The calculation of inventory expense on the operations statement and the posted balance on the statement of condition (balance sheet) may be approached in several different ways. List and discuss the various methods of inventory valuation that may be used. Indicate in your response why a certain method may be used in certain situations. What are predominant methods used in health care organizations (tax exempt or for profit)
In Inventories are sold, and they are purchased on a continuous basis. Due to the varying market conditions, the prices of the inventories may change and as a result, valuation of inventory is imperative. There are various methods that organizations use in valuing stocks. The most common methods are:
LIFO
The LIFO approach
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For instance, the profit making health organizations have the main intention of creating profits for the shareholders while the nonprofit organizations are created to further their mission (Knowing the Differences Between Nonprofit and For-Profit Accounting , 2015). Just the way these organizations differ in their purpose and foundation, they also differ in their accounting procedures. Their financial statements are presented in different ways. The financial statements prepared at the end of a year are also very different. The main reason for these differences is because the two organizations follow different accounting standards. In this part, I will lay an explicit focus on how the two organizations present the various items in the owners’ equity statement (Baker, …show more content…
For example, in a profit making organization, the assets will be classified as either noncurrent assets, intangible assets or as current assets. However, this is not the case in nonprofit healthcare organizations. For nonprofit healthcare organizations, assets are classified as permanently restricted assets, which refers to assets that cannot be used up. These assets can be current or noncurrent assets, but the donor restricts their use. On the other hand, they also have unrestricted assets (Baker, 2013). These are assets that do not have any restriction, and the organization can use them (Baker,
In order for Jim Turin & Sons, Inc to have used this method of accounting it would have had to match the cost of the merchandise with the revenue earned from the sale. Using the matching of revenue and cost the company would have had to have kept an actual inventory and maintained records of the costs associated with said inventory. Since the costs are not immediately deducted under the accrual method they are deferred to the year when the merchandise is
As part of the calculation for cost of goods sold it is necessary to determine the value of goods on hand, termed merchandise inventory. Accountants use two basic methods for determining the amount of merchandise inventory. Identify the two methods and describe the circumstances (including examples of users of each method) under which each method would be used.
Making an analysis of the profitability of the shareholder can be seen that although both companies have similar returns, the source of this return is different.
According to the Financial Accounting Standards Board (FASB), the purpose of SFAS 117 was to enhancing the relevance, understandability, and comparability of financial statements issued by nonprofit organizations (McLaughlin, 2009). The intention of the SFAS 117 was to make nonprofit organization financial statements readable as well as usable by stock holders of the nonprofit organization. With this being implemented there are now three types of funds which include; unrestricted, temporarily restricted, and finally permanently restricted (McLaughlin, 2009).
There are several types of not-for-profit organizations including charitable hospitals, research institutions, educational hospitals, and public health programs. Charitable hospitals provide basic, extensive and emergency health care, but are exempt from federal, state and local taxes, and raise money from the charitable contributions of donors (Litten, et al, 2010). Financial assistance policy needs to be clear and concise and charges should be limited as the majority of the people will be poor and needy. Billing and collection policies should include ‘reasonable efforts’ to determine assistance eligibility (Litten, et al, 2010). Educational hospitals provide clinical education and training to student doctors, nurses and other health care professionals, as well as traditional basic and emergency care and testing and lab services (Medical Dictionary, 201...
Their inventories are purchased both domestically and foreign. The company’s inventories consist of current assets reported in descending order of liquidity. The current assets that they consist of are ; cash and cash equivalents, accounts receivable, inventories and other current assets. The method that the company uses to count inventories is LIFO in perpetual method. LIFO method is last in, which is used to dispense cost to the cost of goods based on the link with the last inventory. As for the first out meaning the beginning inventory of that period will be dispensed to the ending inventory value (8.2 Choosing an accounting
Similarly systematic placement of other components related to cost accounting such as that of products purchased or sold, the record of the services provided by the health department and the expenses of the services acquired from different companies in the form of purchasing of machinery or hiring of experts for the training of a new machine imported. In addition to this record and data regarding the revenue obtained from customers and sales need also be included. (Penner 2003)
Writing has always been my passion. With this passion I have discovered other artistic talents I possess. It has lead me to a desire to start my own publishing and film business. However, I not only wish to further my career, but assist in the artistic growth of Christian teens in my community and beyond with the creation of my own non-profit. This non-profit will aid Christian teen artists (ages 12-19), from all art backgrounds, in gaining guidance, knowledge and supplies. It will also aid in growing their skills by teaching them to employ their supplies and knowledge and expanding upon them.
William & Torres provided a table to reflect hospitals ownership, and noted that some hospitals, while owned by one type of entity, may be operating under a contract by another entity, such as a hospital management company (Williams & Torrens, page 185). Some of the largest groups of hospitals in the nation are nonprofit community hospitals (Williams & Torrens, page 185). Nonprofit entities, including hospitals, function under special provisions of corporation law in each state, and under federal and state tax provisions that recognize their community service function (Williams & Torrens, page 185). The nation has approximately 1 million nonprofit entities of various sorts and hospitals have long been a traditional service provider in the nonprofit sector (Williams & Torrens, page 185). Nonprofit entities are generally exempt from most taxes at the federal, state, and local levels including income and property taxes (Williams & Torrens, page 185). These facilities are governed by a community based board that has ultimate authority for running these entities. Sponsorship for a nonprofit can come from various organizations, unlike other hospitals with traditional religious sponsorship (Williams & Torrens, page 185). A small percentage of the nation’s hospitals are operated by for-profit businesses (Williams & Torrens, page 186). For-profit hospitals have owners and issue stock to those owners to reflect their equity position (Williams & Torrens, page 185). For-profit hospitals are not just accountable to the community but must also provide a return on investment to the shareholders; they expect to generate a profit to pay a return to the equity inves...
Schofield (2014) researches the difference between public and private company financial reporting. For instance, a private company has fewer consumers reviewing their financial statements, whereas public companies could have multiple consumers reviewing financial statements. In addition, private companies typically have less specialized accounting personnel, whereas public companies will have several. Lastly, Schofield (2014), reviewed the number of amendments proposed and finalized to help benefit private companies financial reporting.
There are plenty of different techniques to value stocks. The major part is to capture each approach into account while articulating a general opinion of the stock. If the valuation of the firm were lower or higher than other similar stocks, following the next step would be to decide the rationality for the discrepancy.
This shows how effectively inventory is managed by comparing the cost of goods sold with average inventory for the period.
Different inventory accounting method may have different impacts on Airline company like Qantas. Due to the complexity of the aircraft system and also to ensure the airline operation safety, airlines need to devote a great deal of manpower and material resources to maintain and repair the aircrafts. Inventories such as aircraft components play significant role in repairing and maintaining aircrafts, which is the basis for achieving the goal of on-time flight. So it is a very important
This method is based on the fact that some stock items have a much higher annual usage value than others. This after doing a cost analysis, stock items are separated into three classes with the following characteristics.
Inventory management is a method through, which a business handles tangible resources and materials to ensure availability of resources for use. It is a collection of interdisciplinary processes including a full circle from the demand forecasting, supply chain management, inventory control and reverse logistics. Inventory management is the optimization of inventories of manufactured goods, work in progress, and raw materials. According to Doucette (2001) inventory management can be challenging at times; however, the need for effective inventory management is largely seeing more as a necessity than a mere trend when customer satisfaction and service have become a prime reason for a business to stand apart from its competition. For example, Wal-Mart’s inventory management is one of the biggest contributors to the success of the company;