug":"using-accounting-information-make-investment-choices","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/226406"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":281922,"slug":"accounting-for-dummies","isbn":"9781119837527","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119837529/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119837529/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119837529-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119837529/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119837529/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/9781119837527-203x255.jpg","width":203,"height":255},"title":"Accounting For Dummies, 7th Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"\n <p><b data-author-id=\"9472\">John A. Tracy</b>, CPA, is professor of accounting, emeritus, at the University of Colorado in Boulder. <b data-author-id=\"9473\">Tage C. Tracy</b> is principal, owner, and founder of TMK & Associates, an accounting, financial,and strategic business planning consulting firm.</p>","authors":[{"authorId":9472,"name":"John A. Tracy","slug":"john-a-tracy","description":"John A. Tracy, CPA, is professor of accounting, emeritus, at the University of Colorado in Boulder.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9472"}},{"authorId":9473,"name":"Tage C. Tracy","slug":"tage-c-tracy","description":"Tage C. Tracy is principal, owner, and founder of TMK & Associates, an accounting, financial,and strategic business planning consulting firm.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9473"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119837527&quot;]}]\" id=\"du-slot-6217bb3e266ac\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119837527&quot;]}]\" id=\"du-slot-6217bb3e27183\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":169496,"title":"Financial Statements Q&A","slug":"financial-statement-qa","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/169496"}},{"articleId":169497,"title":"Accounting Tips for Business Managers","slug":"accounting-tips-for-business-managers","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/169497"}},{"articleId":169495,"title":"10 Key Accounting Terms","slug":"ten-key-accounting-terms","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/169495"}}],"content":[{"title":"Financial statements Q&A","thumb":null,"image":null,"content":"<p>In a <em>financial report, </em>accounting information is presented in the form of financial statements packaged with other information, such as explanatory footnotes and a letter from top management.</p>\n<p>Financial statements are prepared at the end of each accounting period, which may be one month, one quarter (three calendar months), or one year. Read on for info on what you find in these documents.</p>\n<p><strong>Q: Who is the target audience of financial statements?</strong></p>\n<p>A: Believe it or not, financial statements are for <em>nonaccountants</em> — in particular, the lenders, investors, and analysts who follow the business, as well as its managers. These users need to know how to read financial statements, which can be a challenge.</p>\n<p><strong>Q: What information is reported in financial statements?</strong></p>\n<p>A: Oh, not much . . . the profit or loss of the business, whether its financial condition is sound or precarious, and whether its cash flow is strong or weak. Just these little financial odds and ends about the business.</p>\n<p><strong>Q: Where do I find the top-line sales and bottom-line profit or loss of a business?</strong></p>\n<p>A: The very first line in the income statement should report total sales revenue (commonly referred to as the “top line”). The bottom-line profit or loss is the last line in its <em>income statement,</em> which summarizes the sales revenue, income, expenses, and losses of the business for the period. Public companies also report earnings per share in their income statements. Private companies don’t have to.</p>\n<p><strong>Q: Where do I find the summary of assets and liabilities of a business?</strong></p>\n<p>A: In its <em>balance sheet, </em>which also reports the sources of its owners’ equity. The sales and expense activities of a business propel or drive its assets and liabilities (not all, but most). The asset values reported in a balance sheet reflect past transactions and may differ from their current replacement or market values.</p>\n<p><strong>Q: Where do I find the good or bad news about cash flow of a business?</strong></p>\n<p>A: Read the business’s<em> statement of cash flows.</em> Cash flow generated from making profit is disclosed in the first section of this financial statement. A business could report a decent profit but still have cash flow problems.</p>\n<p><strong>Q: Are standard financial statements adequate for managing a business?</strong></p>\n<p>A: No, not by a long shot. Financial statements are a good starting point, but managers need more detailed information, which is confidential and not circulated outside the business, to do their jobs. Accountants who don’t understand this should be fired on the spot.</p>\n"},{"title":"Accounting tips for business managers","thumb":null,"image":null,"content":"<p>Business managers should get the most out of their accounting information — to know how the business is doing and how to do better, and whether or not it’s on the verge of serious cash flow and financial problems. You wouldn’t pilot a plane without knowing how to read the flight map. A business manager should know how to read the financial map of the business provided by accounting information. Here are some useful tips to keep in mind:</p>\n<ul>\n<li><strong>Take charge in choosing the accounting methods for your business and the design of your accounting reports.</strong> All too often, business managers adopt the policy that accounting is best left to the accountants. Unfortunately, this may result in your not fully understanding your own financial information.</li>\n<li><strong>Make sure you have a smartly designed P&amp;L (profit and loss) report that serves as a hands-on tool for managing profit.</strong> A good P&amp;L report highlights the key variables that drive performance for each major profit center of your business. It should serve like a well-used guide that directs you to the right destinations. You may need different formats for different profit centers in your business.</li>\n</ul>\n<p class=\"article-tips remember\">A P&amp;L report generally should focus on key margins (gross margin or profit, operating margins, and contribution margins), sales volume, variable expenses, and fixed expenses. Margin per unit equals sales price minus product cost and minus the variable expenses of making the sale. Your business must sell enough volume to earn total margin equal to fixed expenses before breaking into the profit zone. After sales reach the breakeven point, the margin from additional sales goes entirely to profit (before income tax).</p>\n<ul>\n<li><strong>Remember that relatively small changes in profit factors can yield dramatic results.</strong> A small slippage in margin per unit can have a devastating impact because unit margin is multiplied by total sales volume. On the other hand, even a slight boost in sales price or a little more sales volume yields lots more profit.</li>\n<li><strong>Make sure you clearly understand every cost figure you use.</strong> Product costs depend on which accounting method is used, such as the choice between the last-in, first-out (LIFO) and the first-in, first-out (FIFO) methods, or they depend on rather arbitrary allocation methods. Know how your costs are calculated! Press your accountant to explain if you aren’t clear about costs.</li>\n<li><strong>Establish and enforce strong internal controls, especially in the technology digital age and post-Covid.</strong> More companies are storing their data in the cloud, and more employees are handling confidential data on their home devices; some use public Wi-Fi that isn’t secure. Businesses process a large amount of data, confidential information, financial transactions, and money, which present countless opportunities for errors, theft, embezzlement, and fraud. Make sure bulletproof internal controls are in place and working well, and actively involve the technology team to implement best-in-class security firewalls. When your internal controls are weak, you can be sure that some of your hard-earned profit will go down a rat hole.</li>\n</ul>\n"},{"title":"A few key accounting terms","thumb":null,"image":null,"content":"<p>Knowing the correct accounting terms and what they mean can make a world of difference when you’re deciphering financial statements and reports and determining profits and losses. It’s easy to get debits and credits confused, and it’s a must to know which documents make up a complete financial report. A ton of cash could depend on your understanding of the following basic accounting terms:</p>\n<ul>\n<li><strong>Accounting: </strong>The methods and procedures for identifying, analyzing, recording, accumulating, and storing information and data about the activities of an entity that has financial results and for preparing summary reports of these activities internally for managers and externally for those entitled to receive financial reports about the entity. A business’s managers, investors, and lenders depend on accounting reports called <em>financial statements</em> to make informed decisions. Accounting also encompasses preparing tax returns that the entity must file with government tax authorities and facilitating day-to-day operating functions.</li>\n<li><strong>Balance sheet: </strong>A financial statement that summarizes the assets, liabilities, and owners’ equity of a business at a moment in time. It’s prepared at the end of every profit period (and whenever else it’s needed). The main elements of a balance sheet are called <em>accounts </em>— such as cash, inventory, notes payable, and capital stock. Each account has a dollar amount, which is called its <em>balance.</em> But be careful: The fact that the accounts have balances is not the reason this financial statement is called a <em>balanc</em>e <em>sheet;</em> rather, the name refers to the equality (or balance) of assets with the total of liabilities and owners’ equity. This financial statement is also called the <em>statement of financial condition</em> and the <em>statement of financial position.</em></li>\n<li><strong>Cash flow: </strong>An ambiguous term that can refer to several different sources of or uses of cash. This term is often shorthand for cash flow from earning profit or from operating activities. Some friendly advice: When using this term, always make clear the particular source or use of cash you have in mind!</li>\n<li><strong>Debits and credits: </strong>Accounting jargon for decreases and increases recorded in accounts according to the centuries-old scheme based on the accounting equation (Assets = Liabilities + Owners’ equity, or Assets = Sources of assets). An increase in an asset is a debit, and the ingenious twist of the scheme is that a decrease in a liability or an owners’ equity is also a debit. Conversely, a decrease in an asset is a credit, and an increase in a liability or an owners’ equity is a credit.</li>\n</ul>\n<p class=\"article-tips remember\">Revenue is recorded as a credit, and expenses are recorded as debits. In recording transactions, the debit or sum of debits must equal the credit or sum of credits. The phrase “the books are in balance” means that the total of accounts with debit balances equals the total of accounts with credit balances.</p>\n<ul>\n<li><strong>Financial reports: </strong>The periodic financial communications from a business (and other types of organizations) to those entitled to know about the financial performance and position of the entity. Financial reports of businesses include three primary financial statements (the balance sheet, income statement, and statement of cash flows) as well as footnotes and other information relevant to the owners of the business. Public companies must file several types of financial reports and forms with the Securities and Exchange Commission (SEC), which are open to the public. The financial reports of a private business are generally sent only to its owners and lenders.</li>\n<li><strong>Financial statement: </strong>Generally refers to one of the three primary accounting reports of a business: the balance sheet, statement of cash flows, and income statement. Sometimes financial statements are simply called <em>financials.</em> Internal financial statements and other accounting reports to managers contain considerably more detail, which is needed for decision-making and control.</li>\n<li><strong>Fixed or capital assets:</strong> The shorthand term for the variety of long-life physical resources used by a business in conducting its operations, which include land, buildings, machinery, equipment, furnishings, tools, and vehicles. These resources are held for use, not for sale. Please note that <em>fixed assets </em>is an informal term; the more formal term used in a balance sheet is <em>property, plant, and equipment.</em></li>\n<li><strong>Generally accepted accounting principles (GAAP): </strong>The authoritative standards and approved accounting methods that should be used by profit-motivated businesses and private not-for-profit organizations domiciled in the United States to measure and report their revenue and expenses; to present their assets, liabilities, and owners’ equity; and to report their cash flows in their financial statements. GAAP are not a straitjacket; these official standards are loose enough to permit alternative interpretations.</li>\n<li><strong>Income statement (also known as the P&amp;L or profit &amp; loss statement): </strong>A financial statement that summarizes sales revenue (and other income) and expenses (and losses) for a period and reports one or more different profit lines. Also, any unusual gains and losses are reported separately in this financial statement. The income statement is one of the three primary financial statements of a business included in its financial report and is also called the <em>earnings statement,</em> <em>operating statement, </em>simply<em> the P&amp;L,</em> or similar titles.</li>\n<li><strong>Profit:</strong> A very general term that is used with different meanings. It may mean gains minus losses or other kinds of increases minus decreases. In business, the term means sales revenue (and other sources of income) minus expenses (and losses) for a period of time, such as one year. In an income statement, the preferred term for final or bottom-line profit is <em>net income. </em>For public companies, net income is put on a per-share basis, called <em>earnings per share.</em></li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2021-11-12T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208033}],"_links":{"self":{"self":"https://dummies-api.dummies.com/v2/categories/34230/categoryArticles?sortField=time&sortOrder=1&size=10&offset=0"},"next":{"self":"https://dummies-api.dummies.com/v2/categories/34230/categoryArticles?sortField=time&sortOrder=1&size=10&offset=10"},"last":{"self":"https://dummies-api.dummies.com/v2/categories/34230/categoryArticles?sortField=time&sortOrder=1&size=10&offset=669"}}},"objectTitle":"","status":"success","pageType":"article-category","objectId":"34230","page":1,"sortField":"time","sortOrder":1,"categoriesIds":[],"articleTypes":[],"filterData":{"categoriesFilter":[{"itemId":0,"itemName":"All Categories","count":679}],"articleTypeFilter":[{"articleType":"All Types","count":679},{"articleType":"Articles","count":661},{"articleType":"Cheat Sheet","count":12},{"articleType":"Step by Step","count":6}]},"filterDataLoadedStatus":"success","pageSize":10},"adsState":{"pageScripts":{"headers":{"timestamp":"2022-05-16T12:59:10+00:00"},"adsId":0,"data":{"scripts":[{"pages":["all"],"location":"header","script":"<!--Optimizely Script-->\r\n<script src=\"https://cdn.optimizely.com/js/10563184655.js\"></script>","enabled":false},{"pages":["all"],"location":"header","script":"<!-- comScore Tag -->\r\n<script>var _comscore = _comscore || [];_comscore.push({ c1: \"2\", c2: \"15097263\" });(function() {var s = document.createElement(\"script\"), el = document.getElementsByTagName(\"script\")[0]; s.async = true;s.src = (document.location.protocol == \"https:\" ? 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General (Accounting) Articles

What's the relationship between Cost of Equity and Cost of Capital? How do mergers and acquisitions work? No matter what your question, we've got the info you'll need to make sense of any accounting issue.

Articles From General (Accounting)

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679 results
679 results
General (Accounting) Accounting For Canadians For Dummies Cheat Sheet

Cheat Sheet / Updated 03-25-2022

Every business and not-for-profit entity needs a reliable accounting system to facilitate day-to-day operations and to prepare financial statements, tax returns, and internal reports to managers. The Accounting For Canadians For Dummies Cheat Sheet provides a quick and easy introduction into the key functions and responsibilities of the accounting department in any organization.

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General (Accounting) Accounting Workbook For Dummies Cheat Sheet

Cheat Sheet / Updated 02-28-2022

As a business manager, taking care of your company’s accounting needs is top priority. Correctly preparing a financial statement involves knowing all the information that needs to appear on the statement. Making a profit keeps you in business, so follow the financial statements closely, make adjustments if needed, and follow some basic rules for presenting accounting information to your business’s managers.

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General (Accounting) 1,001 Accounting Practice Problems For Dummies Cheat Sheet

Cheat Sheet / Updated 02-28-2022

Accounting, as you may guess, involves a lot of math. As you practice various types of accounting problems, and when you begin doing accounting work for real, you will need to utilize various formulas to calculate the information you need.

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General (Accounting) Understanding Business Accounting For Dummies Cheat Sheet

Cheat Sheet / Updated 02-25-2022

Want to get seriously savvy with your business accounting, but don’t know where to start? You don’t need to be a professional accountant to decode the jargon. Use these pointers to find out how to make sense of your accounts, balance your budgets, and boost your profit margin.

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General (Accounting) Accounting All-In-One For Dummies Cheat Sheet

Cheat Sheet / Updated 02-24-2022

The accounting field covers a lot of ground, from setting up accounts and producing financial reports to budgeting for a business and preventing and detecting fraud. Quickly get up to speed on the basics with tips for controlling cash in a business, an overview of cash flow and profit, quick access to essential cost-accounting formulas, and the red flags of financial statement fraud.

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General (Accounting) Managerial Accounting For Dummies Cheat Sheet

Cheat Sheet / Updated 02-22-2022

Managerial accounting helps managers and other decision-makers understand how much their products cost, how their companies make money, and how to plan for profits and growth. To use this information, company decision-makers must understand managerial-accounting terms. When planning for the future, they follow a master budgeting process. To prepare this budget, and to understand how costs behave, the decision-makers should understand cost-volume-profit relationships, which explain how changes in volume or price affect profits.

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General (Accounting) Intermediate Accounting For Dummies Cheat Sheet

Cheat Sheet / Updated 02-22-2022

Intermediate accounting builds on basic financial accounting skills. It's still all about generally accepted accounting principles (GAAP) and preparing financial statements. The material that intermediate accounting covers, however, goes beyond basic accounting scenarios. Think of financial accounting as the appetizer and intermediate accounting as the main course. Hope you're ready to chow down (Number Munchers, anyone?)!

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General (Accounting) Cost Accounting For Dummies Cheat Sheet

Cheat Sheet / Updated 12-15-2021

Cost accounting is a valuable tool you use to reduce and eliminate costs in a business. You also use cost accounting to determine a price for your product or service that will allow you to earn a reasonable profit. Familiarize yourself with the most important formulas, terms, and principles you need to know to apply cost accounting. You'll also want to get the scoop on text-taking strategies for cost accounting students.

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General (Accounting) Corporate Finance For Dummies Cheat Sheet

Cheat Sheet / Updated 12-07-2021

Corporate finance is the study of how groups of people work together as a single organization to provide something of value to society. It’s the job of those in corporate finance to manage the organization so that resources are efficiently utilized, the most valuable projects are pursued, the corporation can remain competitive, and everyone gets to keep their job.

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General (Accounting) Accounting For Dummies Cheat Sheet

Cheat Sheet / Updated 11-12-2021

Accountants keep the books of businesses, not-for-profits, and government entities by following systematic methods of recording all financial activities. If you invest your hard-earned money in a private business or a real estate venture, save money in a credit union, or are a member of a nonprofit association or organization, you likely receive regular financial reports. You should read these financial reports carefully, but if you don’t — or if you do but don’t understand what you’re reading — this Cheat Sheet can help you understand the language and necessity of accounting.

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