Kamonphan Teeraphabpitag

Professor Markoff
Fundamentals of Accounting
19 January 2015

FUNDAMENTALS OF ACCOUNTING
Professor Steve Markoff
PREPARATION ASSIGNMENT FOR CLASS #1
A) Read the Course Syllabus carefully. We will be reviewing the MOST IMPORTANT PARTS of this in class.
Come prepared to ask anything that I might not cover.
B) Come to class Monday prepared to discuss the following. As always, the best way to demonstrate
preparation for class is by handing in the assigned work. (Hint: I would like you to hand in written answers to
these). They should be done on word-processing hand written work will NOT be accepted.
1. You just got done spending 3 months of your life taking a course called Fundamentals of Financial
Accounting. In your own words, what was the course all about? What was the purpose? Whats
financial accounting?
Fundamentals of Financial accounting is a systematical way to prepare the financial
statements of an organization. They reports information about an entitys performance (i.e.
profit or loss) to external users such as investors, customers, suppliers, bankers and
government agencies. Those financial statement are organized for decision making, which will
affect the businesss future.
2. What (are/is) Generally Accepted Accounting Principles (GAAP)? Why are they needed?
Generally Accepted Accounting Principles is rule and standards to be followed in
preparing and reporting financial statements. GAAP is needed because accountants use it as a
language to communicate information about the financial condition of a company.
3. Are ethics important in financial accounting? Yes or no and WHY. Give a SPECIFIC EXAMPLE of how
this area is important to YOU as a member of society?
Yes, ethics are very important in financial accounting. Without ethics, companies will pay
off the accountant to get a good report and after that no one will trust what is in the financial
statements. The examples are Enron and WorldCom. Back in 2000, Enron hid debts and losses.
They lied to their employees, their stockholders and investors about its company value and
convinced people to buy stocks. Enron wouldnt success if they didnt get help from an
accounting firm named Arthur Anderson. After they get caught, it brought such negative
consequences to the country such as employees lost their job, investors lost their money in the
few days and people lost their trust in American economic system.
4. Whats managerial accounting?

Managerial accounting is the provision of accounting information for a companys

internal users. (Basically, they provided information for internal users such as managers,
executives and workers).

5. Do you think that something similar to GAAP is needed for Managerial Accounting? Why or why not?
No, because Managerial Accounting is not required to follow accounting standard since
theyre using for internal purpose. It designed to help managers plan for the future and make
decisions for the company.
6. Whats inventory? How was that accounted for in Financial Accounting? WHY was that the correct
treatment? For a merchandiser, what types of things were included in inventory?
Inventory is a complete list of items such as property, goods in stock, or the contents of a
building and for retailers, they have only single inventory: cost is purchase price.
7. What are sales? What are revenues? Are they different? If so, how?
Sales and Revenues are different, sales defines as the economic price paid by customers
but revenue is the total amount of money taken in by a business during a set period of time. (Total
income)
8. What is meant by cost of goods sold?
Cost of goods sold represents the cost of goods that were sold during the period by a
company.
9. NOW ASSUME we were a manufacturer instead of a retailer how would your answers #6-#8 be
different? WHY?
#6 Manufacturer has more than one form of inventory, depending on stage of development
for example raw materials, work in process and finished goods. Because Manufacturer produced
goods and retailer didnt (they only sells goods to consumer).
#8 Cost of goods sold is the cost assigned to units either completed or still in the process of
being completed at the end of an accounting period.
10. What is managerial accounting and how does it differ from financial accounting?
Managerial accounting focuses on internal usersmanagers, executives and any other
personnel within organization who use accounting information to make important decisions for
the future. While managerial accounting focuses on reporting to inside users, financial
accounting focuses on reporting to outside users and they prepared historical information with
U.S. GAAP to summarize overall company results.
11. In your opinion, what are the two most significant differences between the two disciplines? WHY are
these so important?

1. Target users: Managerial accounting has its focus on providing information within the
company, but financial accounting has its focus on the financial statements which are
distributed to stockholders, lenders, financial analysts, and others outside of the
company.
2. Time orientation: Courses in financial accounting reporting the results of a
corporation's past transactions on its balance sheet, income statement, statement of
cash flows, and statement of changes in stockholders' equity. But Managerial
accounting strongly emphasizes providing information about future events.

12. What are the three major areas of management responsibility (information needs) that managerial
accounting addresses? Say we have a company that manufactures and sells chairs. Give an example
of each of these areas?
1) To provide information for planning the organizations actions: a firm may set the
objective of increasing its short term and long term profitability by improving by the
overall quality of its products.
2) To provide information for controlling the organizations actions: comparing actual
performance against standards.
3) To provide information for making effective decisions: Supply information that
facilitates decision making.
13. Explain the term product costing? What do you think it means to cost a product? WHY do you
think managers need this? WHY do accountants need this?
Product costing is the costs used to create a product such as raw material purchases,
worker wages, productions transportation costs. Managers need product costing so they can
use these overall costs to plan a variety of business strategies, including setting product prices.
Accountants prepare product costs so they can serve two purposes: decision making by
managers and external report.

14. Are ethics important in managerial accounting? Yes or no and WHY? Give a specific example of
how ethics might apply.
Yes ethics are important in managerial accounting because business owners and
decision makers rely upon the accountants findings and reports for various things. If
accountants are unethical, itll bring negative consequences to the company. Ethical standards
ensure that information is reported without bias whether the information is positive or negative.
Since managerial accountants have access to sensitive business information, they shouldnt
disclosure of use internal information for personal gain.
15. What is meant by the value chain? Why is it important?

Value chain is a set of activities that a firm operating in a specific industry performs in
order to deliver a product or service for the market. It begins with the processing of raw
materials to the finished product being sold to the customer. Its important because listing each
step determines which of these steps add value and it will help the company make important
decision for example whether it should outsource or integrate into different stages of
production to enhance value or improve the process.
Design > Develop > Produce > Market > Deliver > Service