Accounting For Dummies
John A. Tracy
Format: PDF / Kindle (mobi) / ePub
Learn the basics of practical accounting easily and painlessly with Accounting For Dummies, 4th Edition, which features new information on accounting methods and standards to keep you up to date. With this guide, you can avoid accounting fraud, minimize confusion, maximize profits, and make sense of accounting basics with this plain-English guide to your accountant’s language. Understand how to manage inventory, report income and expenses for public or private companies, evaluate profit margins, analyze business strengths and weaknesses, and manage budgets for a better bottom line.
of management control. One student answered that management control means “watching everything.” That’s not bad. Even in a business that doesn’t do budgeting, managers depend on regular profit reports, balance sheets, and cash flow statements. These key internal financial statements should provide detailed management control information. These feedback reports are also used for looking ahead and thinking about the future. Other specialized accounting reports may be needed as well.
sold expense for the period, a higher pretax profit of the same amount, and a much improved bottom-line net income. Being careful when production output is out of kilter with sales volume In the highly suspect example shown in Figure 11-2, the business produced 150,000 units (full capacity). As a result, its inventory asset includes an additional $7.7 million of the company’s fixed manufacturing costs for the year as compared with the original example in Figure 11-1. Its cost of goods
interpreting a financial report, the better prepared you are to evaluate the commentary and advice of stock analysts and other investment experts. If you can at least nod intelligently while your stockbroker talks about a business’s P/E and EPS, you’ll look like a savvy investor — and you may get more favorable treatment. (P/E and EPS, by the way, are two of the key ratios explained later in the chapter.) You may regularly watch financial news on television or listen to one of today’s popular
amortization expense, if any) because there is no cash outlay for the expense during the period. 3. Deduct increases or add decreases in operating assets because • An increase requires additional cash outlay to build up the asset. • A decrease means amount invested in the asset is reduced and thus provides cash. 4. Add increases or deduct decreases in operating liabilities because • An increase means less cash is paid out than the expense. • A decrease means
Balance sheet for a product company Figure 2-3 shows the building blocks (basic information components) of a typical balance sheet for a business that sells products on credit. One reason the balance sheet is called by this name is that its two sides balance, or are equal in total amounts. In the example, the $5.2 million total of assets equals the $5.2 million total of liabilities and owners’ equity. The balance or equality of total assets on the one side of the scale and the sum of