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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 that’s 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:
Cash Equipment
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 department’s 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 asset’s 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 period’s 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 establishment’s 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