ACCT EXAM # 1 STUDY

Period Costs Formula

selling expenses + administrative expenses

Partnership ( TAx)

A conduit or flow through entity - passes income, gains ,losses, deductions, and credits through to the partners (owners) to be reported on the partners' tax returns Most items retain their character when passes through to partners Partners are taxed on their share of profits regardless of whether they receive any distributions Profits retained in the partnership can be distributed later tax free Partners can deduct losses passed through to them to the extent of each partner's basis account.

Activity Based Costing

A method of allocating overhead based on each product's use of activities in making the product.

FICA taxes

Based on the Federal Insurance Contributions Act; tax withheld from employees' paychecks and matched by employers for Social Security and Medicare. SS & medicare

Cash Budget

Beginning Cash Balance Add: Cash Receipts for XXX (month) =Total Available Cash Less: Cash disbursements for XXX(month)* =Excess (or deficiency) of available cash over cash disbursements +Financing (Can be zero) =Ending Cash Balance

LLC treated as a partnership unless the company elects to be taxed as a corporation

C Corporation S Corporation

Internal Audits

Conducted by employees of the organization Provide assurance about various aspects of the organization Priorities of an internal audit is determined by those charged with governance and management within the organization

Theory of Constraints-

Constraints (bottlenecks) limits the company's potential of Profitability. A specific approach to identify and manage these constraints in order to achieve company goals.

product cost formula - manufacturing

DM + DL + MO = Manufacturing cost

Compliance Audits

Determines whether the origination under review has followed the rules, police, procedure, laws, and regulations. Example- IRS Audit

Calculation of budgeted total unit cost:

Direct Materials Direct Labor Manufacturing Overhead =Total Unit Cost

Cash Disbursements can include:

Direct Materials Direct Labor Manufacturing Overhead Selling and Admin expenses Purchase of Truck Income Tax Expense

Balanced Scorecard

Evaluate operations in an integrated fashion, using both financial and nonfinancial measures. Links performance to overall company objectives.

Production Budget:

Expected Unit Sales Add: Desired Ending Finished Goods Units =Total Required Units Less: Beginning Finished Good Units =Required Production Units

Sales Budget:

Expected Unit Sales xUnit Selling Price =Total Sales

FASB

Financial Accounting Standards Board decides the rules of accounting public companies to protect users for financial statements

Operational Audit

Reviews the economy, efficiency, and effectiveness of an organization's activities. Economy - cost of inputs, including wages and materials Efficiency - Relationship between inputs and outputs, or the use of the minimum amount of inputs to achieve a given output. Example - how many hours does it take to make 1 bike. Generally conducted by an organization

Basic Income Tax Calculation:

Gross Income → what your job paid you -Deductions → Eligible expenses (local tax, medicare, charitable etc) =Taxable Income (Loss) → Your Net Income xTax Rate =Gross Income Tax Liability → what you owe -Tax Credits and Prepaid→Already deducted from paychecks =Tax Owed or Refund Due

Three types of persons subject to income tax in the U.S.

Individual C Corporation Fiduciary

Just in time Inventory Methods

Inventory system in which goods are manufactured or purchased just in time for sale. Saves money, and space. Risk stockout due to high demand.

audit services

Most Scrutiny, "reasonable assurance" audits Financial Statements Internal Control Systems

• Choice of business entity ( tax) Sole Proprietorship

No Formal Filing required by state, Must pay Self-employment tax on net profit, Not eligible for tax free employee fringe benefits A business loss can offset the sole proprietors other income Are liable for all debts of the business

Attestation Services

Provide "limited assurance" Review of Financial Statement Examine Financial Forecast A type of assurance service in which the CPA firm issues a report about a subject matter or assertion that is made by another party

PCAOB

Public Company Accounting Oversight Board overseas audits

Total Quality Management

Reduce defects in finished products, with the goal of zero defects.

Ex. Budgeted Income Statement

Sales -Cost of goods sold =Gross Profit -Selling and Admin Expenses =Net Income

Enterprise Resource Planning

Software programs designed to manage all major business processes.

marginal tax rate

amount of tax payable on the next dollar earned

progressive tax

The more you earn, the higher your tax rate. Individual Income Taxes.

Audit Expectation Gap

There are often differences between auditors and financial statement users as to their understanding of what an audit is and what an audit does and does not. The gap occurs when users beliefs when user beliefs do not align with what an auditor has actually done.

Direct Materials Budget:

Units to be Produced Direct Materials Per Unit = Total Pounds needed for Production Add: Desired Ending Direct Materials (pounds) =Total Materials Required Less: Beginning Direct Materials =Direct Materials purchases X Cost per Pound =Total Cost of Direct Materials Purchases (Should be a dollar amount)

calculated product unit needed

budget sales units + desired ending inventory - beginning inventory

SEC

enforces stocks and bonds securities and exchange commission

Assurance Services

independent professional services that improve the quality of information, or its context, for decision makers Improve the quality of information Website Security Data Integrity Risk Advisory Services

intergraded audit

intern control audit & financial statement audit done at same time private companies not required by the gov to have an audit of ICFR

C Corporation

is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity.

National Association of State Boards of Accountancy (NASBA) and State Boards of Accountancy

professional organization whose mission is to enhance the effectiveness and advance the common interests of its members, which are the state boards of accountancy NASBA also provides education and development opportunities for its members, provides technology support, and promotes ethical behavior in the profession. services NASBA provides to state boards is that it serves as the application center for individuals applying to sit for the CPA exam.

The role of COSO is to: ? And what is COSO?

provide guidance in the area of internal control and risk management. Committee of Sponsoring Organizations

Manufacturing Overhead Budget - calc

total variable costs + total fixed costs = manufacturing overhead divided total manufacturing overhead by total direct labor hours = manufacturing overhead rate per direct labor hour

Direct Labor Budget

units to be produced x direct labor hours per unit = total required direct labor hours x direct labor cost per hour = total direct labor cost

. Proportional "Flat" Tax System

•All income taxed at same rate regardless of amount or type of income •21% corporate income tax rate

Regressive Tax System

•Pay a decreasing proportion of income as income increases •Social Security tax is 6.2% for employers and for employees on first $132,900 in wages