Summary Major Field Test Business Complete Study Guide_ Guaranteed Success.
Major Field Test Business Complete Study Guide Balance Sheet - Attempts to describe the financial condition of the firm at a point in time. Includes: Assets, Liabilities, & Equity - "net assets" what remains after deducting liabilities from assets.. Income Statement - Presents the results of the operations of an entity over a peroid of time. Includes: Revenues, Expenses, Income, Gains & Losses Statement of Equity or Statement of Retained Earnings (Capital) - Bridges the gap between the income statement and the balance sheet. Arrangement depends on type of organization: Proprietorship: Statement of Owners Equity Partnership: Statement of Partners Equity Corporation: Statement of Stockholders Equity In addition, it contains: Investments by Owners and Distribution to owners Statement of Cash Flows - Provides information about a company's cash receipts and cash payments during a specific period of time. Includes all 10 elements of financial statements: assets, liabilities, equity, net income, income, gains, losses, Statement of 'X' Equity, Investments by Owners, Distributions to Owners. Cash Basis Accounting - Revenue is recognized in the accounting period in which the associated cash is received and Expenses are recognized in the accounting period that the cash is paid. Accrual Basis Accounting - Revenue is recognized in the accounting period in which the revenue is earned, regardless of when the associated revenue is received. (Recorded when the sale is made, not when it is paid for.) Depreciation - A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes. Straight-Line Deprecation - Straight Line Depreciation - (estimated value/useful life) Equal amounts of depreciation expense are recorded in each period of the useful life of the asset, if not disposed of prior to the end of estimated useful life. The value is divided among estimated life of item. Double Declining Balance Depreciation - Double Declining Balance An "accelerated" depreciation method (more expense is recorded in the early periods of useful life and less in the later periods.) Basic Inventory Equation for Goods - Beginning Inventory + Purchases = Goods Basic Inventory Equation for Cost of Goods Sold (COGS) - Goods Available for Sale - Ending Inventory = Cost of Goods Sold (COGS) Basic Inventory Equation for Ending Inventory - Beginning Inventory + Purchases = Goods Available for Sale - Cost of Goods Sold (COGS) = ending inventory Periodic Inventory Accounting - No transactions are recorded in the inventory account until the end of the accounting period. Merchandise purchases are recorded in a purchases account. Inventory is counted and costed at the end of each accounting period. The inventory account beginning balance is adjusted to physical inventory amount and the difference is added to or subtracted from periodic Cost of Goods Sold. Perpetual Inventory Accounting - Merchandise purchases are added to the inventory account when the merchandise is received. Cost of Goods Sold is computed and subtracted from the inventory account as sales are recorded. FIFO (Inventory) - Inventory Oldest items inventory are sold first .(Example: Fruit) LIFO (Inventory) - Most recent items added to inventory are sold first. (Example: Ore from Mining) Average Cost (Inventory) - Ending inventory units are costed using an average cost of goods available divided by the units available for sale. (Example: Rope) Specific Identification (Inventory) - Inventory items are tagged with their cost. (Example: automobiles) Generally Accepted Accounting Principles (GAAP) - A framework of accounting standards, rules and procedures defined by the professional accounting industry, which has been adopted by nearly all publicly traded U.S. companies. Securities Act of 1935 - Established the SEC Securities and Exchange Commission with the explicit authority to establish the rules, standards, and procedures used to account for transactions and events. Also to establish the form and content of published financial reporting. Management Accounting - Concerned with identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used my management to plan and evaluate and control within an organization to assure appropriate use of and accountability of resources. Cost Accounting - Concerned only with the cost of a product or service. Product Costs - Cost of the various products manufactured and sold by a company. (Examples: Inventory Costs or Cost of Prodcution Period Cost - ll costs incurred by a company that are not considered product costs. (Examples: Administration Expenses or Selling Expenses) Direct Costs - A cost that is easily traceable to the cost object and is a result solely of the cost object. (Example: Lye used to make bars of soap.) Indirect Cost - A cost that supports more than one cost objects, and must be "allocated" to those various cost objects (Example: Electricity used at a plant.) Direct Material - Cost of materials used in production. (Examples: sheet metal, tires, fabric, etc.) Direct Labor - Cost of Labor used in production. (Example: assembly line workers) Manufacturing Overhead - Indirect factory-related costs that are incurred when a product is manufactured. (Examples: facility costs, indirect labor, machine set up costs, quality control, etc.) Variable Costs - Expenses that vary directly with changes in activity or changes in volume. Fixed Cost - Expenses that do not change as a function of the activity of a business, within the relevant period. (Examples: Rent, Utilities, etc.) Adam Smith - Father of Economics Responsible for Division of Labor 1776: Tasks are subdivided into individual jobs Employees perform only the tasks relevant to their specialized function Jobs tend to be small, but they can be performed efficiently Proposes that production can be increased by dividing labor on to similar tasks Frederick Winslow Taylor - Scientific Management 1911: Developed standard method for performing each job Selected workers with appropriate abilities for each job. Trained workers in standard method. Provided wage incentives to workers for increased output. Did not acknowledge variance among workers. Did not appreciate social context of work and higher needs of workers. Max Weber - Bureaucracy: Focused on the organization as a whole Organizations needed division of labor with clear definitions of authority and responsibility. Positions organized in a hierarchy of authority. Henri Favol - Developed the 14 General Principles of Management 14 General Principles of Management - Division of Labor, Authority, Discipline, Unity of Command, Unity of Direction, Subordination of Individual Interests to the General Interest, Remuneration, Centralization, Scalar Chain, Order, Equity, Stability of Tenure of Personnel, Initiative, and Esprit de Corps Division of Labor or Work (Management) - When employees are specialized, output can increase because they become increasingly skilled and efficient. Authority (Management) - Managers must have the authority to give orders, but they must also keep in mind that with authority comes responsibility. Discipline (Management) - Discipline must be upheld in organizations, but methods for doing so can vary. Unity of Command (Management) - Employees should have only one direct supervisor. Unity of Direction (Management) - Teams with the same objective should be working under the direction of one manager, using one plan. This will ensure that action is properly coordinated. Subordination of Individual Interests to the General Interest (Management) - he interests of one employee should not be allowed to become more important than those of the group. This includes managers. Remuneration (Management) - Employee satisfaction depends on fair remuneration for everyone. This includes financial and non-financial compensation. Centralization (Management) - Centralization - This principle refers to how close employees are to the decision-making process. It is important to aim for an appropriate balance. Scalar Chain (Management) - Employees should be aware of where they stand in the organization's hierarchy, or chain of command. Order (Management) - The workplace facilities must be clean, tidy and safe for employees. Everything should have its place. Equity (Management) - Managers should be fair to staff at all times, both maintaining discipline as necessary and acting with kindness where appropriate. Stability of Tenure of Personnel (Management) - Managers should strive to minimize employee turnover. Personnel planning should be a priority. Initiative (Management) - Employees should be given the necessary level of freedom to create and carry out plans. Esprit de Corps (Management) - Organizations should strive to promote team spirit and unity. Abraham Maslow - Hierarchy of Needs: Proposes that individuals have a hiearchy of needs that need to be fulfilled in order. The hierarchy includes: physiological needs, safety, belongingness, esteem, and self-actualization Maslow's Hierarchy of Needs: - Physiological needs, Safety, Belongingness, Esteem, and Self-actualization Douglas McGregor - Proposed Theory X and Theory Y view of management. Theory X of Management - Employees dislike work and must be threatened with punishment. Theory Y of Management - Employees like work, self-direction and seek responsibility and have creativity. Dr. William Ouchi - Proposed Theory Z view of management; a so-called "Japanese Management" style popularized during the Asian economic boom of the 1980's. *TBC
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major field test business complete study guide
