The Basics
1. Accounting Equation: RETAINED EARNINGS STATEMENT
Assets = Liabilities + Owner’s (Stockholders’) Equity A summary of the changes in the retained earnings of a business
entity that have occurred during a specific period of time, such as a
month or a year.
2. T Account:
Account Title BALANCE SHEET
A list of the assets, liabilities, and stockholders’ equity of a business
Left Side Right Side entity as of a specific date, usually at the close of the last day of a
debit credit month or a year.
INCOME STATEMENT
A summary of the revenue and expenses of a business entity for a
specific period of time, such as a month or a year.
FINAL
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10. Shipping Terms: 16. Contribution Margin Ratio = Sales – Variable Costs
FOB Shipping Point FOB Destination Sales
Ownership (title)
passes to buyer when 17. Break-Even Sales (Units) = Fixed Costs
merchandise is.................... delivered to delivered to Unit Contribution Margin
freight carrier buyer
Transportation costs
are paid by .......................... buyer seller 18. Sales (Units) = Fixed Costs + Target Profit
Unit Contribution Margin
11. Format for Bank Reconciliation:
19. Margin of Safety = Sales – Sales at Break-Even Point
Cash balance according to bank statement ...................... $xxx Sales
Add: Additions by company not on bank
statement .......................................................... $xx
Bank errors ............................................................. xx xx 20. Operating Leverage = Contribution Margin
$xxx Income from Operations
Deduct: Deductions by company not on bank
statement .......................................................... $xx 21. Variances
Bank errors ............................................................. xx xx
Adjusted balance.................................................................. $xxx Direct Materials = Actual Price per Unit – × Actual Quantity
Price Variance Standard Price Used
Cash balance according to company’s records ................ $xxx
Add: Additions by bank not recorded by company .. $xx Direct Materials = Actual Quantity Used –
Company errors..................................................... xx xx × Standard Price
Quantity Variance Standard Quantity per Unit
$xxx
Deduct: Deductions by bank not recorded Direct Labor = Actual Rate per Hour –
by company...................................................... $xx × Actual Hours
Rate Variance Standard Rate Worked
Company errors..................................................... xx xx
Adjusted balance.................................................................. $xxx Direct Labor = Actual Hours Worked – × Standard Rate
Time Variance Standard Hours per Hour
12. Inventory Costing Methods:
Variable Factory Actual Budgeted Factory
1. First-in, First-out (FIFO)
Overhead Controllable = Factory – Overhead for
2. Last-in, First-out (LIFO)
Variance Overhead Amount Produced
3. Average Cost
Fixed Factory Budgeted Factory Applied
13. Interest Computations: Overhead Volume = Overhead for – Factory
Interest = Face Amount (or Principal) × Rate × Time Variance Amount Produced Overhead