- MBA FPX 5010 Assessment 1 Accounting Tools and Practices.
Introduction
Metropolitan Providers is a corporate store company that opened its first entrances in the broad season of 1970. Beginning with the fundamental opening of the store in eastern Pennsylvania, reliable development has been occurring worldwide. Metropolitan providers are from over thirty countries and continue expanding with time (Metropolitan Providers, 2017). Since Metropolitan Providers is a, for the most part, seen company, it is essential to understand the importance of the accounting tools used for this company. Without this general information, trustworthy, valuable development will be a shortfall.
Advertising Costs
The Metropolitan Providers’ advertising costs are regularly limited when they are caused, except when there are hurries to purchaser advertising, which is advanced and confined when the record or content is conveyed or conveyed. Advertising costs are connected with the retail segment moving costs, which surveys photographic pictures for inventories on the website, flexible applications and web-based amusement platforms. When there is a one-time use of the movement, and no future dull status is known, it costs once wound up working.
Advertising Costs and Analysis
The prepaid costs connected with the company’s advertising and other related assets are tracked down in the Solidified Financial record. While looking at the Solidified Statements of Pay, it is urgent to understand that advertising costs are considered to be under the general, administrative, and selling costs. I recommend Table One for the entire joint affirmation of pay for 2017.
For example, the advertising costs in 2017 were $127,159, while in 2016, they were $114,104. It is marvellously integral to understand the proper methodologies used for advertising costs. MBA FPX 5010 Assessment 1 Accounting Tools and Practices highlights the significance of extending general advertising costs to attract new customers in secure regions. With the development of Metropolitan Providers, it is important to understand store operating costs.
Store Operating Costs
Standard operating and opening methods are important in the step-by-step direction that doubtlessly if all else, comes up short for experts in the store opening cycle (Murphy, 2019). The store opening costs are accomplished by Metropolitan Providers when another store is opened. This joins the entire course of the goodbye of the store, which starts a great deal before the store’s veritable opening date. The store opening costs consolidate: opening costs, affiliation costs, getting ready, selection of labourers, pay, and more.
A total diagram of all models that fall under the store operating costs is found in the selling, general and regulatory costs in the Solidified Statements of Pay. Regarding advertising costs, the store operating costs are an expense as achieved cost. The importance of this for store openings is the understanding of the forthright cost of the opening and acknowledging how much pay ought to be gained pay from the store.
Web Development Costs
The web development costs accomplished by Metropolitan Providers endorse material costs achieved during the application, creation, and backing seasons based on the premise of the web development’s planning and operating seasons. The website development costs are coordinated on the money-related record on the assets side. The accounting techniques for web development costs depend on the nonstop development season
MBA FPX 5010 Assessment 1 Accounting Tools and Practices
For example, the costs are advanced when web development is in the application and development is sorted out then; again, during the blueprint and operating seasons of web development, the expenses are caused and confined. Understanding the difference between this is major while conclusively expensing or capitalizing the web development costs. Since the web development was done before 2015, no expenses were achieved during the application and establishment development season of web development. Therefore, Metropolitan Providers advanced no inside-made software development costs.
Importance of Notes for Financial Statements
The notes to financial statements give a company significant openings and information like clarifying, coordinating, and sorting out financial statements, accounting structures, methods, and assessments used in the financial statements (Marshall, 2019). The usage of notes is significant, considering that not astoundingly considerable information can be given by numbers. The importance of the financial records is summarized in a word plan in the notes of the statements. Using these notes grants cash directors of all levels prepared to understand the financial statements better (Tuovila, 2019).
Financial Notes and Disclosures
Metropolitan Providers is a general company with a must-expand plan, and the notes consider everyone in the business to understand the effect and what is happening financially with the company. The notes correspondingly offer additional information that sorts out how the company showed up in the numbers that are tended to in the financial statements. For looking at the company, the notes in the financial statements give significant disclosure nuances related to information, and these fulfil the necessities of outside stockholders and external perusers (Tuovila, 2019).
With these notes, financial investigators can procure information and formulate more cautious assessments for future years. Then, once more, the footnotes suggest additional information that helps the reader understand how a company appeared in the figures, which grants partners the ability to understand the company’s current and past and undertake financial thriving (School of Michigan, 2010).
How does the accounting method the company uses affect the financial statement?
Any company needs to understand and maintain the value of its accounting diagrams and financial statements to make the most informed decisions about the financials and company socials. The accounting company that is singled out at a principal level affects the ability to seek sound financial decisions for the company. Cash reason and gathering premise account methods are two significant accounting methods used to follow the financial statements. The two methods are different but are used in the right economic conditions.
The storing up premise method of accounting is where all financial trades are acquired, offering little appreciation to when the cash is paid or gotten. The compensation of the business is recorded when a blueprint occurs. For example, in 2017, Metropolitan Providers had a total remuneration of strategies of 218 million bucks (Metropolitan Providers, 2017). Costs are when they are recorded with work, and things are done. Metropolitan Providers uses the total method because of the regular increments of the technique.
Accrual vs. Cash Accounting
The assortment method matches related pay rates and locales, giving financial statements the most solid and fitting profit appraisal (Kenton, 2019). Since the business pay is more principal than 5,000,000, the gathering method should be used for charge purposes behind the company. Counting the gathering method within the company’s reporting methods, too, is significant. Moreover, since the company has outside credits, urges, andinvestors, The gathering method is essential because it explains its financial strength (Kenton, 2019). The cash premise accounting method is altogether different than the variety method. The method attempts to match its costs and livelihoods on a month-to-month basis.
However, the cash premise method is chosen for cash inflow and flood; the resource reports can bar or follow any records payable or receivable (Accounting Tools, 2019). If all else fails, the accounts are kept straightforwardly with this method. This method would not work for Metropolitan Providers due to the company’s size. The gathering method gives a better financial picture, especially for the future and long levity of the company. Considering the need for the financial statements being assessed, the gathering method is a must-involved method for Metropolitan Providers.
How the financial statements would differ if another accounting method were to capture the costs
Since Metropolitan Suppliers uses the gathering justification for the accounting frameworks, the financial statements would change largely if the money-premise method were utilized. If the money-premise method is utilized, which is insane because of the company’s plans, how much would remuneration rates and costs be looked out for on a different record?
If all else fails, this record is a profit/misfortune account. Furthermore, if the money premise method were utilized, there would be a deferral and a timing difference in the compensation demand. Generally, the method is utilized in extra-fair or individual financial statements.
Preference between capitalizing and expensing the costs
Between capitalizing and expensing the costs of Metropolitan Suppliers, capitalizing the costs over expensing the costs. One advantage of capitalizing costs is that they will show on the cash-related record in the approaching financial years through amortization or dirtying. For the most part, fixed resources for the company have progressed, which gives advantages to the company for an expanded period. For instance, capitalizing costs will limit the peculiarity of the company’s stock, which will permit investors to have higher worth (Knight, 2019).
For this specific company, with the development of stores, it is key to have different investors to raise the company’s general worth. One final importance of capitalizing on costs is that it expands the degree of general profitability. With this development degree, the total net augmentation from approaches would be significant for the company’s future movement.
Conclusion
Understanding the accounting approaches that the company uses is significant for the company’s future unpreventable delayed consequences. This MBA FPX 5010 Assessment 1 Accounting Tools and Practices booklet provides information to new delegates once they become members of the Metropolitan Suppliers company. Without understanding the importance of these methodologies and their differences, there would be no thinking for financial records utilizing every single under-the-sun mean.
Appendix A: 2017 Consolidated Statements of Income
Table 1: 2017 Consolidated Statements of Income
| Category | Jan. 31, 2017 | Jan. 31, 2016 | Jan. 31, 2015 |
|---|---|---|---|
| Net Sales | $3,545,794 | $3,445,134 | $3,323,077 |
| Cost of Sales | 2,301,181 | 2,243,232 | 2,148,147 |
| Gross Profit | 1,244,613 | 1,201,902 | 1,174,930 |
| Selling, General & Administrative Expenses | 906,086 | 848,323 | 809,545 |
| Income from Operations | 338,527 | 353,579 | 365,385 |
| Interest Income | 1,879 | 943 | 2,319 |
| Other Income | 2,280 | 958 | 580 |
| Other Expenses | (4,587) | (5,449) | (4,834) |
| Income Before Income Taxes | 338,099 | 350,031 | 363,450 |
| Income Tax Expense | 119,979 | 125,542 | 131,022 |
| Net Income | $218,120 | $224,489 | $232,428 |
Net Income Per Common Share
| Category | Jan. 31, 2017 | Jan. 31, 2016 | Jan. 31, 2015 |
|---|
| Basic | $1.87 | $1.79 | $1.70 |
| Diluted | $1.86 | $1.78 | $1.68 |
Weighted-Average Common Shares Outstanding
| Category | Jan. 31, 2017 | Jan. 31, 2016 | Jan. 31, 2015 |
|---|---|---|---|
| Basic | 116,873,023 | 125,232,499 | 136,651,899 |
| Diluted | 117,291,117 | 126,013,414 | 138,192,734 |
References
Accounting Tools. (2019). Cash basis vs. accrual basis accounting. AccountingTools. Retrieved from https://www.accountingtools.com/articles/cash-basis-vs-accrual-basis- accounting.html
Kenton, W. (2019). Accrual accounting. Investopedia: Corporate Finance and Accounting.
Retrieved from https://www.investopedia.com/terms/a/accrualaccounting.asp
Knight, J. (2019). Expensing and capitalizing. Business Literacy Institute. Retrieved from http://www.business-literacy.com/financial-concepts/expensing-capitalizing/
Marshall, D., McManus, W., & Viele, D. (2020). Accounting: What the numbers mean (12th ed.). New York, NY: McGraw-Hill.
Murphy, B. (2019). Operating cost definition and operating costs. Investopedia Corporate Finance and Accounting. Retrieved from https://www.investopedia.com/terms/o/operating-cost.asp
Tuovila, A. (2019). Footnotes to the financial statements. Investopedia: Corporate Finance and Accounting. Retrieved from https://www.investopedia.com/terms/f/footnote.asp
University of Michigan. (2010) Notes to consolidated financial statements. University of Michigan Finance Journal. Retrieved from http://www.finance.umich.edu/reports/2011/pdf/NCFSFY11.pdf
Urban Outfitters Company Website. (2017). Urban Outfitters reports record sales. Urban Outfitters. Retrieved from https://www.urbn.com/posts/Urban-Outfitters-Reports-Record- Q4-Sales
U.S. Securities and Exchange Commission. (2017). Urban Outfitters INC (Filer). Retrieved from https://www.sec.gov/cgi-bin/viewer? action=view&cik=912615&accession_number=0001193125-17-108506&xbrl_type=v#