New Controller Guidebook 2nd Edition Text - CPE …

1 Controller Guidebook 2nd Edition Steven M. Bragg Table of Contents Chapter 1 The Controller Job Description ..1 Learning Objectives ..1 The Controller Job Description ..1 The Chief Financial Officer Job Description ..2 The New Controller Checklist ..4 Summary ..7 Review Review Answers ..9 Chapter 2 Cash Management ..10 Learning Objectives ..10 Controller Responsibilities ..10 Overview of the Bank Reconciliation ..10 The Bank Reconciliation Procedure ..11 Bank Reconciliation Problems ..12 The Bank Reconciliation Statement ..12 Accounting for Petty Cash ..13 The Cash Forecast ..14 Cash Investments ..16 Negative Cash on the Balance Sheet ..17 Cash Controls ..17 Cash Keeping ..18 Cash Record Keeping ..18 Summary ..19 Review Review Answers ..21 Chapter 3 Credit and Collections Management ..22 Learning Objectives ..22 Controller Responsibilities ..22 Receivables Measurement ..22 Credit Management.

2 24 Credit Terms and the Cost of Credit ..26 Collections Management ..27 Other Cash Acceleration Techniques ..29 The Allowance for Doubtful Accounts ..30 The Direct Write-off Method ..32 Credit and Collection Controls ..32 Summary ..33 Review Review Answers ..35 Chapter 4 Billing Management ..36 Learning Objectives ..36 Table of Contents ii Controller Responsibilities ..36 Billing Management ..36 Structure of the Invoice ..38 Accounting for Billings ..40 Accrued Revenue ..40 Accounting for Sales Taxes ..41 Billing Controls ..43 Summary ..43 Review Review Answers ..45 Chapter 5 Inventory Management ..46 Learning Objectives ..46 Controller Responsibilities ..46 The Periodic Inventory System ..46 The Perpetual Inventory How to Set Up Inventory Record Keeping ..48 Cycle Counting ..48 Inventory Reconciliation ..49 The Physical Inventory Count ..51 Inventory Costing ..51 The First In, First Out Method.

3 52 The Weighted Average Method ..54 Standard Costing ..55 The Retail Inventory Method ..56 Accounting for Obsolete Inventory ..57 Summary ..58 Review Review Answers ..60 Chapter 6 Fixed Assets Management ..61 Learning Objectives ..61 Controller Responsibilities ..61 Fixed Asset Tracking ..61 Tag Tracking ..61 Bar Code Tracking ..62 RFID Tracking Active Transmission ..62 RFID Tracking Passive Transmission ..63 Accounting for Fixed Assets ..63 Fixed Asset Controls ..65 Controls for Fixed Asset Acquisition ..65 Controls for Fixed Asset Theft ..65 Controls for Fixed Asset Disposal ..66 Fixed Asset Record Keeping ..66 Audit Requirements ..67 Summary ..68 Review Review Answers ..70 Table of Contents iii Chapter 7 Accounts Payable Management ..71 Learning Objectives ..71 Controller Responsibilities ..71 Accounts Payable Management ..71 Three-Way Matching ..73 Use Taxes ..74 Accounting for Accounts Payable.

4 75 Accounts Payable Controls ..76 Accounts Payable Record Keeping ..77 Summary ..77 Review Review Answers ..80 Chapter 8 Equity Management ..81 Learning Objectives ..81 Controller Responsibilities ..81 Accounting for Stock ..81 The Sale of Stock for Cash ..81 Stock Issued in Exchange for Non-Cash Assets or Services ..82 The Repurchase of Stock (Treasury Stock) ..82 Accounting for Dividends ..83 Summary ..85 Review Review Answers ..87 Chapter 9 Payroll Management ..88 Learning Objectives ..88 Controller Responsibilities ..88 Payroll Cycle Duration ..88 Streamlined Timekeeping ..90 Timekeeping Systems ..91 Computerized Time Clocks ..91 Internet-Based Time Tracking ..92 Electronic Payments ..93 Payments by Direct Deposit ..94 Payments by Pay Card ..95 Employee Self-Service ..95 Manager Self-Service ..96 Transaction Error Analysis ..96 Staff Training Program ..97 The Payroll Calendar ..97 Information Confidentiality.

5 98 Accounting for Payroll ..99 Primary Payroll Journal Entry ..99 Accrued 100 Accrued Bonuses .. 101 Accrued Commissions .. 102 Manual Paycheck Entry .. 102 Table of Contents iv Employee Advances .. 103 Accrued Vacation Pay .. 103 Payroll Controls .. 104 General Controls .. 105 Payroll Calculation Controls .. 105 Check Payment Controls .. 106 Direct Deposit Controls .. 107 Self-Service Controls .. 107 Garnishment Controls .. 107 Employee Advances Controls .. 108 Summary .. 108 Review 109 Review Answers .. 111 Chapter 10 Department Management .. 113 Learning Objectives .. 113 113 Controller Responsibilities .. 113 Schedule of Activities .. 113 Error Tracking System .. 114 Process Reviews .. 116 Queue Management .. 117 Department Layout .. 117 Skills Review and Training .. 118 Consolidate Accounting .. 119 Summary .. 120 Review 121 Review Answers .. 122 Chapter 11 Closing the Books .. 123 Learning Objectives.

6 123 123 Controller Responsibilities .. 123 Prior Steps: Update Reserves .. 123 Core Steps: Issue Customer Invoices .. 125 Core Steps: Value Inventory .. 126 Core Steps: Calculate Depreciation .. 128 Core Steps: Create Accruals .. 130 Core Steps: Consolidate Division Results .. 130 Core Steps: Eliminate Intercompany Transactions .. 131 Core Steps: Review Journal Entries .. 131 Core Steps: Reconcile Accounts .. 131 Core Steps: Close Subsidiary Ledgers .. 133 Core Steps: Create Financial Statements .. 133 Core Steps: Review Financial Statements .. 134 Core Steps: Accrue Tax Liabilities .. 134 Core Steps: Close the Month .. 134 Core Steps: Add Disclosures .. 135 Core Steps: Write Cover Letter .. 135 Core Steps: Issue Financial Statements .. 136 Delayed Steps: Issue Customer Invoices .. 136 Table of Contents v Delayed Steps: Closing Metrics .. 136 Delayed Steps: Document Future Closing Changes .. 137 Delayed Steps: Update Closing Procedures.

7 137 Summary .. 138 Review 139 Review Answers .. 140 Chapter 12 The Financial Statements .. 141 Learning Objectives .. 141 141 Controller Responsibilities .. 141 The Income Statement .. 141 Income Statement Overview .. 141 The Single-Step Income 143 The Multi-Step Income Statement .. 144 The Condensed Income Statement .. 145 The Contribution Margin Income Statement .. 145 The Multi-Period Income Statement .. 146 How to Construct the Income Statement .. 147 The Balance Sheet .. 148 Overview of the Balance Sheet .. 148 The Common Size Balance Sheet .. 151 The Comparative Balance Sheet .. 152 How to Construct the Balance 152 The Statement of Cash Flows .. 154 Overview of the Statement of Cash 154 The Direct Method .. 155 The Indirect Method .. 156 How to Prepare the Statement of Cash Flows .. 157 The Statement of Retained Earnings .. 158 Overview of the Statement of Retained Earnings .. 159 How to Prepare the Statement of Retained Earnings.

8 160 Summary .. 160 Review 161 Review Answers .. 163 Chapter 13 Public Company Financial Reporting .. 166 Learning Objectives .. 166 166 Controller Responsibilities .. 166 Interim Reporting .. 166 The Integral View .. 166 The Discrete View .. 167 Comparison of the Integral and Discrete Views .. 168 Interim Reporting Issues .. 168 Segment 168 Primary Segment Reporting Issues .. 168 The Segment Report .. 170 Earnings per 171 Basic Earnings per Share .. 171 Diluted Earnings per Share .. 172 Table of Contents vi Presentation of Earnings per Share .. 175 The Public Company Closing Process .. 176 The Form 10-Q .. 177 The Form 10-K .. 178 Summary .. 180 Review 181 Review Answers .. 183 Chapter 14 Management Reports .. 185 Learning Objectives .. 185 185 Controller Responsibilities .. 185 The Duration of a Report .. 185 Responsibility Reporting .. 185 The Flash Report .. 186 Expense Reporting .. 187 Margin Reporting.

9 189 Variance Reporting .. 191 The Purchase Price 192 Material Yield Variance .. 192 Labor Rate Variance .. 193 Labor Efficiency Variance .. 194 Variable Overhead Spending Variance .. 194 Variable Overhead Efficiency Variance .. 195 Fixed Overhead Spending 196 Selling Price Variance .. 196 Sales Volume Variance .. 197 Problems with Variance Analysis .. 198 Which Variances to Report .. 198 How to Report Variances .. 199 Summary .. 200 Review 201 Review Answers .. 202 Chapter 15 Ratio Analysis .. 203 Learning Objectives .. 203 203 Controller Responsibilities .. 203 Deflated Sales Growth .. 203 Deflated Profit Growth .. 204 Core Earnings Ratio .. 205 Margin of Safety .. 206 Interest Coverage Ratio .. 206 Return on Equity .. 207 Days Sales Outstanding .. 209 Best Possible DSO .. 210 Inventory Turnover Measurements .. 211 Sales Productivity .. 211 Sales Backlog Ratio .. 212 Measurement Consistency .. 213 Measurements and the Soft Close.

10 213 Table of Contents vii Summary .. 214 Review 215 Review Answers .. 216 Chapter 16 Budgeting .. 217 Learning Objectives .. 217 217 Controller Responsibilities .. 217 The System of Budgets .. 217 The Reasons for Budget Iterations .. 220 Overview of the Revenue Budget .. 221 The Ending Finished Goods Inventory Budget .. 223 The Production Budget .. 225 Production Budgeting for Multiple Products .. 227 The Direct Materials Budget (Roll up Method) .. 227 The Direct Materials Budget (Historical Method) .. 229 The Direct Labor 230 The Manufacturing Overhead Budget .. 230 The Sales and Marketing Budget .. 232 Diminishing Returns Analysis .. 233 The Research and Development Budget .. 234 The Administration Budget .. 236 The Compensation Budget .. 237 The Budgeted Income Statement .. 239 The Budgeted Balance Sheet .. 240 Accounts Receivable .. 241 Inventory .. 242 Fixed Assets .. 243 Accounts Payable .. 244 Additional Estimation Elements.