Training-Accounting Tools and Practices PDF

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Training-Accounting Tools and Practices Training Manual Allysha Smith Capella University 2/3/2020

Introduction: The basics are necessary to cover when being introduced to a new company. A couple of

basics we will be covering are balance sheet and income statements and types of accounting. These are important to know what we use here at Urban Outfitters. A balance sheet is used to show for instance Urban Outfitters assets, liabilities, and shareholders’ equity. It is important for the total assets to be equal to the total amount of liabilities we have and shareholders’ equity. It shows us how our assets are put to work and how these are financed. Investors and creditors utilize the balance sheet to see how a company is putting its resources to work. (Murphy, 2019) Commonly referred to as the profit and loss statement the income statement shows revenue costs and expenses over a period of time. The income statement provides useful information about revenue, sales and expenses for the company. (Murphy, 2019) At Urban Outfitters, cash and accrual accounting are two methods that are used. Cash accounting transactions are based on what cash flow is coming in and going out. This is not to be confused with accounts receivable and accounts payable. These will be tracked separately. For accrual accounting remember that the income is tracked when the sale occurs, and expenses are tracked when the goods are received by the consumer. Transactions are accounted for when the transaction occurs or is earned, regardless of the when the cash is paid or received (Signature Analytics, 2019)

Advertising: The company expense the costs of advertising when the advertising occurs, except for direct-toconsumer advertising, which is capitalized and repaid over its expected period of prospective benefit (Urban, 2016-2017) Advertising cost primarily relate to our retail segment marketing expenses which are comprised of web marketing, catalog printing, paper, postage and other costs related to production of photographic images used in our catalogs, on our websites, mobile applications and in our social media campaigns. If there is not going to be an expected future benefit, the cost of advertising is expensed when incurred (Epstein, Nach,& Bragg, 2009). Advertising cost reported as prepaid expenses were $2,087 and $3,724 as of January 31, 2017

and 2016 can be found in “Prepaid expenses and other current assets” in the Consolidated Balance Sheets. For Fiscal 2017,2016 and 2015, advertising expenses came out to be $127,159, $114,104 and $103,882 (Urban, 2016-2017).

Store Opening Costs : Urban Outfitters expenses all store opening and organization cost as incurred, including travel, training, recruiting, salaries and other operating costs, and all such cost are included in “Selling, general and administrative expenses” in the Consolidated Statements of Income. (Urban, 20162017) Start up costs should be recorded as they are incurred. This is common for accrual accounting (Dewitt, 2018) Another way to look at start up costs is they are considered expenses that happen before the business is up and operating to the public. All startup costs are treated equally for accounting. The costs will likely be combined together into the same category and will not be broken down into subcategories (Dewitt, 2018).

Website Development Costs: The company capitalized applicable costs incurred during the application and infrastructure development stage and expenses cost incurred during the planning and operating stage (Urban, 2016-2017). Urban Outfitters did not have any internally generated internal-use software development costs during fiscal 2017, 2016 and 2015. This was because all costs were incurred during the planning and operating stages of the process. The costs that were incurred during the application and infrastructure development stage were not material (Urban, 2016-2017).

Notes: At Urban Outfitters notes, or commonly known as footnotes are important to keep details related to the accounting process. Footnotes provide us with information about accounting policies, change that may occur, nonmonetary transactions, fair value, business combinations and

contingencies of a legal nature (Barstow, 2019) Without notes additional information such as methodology, valuation and time period would not be recorded and documented for future use. (Barlow, 2019)

Capitalizing Vs. Expensing When taking into consideration accounting of assets, capitalizing versus expensing different costs will affect probability, financial ratios and trends presented. When a cost is capitalized, it is documented on the balance sheet as an asset. The cost is then allocated to the income statement over multiple periods as depreciation expense for tangible assets and amortization expense for intangible assets (Robinson, Henry , & Broihahn, 2012). If a cost is expensed in the current period, it reduces the pre-tax income by that amount (Robinson, Henry , & Broihahn, 2012). When a cost is capitalized in a company the net income increases. This increase also increases the shareholder’s equity. Any prediction on spending that may occur to provide benefits for accounting periods should be capitalized.

Resources: Barstow, Sharon R. (2019) Why Are Notes and Footnotes Important in Accounting? Retrieved from https://smallbusiness.chron.com/notes-footnotes-important-accounting-76393.html Dewitt, Kaylee (2016) Accounting for Startup Costs (Plus How to Handle Taxes); Retrieved from https://www.patriotsoftware.com/accounting/training/blog/accounting-for-startup-costsexpenses-examples/ Epstein, B. J., Nach, R., & Bragg, S. M. (2009). Wiley Gaap: interpretation and application of generally accepted accounting principles. Hoboken, NJ: Wiley.

Murphy, Chris B. (2019) How do the income statement and balance sheet differ?; Retrived from https://www.investopedia.com/ask/answers/101314/what-difference-between-income-statementand-balance-sheet.asp Robinson, T. R., Henry , E., & Broihahn, M. (2012). International financial statement analysis [Fourth]. Retrieved from https://books.google.com/books? id=Q7nEDwAAQBAJ&pg=PA341&lpg=PA341&dq=Any spending that is predicted to provide benefits for multiple accounting periods should be capitalized(Finance Train, 2019.&source=bl&ots=iDJQ8MnP49&sig=ACfU3U0axZCf8yTApt__Wex2ThCS7jD4Q&hl=en&sa=X&ved=2ahUKEwjS6uChrbnAhWLY80KHfdJDm4Q6AEwAHoECAwQAQ#v=onepage&q=Any spending that is predicted to provide benefits for multiple accounting periods should be capitalized(Finance Train, 2019.&f=false Signature Analytics (2019) Cash Basis or Accrual Basis – Which Accounting Method is Right for Your Business?; Retrieved from https://signatureanalytics.com/cash-basis-accrual-basisaccounting-method-right-business/ Urban Resources (2016-2017). 2016-2017 Finance Report. Finance Statements. Retrieved from https://www.sec.gov/Archives/edgar/data/912615/000119312517108506/d286750d10k.htm...