1. Financial Resource Management Domain 4
Domain 4 Champions
Ted Eschenbach, Ph.D., P.E., PEM, PMP
Donald Kennedy, Ph.D., P.Eng., PEM
Slides compiled by
Patrick Kush, MEM, MBA
Domain 4 Champions
Ted Eschenbach, Ph.D., P.E., PEM, PMP
Donald Kennedy, Ph.D., P.Eng., PEM
Slides compiled by
Patrick Kush, MEM, MBA, AEM

2. Key words and concepts Accrual Assets Balance Sheet Credit Debit
Double entry
Equity
Expenses
Definitions (Key Words and Concepts)
Accrual: Future payment or receipt entered into the books as an allowance to reflect its present value
Assets: Items owned by the enterprise
Balance Sheet: Financial statement that provides a snapshot of the total accounts for assets, liabilities and equity
Credit: One of the columns used in double-entry accounting to show decreases in expenses and assets and increases in liabilities, income and equity
Debit: One of the columns used in double-entry to show increases in expenses and assets and decreases in liabilities, income and equity
Double Entry: The system of accounting whereby all the transactions consist of entries in two columns that have offsetting values
Equity: The owner’s value of an organization, determined from subtracting total liabilities from assets
Expenses: Moneys paid by the organization for the operation of the business

3. Key words and concepts Fixed costs Income statement Liabilities Margin
Ratio analysis
Revenue
Variable costs
Definitions (Key Words and Concepts)
Fixed Costs: Also called overheads, expenses that are not impacted by a small change in sales, such as property rentals
Income Statement: Financial statement that provides information on the profitability of an enterprise over a specific period of time
Liabilities: Debts and other payments owed by an enterprise that will be repaid in the future
Margin: The difference between the selling price and cost of production
Ratio Analysis: Calculations based on the financial statements that provide bases for improved comparisons between different organizations or time periods
Revenue: Money generated through the sales of products and services
Variable Cost: Also called direct costs, expenses that result from the incremental increases in sales, such as raw materials for components

4. Accounting GAAP IFRS General Accepted Accounting Practices Rules based
International Financial Reporting Standards
Principles based

5. Accounting Sarbanes- Oxley Act (2002)
Aimed at rebuilding public confidence in securities market
Regulations focused on:
Rigorous methods for ensuring independent auditing
Increased accountability
Greater transparency
Reducing variance in accounting procedures

6. Accounting Bookkeeping Principles Journal 5 basic types of accounts
Kept in chronological order
Transactions in a ‘to-from’ format
Detailed journal entries are transferred to a ledger
5 basic types of accounts
Assets, liabilities, revenue, expenses and equity
Standard practices
Double entry accounting system
Debit and credit columns

7. Accounting Double-Entry Accounting Principle Figure 4-1 Account Type
Increase
Decrease
Assets
Debit
Credit
Liabilities
Revenue
Expenses
Equity

8. Accrual Accounting Expenses or revenues
Leveled off through posting through appropriate asset or liability “holding accounts”
Examples
Prepaid expenses
WIP (Work In Progress)
Replacement costs spread over the expected life is depreciation

9. Fixed and Variable Expenses
Fixed cost: overhead cost (example SG&A, selling, general, and administrative expenses)
Tracked at the enterprise level
Variable cost: direct cost (COGS, cost of goods sold)
Tracked at the product level
Margin is the desired result of separating the fixed and variable cost of a unit sold

10. Fixed and Variable Expenses
Contribution margin is the difference between the selling price and the direct cost of a unit
Cash break-even: the point where the contribution margin is sufficient to cover the cash outflow
Contribution margin is the difference between the selling price and the direct cost of a unit
The aim of the operations management of a business is to grow the sales of enough units so that the total contribution margin is greater than the fixed costs of running the business