COURSE : BPQ1213 MANAGEMENT ACCOUNTING

NAME: NURSYAIDATUL SARAH BINTI HANAPI

MATRIC NUMBER: PC21032

DATE OF SUBMISSION: 18 OCTOBER 2021

FIND DEFINITIONS AND EXAMPLES OF BASIC ACCOUNT TERMS.

1. Gross profit
- Gross profit is obtained when sales are deducted from costs of purchase. Sales
higher than the cost of sales will result in gross profit. While if the price of sales is
higher than the sales, it will result in an awful loss. The gross profit earned
indicates the operating efficiency of the business.

2. Net profit
- The net profit earned from the business will be added to the initial capital as the
net profit will add to the owner’s equity. Otherwise, the net loss incurred by the
company will be deducted from the initial capital.

3. Interest
- Interest is the cost of funds loaned to an entity by a lender. Interest usually
expressed as a percentage of the principal on an annual basis. Interest can be
calculated as simple interest or compound interest, which results in a higher return
to the investor. Depending on the tax laws of the applicable government entity,
interest expense is tax-deductible for a borrower. The exciting concept can also
refer to the equity ownership by an investor in a business entity. An investor has a
controlling interest in a business with ownership of any amount exceeding 50% of
its outstanding common stock.

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4. Cost
- Cost is simply the expenditure incurred or the cash or cash equivalent incurred for
producing goods and services. There are various elements of product costs.
Examples of product costs include material cost, labour cost and overhead.

5. Direct cost
- Direct costs are costs that can be directly identified to cost objects. Direct costs
such as direct material, direct labour and direct expenses can be directly traced to
cost objects.

6. Indirect cost
- Indirect costs are costs that cannot be directly identified to the cost objects. Like
direct cost, indirect costs consist of indirect materials, indirect labour, and indirect
expenses, which cannot be identified explicitly to individual cost objects.

7. Assets
- The asset is property owned by the business and used to carry on the business. An
asset can be tangible and intangible. Examples of tangible assets are premises and
machines. At the same time, the example of an intangible asset is copyright.

- Examples of tangible assets:

- Examples of intangible asset :

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8. Non-current asset
- The non-current asset is purchased not for resale but used to help run a business—
for example, vehicles, furniture and machines.

-example for non-current asset:

9. Current asset
- Current asset are assets that can be converted into cash in the short period. For
examples debtor and stock. Customers who owe the business are also assets that
are classified as current assets.

10. Liabilities
- liabilities is the responsibility or debt of the business to an outside party. Debt
exists because of buying stock from a supplier or obtaining a loan from the bank.

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11. Current liabilities
- Business debts need to be paid off in the short term, i.e. less than one year of
accounting—for example, creditors, bank overdraft and previous proceeds.

- An example for current liabilities:

12. Non-current liabilities

- Business debts need to be repaid in an extended period, usually more than one
accounting period (1 year). Example for non-current liabilities is loan bank and
mortgages.

- Examples for non-current liabilities:

13. Bonds and coupons (B&C)

- A bond is a form of debt investment and is considered fixed-income security. An
investor, whether an individual, company, municipality or government, loans
money to an entity with the promise of receiving their money back plus interest.
The “coupon” is the annual interest rate paid on a bond.

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14. Debit
- An accounting entry is either an increase in assets or a decrease in liabilities on a
company's balance sheet.

15. Credit
- An accounting entry may either decrease assets or increase liabilities and equity
on the company's balance sheet, depending on the transaction. When using the
double-entry accounting method, there will be two recorded entries for every
transaction: A credit and a debit.

16. Cost of Goods Sold (COGS)

- Cost of Goods Sold is the direct expenses related to producing the goods sold by a
business. The formula for calculating this will depend on what is being produced.
However, as an example, this may include the raw materials (parts) cost and the
amount of employee labour used in production. For external profit reporting, costs
are classified into two types: product costs and period costs. As explained
previously, product costs eventually become an expense when the goods are sold.
However, not all finished good produced and purchased are sold in the same
period. Any finished goods unsold during a period are treated as good finished
stock.

17. Cost of Goods Manufactured (COGM)

- The cost of goods manufactured represents the total product costs for
manufacturing organizations. In determining the cost of goods manufactured,
there need to consider two different types of stock valuation. Firstly, their need to
recognize that not all raw materials purchased during a period will be input into
production. Secondly, at the end of each period, the unit started on but not
finished has to be considered. These are referred to as work-in-process stock.

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18. Fixed costs
- Fixed costs are those costs that remain unchanged regardless of the level of
activity or the outcome of a decision under consideration. Examples of fixed costs
include supervisor' salaries, factory rent, depreciation of plant and machinery and
equipment leasing charges. Within the relevant range concept, most fixed costs
can be considered unavoidable and therefore not relevant for decision purposes.

19. Variable costs

- Variable costs are costs that vary with production output. In the short term,
variable costs change in direct proportion to the level of production output. That
means that total variable cost increases when additional units are produced and
decreases when fewer units are produced. Although total variable cost increases
proportionately with production output, unit variable cost is assumed to remain
constant.

20. Accounts payable

- The amount of money a company owes creditors (for example, suppliers.) in
return for goods or services they have delivered.

21. Accounts receivable

- Accounts receivable is number of money customers or clients owes to a business
after goods or services have been delivered or used.

22. Owners’ equity

- Owner's equity is a business debt to its owner for lending money as capital to start
a business. In other words, it is the owner's right to claim his business asset.

23. Outcome
- Business income is money received or money to be received by the business on a
future date from the sale of merchandise or services offered.

24. Cash flow

- Cash flow is a snapshot of the timing and amount of cash collection spent on the
operation, investment and financing.

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25. Income statement
- Income statements, also known as statements of revenue and expense or profit and
loss statements, income statements provide information about businesses’
expenses and revenue in specific periods of time. Along with balance sheets and
statements of cash flows, income statements offer insight into companies’
financial health.

26. Inventory
- Inventory represents the goods their small business has for sale or in storage.
Their small business's inventory includes raw materials used to create finished
products, items in the production process, and finished goods.

- An examples of raw material is wood which will be used to make paper, furnature
etc. for sale to customers.

27. Overhead
- Overhead refers to the ongoing business expenses not directly attributed to
creating a product or service. Companies must understand the overhead cost to
figure out how much they need to charge for their goods or services and make a
profit. In other words, overhead is any expense incurred to support the business.

28. Accounts Receivable

- Accounts receivable is the balance of money due to a firm for goods or services
delivered or used. This money is typically collected after a few weeks and
recorded as an asset on their balance sheet.

29. Raw material

- Raw materials are materials or substances used in the primary production or
manufacturing of goods. Raw materials are commodities that are bought and sold
on commodities exchanges worldwide. Most raw materials are highly
standardized and so can serve as inputs into multiple products.

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30. Debt
- Debt is defined as an amount owed for funds borrowed. Many corporations and
individuals use debt to make large purchases that they could not afford under
normal circumstances.