MBA Accounting notes
Definition and explanation of LIFO method Example of LIFO costing method Advantages of Last in First Out method Disadvantages of Last in First Out Method Definition and explanation: Thelast in first out (LIFO) methodof costing materials issued is based on the premise that materials units issued should carry the cost of the most recent purchase, […]
Definition and Explanation of FIFO Method Advantages of First in First out-FIFO-Costing Method Example of FIFO Method Disadvantages or Limitations of FIFO Costing Method Definition and Explanation: The first in first out (FIFO) method of costing is used to introduce the subject of materials costing. The FIFO method of costing issued materials follows the principle
Current Liabilities Current liabilities are short-term financial obligations that are paid off within one year or one current operating cycle. These liabilities are reasonably expected to be liquidated within a year. It includes: · Accrued expenses as wages, taxes, and interest payments not yet paid · Accounts payable · Short-term notes · Cash dividends and · Revenues
Reversing Entries When an adjusting entry is made for an expense at the end of the accounting period, it is necessary to keep track of this expense so that the transaction will be allocated properly between the two periods. Reversing entries are a way to handle such transactions. Consider the case in which a note is issued on the 16th of
Financial Statements Once the adjusting entries have been made or entered into a worksheet, the financial statements can be prepared using information from the ledger accounts. Because some of the financial statements use data from the other statements, the following is a logical order for their preparation:
Source Documents The source document is the original record of a transaction. During an audit, source documents are used as evidence that a particular business transaction occurred. Examples of source documents include:
Trial Balance Sheet If the journal entries are error-free and were posted properly to the general ledger, the total of all of the debit balances should equal the total of all of the credit balances. If the debits do not equal the credits, then an error has occurred somewhere in the process. The total of the accounts on the debit and credit
General Journal Entries The journal is the point of entry of business transactions into the accounting system. It is a chronological record of the transactions, showing an explanation of each transaction, the accounts affected, whether those accounts are increased or decreased, and by what amount.
Chart of Accounts The chart of accounts is a listing of all the accounts in the general ledger, each account accompanied by a reference number. To set up a chart of accounts, one first needs to define the various accounts to be used by the business. Each account should have a number to identify it.
Balanced Scorecard Traditional financial performance metrics provide information about a firm’s past results, but are not well-suited for predicting future performance or for implementing and controlling the firm’s strategic plan. By analyzing perspectives other than the financial one, managers can better translate the organization’s strategy into actionable objectives and better measure how well the strategic plan is executing.
