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All you wanted to know about Accounting and More.

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Presentation on theme: "All you wanted to know about Accounting and More."— Presentation transcript:

1 All you wanted to know about Accounting and More

2 There Are Two Sides to Every Transaction Story In the world of business, you have to give something to get something. Accountants recognize this, and thats why every transaction has both a debit side and a credit side.

3 Understanding T-accounts Debits- Recorded on the Left side of the T-account Credits- Recorded on the Right side of the T-account ACCOUNT NAME DEBITS CREDITS Example: A manager buys an oven for $8,500 cash. The transaction will be recorded as follows: CashEquipment 8,500 8,500

4 The Accounting Cycle Transactions are recorded throughout the month. Trial balance is prepared. Necessary adjustments are made. Information is transferred to the balance sheet and income statement. Accounts are closed, and a new cycle begins.

5 Cost of Sales Formula Opening Inventory (Food on hand; first day of the period) + Purchases - Closing Inventory (Food on hand, last day of the period) = Cost of Sales (or food cost)

6 DIRECT COSTS Definition: Expenses that are the responsibility of a specific department Examples Include: food purchases, supplies, and wages INDIRECT COSTS Definition: Expenses that are not easily charged to any one specific department; usually distributed according to each departments percent of total revenue Examples Include: advertising, utilities, administrative costs, building maintenance, and energy costs

7 Straight-line Depreciation Method Distributes the coast of an asset equally over each year of its useful life. (Cost of asset – Trade-in Value) Useful life of asset (in years) Your Turn: A rotating oven with a purchase price of $9,200 will be worth $400 in 4 years. How much will the oven depreciate monthly using the straight-line method?

8 Answer: $183 (rounded)

9 Declining Balance Depreciation Method The depreciation rate is greater than the straight-line rate, and no trade-in value is used this method will give the business a lower taxable income in the earlier years.

10 Sum-of-the Years Digits Depreciation Method -Depreciation is accelerated by using an assets estimated life to determine the rate.

11 Just the Facts New equipment purchased: cash register system Initial cost: $14,750 Estimated Life: 6 Years Trade-in value in 6 years: $1,250 Denominator to be used: 21 Numerators to be used: 6,5,4,3,2, and 1 Fractions to be used each year: 6/21,5/21,4/21,3/21,2/21,1/21 Depreciation Year 1:____________ Year 2:____________ Year 3:____________ Year 4:____________ Year 5:____________ Year 6:____________

12 Answers Year 1: $3,857 Year 2: $3,214 Year 3: $2,571 Year 4: $1,929 Year 5: $1,286 Year 6: $ 643

13 Units of Production Depreciation Method Used to determine depreciation values for those assets with specific units of production (Cost – Trade-in value) Estimated units of production over useful life

14 An Income Statement Shows: How a business is doing in terms of total sales and expenses. How one periods sales and expenses compare to those of other periods

15 Costs listed on a Typical Income Statement Cost of Sales Controllable expenses -Salaries and wages -Employee benefits -Direct operating expenses -Marketing -Energy and utility services -Administrative and general costs -Repairs and general costs

16 Costs Listed on a Typical Income Statement cont. Occupancy costs Interest expense Depreciation Overhead Income taxes

17 A Balance Sheet: Demonstrates a foodservice establishments ability to pay its debts. Shows what portion of profits have been retained. Helps investors estimate the level of risk for future investments.

18 Capital Item Definition- items such as land, buildings, and equipment that have a life expectancy of at least three years. Examples - Furniture - Fixture - Piece of equipment

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