Tiếng anh chuyên ngành kế toán part 24 ppsx

For instance, sales greater than expected would leave a credit variance.” Standard Variable Costs “The second exception involves so-called standard cost systems.. “The existence of a cre

enter a budgeted number in the ledgers in anticipation of an actual number For instance, city governments will enter budgeted revenues as a debit on the left side of the ledger account Then when the sales are actually made, they will enter the actual revenues as a credit on the right column of the ledger account The effect is that at the end of the year, only variances are left in accounts For instance, sales greater than expected would leave a credit variance.”

Standard Variable Costs

“The second exception involves so-called standard cost systems In a typical implementation, the standard cost of a product, not the actual cost incurred, is entered into the work-in-process account The difference between the stan-dard cost and the actual cost creates a variance—in the actual accounts For example, in the case of paper used, the inventory account would be charged with the standard $4.00 for every ream used but only $3.50 would be paid to the supplier The difference of $0.50 would be shown in a separate variance account in the books of the company

“The existence of a credit variance in the accounts indicates that the bud-geted unit cost exceeds the actual unit cost, that is, there is a favorable vari-ance Were the variance a debit, it would be unfavorable

“By the end of the job, after they have produced 1,200 reams, they will show in their accounts a variance of $0.50 per ream on all their variable costs times 1,200 reams, or a credit of $600 This is the same favorable $600 variance that we saw in Exhibit 7.4 when we subtracted the actual cost from the f lexible budget Standard cost systems, in other words, track the f lexible budget

“Each of these variances is identical to the variances computed above; each can be stated in percentage terms to indicate their relative size, that is, material costs are down 12.5%, labor costs are even, and variable overhead costs are down 16.67% The key point to realize is that variances generated by

a standard cost system are identical to those generated by a budgetary control system—once one removes the volume effect.”

Standard Fixed Costs

“The parallels between standard cost systems and budgetary control systems

do not extend to fixed costs, unfortunately The reason lies in the way fixed costs are applied to products In a standard cost system, a fixed overhead rate

is established at the start of a period by dividing the budgeted fixed overhead

by the budgeted volume In our case, the predetermined fixed overhead rate was $4,000 divided by 1,000 reams, which equals $4.00 per ream The pre-determined fixed overhead rate is therefore based on the static budget

“Fixed overhead is then applied to goods as they are produced by multi-plying the number of reams produced by this overhead rate In this case, one charges $4.00 of fixed overhead to each of the 1,200 reams produced The

re-sult is $4,800, which is known as the applied overhead The problem is that this

Measuring Productivity 219

is neither actual nor budgeted It is really a miscomputed number If the num-ber of actual reams had been known in advance, one should have divided the

$4,000 by 1,200 reams, giving $3.33 per ream In other words, one should have used the f lexible budget Using that rate would have led to the application of

$4,000 of fixed overhead exactly The difference between the budgeted amount of $4,000 and the amount actually applied, namely $800, is said to have

been over-applied—one might say over-applied in error A correcting entry is

typically made in the accounting system to fix this error

“The accounts of the company record that it actually had fixed overhead costs of $4,680 and applied overhead of $4,800 This generates a credit vari-ance of $120 in the accounts Regardless of what appears in the accounts, the spending variance that should be reported is an unfavorable $680—not a favor-able $120 No matter the confusions in the ledger, the only variance that one is interested in is:

“The difference between the variance produced by a standard cost system and the variance wanted for budgetary control purposes is:

“In short, the error in the fixed overhead variance appearing in a standard cost system is due to volume changing from 1,000 units to 1,200 units The result is

a variance in the standard cost system that is useless for control purposes

“The budgeted overhead will be equal to the applied overhead only when the actual volume equals the budgeted volume, which rarely happens More commonly, a fixed cost variance is found in the ledger, but this is of no interest for budgetary control For control purposes, you should compute the spending variance directly and simply ignore the net overhead variance derived in the books.”

“Now I see why you ignored the fixed overhead when doing the variances originally,” said Tom “Let’s hope that my management understands this as well

as you seem to do!”

BUDGETARY CONTROL R EVISITED

“Budgetary control, as we noted at the outset,” Jane continued, “consists of comparing actual results with budget estimates When doing this one is advised

to distinguish between revenues and costs that vary with volume and those that are fixed with respect to volume changes A revised budget, adjusted for the actual volumes rather than the predicted volumes, yields a f lexible budget as opposed to the original or static budget

Budgeted Overhead Applied Overhead− = −

$ , $ ,

$

4 000 4 800

4 1 000 4 1 200

4 200 Applied Overhead Budgeted Overhead− =$ ,4 680−$ ,4 000

“Since the static and the f lexible budgets for fixed costs are identical, the fixed-cost spending variance is simply the difference between the actual and the original budget The spending index for fixed costs is their quotient

“In the case of variable costs and revenues, a few simple rules emerge The ratio between the f lexible and the static budgets indicates the difference

in the quantities expected and the quantities actually experienced The ratio between the actual results and the f lexible budget indicates the change in costs

or revenues that can be attributed to changes in unit costs or selling prices

“In the case of multiple outputs or multiple inputs, the quantity indices can be further refined They break into at least two indices The first reveals the effect of changing mixes of either outputs or inputs The second reveals the effect of changing the overall volume The mix variance may be computed directly or simply by dividing the quantity index by the volume index In the case of variable costs, it is usually possible to draw out another index indicating the total yield, that is, the amount of input required to produce a given amount

of output

“All these indices can be computed using an accounting system that col-lects only actual costs and comparing these in a spreadsheet with the budgeted costs Alternatively, they may be derived by keeping a standard cost system The variances that emerge as one enters standard costs into work-in-process and credits the corresponding asset or liability account at actual are identical

to those derived from a f lexible budgeting control system The one exception

to this identity is fixed costs, but the difference here is easily reconciled

“In short, budgetary control analysis provides one vehicle for controlling

a business The budget ref lects, ideally, a company’s strategies and objectives

As actual results emerge they are compared with the budget to see to what ex-tent the enterprise has met its goals and productivity targets Any difference encountered can be decomposed to determine whether it was due to a change

in usage or a change in price Where inputs or outputs are substitutable, one can also examine the changing mix for further insight into how one achieved one’s goals

“In each case, the index derived is neither good nor bad It simply indi-cates a change As noted earlier, the same rise in sales may be a matter for con-gratulation when markets are declining and a matter for concern when markets are expanding faster than one’s sales All that the index does is to point one to where still more information must be gathered.”

FOR FURTHER R EADING

Anthony, Robert N., David F Hawkins, and Kenneth A Merchant, Accounting: Text

and Cases, 10th ed (New York: Irwin/McGraw-Hill, 1999), esp chs 19 and 20.

Davidson, Sidney, and Roman L Weil, Handbook of Cost Accounting (New York:

McGraw-Hill, 1978), esp chs 15 and 16

Measuring Productivity 221

Ferris, Kenneth R., and J Leslie Livingstone, eds., Management Planning and

Control: The Behavioral Foundations (Columbus, OH: Century VII, 1989), esp.

chs 3, 8, and 9

Horngren, Charles T., Gary L Sundem, and William O Stratton, Introduction

to Management Accounting, 11th ed (Englewood Cliffs, NJ: Prentice-Hall,

1999), esp chs 7 and 8

Kaplan, Robert S., and Anthony A Atkinson, Advanced Management Accounting, 3rd

ed (Englewood Cliffs, NJ: Prentice-Hall, 1998), esp chs 9 and 10

Maher, Michael W., Clyde Stickney, Roman L Weil, and Sidney Davidson,

Manager-ial Accounting (Fort Worth, TX: Harcourt College Publishers, 1999), esp

chs 10 and 11

Shank, J.K., and N.C Churchill, “ Variance Analysis: A Management-Oriented

Ap-proach,” The Accounting Review, 52 (Oct 1977): 950–957.

Welsch, Glenn A., Ronald W Hilton, and Paul N Gordon, Budgeting: Profit Planning

and Control, 5th ed (Englewood Cliffs, NJ: Prentice-Hall, 1988), esp ch 16.

INTER NET LINKS

Internet links and Web sites have an uncomfortable way of disappearing The reader is advised, therefore, to do her or his own search under key words such as “variance analysis” and “standard costing.” This will turn up sites such

as Conoco’s and Corn Products International’s discussions of their results at www.conoco.com and www.cornproducts.com Both make excellent use of variance analysis The U.S Army Cost and Economic Analysis Center at www.ceac.army.mil/web/default.html provides a good discussion of standards, while the Association of Accounting Technicians, at www.aat.co.uk, provides

an excellent forum for questions and answers on this and many other accounting topics The Institute of Management Accountants maintains a site at www imanet.org that provides all kinds of managerial accounting resources Finally, the reader is invited to visit my own site, at www.smu.edu/∼mvanbred, with its many links and notes on both financial and managerial accounting

NOTES

1 R Kaplan and D Norton, “The Balanced Scorecard—Measures That Drive

Performance,” Harvard Business Review, 70 (Jan.–Feb 1992): 71–79.

2 National Association of Accountants, Standard Costs and Variance Analysis

(New York: NAA, 1974): 9

3 Whyte, W.F., ed., Money and Motivation: An Analysis of Incentives in

Indus-try (New York: Harper & Row, 1955).

4 Cooper, Robin, and Robert S Kaplan, “How Cost Accounting Distorts

Prod-uct Costs,” Management Accounting, 69 (Apr 1988): 20–27.

PART TWO

PLANNING AND FORECASTING

8 CHOOSING A BUSINESS FORM

Richard P Mandel

THE CONSULTING FI RM

Jennifer, Jean, and George had earned their graduate business degrees to-gether and had paid their dues in middle management positions in various large corporations Despite their different employers, the three had maintained their friendship and were now ready to realize their dream of starting a con-sulting practice Their projections showed modest concon-sulting revenue in the short term offset by expenditures for supplies, a secretary, a small library, per-sonal computers, and similar necessities Although each expected to clear no more than perhaps $25,000 for his or her efforts in their first year in business, they shared high hopes for future growth and success Besides, it would be a great pleasure to run their own company and have sole charge of their respec-tive fates

THE SOFTWAR E ENTR EPR ENEUR

At approximately the same time that Jennifer, Jean, and George were hatching their plans for entrepreneurial independence, Phil was cashing a seven-figure check for his share of the proceeds from the sale of the computer software firm he had founded seven years ago with four of his friends Rather than rest

on his laurels, however, Phil saw this as an opportunity to capitalize on a com-plex piece of software he had developed in college Although Phil was con-vinced that there would be an extensive market for his software, there was

much work to be done before it could be brought to market The software had

to be converted from a mainframe operating system to the various popular mi-crocomputer systems In addition, there was much marketing to be done prior

to its release Phil anticipated that he would probably spend over $300,000 on programmers and salespeople before the first dollar of royalties would appear But he was prepared to make that investment himself, in anticipation of retain-ing all the eventual profit

THE HOTEL VENTUR E

Bruce and Erika were not nearly as interested in high technology Directly fol-lowing their graduation from business school, they were planning to construct and operate a resort hotel near a popular ski area They had chosen as their location a beautiful parcel of land in Colorado owned by their third partner, Michael Rich in ideas and enthusiasm, the three lacked funds They were cer-tain, however, that they could attract investors to their enterprise The loca-tion, they were sure, would virtually sell itself

THE PURPOSE OF THIS CHAPTER

Each of these three groups of entrepreneurs would soon be faced with what might well be the most important decision of the initial years of their busi-nesses: which of the various legal business forms to choose for the operation of their enterprises It is the purpose of this chapter to describe, compare, and contrast the most popular of these forms in the hope that the reader will then

be able to make such choices intelligently and effectively After discussing the various business forms, we will revisit our entrepreneurs and analyze their choices

BUSINESS FORMS

Two of the most popular business forms could be described as the default forms because the law will deem a business to be operating under one of these forms unless it makes an affirmative choice otherwise The first of these forms

is the sole proprietorship Unless he or she has actively chosen another form, the individual operating his or her own business is considered to be a sole pro-prietor Two or more persons operating a business together are considered a partnership (or general partnership), unless they have elected otherwise Both

of these forms share the characteristic that for all intents and purposes they are not entities separate from their owners Every act taken or obligation sumed as a sole proprietorship or partnership is an act taken or obligation as-sumed by the business owners as individuals

Choosing a Business Form 227

Many of the rules applicable to the operation of partnerships are set forth

in the Uniform Partnership Act, which has been adopted in one form or another

by 49 states That Act defines a partnership as “an association of two or more persons to carry on as co-owners a business for profit.” Notice that the defini-tion does not require that the individuals agree to be partners Although most partnerships can point to an agreement between the partners (whether written

or oral), the Act applies the rules of partnership to any group of two or more persons whose actions fulfill the definition Thus, the U.S Circuit Court of Ap-peals for the District of Columbia, in a rather extreme case, held, over the de-fendant’s strenuous objections, that she was a partner in her husband’s burglary

“business” (for which she kept the books and upon whose proceeds she lived), even though she denied knowing what her husband was doing at nights As a re-sult of this status, she was held personally liable for damages to the wife of a burglary victim her husband had murdered during a botched theft

In contrast, a corporation is a legal entity separate from the legal identities

of its owners, the shareholders In the words James Thurber used to describe a unicorn, the corporation “is a mythical beast,” created by the state at the request

of one or more business promoters upon the filing of a form and the payment

of the requisite, modest fee Thereupon, in the eyes of the law, the corpora-tion becomes for most purposes a “person” with its own federal identificacorpora-tion number! Of course, one cannot see, hear, or touch a corporation, so it must in-teract with the rest of the world through its agents, the corporation’s officers and employees

Corporations come in different varieties The so-called professional cor-poration is available in most states for persons conducting professional prac-tices, such as doctors, lawyers, architects, psychiatric social workers, and the like A subchapter S corporation is a corporation that is the same as a regular business corporation in all respects other than taxation These variations are discussed later

A fourth common form of business organization is the limited partner-ship, which may best be described as a hybrid of the corporation and the gen-eral partnership The limited partnership consists of one or more gengen-eral partners—who manage the business much in the same way as do the partners

in a general partnership—and one or more limited partners, who are essen-tially silent investors with no control over business operations Like the general partnership, limited partnerships are governed in part by a statute, the Uni-form Limited Partnership Act (or its successor, the Revised UniUni-form Limited Partnership Act), which has also been adopted in one form or another by

49 states

The limited liability company (LLC), is now available to entrepreneurs in all 50 states The LLC is a separate legal entity owned by “members” who may, but need not, appoint one or more “managers” (who may but need not be mem-bers) to operate the business A few states require that there be more than one member, but the trend is toward allowing single-member LLCs An LLC

is formed by filing an application with the state government and paying the