JenaeWoodson07
i need help with scholarly resources on this paper… …
i need help with scholarly resources on this paper…
Introduction
This memo is being submitted to inform respective Human Resources staff that I am interested in a position managing the front-end operations of Costco. Whenever a new position becomes available, experts suggest that the applicant researches the organization to ensure all the components of the position are understood, as well as the company. As part of the interview process I will need to demonstrate competencies in both financial and managerial accounting. In order to prepare for the upcoming interview, I have decided to demonstrate an understanding of the accounting components and uses of the balance sheet and income statement.
In order to do so, I will be explaining the different classifications of accounts contained in the balance sheet and the income statement as well as the process for the income to move from the income statement to the balance sheet. I will then identify the different components on the balance sheet and income statement within the service, merchandising, and manufacturing industries, and which industry Costco would fall within. I will evaluate the different accounts on the balance sheet and the income statement as these relate to Costco, elaborate on whether Costco’s revenues are generated through providing a service, selling merchandise, or manufacturing operations or a combination of these processes. Then, explain how the revenue
and company operations in general affect various inventories on the balance sheet. Lastly, I will analyze the financial position of Costco based on the 2018 financial statements.
Different Classifications of Accounts Contained in The Balance Sheet
Costco’s accounts vary within the balance sheet and income statement. Both are necessary in order to track spending and profit, as well as the company’s assets, liabilities, and equity at the end of each accounting period. Costco’s balance sheet is a statement which reflects Costco’s assets, liabilities and shareholder equity either on a quarterly or yearly basis. These accounts are considered permanent accounts. In order for a balance sheet to flow correctly, the amount of liabilities plus shareholder equity must equal the company’s assets. The accounting equation for the balance sheet is Assets = Liabilities + Shareholders Equity. To break it down further, assets are considered as what Costco owns. Liabilities is the amount that the company owes. Equity represents the difference between what is owned and what is owed. For example, Costco’s Assets for the year 2022 is over $64 million. The company’s liability is $43,519,000. The equity is the difference between the two, which is $20,647,000. The equity is Costco’s net worth.
Different What are the classifications on the income statement?
The income statement has three main classifications, revenue, expenses, and net income. It reflects all revenues and expenses or profits and losses that the company has acquired during a specific period of time. Income statements also display Costco’s corporate tax rate as well as their earnings per share. The income statement is the first statement prepared and also provides information regarding the company’s gains and losses that aren’t related to normal business costs. Revenue and expense accounts are temporary accounts and are expected to improve with time. This is because they are closed each month.
Before the account closes, the company’s profits and losses are transferred to the new retained earning balance, which in return ensures the balance sheet is correct. Essentially, balance sheets and income statements go hand in hand. Profits and losses happen when products or goods are sold above or below their current book value. For example, if a dining room set form Costco is sold for less than current book value, it’s considered a loss. The purpose of gains and losses being listed separately is for individuals to see the amount of gains or losses the organization has taken. Th last item on the income statement is the net income. This is the amount of profit the company has left over after paying off all expenses.
Net income is the amount of accounting profit a company has left over after paying off all its expenses. Net income is found by taking sales revenue and subtracting COGS, SG&A, depreciation, and amortization, interest expense, taxes and any other expenses. Net income is the last line item on the income statement proper. Some income statements, however, will have a separate section at the bottom reconciling beginning retained earnings with ending retained earnings, through net income and dividends.
Process for The Income to Move from The Income Statement to The Balance Sheet
Income is moved from the income statement to the balance sheet by using an accounting cycle. An accounting cycle is a list of steps which helps transfer the income to the balance sheet properly by recording each transaction, adjusting the accounts, preparing statements from the income statement, statement of retained earnings, balance sheet, and the statement of cash flows, closing the temporary accounts, and preparing the post-closing trial balance. Each step must be followed and done correctly in order for the income from the income statement is successfully transferred into the balance sheet.
Components of The Balance Sheet and Income Statement Within the Service, Merchandising, and Manufacturing Industries, and Which Industry Costco Would Fall Within
A service company provides services to other companies. This includes law firms, accounting firms, salons and spas, while merchandising companies buys inventory in bulk and then delivers the products to other businesses. Usually, service companies have only expenses relating to the daily operations of the business. There is no inventory to track, therefore companies who offer service only require a single-step income statement. Merchandising companies sell products for a higher price than they bought it. For example, a retailer may purchase products like shoes for a set wholesale price. Then the retailer resells the shoes at a higher price. This industry utilizes a multi-step statement which represents the cost of goods sold. Merchandising company’s expenses included the cost of their product and expenses pertaining to the overhead of the company, like rent, utilities, supplies and paying staff members.
The balance sheet for a merchandising company reflects an asset for inventory. There is no ne to display an asset for inventory on a balance sheet for a service industry. Costco would be considered apart of the merchandising industry. This is because Costco purchases its products for a wholesale price, then in return sells the products to consumers for a higher price.
Different Accounts on The Balance Sheet and The Income Statement as These Relate to Costco
For Costco, the different accounts on a balance sheet include two major accounts, assets and liabilities & Shareholders’ equity. This is further broken down into cash and short-term investments, accounts receivables, inventories, assets, net property, plant &
equipment, assets, accounts payable, payroll, debts, common stock, deferred taxes and equity. Costco’s income statement includes its sales/revenue, the cost of goods sold, gross income, SG&A Expense, expenses, interest expense, pretax income, income tax, consolidated net income, minority interest expense, net income, minority interest expense, net income after extraordinary and available to common, EPS, basic shares outstanding, diluted shares outstanding, EBITDA or Earnings before interest, taxes, depreciation amortization.
How Costco’s revenues are generated through providing a service, selling merchandise, or manufacturing operations or a combination of these processes
Costco Wholesale is a large bulk retailer with warehouse club operations in eight countries with a gross profit of 27.819 billion a last year. Costco’s revenues are made from the sales of tangible goods. Aside from selling good to its customers, Costco provides consumers with the option to buy bulk, as well as providing other services like optical, pharmaceutical, and gasoline services as well. So, Costco’s revenue not only comes from merchandise, but providing services as well.
How the Revenue and Company Operations in General Affect Various Inventories on The Balance Sheet
The revenue and company operations affect the balance sheets inventory because the more inventory Costco sells, the more revenue Costco receives. All merchandise sold and services provided creates revenue earned. This revenue on the balance sheet as cash or sales made on credit, as accounts receivable. Also, in order for Costco to be profitable, the company must keep a substantial amount of inventory in their stores at all times. If the supply for the demand isn’t met, Costco may lose customers. Their inventory would show on the balance sheet as inventory sold and inventory held. The balance sheet also displays operating and preopening expenses, money paid toward membership benefits and goods not sold due to damages.
The Financial Position of Costco Based on 2018 Financial Statements
Costco was thriving in 2018 and continues to thrive today. Costco ended the year 2018 with a $141,576,000 revenue and has grown substantially each year. The organization offers more supplies and inventory within its store than its competitors. Its profitability ratio for 2018 is 7.15, an increase from 2017, where the profitability ratio was 6.11, proving growth within the company. Costco’s total sales increased 9.7%, or $138.4 billion in 2018, the member renewal rate remained at 90%, and net sales increased 10% from the year prior. 25 new warehouses were opened and the company’s net income increased 17% as well. Costco has proven its financial position and is anticipated to continue its growth every year.
