Accounting Principles In Costco - Research Paper Example

Accounting Principles In Costco Introduction Costco Wholesale Corporation is a warehouse club company operating in America. Currently, in America, Costco is the largest retailer and number three in the world. The company headquarter is in Issaquah, Washington. It operates in 657 locations, with 25 retail outlets in United Kingdom, 6 in Canada, 9 in Taiwan, 33 in Mexico, 1 in Spain, 451 in United States, 11 in the South Korea and 15 in Japan. The company started his operation in 1983 in Seattle. For six years, Costco grew from nothing to $ 3 billion. In 2012, the company had a net profit of $ 1.709 billion and sales of $ 97.062 billion. The company has been expanding each year because in 2011 it had total asset of $ 26,761, in 2012 it reduced to $ 27,140, in 2013 it raised to $ 30,283 and in by August 2014 had $ 33,024. In respect to the financial report, the company has been expanding and gaining more income yearly. Costco’s Income statement The company’s income statement shows increment of values from 2011 to August 2014. The company’s revenues were $ 88,915 million in 2011, $ 99,137 million in 2012, $ 105,156 in 2013 and $ 112,640 million in 2014. As from 2011 the revenue increased from $ 88,915 million to $ 112,640 in 2014. This shows that the company increases is operation each year. The same increment has occurred in gross profit, operating income, and net income. The company has an outstanding business operation since it operates with a huge amount. The company's net income was $ 1,462 in 2011; it increased to $ 1,709 million in 2012, in 2013 was $ 2,039 million and in 2014 is $ 2,058 million (10-K Report, 2013). The increment in net income is an indication that the company has a sound management whereby the business operations are managed professionally (Kieso and Paul, 2013). The graph below shows or idicates the rate of net income as highlighted in the company's income statement. Costco’s Balance sheet In respect to the balance sheet, the company has a potential growth. The figures from the balance sheet increase annually. In comparison of balance sheets from 2011 to 2014, the company has been expanding in respect to assets, inventory, capital, cash, investments and account receivable among others. In 2011, the company’s inventory was $ 6,638 million, $ 7,096 million in 2012, $ 7,894 million and in 2014 is $ 8,456 million. The cash and short term investment also increased with a significant number from 2011 to 2014. In 2011, the short term investments and cash were $ 5,613 million, it reduced to $ 4,854 million in 2012 and increased to $ 6,124 million in 2013 and then to $ 7,315 million in 2014. The total receivables were $ 965 million in 2011, increased to $ 1,026 million in 2012, then to $ 1,201 million and finally reduced to $ 1,148 million in 2014. The number of total assets increased each year from 2011 to 2014, and this shows that the company has good managements that ensure improvement expansion in terms of assets (Kieso and Paul, 2013). The total assets in 2011 were $ 26,761, and then increased to $ 27,140 in 2012, $ 30,283 in 2013 and $ 33,024 in 2014 (10-K Report, 2013). The graph below represents the number of assets as from 2011 to 2014 as highlighted in the balance sheet. According to Kieso and Paul, (2013) in order for a company to expand it is supposed to reduce the expenses. Costco is unable to reduce the expenses, and it increases the liability in order to gain more profit. In 2011, the total liabilities were $ 14,188 million, $ 14,622 million in 2012 and increased with a high margin in 2013 to $ 19,271 and then to $ 20,509 in 2014 (10-K Report, 2013). The graph below represents the liabilities' growth as from 2011 to 2014 as represented in the balance sheet. The equity also changed from year to year. The company in 2011 operated with an equity of $ 12,573 million, $ 12,361 million in 2012, $ 10,833 million in 2013 and $ 12,303 million in 2014. The graph below represents total equity as highlighted in the balance sheet (10-K Report, 2013). Business continuity In each warehouse the company has average stock of 3,700 which is a high number of active stocks as compared to supermarkets, discount retailers and supercenters. The company offers most of the consumable products for sale in cartons, case or multiple pack quantities. The company, in order to keep the policy of satisfaction of members it accepts the return of merchandise (Kieso and Paul, 2013). It has a 90 days return policy for electronic products and offers extended warrant and technical support services. The products sold by the Costco include sundries, food, soft-lines, fresh foods, hard-lines and ancillary among others. The products sales increase annually meaning the company serves more customers each year. The ancillary businesses set in or near the warehouses provide expanded services and products and encourage the customers to shop more frequently (10-K Report, 2013). The table below represents the contacted ancillary businesses as from 2011 to 2013. Ancillary businesses 2013 2012 2011 Food Court 628 602 586 One-Hour Photo Centres 622 591 581 Optical Dispensing Centres 614 589 574 Pharmacies 565 544 529 Hearing-Aid Centres 502 469 427 Gas Station 414 394 368 Number of Warehouses 634 608 592 Conclusion/Summery In summery the paper analysis the Costco’s operation and financials records for different years. The company provides warehouse services in America and other countries across the world. The income statement of the company shows progress as the amount in figures increases each year as from 2011 to 2014. The company also has a balance sheet which shows the progress. The assets, liabilities and equity of the company, are represented in the balance sheet. The company sells different products and offers after sales services to the customers in order to attract more customers. Costco is a large company and operates with a lot of money. The amount of money allocated for the operation enables the company to get enough profit that is used for expansion. The company’s growth has been marked by the investment of huge capital. The company also encourages customers to buy products from their stores and offers after sales services. References 10-K Report (2013). Costco Wholesale Corporation Annual Report on Form 10-K for the Fiscal year Ended September 1, 2013. Retrieved September 22013, from http://www.sec.gov/Archives/edgar/data/909832/000144530513002422/cost10k2013.htm Kieso K. D. and Paul W. J. (2013). Accounting Principles, 11th Edition. New York: John Wiley & Sons, Inc. Read More