Cost accounting for dummies pdf

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Editorial Reviews. From the Back Cover. Learn to: Master important cost accounting concepts; Apply your skills with real-world examples; Score your highest in a. Accounting FORDUMmIES‰4THEDITION Accounting Accounting FOR DUMmIES ‰ 4TH EDITION Accounting FOR DUMmIES ‰ 4TH DOWNLOAD PDF operating expenses on their cost behavior basis Separating variable. Managerial and Cost Accounting. 4. Contents. 5. Financial Statement Issues that are Unique to Manufacturers. Schedule of Raw Materials. Schedule of.

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Cost Accounting For Dummies Pdf

The easy way to get a grip on cost accounting Critical in supporting strategic business decisions andimproving profitability, cost accounting is arguably one of . Cost Accounting For Dummies tracks to a typical cost accounting course and provides in-depth explanations and reviews of the essential concepts you'll. Cost Accounting Basics: There is No Magic Number. Germain Boer. In fact, there is always some decision for which any cost is irrelevant regardless of the effort.

By Chris B. Murphy Updated May 8, Cost accounting is an accounting process that measures and analyzes the costs associated with products, production, and projects, so that correct amounts are reported on a company's financial statements. It can be easily traced to a product, department or project. For example, Ford Motor Company F manufactures cars and trucks. The direct costs associated with the car are the wages paid to the worker and the parts used to build the car. An indirect cost cannot be easily traced to a product, department, activity or project. For example, suppose a company leases a machine for production for two years. The lease payment is considered a fixed cost as it remains unchanged. This type of cost varies depending on the number of products a company produces. A variable cost increases as the production volume increases, and it falls as the production volume decreases. For example, a toy manufacturer must package its toys before shipping products out to stores. This is considered a type of variable cost because, as the manufacturer produces more toys, its packaging costs increase. However, if the toy manufacturer's production level is decreasing, the variable cost associated with the packaging decreases. In other words, an opportunity cost represents an alternative given up when a decision is made.

Glossary The accounting terminology in financial statements is a mixed bag.

Sometimes it must seem like accountants are speaking a foreign language. I must admit that accountants use jargon more than they should. In some situations accountants resort to arcane terminology to be technically correct, much like lawyers use arcane terminology in filing lawsuits and drawing up contracts.

Where I use jargon in the book, I pause and clarify what the terms mean in plain English.

Also, I present a helpful glossary at the end of the book that can assist you on your accounting safari. This glossary provides quick access to succinct definitions of key accounting and financial terms, with relevant commentary and an occasional editorial remark.

This is better than your average glossary. Introduction Icons Used in This Book This icon points out especially important ideas and accounting concepts that are particularly deserving of your attention.

The material marked by this icon describes concepts that are the undergirding and building blocks of accounting — concepts that you should be very clear about and that clarify your understanding of accounting principles in general. I use this icon sparingly; it refers to very specialized accounting stuff that is heavy going, which only a CPA could get really excited about.

However, you may find these topics important enough to return to when you have the time. Feel free to skip over these points the first time through and stay with the main discussion. This icon calls your attention to useful advice on practical financial topics. It saves you the cost of downloading a yellow highlighter pen.

This icon is like a caution sign that warns you about speed bumps and potholes on the accounting highway. Taking special note of this material can steer you around a financial road hazard and keep you from blowing a fiscal tire. In short — watch out! You might start with Chapters 4, 5, and 6 which explain the three primary financial statements of businesses, and finish with Chapter 13 on reading a financial report.

You might jump right into Chapters 9 and 10, which explain the analysis of profit behavior and budgeting cash flows. The book is not like a five-course dinner in which you have to eat in the order the food is served to you.

In this part, you find out why. Accounting is equally vital in managing the business affairs of not-forprofit and governmental entities. From its accounting records, a business prepares its financial statements, its tax returns, and the reports to its managers. In financial reports to investors and lenders, a business must obey authoritative accounting and financial reporting standards.

If not, its financial reports would be misleading and possibly fraudulent, which could have dire consequences. Bookkeeping — the record-keeping part of accounting — must be done well to ensure that the financial information of a business is timely, complete, accurate, and reliable — especially the numbers reported in its financial statements and tax returns. Wrong numbers in financial reports and tax returns can cause all sorts of trouble. A ccounting is all about financial information — capturing it, recording it, configuring it, analyzing it, and reporting it to persons who use it.

But I talk a lot about how accountants communicate information in financial statements, and I explain the valuation methods accountants use — ranging from measuring profit and loss to putting values on assets and liabilities of businesses. As you go through life, you come face to face with accounting information more than you would ever imagine. Accounting information is presented on the assumption that you have a basic familiarity with the vocabulary of accounting and the accounting methods used to generate the information.

In short, most of the accounting information you encounter is not transparent. The main reason for studying accounting is to learn its vocabulary and valuation methods, so you can make more intelligent use of the information.

The purpose of this book is to make you a knowledgeable spectator of the accounting game. Let me point out another reason you should know accounting basics — I call it the defensive reason.

A lot of people out there in the cold, cruel financial world may take advantage of you, not necessarily by illegal means but by withholding key information and by diverting your attention from unfavorable aspects of certain financial decisions.

These unscrupulous characters treat you as a lamb waiting to be fleeced. Accounting Is Not Just for Accountants One main source of accounting information is in the form of financial statements that are packaged with other information in a financial report.

Accountants keep the books and record the financial activities of an entity such as a business. From these detailed records the accountant prepares financial statements that summarize the results of the activities. Financial statements are sent to people who have a stake in the outcomes of the activities. If you own stock in General Electric, for example, or you have money in a mutual fund, you receive regular financial reports. If you invest your hard-earned money in a private business or a real estate venture, or you save money in a credit union, you receive regular financial reports.

Cost Accounting For Dummies

In summary, one important reason for studying accounting is to make sense of the financial statements in the financial reports you get. I guarantee that Warren Buffett knows accounting and how to read financial statements.

Affecting both insiders and outsiders People who need to know accounting fall into two broad groups: insiders and outsiders. Business managers are insiders; they have the authority and responsibility to run a business.

They need a good understanding of accounting terms and the methods used to measure profit and put values on assets and liabilities. Chapter 1: Accounting: The Language of Business, Investing, Finance, and Taxes Accounting information is indispensable for planning and controlling the financial performance and condition of the business. Likewise, administrators of nonprofit and governmental entities need to understand the accounting terminology and measurement methods in their financial statements.

The rest of us are outsiders. We are not privy to the day-to-day details of a business or organization. Therefore, we need to have a good grip on the financial statements included in the financial reports. For all practical purposes, financial reports are the only source of financial information we get directly from a business or other organization. By the way, the employees of a business — even though they obviously have a stake in the success of the business — do not necessarily receive its financial reports.

Only the investors in the business and its lenders are entitled to receive the financial reports. Of course, a business could provide this information to those of its employees who are not shareowners, but generally speaking most businesses do not. The financial reports of public businesses are in the public domain, so their employees can easily secure a copy. However, financial reports are not automatically mailed to all employees of a public business. In our personal financial lives, a little accounting knowledge is a big help for understanding investing in general, how investment performance is measured, and many other important financial topics.

Keep in mind that this is not a book on bookkeeping and recordkeeping systems. I offer a brief explanation of procedures for capturing, processing, and storing accounting information in Chapter 3. Even experienced bookkeepers and accountants should find some nuggets in that chapter. However, this book is directed to users of accounting information. I focus on the end products of accounting, particularly financial statements, and not how information is accumulated. Overcoming the stereotypes of accountants I recently saw a cartoon in which the young son of clowns is standing in a circus tent and is dressed as a clown, but he is holding a business briefcase.

He is telling his clown parents that he is running away to join a CPA firm.

Why is this funny? As a CPA and accounting professor for more than 40 years, I have met and known a large number of accountants. Most accountants are not as gregarious as used-car sales people though some are. Accountants certainly are more detail-oriented than your average person. Accountants use very little math no calculus and only simple algebra.

Accountants are very good at one thing: They want to see both sides of financial transactions: the give and take. If you walked down a busy street in Chicago, New York, or Los Angeles, I doubt that you could pick out the accountants.

I have no idea whether accountants have higher or lower divorce rates than others, whether they go to church more frequently, whether most are Republicans or Democrats, or if they generally sleep well at night.

I do think that accountants are more honest in paying their income taxes than other people, although I have no proof of this. Well, a great deal of the information you use in making personal finance and investing decisions is accounting information. You have a stake in the financial performance of the business you work for, the government entities you pay taxes to, the churches and charitable organizations you donate money to, the retirement plan you participate in, the businesses you download from, and the healthcare providers you depend on.

[PDF] Cost Accounting For Dummies Popular Online

The financial performance and viability of these entities has a direct bearing on your personal financial life and well-being. For example, as an employee your job security and your next raise depend on the business making a profit. If the business suffers a loss, you may be laid off or asked to take a reduction in pay or benefits.

Business managers get paid to make profit happen. If the business fails to meet its profit objectives or suffers a loss, its managers may be replaced or at least not get their bonuses. As an author, I hope my publisher continues to make profit so I can keep receiving my royalty checks.

I hope the stores I trade with make profit and continue in business. The federal government and many states depend on businesses making profit to collect income taxes from them.

When you sign a mortgage on your home, you should understand the accounting method the lender uses to calculate the interest amount charged on your loan each period. Individual investors need to understand accounting basics in order to figure their return on invested capital. And it goes without saying that every organization, profit-motivated or not, needs to know how it stands financially.

All economic activity requires information. The more developed the economic system, the more the system depends on information. Much of the information comes from the accounting systems used by the businesses, institutions, individuals, and other players in the economic system. Some of the earliest records of history are the accounts of wealth and trading activity. The need for accounting information was a main incentive in the development of the numbering system we use today.

The history of accounting is quite interesting but beyond the scope of this book. Taking a Peek into the Back Office Every business and not-for-profit entity needs a reliable bookkeeping system see Chapter 3. Keep in mind that accounting is a much broader term than bookkeeping. For one thing, accounting encompasses the problems in measuring the financial effects of economic activity. Furthermore, accounting includes the function of financial reporting of values and performance measures to those that need the information.

Business managers and investors, and many other people, depend on financial reports for information about the performance and condition of the entity.

Accounting For Dummies

Of course the financial information base should be complete, accurate, and timely. Every recordkeeping system needs quality controls built into it, which are called internal controls or internal accounting controls. Accountants design the internal controls for the bookkeeping system, which serve to minimize errors in recording the large number of activities that an entity engages in over the period. The internal controls that accountants design are also relied on to detect and deter theft, embezzlement, fraud, and dishonest behavior of all kinds.

In accounting, internal controls are the ounce of prevention that is worth a pound of cure. I explain internal controls in Chapter 3. Here, I want to stress the importance of the bookkeeping system in operating a business or any other entity. These back-office functions are essential for keeping operations running smoothly, efficiently, and without delays and errors. This is a tall order, to say the least. Based on detailed private information in personnel files and earnings-to-date information, the correct amounts of income tax, social security tax, and several other deductions from gross wages have to be determined.

Stubs, which report various information to employees each pay period, have to be attached to payroll checks. The total amounts of withheld income tax and social security taxes, plus the employment taxes imposed on the employer, have to be paid to federal and state government agencies on time.

Retirement, vacation, sick pay, and other benefits earned by the employees have to be updated every pay period. In short, payroll is a complex and critical function that the accounting department performs.

What are the types of costs in cost accounting?

Many businesses outsource payroll functions to companies that specialize in this area. The accounting department makes sure that the cash is deposited in the appropriate checking accounts of the business and that an adequate amount of coin and currency is kept on hand for making change for customers.

Accountants balance the checkbook of the business and control who has access to incoming cash receipts. Selected type: Added to Your Shopping Cart. Boyd ISBN: The easy way to get a grip on cost accounting Critical in supporting strategic business decisions and improving profitability, cost accounting is arguably one of the most important functions in the accounting field. Tracks to a typical cost accounting course Includes practical, real-world examples Walks you though homework problems with detailed, easy-to-understand answers If you're currently enrolled in a cost accounting course, this hands-on, friendly guide gives you everything you need to master this critical aspect of accounting.

About the Author Ken Boyd is a former CPA with over 27 years of experience in accounting, education, and financial services.

Permissions Request permission to reuse content from this site. Table of contents Introduction 1 Part I: Estimating Costs with Job Costing 47 Chapter 5: More Activity, More Cost: Budgeting for a Better Bottom Line 83 Chapter 7: Constant Change: Variance Analysis Chapter 8: Focusing on Overhead Costs Chapter 9: Making Smart Pricing Decisions: Analysis Methods to Improve Profitability Chapter Behind the Scenes: