D196 Principles of Financial and Managerial Accounting - Set 1 - Part 1

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The budgets in a manufacturing business typically follow the sequence of sales, production, and direct materials to ensure adequate resources for production based on expected sales.

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The Financial Accounting Standards Board (FASB) is the primary body responsible for setting accounting rules in the United States, known as Generally Accepted Accounting Principles (GAAP).

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Financial statement data are often used to calculate employee bonuses, making employees interested in the company's financial performance.

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The statement of cash flows is one of the three primary financial statements, along with the balance sheet and the income statement.

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When a company borrows cash, it increases both its assets (cash) and its liabilities (the loan amount).

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Expenses reduce the owners' equity in the company because they represent costs incurred by the business.

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Both accounts payable and notes payable are liability accounts, representing the amounts the company owes to others.

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The financial accounting cycle collects and processes financial transactions to generate useful information about the company's performance and financial position.

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The accounting equation states that assets must always equal the sum of liabilities and equity.

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Cost of goods sold is an expense related to the production of goods sold by a company.

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Gross profit is calculated as the difference between sales and the cost of goods sold, reflecting the profit from core operations before deducting other expenses.

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Retained earnings are part of equity, representing the cumulative earnings of the company that have not been distributed as dividends.

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Operating activities include day-to-day transactions such as paying employees, purchasing inventory, and collecting payments from customers.

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A classified balance sheet helps decision-makers by showing the distinction between short-term (current) and long-term assets and liabilities.

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The balance sheet provides a snapshot of the financial position of a company, showing its assets, liabilities, and equity at a specific point in time.

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Accounts payable represent amounts owed by a company to its suppliers or vendors for goods or services purchased on credit.

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The company's cash flow is negative because many December sales were made on credit, meaning cash was not collected immediately.

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Managerial accounting provides financial information used for internal planning, control, and decision-making processes.

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Financial accounting is concerned with providing financial reports to external stakeholders such as investors, creditors, and regulators.

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Managerial accounting deals with internal operations, including product costs, budgeting, and performance evaluation, all aimed at helping managers make informed decisions.