The most important points or concepts in chapter two are how to prepare an INCOME STATEMENT and a BALANCE SHEET. My reason is they are the most important in understanding the financials of a business. They give you a picture of the performance of your business. A practical example of this is as follows:
Company revenue-expenses= net income= 6000-4700=1300 this 1300 net income must also be shown on the balance sheet as equity. (Garrison, 2010)
The most important point or concept in chapter three is JOB ORDER COSTING. My reason is allows one to distinguish overhead cost versus direct labor cost. Example is the cost of service in a law firm. The time expended on clients by an attorney is direct labor and the legal documents preparation, and secretaries , legal aid, etc can be categorize as overhead. (Garrison, 2010)
The most important point or concept in chapter five is the behavior of FIXED and VARIABLE COST. An example of fixed cost would be rent and taxes paid to utilize a facility for doing business. This cost is constant and can only decrease on a per unit basis as the level of activity increases. In contrast variable cost reacts to some activity occurring. This activity is what drives the cost up or down. (Garrison, 2010)
The most important point or concept in chapter six is determining the CONTRIBUTION MARGIN RATIO. Determining the contribution ratio allows one to see the impact of fixed expenses and sales on the profit. Practi...
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...rall cash balance. An example could be the household budget. For instance your inflow of cash would be your paycheck and the out flow that affects overall cash balance in your check book ledger could be anything from utilities to mortgage. The picture allows you to know whether you will be able to meet other financial obligations. (Garrison, 2010)
The most important concept and point in chapter 16 are ratios and their effect. Ratios are not a cure all but they do give an organization the ability to take a quick glance at their ability to meet certain financial obligations. For example a ratio analysis can give a bank that is making a loan to you a clear example if you have enough liquid or disposable income to repay the loan. (Garrison, 2010)
Garrison, R. H. (2010). Managerial Accounting (13th edition ed.). Ney York, New York: McGraw-Hill Irwin.
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