MBA-FPX5010_VitosGarciaJavierAndres_Assessment1_1

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1 Training-Accounting Tools and Practices (Javier A Vitos Garcia) Capella University Daniela Pavel Nov 6, 2023 MBA-FPX5010

Training-Accounting Tools and Practices 2 Income Statement "Urban Outfitters is a retail business where its work is inspired by customers through a unique mix of products, ingenuity and culture and was created in 1970 in a small location in front of the University of Pennsylvania (Urban Outfitters, 2022). The brand has become internationally renowned, which is only possible with understanding the importance of accounting tools. Accounting allows you to better understand the company's business form and know short, medium and long-term predictions for the future. Accounting provides absolute knowledge and control over a company, which helps managers make accurate decisions. In this tutorial, we will analyze the financial statements. Through these analyses, you will see how advertising and digital marketing costs, company website improvements, and store opening costs relate to overall financial information. Advertising Costs Most of Urban Outfitters' profits are in digital advertising. It is easier to run an online store by sending ads to customers who mostly browse the Internet. In addition, updates of new products are made on the website. The investment in advertising enters as a sales expense; They can also be business or general expenses. Store Opening Costs n many occasions when we create an online store we must often include cost expenses before creating it, these costs in most cases depend a lot on the investment. We must have the

Training-Accounting Tools and Practices 3 time and knowledge to create it. In most cases when we create an online store it will help us save a lot of money on the money that was invested. “Most of the time the process of building and launching an online store is overwhelming, but the truth is that building an online store is easy if you want it to be” (Lazazzera; 2015 ).The cost of opening a store is all the costs you pay to open a store, such as operating license costs, purchasing a domain, hiring employees, salaries, and moving expenses. One of the most challenging costs is the start-up cost, and it is necessary to effectively calculate and estimate the expected profit of the business because if a large amount of money is invested in a business that does not generate significant profits, there may be a considerable cost loss. Web Development Costs Web development or technology costs are the fees you pay from purchasing a branded web domain to maintaining and updating your website. The costs shown in the table include website creation, launch, operations, and maintenance. Purchase costs typically include the cost of the required hardware, extended warranty or maintenance contract, server operating system, application licenses, and rack server deployment (if applicable). Operating costs, on the other hand, typically include technical support, power consumption of the computers running the site, cooling of the server room (in the event that the company has servers dedicated to that work), change or replacement of the different components of the server (it can be hard drives) and administrative (inversion and update). Notes to Financial Statements

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Training-Accounting Tools and Practices 4 The purpose of the notes is to provide accurate information and achievable outline of the company's accounting practices so that clients can more easily understand them and subsequently analyze them when making decisions. It is about explaining what was done, how it was done, and why it was done over some time in order to evaluate in the reviews the essential elements that in some way can affect the future of the company. Notes to the financial statements are explanations or clarifications of quantifiable or non-quantifiable facts or circumstances that result from changes in the financial statements and should be read in conjunction with the financial statements for proper interpretation. It is also essential information for investors who want to buy company shares. The notes themselves are prepared to describe the legal basis used by the company, the accounting practices, and the measurement bases used. Instead, the company's financial condition is understood using information about each account associated with the notes. How the accounting method the company uses affects the financial statements Maximizing accounts and having a clear financial policy are two activities that a company must carry out constantly since they are essential for the financial development of the company. Urban Outfitters uses an accrual method based on recording expenses and income. Expenses and income are recorded when incurred or earned. Any form of accounting has some drawbacks, and accrual accounting is no exception. A company may look good on paper, but in reality, it is cash-strapped and in debt, especially when customers stop paying their bills on time. Accruals assume that all accounts are up to date, but if the customer defaults or defaults, the company will not be able to pay the debt. If a customer defaults, the company must calculate and record accounts receivable to correct the records and recover taxes paid on income that was

Training-Accounting Tools and Practices 5 never received. Therefore, Urban Outfitters' accounting method focuses on moving cash in and out. “How the financial statements would differ if another accounting method were to capture the costs.” If cash accounting is used, revenue is generally recorded as received. Instead, expenses are recorded when you pay them, because the income is shown in the income statement at the time the profits are received. Expenses are recorded only in cash. Mostly in personal economies and small businesses, the method that is mostly used is cash (Morah, 2021). If Urban Outfitters uses this cash payment method, you must report all charges separately. It is unsuitable for businesses as the cash method is more beneficial for personal finances and small businesses with only one member. Preference between capitalizing and expensing the costs I prefer capitalization of costs because accounting capitalization means an amount recorded as part of a balance sheet item. Contrary to popular belief, the term capitalization, although it is recorded as part of the asset, does not mean that it is no longer recognized in the company's results. “Capitalization counts as a cost incurred for the purchase of a fixed asset that is expected to directly produce an economic benefit beyond a company's normal operating cycle” (Chihambakwe; 2022). At some point, it will go through the profit and loss account, but not immediately and according to the depreciation or amortization schedule established by the

Training-Accounting Tools and Practices 6 company's management. The costs of services that can be capitalized are linked to plant, real estate, intangible assets or machinery. Capitalized costs refer to costs that provide an economic benefit to the company, including extending the useful life of assets and improving production capacity. Asset quality improvement costs. Finished products. Products and increase the value of assets that will ultimately benefit the company's stakeholders, such as stabilizing the company's stock. Conclusion This training manual is designed to help new employees understand that the accounting policies of a company (in this case, Urban Outfitters) are critical to success. Likewise, it helps to make good decisions in difficult times for the company based on the data collected. Let us also remember that achieving balance in the organization provides good financial health. If procedures are followed, all stakeholders will ultimately benefit.

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Training-Accounting Tools and Practices 7

Training-Accounting Tools and Practices 8 Reference CHIHAMBAKWE, ANGELINA. 2022. Cost Capitalization. Retrieved from: https://www.fe.training/free-resources/project-finance/cost-capitalization/#:~:text=Cost %20capitalization%20is%20used%20when,a%20company%27s%20normal %20operating%20cycle. Lazazzera, Richard. 2015. How to build an online store from scratch and generate profits of $922.16 in 3 days. Retrieved from: https://www.shopify.com/es/blog/ Morah, Chizoba. (2021). Accrual Accounting vs. Cash Basis Accounting: What's the Difference?. Retrieved from: https://www.investopedia.com/ask/answers/09/accrual- accounting.asp#:~:text=Revenue%20is%20reported%20on%20the,businesses%20and %20for%20personal%20finances. Urban Outfitters Company Website. (2022). About UO. Retrieved from: https://www.urbanoutfitters.com/. U.S. Securities and Exchange Commission. (2017). Urban Outfitters INC (Filer). Retrieved from https://www.sec.gov/cgibin/viewer? action=view&cik=912615&accession_number=0001193125-17-108506&xbrl_type=v#.

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