Test 1 Study Guide

School: Kennesaw State University - Course: ACCT 2101 - Subject: Accounting

Introduction What do accountants do? Students Audit- look for material errors -Help accountants fix mistakes so they don't make them again Taxes- Tax compliance, tax planning: keep as much money as possible Systems- MSIT of accounting Professionals(Business cycle) Plan- budgeting, forecasting, decision making Direct- operational phase (test 1) Control- compares plans and reality (tells you if you did good or bad!) Accounting helps you realize youractualcash numbers -A lot of time people have high revenue because their accounts receivable is too high -Problem because on paper your company looks good, but in reality it's not -You're selling, but not collecting Financial accounting VS managerial accounting -In small businesses, an accountant may do both FinancialManagerial RulesGAAPNONE - guidelines ●Benefit must outweigh the cost ●Use behavioral implications... customers drive business! Time focusPastFuture UsersExternalInternal OutputFinancial statement -Company Whatever - segment PreparersAccountantsEveryone BOTH pull from accounting system **** Chapter 2 - Building Blocks of Managerial Accounting

-Planning (budgeting), directing (get it done), controlling (comparing expectations to reality) -You have to understand your cost to be profitable **** -Profitable- revenues exceed expenses Revenue: What a business earns ------Price x Units sold 1.Price 2.Volume Your selling price won't be right if you don't understand thecostsyou incur Where Businesses Incur Costs "Would I be willing to pay for that?" -Customer Value chain (costs) 1.Research a.Gap in market that you can fill 2.Design a.Do I make this product or buy this product and resell it? i.Tangible - buying or making an item ii.Production or purchasing an item b.Establishing where you buy this product, workers, etc. 3.Advertising a.Let the market know 4.Distribution/Delivering 5.Customer service Service Company- provides a service -WILL NEVER HAVE PURCHASES OR PRODUCTION LINK IN SUPPLY CHAIN because there is no inventory -Ex. electrician, lawyer Merchandiser- makes a tangible item -PURCHASE LINK -Has inventory and cost of buying inventory