HFT 3431 Chapter 1 Introduction to Managerial Accounting

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Text of HFT 3431 Chapter 1 Introduction to Managerial Accounting

  • Slide 1
  • HFT 3431 Chapter 1 Introduction to Managerial Accounting
  • Slide 2
  • The Accounting Profession Financial Financial Cost Cost Managerial Managerial Tax Tax Auditing Auditing Governmental Governmental
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  • Users of Financial Information Owners Owners Creditors Creditors Managers Managers Governments Governments Investors Investors
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  • Financial vs. Managerial Accounting Financial accounting is historical Financial accounting is historical Managerial accounting focuses on analysis, information, enhanced controls and planning Managerial accounting focuses on analysis, information, enhanced controls and planning
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  • Managerial Accounting Management is choosing from alternative courses of action Management is choosing from alternative courses of action Managerial accounting is concerned with serving internal decision makers Managerial accounting is concerned with serving internal decision makers Managerial accounting links with cost accounting Managerial accounting links with cost accounting Provides financial statement analysis and interpretation Provides financial statement analysis and interpretation Financial accounting is concerned with serving external decision makers Financial accounting is concerned with serving external decision makers
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  • End Products Used from Financial Accounting Balance Sheet (Ch 2) Balance Sheet (Ch 2) Income Statement (Ch 3) Income Statement (Ch 3) Statement of Cash Flows (Ch 4) Statement of Cash Flows (Ch 4)
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  • The Hospitality Business Hotels, motels, motor inns Hotels, motels, motor inns All types of food service All types of food service Theme parks Theme parks Transportation services Transportation services Entertainment Entertainment Recreational facilities Recreational facilities Convention services Convention services
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  • H o s p i t a l i t y I n d u s t r y R e s t a u r a n t s & F o o d S e r v i c e L o d g i n g T r a v e l & T o u r i s m C o n v e n t i o n s A t t r a c t i o n s S e r v i c e
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  • The Hospitality Business Seasonal business Seasonal business Fluctuating demand Fluctuating demand Short conversion time food & beverage Short conversion time food & beverage Selling space Selling space Perishable product Its now or never Labor intensive Labor intensive Intensive fixed asset requirement Intensive fixed asset requirement
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  • Accounting Review Uniform System of Accounts Uniform System of Accounts Generally Accepted Accounting Principles (GAAP) Generally Accepted Accounting Principles (GAAP) International Financial Reporting System (Near future) International Financial Reporting System (Near future)
  • Slide 11
  • Principles of Accounting Cost Cost Business Entity Business Entity Continuity of the Business Unit Continuity of the Business Unit Unit of Measurement Unit of Measurement Objective Evidence Objective Evidence Full Disclosure Full Disclosure Consistency Consistency Matching Matching Conservatism Conservatism Materiality Materiality
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  • Cost Principle States that when a transaction is recorded, the transaction price (cost) establishes the accounting value
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  • Business Entity Statements are based on the concept that each business maintains its own accounts, & that these accounts are separate from other interests of the owners
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  • Continuity of the Business Unit The assumption that the business will continue indefinitely
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  • Unit of Measurement All transactions are expressed in monetary terms All transactions are expressed in monetary terms
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  • Objective Evidence Accounting records are based on objective evidence ( invoices, checks, cash register receipts)
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  • Full Disclosure Financial statements must provide all information pertinent to interpretation of the financial statements
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  • Consistency The same accounting method from time period to time period
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  • Matching Match revenues with expenses Cash versus accrual
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  • Conservatism Recognize expenses as soon as possible, but delay recognition of revenues until they are sure
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  • Materiality Events or information must be accounted for if they make a difference to the financial statements
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  • Cash vs. Accrual Accounting Cash basis accounting Cash basis accounting Recognize revenue when cash received, expense when cash disbursed Accrual basis accounting Accrual basis accounting Recognize revenue when earned Recognize expense when incurred
  • Slide 23
  • Fundamentals of Accounting Balance Sheet Balance Sheet Assets (Things Owned) = Liabilities ( Obligations ) + Equity ( Residual Claims on Assets )
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  • Fundamentals of Accounting Income Statement Income StatementRevenues - Expenses = Net Income (Loss) Temporary Accounts are Netted and Closed to Equity (retained earnings)
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  • Fundamental Equation Assets = Liabilities + Owners Equity Assets = Liabilities + Owners Equity Assets = Liabilities Assets = Liabilities + Permanent OE + Permanent OE + Temporary OE + Temporary OE Assets = Liabilities Assets = Liabilities + Permanent OE + Permanent OE + Revenue + Revenue - Expenses - Expenses
  • Slide 26
  • Assets Resources owned by a business Resources owned by a business Common characteristic the capacity to provide future benefit or service Use for the purpose production, consumption and exchange of goods or services Future economic benefits results in cash inflows
  • Slide 27
  • Liabilities Claims against assets Claims against assets Creditors Creditors Existing debts and obligations Existing debts and obligations Accounts payable Notes payable Wages payable Sales, Real Estate and Income Taxes payable
  • Slide 28
  • Equity Claims of the owners on the assets Claims of the owners on the assets Corporations Corporations Paid in capital Retained earnings Revenues Expenses Dividends Revenues > Expenses = Net Income Revenues > Expenses = Net Income Revenues < Expenses = (Net Loss) Revenues < Expenses = (Net Loss)
  • Slide 29
  • Transactions Transactions defined: economic events of the enterprise recorded Transactions defined: economic events of the enterprise recorded Each transaction may be internal or external Each transaction may be internal or external Each transaction must identify the specific items affected and the net change on each item Each transaction must identify the specific items affected and the net change on each item Each transaction has a dual effect on the accounting equation Each transaction has a dual effect on the accounting equation The two sides of the accounting equation must always equal The two sides of the accounting equation must always equal
  • Slide 30
  • Effects of Transactions on the Accounting Equation Increase in an asset Increase in an asset Decrease in another asset Increase in a liability Increase in owners equity Increase in a liability Increase in a liability Increase in an asset Decrease in another liability Decrease in owners equity Increase in owners equity Increase in owners equity Increase in an asset Decrease in liability
  • Slide 31
  • Types of Accounts Asset Accounts Normal Balance = Debit Asset Accounts Normal Balance = Debit Liability Accounts Normal Balance = Credit Liability Accounts Normal Balance = Credit Equity Accounts Equity Accounts Permanent Equity Normal Balance Credit Temporary Owners Equity Revenue Normal Balance = Credit Revenue Normal Balance = Credit Expense Normal Balance = Debit Expense Normal Balance = Debit
  • Slide 32
  • Debit vs Credit Assets and Expenses have a normal balance of a Debit Assets and Expenses have a normal balance of a Debit To increase the balance Debit To decrease the balance Credit Liabilities, Permanent OE and Revenues have a normal balance of a Credit Liabilities, Permanent OE and Revenues have a normal balance of a Credit To increase the balance Credit To decrease the balance Debit
  • Slide 33
  • Forms of Business Organizations Sole Proprietorship Sole Proprietorship Partnerships Partnerships Limited Partnerships Limited Partnerships Limited Liability Companies (LLC) Limited Liability Companies (LLC) Corporations Corporations
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  • Sole Proprietorship Easiest to organize / dissolve Easiest to organize / dissolve Legally not a separate business liability issues Legally not a separate business liability issues It is separate for accounting purposes, however It is separate for accounting purposes, however Owner not paid a salary or wage - withdrawals Owner not paid a salary or wage - withdrawals
  • Slide 35
  • Partnerships Two or more people joined together in a non- corporate manner for conducting business. Can use a written or oral agreement Two or more people joined together in a non- corporate manner for conducting business. Can use a written or oral agreement
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  • Partnerships Advantages Advantages Greater financi