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The power of accounting: what the numbers mean and how to by Lawrence D. Lewis

By Lawrence D. Lewis

The ability of Accounting: What the Numbers suggest and the way to take advantage of Them presents a hugely readable textual content for non-financial managers. It explores accounting’s makes use of and barriers within the administration technique. The textual content is meant for clients of accounting info instead of preparers. It makes a speciality of supporting the reader in realizing what accounting numbers suggest, what they don't suggest, while and the way they are often used for selection making and making plans and after they cannot.
The booklet discusses the significance of accounting details within the economic system and the truth that accounting numbers are frequently the results of estimates and arbitrary allocations. it is also a cautionary notice concerning the vague use of terminology usually present in accounting and monetary literature.

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Extra resources for The power of accounting: what the numbers mean and how to use them

Example text

The flip side, however, is that by producing more units it will incur higher inventory management costs. Firms pursuing a just-in-time (JIT) inventory policy generally produce in smaller batches. These firms find that other advantages afforded by a JIT policy offset the higher setup costs. As with most decisions a manager must face there are trade-offs that need to be taken into account. COSTS, COST BEHAVIOR AND COST ANALYSIS 37 Costs may also vary with the number and complexity of different products and models a firm produces.

THE BASICS 25 The final item on the balance sheet to consider is retained earnings. Retained earnings are ethereal. Reviewing the balance sheet, all of the items we’ve mentioned so far are fairly easy to visualize: We need only refer to our checkbook and monthly bank statements to visualize cash in the bank; accounts receivable can be visualized as a stack of invoices showing what customers owe us; we can see the inventory piled on shelves or stored in the warehouse; buildings and machinery are obvious.

Armed with this information 50 COST-VOLUME-PROFIT ANALYSIS Butterfield Stores’ managers are now in a position to do market research and determine if they can sustain this level of sales. This is the type of analysis that Wal-Mart, Target, Sears and grocery chains perform whenever they consider expanding. What we have just described for both Vino Vintners and Butterfield Stores is a model of their operations. The validity of any model depends on how near to the real-world phenomenon it actually is.

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