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SMC|Academic Programs|Business Department|Accounting 2

Accounting 2

5 Units
Prerequisite: Accounting 1

Catalog Description:
This course continues the study of introductory financial accounting principles begun in Accounting 1 and also covers introductory managerial accounting.  The financial accounting portion of the course covers the corporate form of business organization, bond financing, installment notes and other long-term liabilities, investments in debt and equity securities, international operations and the Statement of Cash Flows.  Financial statement analysis and full-absorption costing for manufacturing businesses completes the financial accounting portion of the course and transitions the focus to managerial accounting and internal users rather than third party users of financial statements. Managerial accounting study includes cost accounting for special order and for mass produced goods, including just-in-time and total quality management approaches. Also studied are cost allocation among business divisions, performance measurement, cost-volume-profit analysis, budgeting, standard costing, and decision making processes. 

Course Objectives:
Upon completion of the course, students will be able to:

A. Identify the characteristics of a corporation, record the issuance of stock, account for cash and stock dividends, account for treasury stock, and prepare the stockholders’ equity section of the balance sheet.
B. Prepare, understand and analyze a corporate income statement, including the disclosure issues relating to special items and the calculation and presentation of earnings per share.
C. Account for bonds payable transactions including issuance of bonds, payment of interest, accrual of interest at year-end, retirement and conversion of bonds.  Account for other long term liabilities, including their financial statement presentation and required disclosures.
D. Account for corporate investments in debt and equity securities, including presentation of unrealized income and international transactions.
E. Identify the purposes of the statement of cash flows, and be able to determine cash flows from operating, investing and financing activities.  Analyze statement results.
F. Analyze corporate financial statements by computing liquidity, long term solvency, profitability and market performance ratios, and prepare vertical and horizontal analyses of financial statements.
G. Account for a manufacturing business using full absorption GAAP accounting principles, and prepare financial and supporting statements related to manufacturing businesses.
H. Distinguish between financial accounting and managerial accounting and identify managerial cost classifications.
I. List and describe the basic characteristics of a job order cost accounting system; prepare the journal entries to account for custom products.
J. Record process costing transactions for mass-produced products, incorporating just-in-time and total quality management concepts as well as conventional practices.  Use weighted-average assumptions to compute equivalent units and assign costs to units completed and to units in ending work in process inventory.
K. Utilizing activity-based accounting concepts, account for departmental and divisional operations. Prepare a responsibility accounting report for a cost center; prepare responsibility accounting reports for a profit center; compute and interpret the rate of return and other measures of performance for an investment center
L. Classify costs by their behavior as variable costs, fixed costs, or mixed costs; compute the contribution margin, the contribution margin ratio, and the unit contribution margin; determine the break-even point and the volume necessary to achieve a target profit; compute the margin of safety and the operating leverage.
M. Describe the basic elements of the budget process, various approaches to budgeting, and the use of computers in budgeting; describe the master budget for a manufacturing business and prepare the basic income statement budgets, and the cash and capital expenditure budgets.
N. Explain and illustrate how standards are used in budgeting, and prepare flexible budgets.  Calculate and interpret direct materials price and quantity variances, direct labor rate and time variances and factory overhead controllable and volume variances.  Journalize the entries for recording standards in the accounts.  Explain how standards may be used for non-manufacturing expenses.
O. Evaluate capital investment proposals, using the following methods: differential analysis, average rate of return, cash payback, net present value, and internal rate of return.

Course Content:

35%    Financial Accounting (detailed below)
65%    Managerial Accounting (detailed below)

5%    Corporate form of business ownership; accounting for corporate stock transactions
5%    Corporate financial statement preparation
5%    Bonds payable, installment loans and other long term liabilities
5%    Short and long term investments in debt and equity securities; comprehensive income
2%    International operations
5%    Statement of Cash Flows
8%    Financial statement analysis
5%    Manufacturing accounting
8%    Managerial accounting principles
7%    Cost accounting for custom products
7%    Cost accounting for mass-produced goods
7%    Cost allocation, divisional accounting and performance measurement
7%    Cost-volume-profit analysis
8%    Budgeting and Planning
8%    Flexible budgets and Standard Costing
8%    Capital budgeting, Differential analysis and Decision making

Student Learning Outcome(s):
1. Student will be able to prepare a complete set of financial reports and record, classify and analyze financial data for corporations.
As assessed by:  projects, midterms, final exam

2. Student will be able to apply managerial accounting and analysis tools for decision-making in service, merchandising and manufacturing environments.
As assessed by:  projects, midterms, final exam

3. Student will demonstrate readiness for advanced-level accounting courses, upper-division business courses and/or entry level accounting positions.
As assessed by:  projects, midterms, final exam