Urban Outfitters: Financial Statements Training BY CHRISTINA TURNER Capella UniversityFPX 5010MBA-FPX5010__Assessment1

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Urban Outfitters: Financial Statements Training BY CHRISTINA TURNERAgenda Accounting Methods • Cash versus Accrual methods • Preference Financial Statements • What is financial statem... ents • Primary financial statements • Notes to financial statements • Advertising costs • Store opening costs • Website development costs Capitalizing and Expensing • Characterizations • When to use • Limitations • How each affects assetsAccounting Methods Urban Outfitters practices the accrual accounting method. There are two methods of accounting: cash and accrual. In cash accounting, revenue and expenses are recorded when money changes hands and is mainly used by small businesses. In accrual accounting, revenue and expenses are reported as earned and occurred. Accrual based accounting better measures our operation than cash flow because it provides more accurate profitability.Cash vs. Accrual-based Accounting Consider this example: We sent an invoice for $10,000 for a completed acquisition this month, billed $2,500 for project fees this month, paid $1,000 fees from last month, and received $2,500 for an invoice last month. CASH-BASED ACCOUNTING -THE PROFIT FOR THE MONTH WOULD BE $1500, THE $2500 RECEIVED MINUS THE $1000 PAID ACCRUAL-BASED ACCOUNTING - THE PROFIT FOR THE MONTH WOULD BE $7500, THE $10,000 INCOME MINUS THE $2,500 FEES BILLED * THE AMOUNT OF INCOME TAX CHARGED WOULD BE SIGNIFICANTLY DIFFERENT BETWEEN THE TWO METHODSSignificant Difference s Cash-based method Income not taxed until in bank Numbers are shown when transactions are final – does NOT show flow Accounts for the income paid or the expense paid at the time it takes place; does not show flow Exhibits the exact amount of cash at any given period of time Accrual-based method Income is taxed once recorded, even if payments have not been completed Managed in real-time Better shows the flow of cash into and out Matches income and expenses in a given time period [Show More]

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