Managerial Accounting

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Managerial Accounting

• Structure of Financial Statements

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Topic Coverage

1. Consolidated balance sheet
2. Consolidated income statement
3. Consolidated cash flow statement
4. Monthly cash flow statement and LOC needs
5. Linkages between financial statements
6. Self test of statement linkage understanding

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Annual Consolidated Balance Sheet
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Basic Structure of the Balance Sheet
Assets Liabilities and Net Worth Current
assets Current liabilities plus Intermediate
assets plus Intermediate liabilities plus Long
term assets plus long term liabilities plus
Net worth equals Total assets equals Total
liabilities and net worth
Often referred to as equity
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Current Asset Segment
Current assets Cash _________ Savings and
time deposits _________ Marketable
securities _________ Accounts receivable _______
__ Short term notes receivable _________ Unsold
production inventories _________ Supplies on
hand _________ Prepaid expenses _________ Other
Total current assets _________
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Non-Current Asset Segment
Intermediate assets Intermediate notes
receivable __________ Equipment __________ Machi
nery and motor vehicles __________ Other
intermediate assets Total intermediate
assets __________ Long term assets Long term
notes receivable __________ Buildings and other
structures __________ Land __________ Other
long term assets Total long term
assets __________
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Current Liabilities Segment
Current liabilities Accounts payable __________
Short term notes payable __________ Current
payment on term loans __________ Accrued
interest __________ Accrued taxes __________ A
ccrued rents and leases __________ Contingent
tax on current assets Total current
liabilities __________
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Non-Current Liabilities Segment
Intermediate liabilities Intermediate notes less
current payment __________ Sales contract less
current payment __________ Contingent tax in
intermediate assets __________ Other Total
intermediate liabilities __________ Long term
liabilities Mortgages less current
payments __________ Land contracts less current
payment __________ Contingent liability on long
term assets __________ Other Total long term
liabilities __________
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Annual Consolidated Income Statement
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Basic Structure of Income Statement
Cash receipts from product
sales Minus Operating expenses Equals Net cash
income from operations Plus Gain (loss) on
sale of intermediate and long term assets Plus
Cash subsidies received Equals Income (loss)
before taxes and extraordinary items Minus
Provision for income taxes Equals Income before
extraordinary items Plus Extraordinary
items Equals Net cash income
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Annual and MonthlyCash Flow Statements
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Basic Structure of Cash Flow Statement
Cash available Minus Cash
required Equals Cash available less cash
required Plus Savings withdrawals Equals Cash
position Plus Net borrowing Minus Other uses
of cash Minus Additions to savings Equals Ending
cash balance
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Cash Available Segment
Cash available Beginning cash balance __________
Cash receipts from product sales __________ Net
gain on sale of assets __________ Cash subsidies
received __________ Other cash available
Total cash available __________
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Cash Required Segment
Cash required Cash operating expenses _________
_ Income and property tax payments __________ Ins
urance policy payments __________ Current
payment on operating loans Current payment on
intermediate loans __________ Current payment on
long term loans __________ Capital
expenditures __________ Other cash required
Total cash required __________
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Annual Ending Cash Balance
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Monthly Cash Available
January February March
.. Cash available Beginning cash
balance ______ ______ ______ Cash receipts from
product sales ______ ______ ______ Net gain on
sale of assets ______ ______ ______ Cash
subsidies received ______ ______ ______ Other
cash available Total cash available ______ ___
___ ______
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Monthly Cash Required
January February March .. Cash
required Cash operating expenses ______
______ ______ Income and property tax
payments ______ ______ ______
Insurance policy payments ______
______ ______ Current payment on operating
loans ______ ______ ______ Current
payment on intermediate loans ______ ______
______ Current payment on long term loans
______ ______ ______ Capital
expenditures ______ ______ ______
Other cash required Total cash required
______ ______ ______
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Monthly Cash Position
January February March ..
Cash available ______ ______ ______ Cash
required ______ ______ ______ Savings
withdrawal Cash position ______ ______
______
Indicates monthly cash flow surpluses or deficits
before borrowing on a Line of Credit or LOC
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Monthly and Annual Balances
Ending cash balance
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Financial Statement Linkages
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Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total Liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
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Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
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Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
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Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
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Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
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Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
27
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
28
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
29
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
30
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
31
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total Liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
32
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total Liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
33
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total Liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
34
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total Liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
35
Interrelationships Between Financial Statements
2007 Cash Flow Statement Sources of
cash Beginning cash balance Cash receipts from
product sales Other sources of cash Total
sources of cash Uses of cash Cash operating
expenses Interest payments Principal
payments Capital expenditures Withdrawals of
cash Other selected uses of cash Ending cash
balance Total uses of cash Basic
structure Total sources total uses
2007 Income Statement Cash receipts from product
sales Other income Total income Cash
operating expenses Interest payments Other cash
expenses Depreciation Total expenses Net
income from operations Allowance for taxes Net
income Basic structure EBIT total income
total expenses interest payments
Balance Sheet 12/31/07 Ending cash balance Other
current assets Total current assets Machinery
and equipment Buildings and improvements Land
Total assets Accounts payable Current loan
payment Allowance for taxes Other current
liabilities Total current liabilities Remainin
g balance on loans Total liabilities Equity B
asic Structure Equity total assets
total Liabilities ?Equity Retained net Income
asset revaluations
Other statements and schedules Statement of
Change in Owner Equity Depreciable asset schedules
36
Sample Question
What is this firms net income and equity?
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Sample Question
Current assets
Current liabilities
What is this firms net income and equity?
38
Sample Question
Total assets
Total liabilities
What is this firms net income and equity?
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Sample Question
Variable expenses
Fixed expenses
What is this firms net income and equity?
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Calculation of equity Total current assets
10,000 11,000 22,000 43,000 Total current
liabilities 1,200 7,500 7,213
15,913 Total assets total current assets
76,500 14,000 99,500 233,000 Total
liabilities total current liabilities 29,500
1,200 46,613 Equity 233,000 46,613
186,387
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Calculation of equity Total current assets
10,000 11,000 22,000 43,000 Total current
liabilities 1,200 7,500 7,213
15,913 Total assets total current assets
76,500 14,000 99,500 233,000 Total
liabilities total current liabilities 29,500
1,200 46,613 Equity 233,000 46,613
186,387 Calculation of net income Cash
receipts from product sales 73,000 Total
operating expenses 51,200 2,500 7,400
61,100 Net income from operations 73,000
61,100 11,900 Net income before taxes
11,900 Net income 11,900 7,213 4,687 Net
cash income 4,687 7,400 12,087