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Download Manufacturing--part I (new window)
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Manufacturing part I –Managerial accounting basics Managerial accounting Financial accounting • Accounting to Insiders-different levels of management and other employees • Proforma data • Narrowly focused • Single purpose custom statements for one product, one department, one day, etc. • No GAAP • Statements prepared as needed-Hourly, weekly • Accounting to Outsidersinvestors, government, creditors, etc. • Historical data impacting accounting equation • Broadly focused • Multi-purpose statements – income statement, balance sheet, cash flow • GAAP • Statements prepared on a regular basis-Annual, quarterly Comparison of managerial and financial Basic rule -- Record expenses in the same time period as the revenues that they help to generate • Timing is everything! • Manufacturing costs are expensed when the manufactured product is sold-cost of goods sold expense • Expensing manufacturing costs, then is delayed until the product is sold • Manufacturing costs initially start in an asset account, such as a particular type of inventory Matching principle & manufacturing Period costs Product costs • Selling costs-marketing the product and finding customers • Office & administrative costs-support functions of the business • Expensed as incurred • Benefit received when service performed or asset used up • Direct and indirect factory costs • Direct (raw) materials-becomes the product • Direct labor-cost of hands-on workers • Factory overhead-all other factory costs-indirect • Key words to look for – factory, production, manufacturing, product, direct or raw materials, direct labor • Expensed only as product is sold Expense or not to expense!
