Learning Team A Week One Reflection Essay

The object of the aspect for this week is to discuss the objectives for Week One and their relation to the importance of the correspondence sheet to internal and orthogonal users. The objectives discussed by Learning Team A are the components of cash in and cash equivalents, and the comparison and contrast of different arsenal cost flow assumptions and how they are take to bed. The internal users are indentified as prudence and the external users are investors and reference workors. Cash and Cash EquivalentsCash is defined in the text as the most liquid of assets and is identified by companies as a current asset. (Weygandt, Kimmel, & Kieso, 2010) What has become very popular is the classification called cash and cash equivalents. FASB has determined that classification to be misleading and it will believably be eliminated from financial statements. Cash will be cash and what apply to be short term cash equivalents will now be reported as temporary investments. One of the si tuations leading to this decision is some(prenominal) companies having to take large losses on auction-rated notes. These notes are liquid because they buttocks be traded daily, but they are not short term because the wrong of the notes mickle be lengthy, in some cases 30 years. When the economy went bad, the auctions stopped, the value went away and the companies participating had to take sizeable losses. Why funding is primary(prenominal) on the Balance Sheet register is an important aspect on the balance sheet. When an outsider studies the balance sheet, they have to look at the assets that the beau monde currently has to invite the instrument portion of the balance sheet make sense. The reason that the bloodline shows on the balance sheet as a current asset is so outsider investors assume the inventory sells in the future when the product is complete. When investors review the balance sheet, they also like to line up that the company does not have too much inventory in case they are cannot sell it, or get rid of the inventory in the future. If companies do not have an accurate amount of inventory they have to estimate it to reflect the schooling on the balance sheet. designing inventory value using Gross Profit and Retail Inventory methodsThe gross profit inventory valuation method is pretty simple. first base inventory plus purchases minus gross sales at selling toll less gross profit percentage equals ending inventory. The major disadvantage of this method is that it is an estimate and not actual which is why it is not a GAAP approved method unless physical inventory is done to plump for up the valuation (Kieso, Weygandt, & Warfield, 2010).The retail inventory method, on the other hand, is an satisfying way to valuate inventory. Many retail stores have so many a(prenominal) items it is really impractical to do regular inventory counts. To calculate inventory valuation this way, the store takes the beginning inventory plus purchases le ss sales to determine ending inventory at the retail price. Then the goods procurable for sale at cost amount is divided by the goods operational for sale at retail amount to determine the cost-to-retail ratio that recruit is multiplied by the retail ending inventory to come up with the cost.Internal users of accounting can include management, employees, and owners. Managers use this accounting information to view the companys performance. Employees view accounting information for problem security. Owners view accounting information to view profits from their investments. External users can insist of creditors, investors, and customers. Creditors use this information to check the companys credit worthiness. Investors would like to earn money from their investments. Customers would like to maintain a want term company customer relationship. The balance sheet allows internal and external users to view what the business has and what the business owes. Knowing a companys net worth is very important. Using different methods to calculate inventory for companies can be very critical.