Understanding the Financial Accounting Project

 

 

Financial Accounting Project

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Financial Accounting Project

Introduction

Financial accounting is a branch of accounting which prepares financial statements so that decision makers like suppliers, stockholders, government agencies, banks, owners, employees and any other person who qualify as a stakeholder can assess the functionality of the company. The maintenance of financial capital is either measured in the power of constant purchasing unit, or units of nominal monetary. The main aim of financial accounting is for the reduction of the problem of principal-agent, by monitoring and measuring performance of agents and reporting the necessary results to those involved. However, financial accounting is used as a tool for the preparation of information regarding accounting to people who are not involved in the running of the daily businesses of an organization (Shim, Siegel, & Shim, 2012). This paper has detailed information regarding the financial accounting of the magnificent Apple Company.

There are various objectives that are offered by financial accounting. One of the objectives of financial accounting is transaction recording which is systematic. The main aspect of accounting is keeping of all transactions made by a business. Additionally, the other objective is ascertaining of the results that are recorded by the above transactions. This is done with an aim of identifying if the business is making any progress in terms of growth. The other objective is that financial accounting aims at ascertaining the position of the business financially. This makes it possible for businesspeople to ascertain what liabilities or assets a company has and if it is worthy investing. However, the preparations of financial accounting make it possible for an investor to understand if the business can be able to cover its liability in the shortest time possible (Weygandt, Kieso, & Kimmel, 2003).

Process costing is a methodology used in accounting, which accumulates and traces direct costs, while allocating indirect costs involved in the process of manufacturing. The assignment of costs to products is done in large batch, and can include the production of an entire month. However, the allocation of costs is done to products, which are of individual unit. In essence, process costing is a category of operational costing, which at each process of a product’s manufacture, ascertains a cost. Job costing puts into practice the aspect of calculating the costs involved in the manufacturing or construction of goods, which are completed in discrete batches. The costs obtained are recorded throughout the entire period of the batch or job into ledger accounts, which are summarized to the closing trial balance before the preparation of batch manufacturing or job costing statement (Shim, Siegel, & Shim, 2012). Apple Company based on the magnificent products it manufactures, uses the job costing method to calculate its financial accounting. This implies that the company manufacturers different products as they are in separate batches, thus needs to calculate them differently.

Apple is a company that is widely known in the world for the production and manufacture of technological machines. This is a company that develops, design, and sells software of computers, personal computers, and electronics for use by consumers. These include aspects like IPad, IPods, smart phones, and tablets. The manufacturing process of Apple products is very complex. It all starts with the designing of an intended product. This is generally done with an aim of also modifying current products. Better services and programs are incorporated in the new products. The feedbacks provided by the customers make it an aspect that provided the company with the idea of which program to incorporate. Based on complexity of the products, job costing is most efficient for the manufacture and calculation of these products. This is also a determinant on the fact that they are produced in different batches (Lashinsky, 2012).

One of the main products manufactured by Apple Company is iPhone smart phones. These are phones which have received a lot of credit from users as they can assess can aspect. They are installed with the best programs to suit the needs of the customers. The manufacturing process of an iPhone is as shown. The design process, to manufacture, and production, can take up to 10 months.

Component sourcing
Phone testing

 

 

 

Approval by the FCC
Mass production of the phone

Apple Company uses various types of inventory. The company applies into practice the use of two major inventories. These include Merchandising and manufacturing inventory. Merchandising inventory is all about the finished products. This is done by retailers and wholesalers, who facilitate that the product reaches the customer. Manufacturing inventory involves three types of inventory including work in progress, raw materials, and finished goods. There are various manufacturing overheads that apple incurs. Manufacturing overheads are also known as factory burden or factory overhead. These are costs, which are incurred by a company as it produces its products. These may further include direct labor, costs of manufacturing overhead, and materials which are directly attached to the production. These may also include aspects like electricity, factory supplies, depreciation of buildings and equipments, and factory personnel. The potential drivers of this company are the production line, which exhibits less people, but more production (Lüsted, 2012).

As a way of systems of performance management, managers in many organizations, assign responsibilities to different sectors in the production line. This is an aspect that is also common with apple. Based on their magnificent production unit, a lot of responsibility is required. This means that the designers of these gadgets are given the highest responsibility, as they are involved with the production of better gadgets. The other responsibility is laid upon to those who are producing the components. This is because during this process, they can interfere with the production and change aspects. This is done as a result of the data collected regarding costs, revenues, and resource allocation. A responsibility center involves profit, investment, and cost center. An investment center is used for the classification of business units comprised in an enterprise. This center is treated like a unit because it is calculated against the use of its capital. In essence, the investment center is used as a way of taking care for cost, assets, and revenues (Needles, & Powers, 2004).

A profit center is a part of an organization that is taken to be a separate business. However, the losses and profits of a profit center are separately calculated. The manager responsible for the profit center is taken responsible for the costs, revenue, and profits. This implies that the manager is supposed to ensure that the sales of the revenue grow thus leading to cash outflows and cash inflows that causes activities.  A cost center is a part of a business, where the profit margin is used to finance it, while adding to the organizations costs, but contributes its profit indirectly. This center is said to have negative impacts towards the organization, and that’s why it faces aspects like layoffs and rollbacks if the budgets are cut (Weygandt, Kieso, & Kimmel, 2003).

The control and tracking of budget is a very important aspect in any existing business. This is a tool that is very efficient in the decision process that a company makes. There are various budgeting packages that are standalone, which are said to have an impact in the deliverance of budget functionality. There are four methods, which are said to help in the management of budget, and are said to have features like the capability of accounting to many scenarios, workflow, and extended options for budget reporting and entry. Some of these methods include the built in. The advantage of using this method is that it provides sharing to existing structures that are in the system of accounting and budgets are easily differentiated to actual because their storage is in the same database and its access is through similar inquiry and report system (Libby, Libby, & Short, 2004).

The other method of budget management involves the use of spreadsheets. This requires the importation of budget numbers into the accounting systems or the exportation of the actual for the management of comparative reporting, commencing the accounting numbers. The use of this method is said to be poor in the management of budget structures and also the production of comparative reporting matrix based, which are both best handled if the data is recorded in a database rather than it being from the spreadsheet files. The other aspect is financial reporting, where budgeting is considered a function. Writers in financial report are said to act as a bridge between budgeting worksheets and accounting database as they are able to help in the variance and comparative reporting of budget and actual data. The other method is the budget packages which are stand-alone. The aspect that is important in the budget packages which are stand-alone is the functionality of workflow (Needles, & Powers, 2004).

Capital investments denote the investments of partnership or funds in promising startups, and emerging companies. The people involved in the venture investment in a company gain the benefit of getting an ownership interest for the invested money. Various companies like Apple have entered into venture investments, which are made by different venture capitalists. The aspect of venture investment in a company makes it possible for venture capitalists and investors to be associated closely with the functioning of a business. However, they are said to provide aspects like assistance and expertise involving planning as well as taking calls when a meeting is in place (Shim, Siegel, & Shim, 2012).

Consequently, amidst the investment they offer to a company, these capitalists are said to also offer investment of skill and time. The main aspect of investment venture is for the increment of profits and money, an aspect that investors look for, and also which company will grow bigger and larger. The investment of venture capital refers to the capital invested in businesses and companies, and are said to possess risk of high element. These risks are said to have an association with the cash flows and profits. Venture capital is said to be mainly in equity and shares, which are said to be compensated with a return rate that is high because of the high degree risk concerned. Firms of capital ventures and business angels are they major sources of investment in venture capital (Weygandt, Kieso, & Kimmel, 2003).

The organizations that possess a growth potential that is high attract the investment of venture capital. The size of the business is not a determinant in regards to venture capital. Firms involved in venture capital look for companies that can and will offer a turnover that is significant for five years. The various aspects that are looked for include ambitious teams, a management that is experienced, growth prospects which are high, and the ability of the company to change its plan to reality. The time of a project in investment of capital venture may range to seven from three years. The cycle of an investment of capital venture is all about the capital rise, cash flows monitoring, and exiting. This is an aspect that happens as each business requires money for its growth (Needles, & Powers, 2004).

One of the largest investments of venture capital is the one that was done by the company called Braeburn capital. This is a company that is said to own a huge amount of investment in apple. This company has invested about $ 121 billion (Lashinsky, 2012). This is a lot of money that is very essential to a company. This stipulates that the capital of apple has increased, and it can be able to a lot as well as improving its capital revenue. This money makes it possible for a company to grow its original cash. The fact that this company has an ambitious team, a management that is experienced, growth prospects which are high and the ability of the company to change its plan to reality, makes it a company to invest. The main aspect of investment in apple is in corporate securities. The investment in this company is done with a motive of reducing the total tax claimed by the government. This reduces the operating costs of a company. This is an aspect that has seen the company gain more on the revenues.

Any business that is involved with the manufacture of goods must incur some costs. Apple is no exception either as it still suffers from some costs. Some of these costs include software development. These costs are incurred in the development and research regarding new software. The design of new software requires that a lot of money is spent. This is one of the costs that are incurred by apple. These costs are said to increase as a result of the software. This is an aspect that makes it possible for the company to produce better gadgets. These costs can be classified as variable costs as they tend to change with time. Variable costs are costs whose total change directly proportional to the changes happening in activity levels. This means that total costs can decrease or increase as the units made decrease or increase. This cost is said to be constant if the units are expressed per the basis. A variable cost that is incurred by apple is direct material. This is the cost that is associated with the materials that are directly used for the manufacture of its components (Weygandt, Kieso, & Kimmel, 2003). These costs may change as a result of the economy. This may impose a cost on the company.

The other variable cost that is associated and incurred by apple is direct labor. This is the money that is associated with paying employees. This money may vary as a result of the economy an aspect that makes the company increase the price of its products to gain the money paid out. The company also suffers from variable overheads like indirect labor, indirect materials, and other expenses whose allocation is hard like equipment maintenance and utilities expenses. There are fixed costs that apple incurs. Fixed costs are costs whose total costs never changes with the changes involving volume of activity. The unit as per its costs is said to change if the units number changes. Administrative costs are costs, which are fixed and which apple incurs. These costs are attached to the selling costs. The other costs incurred by apple include rent. These are the costs that it has to pay for its building and factories. The other costs incurred by this company are insurance. These costs are incurred as a result of the company shielding itself from total damage incase various calamities like fear or terrorism activities attack (Libby, Libby, & Short, 2004).

The company also suffers from mixed costs. These are the costs that it has to pay for water. This is the water that is used in the mixing of silicon, which is used in the manufacture of phones. There are various means in which these costs can be driven. One way of trying to find the cost drivers of various costs, we should first place them to their different categories. This means that one should clearly place them either as variable, mixed, or fixed costs. The only costs which are bound to change are variable costs. Fixed costs never change even after the application of cost drivers. For the mixed costs, a person needs to clarify if they have a strong aspect of fixed or variable costs. This will make it easier to identify if cost drivers can be used. After the identification of variable costs, one is supposed to divide the produced units with the variable costs (Weygandt, Kieso, & Kimmel, 2003).

There are various cost drivers that apple needs to put in place to ensure that it achieves its costs are catered for.  Costs drivers are activities that ensure a change in the costs in a specific time period. An example of the cost driver necessary for apple is the production level. The materials and gadgets that need to be produced should be established by the company. These cost drivers are a remedy to materials costs. The knowledge of the production level makes it for the company to know the materials to purchase.

The pricing of a product determines the sales. Pricing policy is the aspect of setting prices to maximize profitability for the sold units or the market in overall. This is an aspect that is used as a means of defending existing markets from entrants who are new, as a way of increasing the market share in a market or as a means of entering a new market. Realization of the best pricing strategy makes it possible for a business to achieve success. Apple has a “good-better-best” strategy of pricing (Lüsted, 2012). This is a strategy that shows and denotes that the company understands that the price set is relevant for the product. This is an aspect that was posted after it inaugurated its new devices. The various advantages associated with this strategy are that it offers customers a choice, an aspect that helps in the generation of growth. This is a strategy that makes it possible for customers to choose their preference.

Lean production is the aspect of the company meeting service demands and high throughput using little inventory. The lean production of Apple Company looks at various aspects like plant layout, equipment characteristics, people, and workflow. These are the aspects that make it possible for this company to gain a lower inventory, but have a higher production. Just in time production is a strategy that aims at improving the investment returns of a business while reducing associated carrying costs and reduction of the in process inventory. JIT is dependent on signals, which alerts it what time is necessary for the manufacture of the other part of a product. The policies for JIT for apple are that a component should and will be produced at specific time to ensure that less waste is achieved. This also makes it have less waste in supplies (Needles, & Powers, 2004).

Total quality management is a system that is used a way of maintaining the level of quality of a product.  The total quality management of apple is that its products remain to be the best and that their perfection should grow with their advancement. Outsourcing is an aspect that is very common in business. This is the practice of a third party contracted out a company’s process. This may also refer to the aspect of transferring assets and employees to another firm (Libby, Libby, & Short, 2004). The aspect of outsourcing in apple is getting to its final close as this company has had instances of outsourcing. This is an aspect that made it have a bad perspective to the people. There are various joint products that are produced by apple. These include iPhone, iPad, iPod, computers, and tablets. These are the products, which are produced in the same processing unit. This company seems to have no by product as it has no product it sells below its production cost.

Conclusion

Financial accounting is a branch of accounting which prepares financial statements so that decision makers like suppliers, stockholders, government agencies, banks, owners, employees and any other person who qualify as a stakeholder. The maintenance of financial capital is either measured ion the power of constant purchasing unit, or units of nominal monetary. The main aim of financial accounting is for the reduction of the problem of principal-agent, by monitoring and measuring performance of agents and reporting the necessary results to those involved. However, financial accounting is used as a tool for the preparation of information regarding accounting to people who are not involved in the running of the daily businesses of an organization.            The aspect of a company identifying its financial accounting makes it achieve an advantage as it can realize various aspects. Aspects like investments are dependent on the financial accounting of a firm. Investors also look at the financial accounting of a firm with a motive of realizing if they can invest in a company. Apple is a company, which has grown tremendously over the years as a result of its production of awesome products. Investing in such a company is very beneficial as it can be able to return the required turnover within the shortest time period. The knowledge of financial accounting is also important to managers as they can distinguish where they can invest money for the growth of their companies.

 

 

References

Lashinsky, A. (2012). Inside Apple: How America’s most admired-and secretive-company really works. New York: Business Plus.

Libby, R., Libby, P. A., & Short, D. G. (2004). Financial accounting. Boston: McGraw-Hill/Irwin.

Lüsted, M. A. (2012). Apple: The company and its visionary founder, Steve Jobs. Minneapolis, MN: ABDO Pub.

Needles, B. E., & Powers, M. (2004). Financial accounting. Boston: Houghton Mifflin.

Shim, J. K., Siegel, J. G., & Shim, J. K. (2012). Financial accounting. New York: McGraw-Hill.

Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2003). Financial accounting. New York, NY: Wiley.

 


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