Accounting

Numbers about money for decision-making.

Any company keeps 3 acc. Books – fin , mana , income tax accounting

Bookkeeping

Systematic , quantitative recording of activity

Fin accounting – reporting info to external people ( balance sheet and income statement) -> used by
lenders , investors , suppliers, customers,employees,competitors,govt.
agencies,politicians,journalists

Man. Accounting – info to make internal decisions

Eg. Product costing , break-even analysis , budgeting, performance evaluation, whether to start a
new prodn line , whether to outsource

Income tax acc. –

Net income = rev – expenses

Revenues – amount of assets generated

Profit margin = NI/total revenuw

Cash flow statement – op , inv , fin

Managerial acc is insight , daily details
Product cost : material and labour

 Direct materials , direct labour ( hour * wage/hour) , overhead costs (infra , utilities)
( overhead more difficult to compute )

Suppose one guy is supervising 2 projects , how to spilt overhead costs?

Traditional:

Break-even analysis

Profit = (price – vc/per piece ) * n – FC

Contri = profit/person – VC

Budgets – give realistic targets

Accounting – critical to find the RIGHT thing to measure – stice boys – hong kong

Avg tax rate = tax you pay / amount earned

Progressive tax rate – tax inc as you make more money

Tax deduction – reduction in taxable income

Tax credit – redn. In taxable income directly by amount spent on that item -> money spent on
activities encouraged by govt. ( tax credit better than tax deduction)

Ordinary income , capital gains income ( taxed at a lower rate than ordinary income )