Accounting for Entrepreneurship and Business Innovation
, Lecture 1
Committed fixed cost:
Cannot be changed in the short term and are necessary to maintain the current
service or production capacity
Discretionary fixed cost:
Once decided, these costs are fixed but can be changed in each period by
management without reducing production
Opportunity cost = cashflow from the second best option (renting out your equipment)
Avoid death spiral? → use practical capacity
, Week 2
Product costs: are costs of resources related to manufacturing, like materials and
production labor. (mostly variable costs, raw materials and conversion costs: Direct
Labor Costs + Manufacturing Overheads.)
(1) raw materials
(2) work in progress Inventory
(3) finished goods
→ product costs become expenses when finished goods are sold
Period costs: other costs, unrelated to manufacturing such as administration,
warehousing, marketing, selling and distribution expenses.
→ period costs become expenses
Gross profit or gross margin = the difference between revenues and costs of goods
Inventories are current assets because they are assets for less than a year
→ more than a year: non-current or fixed assets (machines, sales offices)
Fixed assets associated with production become product costs through depreciation
Non-manufacturing fixed assets become period costs (expenses) through
depreciation
Income statement (resultatenrekening, winst & verliesrekening, opbrengsten en
uitgaven)
Income statement: describes how profits are generated over a period ( stakeholders
use it to evaluate whether their investments or their jobs are at risk.)
, Cash flow statement:
Operational
Investment
Financing
CASH FLOW FROM OPERATIONS
Direct method: Indirect method:
Cash received from customers Net profit
- +/-
Cash paid for expenses Non cash revenues and
expenses
CASH FLOW FROM INVESTING: cash received or paid for non-current
assets
CASH FLOW FROM FINANCING: cash received or paid for financing
activities (transactions made with creditors and shareholders such as
reimbursement (vergoeding) of loans, issuance of new equity)
= CASH FLOW FROM PERIOD
, Lecture 1
Committed fixed cost:
Cannot be changed in the short term and are necessary to maintain the current
service or production capacity
Discretionary fixed cost:
Once decided, these costs are fixed but can be changed in each period by
management without reducing production
Opportunity cost = cashflow from the second best option (renting out your equipment)
Avoid death spiral? → use practical capacity
, Week 2
Product costs: are costs of resources related to manufacturing, like materials and
production labor. (mostly variable costs, raw materials and conversion costs: Direct
Labor Costs + Manufacturing Overheads.)
(1) raw materials
(2) work in progress Inventory
(3) finished goods
→ product costs become expenses when finished goods are sold
Period costs: other costs, unrelated to manufacturing such as administration,
warehousing, marketing, selling and distribution expenses.
→ period costs become expenses
Gross profit or gross margin = the difference between revenues and costs of goods
Inventories are current assets because they are assets for less than a year
→ more than a year: non-current or fixed assets (machines, sales offices)
Fixed assets associated with production become product costs through depreciation
Non-manufacturing fixed assets become period costs (expenses) through
depreciation
Income statement (resultatenrekening, winst & verliesrekening, opbrengsten en
uitgaven)
Income statement: describes how profits are generated over a period ( stakeholders
use it to evaluate whether their investments or their jobs are at risk.)
, Cash flow statement:
Operational
Investment
Financing
CASH FLOW FROM OPERATIONS
Direct method: Indirect method:
Cash received from customers Net profit
- +/-
Cash paid for expenses Non cash revenues and
expenses
CASH FLOW FROM INVESTING: cash received or paid for non-current
assets
CASH FLOW FROM FINANCING: cash received or paid for financing
activities (transactions made with creditors and shareholders such as
reimbursement (vergoeding) of loans, issuance of new equity)
= CASH FLOW FROM PERIOD
