MBA FPX 5010 Assessment 1
Training-Accounting Tools and Practices
To the would-be trainees, allow me to introduce the training on Accounting Tools and Practices. This program is designed to ensure new district managers like John have a comprehensive understanding of key financial statements: company income statements and balance sheets.
It is, therefore, imperative that district managers are conversant with these tools so as to reinforce the effectiveness, competence and proficiency in decision-making that will enable the overall growth of the organisation and its profitability (Smith & Johnson, 2021).
As a growing organisation, our recent hiring of new district managers is a clear example of this change. However, some new employees do not fully understand some basic but important management tools, such as accounting. This training should help to fill that gap by offering members of staff and other stakeholders a basic, straightforward, even literal, introduction to financial statements and the parts they are composed of (Jones et al., 2019).
Learning that aspect as a district manager helps to understand the position of the financial aspect of your operation. In other words, income statements and balance sheets are some of the most crucial financial reports that can be employed for measuring performance and planning. In relation to these financial statements, this training will include the definitions and use of each statement, the most important segments of each, and how generic business expenses are reflected on them, according to Brown and Miller (2020).
Accounting Method’s Effect on Specific Financial Statements
Awareness of different ways to impact the accounts is important to the users to enable them to evaluate the financial position of a business (Smith & Johnson, 2021).
These, which are, among others, revenue recognition, inventory, depreciation, long-term contracts, and investment, directly affect the preparation of financial data and the presentation in the income statement and the balance sheet proforma (Jones et al., 2019).
For instance, in choosing the actual method of revenue recognition or undertaking the accrual accounting method, it defines when revenue is recognised and provides an inclusive picture of how the company is performing in the long term (Brown & Miller, 2020). As in the case of cost flow assumptions, inventory costing methods such as FIFO or LIFO affect the recorded value of inventory in a company’s balance sheet and, in turn, greatly influences the financial ratios and the overall status of that company.
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However, the company does not select these accounting methods in the exercise randomly; it is strategic and depends on various factors like regulatory mandates, standard practices in industries, and the economic environment (Adams, 2019).
For instance, when there is an inflationary environment, an organisation may want to have FIFO to ensure the market prices are reflected. Also, it is crucial to note the transparency of accounting policy disclosure, which is an element of financial statements. Through this, the stakeholders are better placed to appreciate the methods used in arriving at the said figures and can thus be guaranteed to find the presented financial information accurate and relevant.
In so doing, potential investors or business partners can better understand the strategies at play in the company’s accounting practices and make more rational decisions when it comes to investing time or finances into the company or engaging in future business with it.
Two Accounting Methods Differ In Their Effects
Looking Comparing the impact of two methods on the financial statements is a good demonstration of how various methods create diverse implications (Jones et al., 2019). This post will discuss the impact of the FIFO and LIFO inventory valuation methods while elucidating the similar effects between the two methods on financial statements and providing examples.
MBA FPX 5010 Assessment 1 Training-Accounting Tools and Practices
This decision has an important impact on the income statement where businesses can use the FIFO or LIFO inventory costing method. ITU stands for first in, first out which means when using this method of costing, the cost of goods sold (COGS) takes into account the oldest inventory. This normally leads to a decrease in IDWT and an increase in NI during the period when the prices are on the increase due to the fact that the new higher-cost stocks remain in the stores.
On the other hand, the LIFO method supposes that the latest obtained inventory is sold prior, which results in bigger COGS and lesser net income in trivial price inflations. This is so because the cost of goods sold means the expenses incurred in acquiring the various items of inventory, and the more recent items are likely to have been bought at a higher price as compared to the previous ones.
A company buys inventory units at varying prices throughout the year, some at one price and some at a different price. FIFO tends to increase net income during periods of inflation because, when selling inventories, older units that were purchased at lower prices are first recognised, and the cost of goods sold is reduced. Whereas, in LIFO, the older and lower-cost units are sold first while the newer and expensive units remain in the inventory, which results in higher COGS and vice versa: low net income (Brown & Miller, 2020).
Conclusion
In conclusion, it could be said that the Accounting Tools and Practices training can be indeed useful for new district managers and help them to choose proper strategies for working with the financial statements more effectively.
Through our case of design decoupling and the results of income statements, balance sheets, and evaluation of principles like revenue recognition, inventory valuation and expense categorisation, new district managers like John are better informed to make proper decisions to foster more growth and profitability in their districts.
As you may notice, throughout this training, we talked about the importance of specific accounting methods and the effect they have on financial statements. While discussing revenue recognition or valuation of inventories by First-in First-out (FIFO) and Last-in-first-out (LIFO) methods, every method holds importance in representing the financial health and profit of the company. Examples and well-illustrated explanations have helped to illustrate some abstract notions and fears, making sure that trainees grasp them.
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References
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Cleverley, W. O., Cleverley, J. O., & Parks, A. V. (2023). Essentials of health care finance. In Google Books. Jones & Bartlett Learning.
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Mousa, S. K., & Othman, M. (2020). The impact of green human resource management practices on sustainable performance in healthcare organisations: A conceptual framework. Journal of Cleaner Production, 243(1).