Editing User:Jukeboksi/BBA studies/Accounting

{{accounting}}

The principles of '''accountancy''' are applied to business entities in three divisions of practical '''art''', named 
# '''[[w:accounting|accounting]]''' ( [[w:fi:laskentatoimi]] ) which is classically split to ( [[w:Financial accountancy|financial]] and [[w:Managerial accounting|managerial]] accounting )
#'''[[w:bookkeeping|bookkeeping]]''' ( [[w:fi:kirjanpito]] ) and 
#'''[[w:auditing|auditing]]''' ( [[w:fi:auditointi]], mahd. [[w:fi:tilintarkastus]] ). ( Wikipedia )


:'''[[w:Accounting|Accounting]]''' ( verb ) or '''accountancy''' ( noun ) 
:::'''Accounting''', or '''accountancy''', is the [[w:measurement|measurement]], processing and communication of financial information about [[w:economic entity|economic entities]]. ( Wikipedia )
:::: Or old wikipedia: Accouting is the process of communicating [[w:financial information|financial information]] about a [[w:business entity]] to users such as [[w:shareholders|shareholders]] and [[w:manager|manager]]s. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of [[w:management|management]]; the art lies in selecting the information that is relevant to the user and is reliable. ( Wikipedia ) 

:'''[[w:Bookkeeping|Bookkeeping]]''', in [[w:business|business]], is the recording of financial transactions, and is part of the process of accounting. 
::: Transactions include purchases, sales, receipts and payments by an individual or organization.  ( Wikipedia )

:'''[[w:Audit|Audit]]''' is a planned and documented activity performed by qualified personnel to determine by investigation, examination, or evaluation of objective evidence, the adequacy and compliance with established procedures, or applicable documents, and the effectiveness of implementation. ( Wikipedia )

{{bookkeeping}}

== Accounting for a New Business 1 ==

=== Accounting lesson 1 Double-entry bookkeeping, credit and debit ===

* '''[[w:Double-entry accounting]]''' ( or '''double-entry [[w:bookkeeping]] system''' [[w:fi:Kahdenkertainen kirjanpito]]) is a set of rules for recording financial information in a [[w:financial accounting]] system in which <u>'''''every transaction'''''</u> or event <u>'''''changes at least two'''''</u> different nominal [[w:ledger]] <u>'''''accounts'''''</u>. ( Wikipedia )

* '''[[w:Debit and credit|Debits and credits]]'''  (abbreviated '''Dr''' and '''Cr''', respectively) are entries made in [[w:Account (accountancy)|account]] [[w:ledger|ledger]]s to record changes in [[w:Value (economics)|value]] resulting from business transactions. Generally speaking, the source account for the transaction is ''credited'' (that is, an entry is made on the right side of the account's ledger) and the destination account is ''debited'' (that is, an entry is made on the left side). Total debits must equal total credits for each transaction; individual transactions may require multiple debit and credit entries to record. ( Wikipedia )

:* '''[[w:Financial accountancy]]''' (or '''financial accounting''') is the field of [[w:accountancy]] concerned with the preparation of [[w:financial statements]] for decision makers, such as [[w:Shareholder|stockholder]]s, [[w:vendor (supply chain)|supplier]]s, [[w:bank]]s, employees, [[w:government agencies]], owners, and other stakeholders. Financial capital maintenance can be measured in either [[w:nominal monetary units]] or [[w:units of constant purchasing power]]. ( Wikipedia ) 

:* '''Management accounting''' or '''[[w:managerial accounting]]''' is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions. ( Wikipedia )

=== Balances and flow statements ===
( [[w:fi:XYZ]] ) 
:*For every '''[[w:fiscal year|fiscal year]]''' ( [[w:fi:Tilikausi]] )a business must produce a '''[[w:annual report]]''' which contains ( in [[w:Finland]] )
:** the annual '''[[w:financial statement]]''' ( [[w:fi:Tilinpäätös]] ) which contains naturally 
:*** the '''[[w:balance sheet]]''' (  main document of accounts, [[w:fi:tase]] )
:***the '''[[w:income statement]]''' ( main flow document, [[w:fi:tuloslaskelma]] ) 
:*** the attachments for balance sheet and income statements [[w:fi:liitteet]]
:*** the [[w:statement of changes in equity]] (SOCE) 
:** Textform description of businesses activities ( [[w:fi:toimintakertomus]] )

==== Income statement or profit and loss statement ====

:* '''[[w:Income statement]]''' (also referred to as '''profit and loss statement (P&L)''', '''revenue statement''', '''statement of financial performance''', '''earnings statement''', '''operating statement''' or '''statement of operations)'''is a company's '''[[w:financial statement]]''' that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the "bottom line"). ( Wikipedia )



::<tt>Mnemonic:</tt> ''"The [[w:income statement]] describes the income possibilities of the [[w:entrepreneur]] with 100% of shares <u>not</u> the income of the business, that's called the [[w:top line]] and is only small part of the whole thing."''

::An '''''[[w:income statement]]''''' (also referred to as '''''profit and loss statement (P&L)''''', '''''revenue statement''''', '''''statement of financial performance''''', '''''earnings statement''''', '''''operating statement''''' or '''''statement of operations''''') is a company's [[w:financial statement]] that indicates how the [[w:revenue]] (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the [[w:net income]] (the result after all revenues and expenses have been accounted for, also known as Net Profit or the "bottom line"). It displays the revenues recognized for a specific period, and the [[w:cost]] and [[w:expense]]s charged against these revenues, including [[w:write-off]]s (e.g., [[w:depreciation]] and [[w:amortization]] of various [[w:asset]]s) and [[w:tax]]es. The purpose of the income statement is to show [[w:Management|managers]] and [[w:investor]]s whether the company made or lost money during the period being reported. ( Wikipedia )

<tt>Formula for income statement</tt>
:: <tt> incoming </tt> '''[[w:revenue]]''' == '''[[w:top line]]''' == '''[[w:turnover]]''' == '''[[w:income]]''' == '''[[w:cash flow]]'''
:: <tt> minus outgoing </tt> '''[[w:expenses]]'''
:: <tt> equals </tt> '''[[w:net income]]'''  == '''The [[w:bottom line]]''' == '''[[w:net profit]]'''  == [[w:net earnings]]'''

:an example of an income statement for a really small business involved in international trade 

:::''''+ [[w:Revenue]]'''
:::'''- [[w:Fixed costs]]''' (
::::- [[w:Personel]] costs
::::- [[w:Facilities]], [[w:office]] and [[w:bookkeeping]] and [[w:accounting]] [[w:cost]]s )
:::'''- [[w:Variable costs]]''' (
::::- [[w:Unit price]] x lot size + [[w:VAT]]
::::- [[w:Duty (economics)|Duties]] and [[w:tariffs]] or in case of [[w:single-market]] or [[w:free trade area]] no need
::::- [[w:Logistics]] and [[w:warehousing]]
::::- [[w:distribution]] costs
::: )
:::________________________________
:::== '''[[w:Net income]]'''


==== Balance sheet ====

:* A '''[[w:Balance sheet]]''' or '''statement of financial position''' ( in [[w:financial accounting]] ) is a summary of the financial balances of a [[w:sole proprietorship]], a [[w:Partnership|business partnership]], a [[w:corporation]] or other business organization, such as an [[w:Limited liability company|LLC]] or an [[w:LLP]]. [[w:Asset]]s, [[w:liability (financial accounting)|liabilities]] and [[w:ownership equity]] are listed as of a specific date, such as the end of its [[w:financial year]]. A balance sheet is often described as a ''"snapshot of a company's financial condition"''. ( Wikipedia )
::: '''Balance sheet terms'''
:::::* '''[[w:Asset]]s == [[w:current assets]] + [[w:non-current assets]]'''
:::::::A '''[[w:current asset]]''' is an [[w:asset]] which can either be converted to cash or used to pay current liabilities within 12 months.  Typical current assets include [[w:cash]], [[w:cash equivalents]], short-term investments, [[w:accounts receivable]], [[w:inventory]] and the portion of prepaid liabilities which will be paid within a year. ( Wikipedia )

:::::* '''[[w:Liability|Liabilities]] == [[w:Current liabilities]] + [[w:non-current liabilities]]'''

::To understand what's going on with a [[w:business]] in addition to having an [[w:income statement]] one must also have knowledge of where the capital is, what is it's cost and it's payoff i.e. the <u>'''''[[w:Balance sheet]]'''''</u>, then you can calculate all sorts of fun [[w:metrics]] like [[w:Return on equity]] and [[w:return on investment]] etc.


In [[w:financial accounting]], a '''[[w:balance sheet]]''' or '''statement of financial position''' is a summary of the financial balances of a [[w:sole proprietorship]], a [[w:Partnership|business partnership]], a [[w:corporation]] or other business organization, such as an [[w:Limited liability company|LLC]] or an [[w:LLP]]. '''[[w:Asset]]s, [[w:liability (financial accounting)|liabilities]]''' and '''[[w:ownership equity]]''' are listed as of a specific date, such as the end of its [[w:financial year]]. A balance sheet is often described as a "snapshot of a company's financial condition". Of the four basic [[w:financial statements]], the balance sheet is the only statement which applies to a single point in time of a business' calendar year. ( Wikipedia )


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=== Accounting class week 9 ===
:* Team quiz on new terminology ( [[w:Category:Accounting terminology]] )
:* '''[[w:Assets]]'''
:* '''[[w:Liabilities]]'''
:* '''[[w:Equity (finance)]]''' ( [[w:fi:Oma pääoma]] )

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=== Accounting class week 10 ===

:*'''[[w:Accrual]]''' (''accumulation'') of something is, in [[w:finance]], the adding together of [[w:interest]] or different [[w:investments]] over a period of time. It holds specific meanings in [[w:accounting]], where it can refer to accounts on a [[w:balance sheet]] that represent liabilities and non-cash-based assets used in accrual-based accounting. These types of accounts include, among others, [[w:accounts payable]], [[w:accounts receivable]], [[w:Goodwill (accounting)|goodwill]], [[w:deferred tax]] [[w:liability (accounting)|liability]] and future interest expense. ( Wikipedia )

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=== Accounting class week 11 ===
* '''[[w:VAT]] accounting''' ( [[w:fi:Arvonlisävero]] )

* [[w:VAT]] vs. [[w:sales tax]] ( not the same thing )




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=== Accounting class week 12 ===
:Joint exam with [[#Business Math 1|Business Math 1]]


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== Accounting for a New Business 2 ==
Course consists of mostly '''[[w:Managerial accounting]]''' and '''[[w:cost accounting]]'''

Topics covered:
* [[w:Forecasting]] [[w:revenue]]s, [[w:sales]] [[w:budgeting]]
* [[w:Pricing]] of products and services
* Estimation of [[w:operational costs]]
* [[w:Profitability]], feasible [[w:business plan]]
* Required [[w:investments]] and [[w:working capital]]
* [[w:Bank loan]]s and other [[w:financial instruments]]
* Annual percentage rate of charge for [[w:loans]] and [[w:credits]]

==== Accounting 2 class week 14 ====
Topics: Financial flows

* '''[[w:cost-volume-profit analysis]]'''
::in managerial economics, is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-run decisions. ( Wikipedia )

* '''[[w:Contribution margin]]''' ( [[w:fi:Katetuottolaskenta]] ) 
::In [[w:cost-volume-profit analysis]], a form of [[w:management accounting]], '''contribution margin''' is the marginal profit per unit sale. It is a useful quantity in carrying out various calculations, and can be used as a measure of [[w:operating leverage]]. Typically, high contribution margins are prevalent in the labour-intensive tertiary sector while low contribution margins are prevalent in the capital-intensive industrial sector.n ( Wikipedia )

* '''[[w:Break-even]]''' (or break even) is the point of balance between making either a profit or a loss. The term originates in finance, but the concept has been applied widely since. ( Wikipedia )

* '''[[w:Margin_of_safety_(accounting)#Margin_of_Safety|Margin of safety]]''' represents the strength of the business. It enables a business to know what is the exact amount it has gained or lost and whether they are over or below the break even point. ( Wikipedia )

* '''[[w:Operating leverage]]''' ( [[w:fi:Velkavipu]] ) is a measure of how revenue growth translates into growth in operating income. Leverage, and of how risky (volatile) a company's operating income is. ( Wikipedia )

::Homework: ex. 4,5,6,7

==== Accounting 2 class week 15 ====

==== Accounting 2 class week 16 ====
* '''[[w:Pricing]]'''
:: Long-run vs. short-run pricing approaches

*'''[[w:Target costing]]''' or '''target pricing''' is a [[w:pricing]] method used by firms.  It is defined as "a cost management tool for reducing the overall cost of a product over its entire [[w:Product lifecycle (engineering)|life-cycle]] with the help of production, engineering, research and design". A target cost is the maximum amount of cost that can be incurred on a product and with it the firm can still earn the required [[w:profit margin]] from that product at a particular selling price. ( Wikipedia )

*'''[[w:Cost-plus pricing]]''' is a pricing method used by companies to maximize their rate of returns. ( Wikipedia )

==== Accounting 2 class week 17 ====
* '''[[w:Operating leverage]]''' is a measure of how revenue growth translates into growth in '''[[w:operating income]]'''. '''[[w:Leverage (finance)|Leverage]]''', and of how risky (volatile) a company's operating income is.

* The '''[[w:current ratio]]''' is a [[w:financial ratio]] that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's [[w:current asset]]s to its [[w:current liabilities]]. ( Wikipedia )

* The '''Acid-test''' or '''[[w:quick ratio]]''' or '''liquid ratio''' ( [[w:fi: Maksuvalmiussuhde]] )  measures the ability of a company to use its ''near cash'' or quick assets to extinguish or retire its [[w:current liability|current liabilities]] immediately. Quick assets include those [[w:current asset]]s that presumably can be quickly converted to cash at close to their [[w:book value]]s. ( Wikipedia )

* '''[[w:Return on investment]]''' ('''ROI''') is the concept of an [[w:investment]] of some resource yielding a benefit to the investor. As a performance measure, it is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ( Wikipedia )

==== Accounting 2 class week 18 ====


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== Managerial Accounting ==

# lesson: '''Cost behaviour''' and '''[[w:cost object|cost object]]s
# lesson: '''[[w:Job costing|Job costing]]''' and '''[[w:overheads|overheads]]'''
# lesson: '''[[w:Cost-volume-profit analysis|Cost-volume-profit analysis]]'''
# lesson: '''Master budgets''' and '''operational [[w:budget|budget]]s'''
# lesson: '''[[w:Activity based costing|Activity based costing]]'''
# lesson: NO LESSON
# lesson: '''Short term business decisions'''

=== Lesson 1 Cost behaviour and cost objects ===
* '''A [[w:Cost object|Cost object]]''' is a tangible input for a product manufactured/service provided, like labor or material. ( Wikipedia )

* '''[[w:Managerial accounting|Managerial accounting]]''' vs. '''[[w:financial accounting|financial accounting]]''' - differences and characteristics listed in hand-out

* Proper financial accounting is [[w:GAAP|GAAP]] + [[w:IFRS|IFRS]] compliant and is [[w:Certified Public Accountant|CPA]] [[w:auditing|audited]]
::: Certified Public Accountant (CPA) is the statutory title of qualified accountants in the United States ( Wikipedia )

* '''[[w:Generally accepted accounting principles|Generally accepted accounting principles]]''' ('''GAAP''') refer to the standard framework of guidelines for [[w:financial accounting|financial accounting]] used in any given jurisdiction; generally known as '''accounting standards''' or [[w:standard accounting practice|standard accounting practice]]. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of [[w:financial statements|financial statements]]. ( Wikipedia )

* '''[[w:International Financial Reporting Standards|International Financial Reporting Standards]]''' ('''[[w:IFRS|IFRS]]''') are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. ( Wikipedia )

* '''[[w:Inventory|Inventory]]''' or stock refers to the goods and materials that a business holds for the ultimate purpose of resale (or repair)

* '''[[w:w:Inventory management software|w:Inventory management software]]''' is a [[w:computer|computer]]-based system for tracking [[w:inventory|inventory]] levels, orders, [[w:sales|sales]] and deliveries. ( Wikipedia )

* '''[[w:Working capital|Working capital]]''' or '''operating capital''' is a financial metric which represents [[w:Accounting liquidity|operating liquidity|]] available to a business, organization or other entity, including governmental entity.  Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Gross working capital equals to current assets. Net working capital (NWC) is calculated as [[w:current assets|current assets]] minus [[w:current liabilities|current liabilities]]. ( Wikipedia )

=== Lesson 2 [[w:Job costing|Job costing]] and [[w:overheads|overheads]] ===

* In [[w:Production (economics)|production]], [[w:research|research]], [[w:retail|retail]], and [[w:accounting|accounting]], a '''[[w:cost|cost]]''' is the value of [[w:money|money]] that has been used up to produce something, and hence is not available for use anymore. ( Wikipedia )

* '''[[w:Job costing|Job costing]]'''  involves the calculation of costs involved in a construction "job" or the manufacturing of goods done in discrete batches. These costs are recorded in ledger accounts throughout the life of the job or batch and are then summarized in the final trial balance before the preparing of the job cost or batch manufacturing statement. ( Wikipedia )

* An '''[[w:overhead|overhead]]''' or '''overhead expense''' refers to an ongoing [[w:expense|expense]] of operating a business; it is also known as an "operating expense". Examples include rent, gas, electricity, and labour burden. The term ''overhead'' is usually used when grouping expenses that are necessary to the continued functioning of the business but cannot be immediately associated with the products or services being offered (i.e.,&nbsp;do not directly generate [[w:profit (accounting)|profit|]]s). ( Wikipedia )


* '''[[w:Costs|Costs]]''':
::* '''[[w:Direct cost|Direct cost]]s''' are costs that can easily be associated with a particular cost object.( Wikipedia on [[w:variable cost|variable cost]] )
::* '''[[w:Indirect costs|Indirect costs]]''' are costs that are not directly accountable to a [[w:cost object|cost object]] (such as a particular project, facility, function or product). Indirect costs may be either fixed or variable. Indirect costs include administration, personnel and security costs. These are those costs which are not directly related to production. Some indirect costs may be [[w:overhead (business)|overhead]]. But some overhead costs can be directly attributed to a project and are direct costs.
::* '''Unallocated [[w:cost|cost]]'''

* '''[[w:Cost pool|Cost pool]]s''' is an [[w:Accountancy|accounting]] term that refers to groups of accounts serving to express the [[w:cost|cost]] of goods and service allocatable within a business or manufacturing organization. The principle behind the pool is to correlate direct and indirect costs with a specified cost driver, so to find out the total sum of [[w:expense|expense]]s related to the manufacture of a product. ( Wikipedia )

* '''[[w:Cost allocation|Cost allocation]]''' is a process of providing relief to shared service organization's [[w:Cost center (business)|cost center]]s that provide a product or service. In turn, the associated expense is assigned to internal clients' [[w:Cost center (business)|cost center|]]s that consume the products and services. ( Wikipedia )

* '''[[w:Manufacturing overhead costs|Manufacturing overhead costs]]''' ('''MOH cost''') are all manufacturing costs that are related to the cost object (work in process and then [[w:finished good|finished good]]s) but cannot be traced to that cost object in an economically feasible way. ( Wikipedia )
:::Examples include supplies, indirect materials such as lubricants, indirect manufacturing labor such as plant maintenance and cleaning labor, plant rent, plant insurance, [[w:property tax|property tax]]es on the plant, plant depreciation, and the compensation of plant managers.
:::This cost category is also referred to as '''[[w:Factory overhead|Factory overhead]] cost''' ('''FO cost'''). ( Wikipedia )

* A '''[[w:pre-determined overhead rate|pre-determined overhead rate]]''' or '''[[w:POHR|POHR]]''' is the rate used to apply [[w:manufacturing|manufacturing]] [[w:business process overhead|overhead]] to work-in-process [[w:inventory|inventory]]. 
:::The pre-determined overhead rate is calculated before the period begins. The first step is to estimate the amount of the [[w:Activity-based costing|activity base]] that will be required to support operations in the upcoming period. 
:::The second step is to estimate the total [[w:manufacturing cost|manufacturing cost]] at that level of activity. 
:::The third step is to compute the predetermined overhead rate by dividing the estimated total [[w:manufacturing overhead costs|manufacturing overhead costs]] by the estimated total amount of [[w:cost accounting|cost driver]] or [[w:Activity-based costing|activity base]]. 
:::Common activity bases used in the calculation include direct [[w:cost|labor costs]], direct [[w:Working time|labor hours]], or [[w:machine|machine]] hours. ( Wikipedia )

* [[w:Direct materials cost|Direct materials cost]] + [[w:direct labor cost|direct labor cost]] + [[w:manufacturing overhead|manufacturing overhead]] -> [[w:work in progress|work in progress]] -> [[w:finished goods|finished goods]] -> [[w:cost of goods sold|cost of goods sold]]



=== Lesson 3 Cost-volume-profit analysis ===
Recap   
* '''[[w:cost-volume-profit analysis]]'''
* '''[[w:Contribution margin]]''' 
* '''[[w:Break-even]]'''
* '''[[w:Margin of safety]]'''
* '''[[w:Operating leverage]]''' from [[Accounting#Accounting 2 class week 14]]

*'''[[w:Cost–volume–profit analysis|Cost–volume–profit analysis]]''' ('''CVP'''), in [[w:managerial economics|managerial economics]], is a form of [[w:cost accounting|cost accounting]]. It is a simplified model, useful for elementary instruction and for short-run decisions. ( Wikipedia )

=== Lesson 4 Master budgets and operational budgets ===
* A '''[[w:budget|budget]]''' is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. ( Wikipedia )

'''Budget types'''
* '''Sales budget''' – an estimate of future sales, often broken down into both units and currency. It is used to create company sales goals.
* '''[[w:Production budget|Production budget]]''' - an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product oriented companies.
* '''[[w:Capital budget|Capital budget]]''' - used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.
* '''Cash flow/cash budget''' – a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.
* '''Marketing budget''' – an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.
* '''Project budget''' – a prediction of the costs associated with a particular company project. These costs include labour, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used to establish a project budget.
* '''Revenue budget''' – consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies.
* '''Expenditure budget''' – includes spending data items. ( Wikipedia )

=== Lesson 5 Activity based costing ===

'''[[w:Activity based costing|Activity based costing]]''' ('''ABC''')  is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. This model assigns more [[w:indirect costs|indirect costs]] ([[w:overhead (business)|overhead]]) into [[w:direct costs|direct costs]] compared to conventional costing. ( Wikipedia )
:::CIMA (Chartered Institute of Management Accountants) defines ABC as 
:::: ''an approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs.'' 
::::Resources are assigned to activities, and activities to cost objects based on consumption estimates. The latter utilize cost drivers to attach activity costs to outputs. ( Wikipedia )

* '''[[w:Sensitivity analysis|Sensitivity analysis]]''' is the study of how the [[w:uncertainty|uncertainty]] in the output of a [[w:mathematical model|mathematical model]] or system (numerical or otherwise) can be apportioned to different sources of [[w:uncertainty|uncertainty]] in its inputs. ( Wikipedia )

=== Lesson 6 NO LESSON ===

=== Lesson 7 Short term business decisions ===
'''Short term business decisions'''

* In '''[[w:finance|finance]]''' or financial operations of borrowing and investing, what is considered 
:::*'''''long-term''''' is usually above 3 years, with 
:::*'''''medium-term''''' usually between 1 and 3 years and 
:::*'''''short-term''''' usually under 1 year. ( Wikipedia on [[w:Term (time)|Term]] )

Key terminology for short-term business decisions:
* In [[w:economics|economics]] and business decision-making, a '''[[w:sunk cost|sunk cost]]''' is a [[w:retrospective|retrospective]] (past) [[w:cost|cost]] that has already been incurred and cannot be recovered. ( Wikipedia )
* '''incremental analysis'''
* In [[w:Microeconomics|microeconomic theory]], the '''[[w:opportunity cost|opportunity cost]] of a choice''' is the [[w:value (economics)|value]] of the best alternative forgone, in a situation in which a choice needs to be made between several [[w:mutually exclusive|mutually exclusive]] alternatives given limited [[w:resource|resource]]s.
* '''avoidable [[w:cost|cost]]''' <- read this
* '''[[w:price taker|price taker]]''' vs. '''price setter'''
* '''Pricing''' is the process of determining what a company will receive in exchange for its product. Pricing factors are [[w:manufacturing cost]], market place, competition, market condition, [[w:brand|brand]], and quality of product.  Pricing is also a key variable in [[w:microeconomic|microeconomic]] price allocation theory. ( Wikipedia )
* '''[[w:pricing|pricing]]''' and '''costing'''
** '''[[w:target costing|target costing]]''' is a [[w:pricing|pricing]] method used by firms. ... A target cost is the maximum amount of cost that can be incurred on a product and with it the firm can still earn the required [[w:profit margin|profit margin]] from that product at a particular selling price. ( Wikipedia )
** '''[[w:cost-plus pricing|cost-plus pricing]]''' is a '''[[w:pricing strategies|pricing strategy]]''' companies use to maximize their rates of return. Firms may accomplish their objective of [[w:profit maximization|profit maximization]] by increasing their production until [[w:marginal revenue|marginal revenue]] equals [[w:marginal cost|marginal cost]] and then charging a price which is determined by the [[w:demand curve|demand curve]]. ( Wikipedia )
::: The MR == MC assumption is very unecological often. Assumes we are not sharing a limited planet ( jubo-jubo )
* '''Return on investment''' (%) = (Net profit / Investment) × 100 ( Wikipedia )
:::'''[[w:Return on investment|Return on investment]]''' ('''ROI''') is the concept of an [[w:investment|investment]] of some resource yielding a benefit to the investor. A high ROI means the investment gains compare favorably to investment cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ( Wikipedia )
* '''product mix considerations'''
* '''[[w:Outsourcing|Outsourcing]] (make or buy decision)''' is the [[w:contract|contract]]ing out of a business process to a third-party. ( Wikipedia )
:::The term "outsourcing" became popular in the United States near the turn of the 21st century. ( Wikipedia )
:::Outsourcing sometimes involves transferring employees and assets from one firm to another, but not always. ( Wikipedia )
* '''[[w:Total absorption costing|Total absorption costing]]''' (TAC) is a method of [[w:Accounting cost|Accounting cost]] which entails the full cost of manufacturing or providing a service. 
:::TAC includes not just the costs of materials and labour, but also of all manufacturing overheads (whether ‘fixed’ or ‘variable’).
:::The cost of each cost center can be direct or indirect cost. The direct cost can be easily identified with individual cost centers. whereas the indirect cost cant be easily identified with the cost center. 
:::The distribution of overhead among the departments is called '''[[w:apportionment|apportionment]]'''. ( Wikipedia )

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== Further reading ==
* [[Finance]]


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== Learn in Wikipedia ==
:* '''[[w:Category:Accounting terminology]]'''

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== Further learning ==

: '''[[w:analysis#Business|Business and investment analyses]]:'''
:# '''[[w:Financial statement analysis|Financial statement analysis]]''' – the analysis of the accounts and the economic prospects of a firm
:# '''[[w:Fundamental analysis|Fundamental analysis]]''' – a stock valuation method that uses financial analysis
:# '''[[w:Technical analysis]]'''  ( [[w:fi:Tekninen analyysi]] )  – the study of price action in securities markets in order to forecast future prices
:# '''[[W:Business analysis|Business analysis]]''' – involves identifying the needs and determining the solutions to business problems
:# '''[[w:Price analysis|Price analysis]]''' – involves the breakdown of a price to a unit figure
:# '''[[w:Market analysis|Market analysis]]''' – consists of suppliers and customers, and price is determined by the interaction of '''[[w:supply and demand]]''' ( Wikipedia )

:build upon understanding of accounting and business math terminology and procedures.
= Navboxen =
== Accounting software ==
{{Accounting software}}

== Financial ratios navbox ==
{{Financial ratios}}