1.
Forest inventory
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Forest inventory is the systematic collection of data and forest information for assessment or analysis. An estimate of the value and possible uses of timber is an important part of the information required to sustain ecosystems. When taking forest inventory the following are important things to measure and note, species, diameter at breast height, height, site quality, age, and defects. From the data collected one can calculate the number of trees per acre, the area, the volume of trees in an area. Inventories can be done for other reasons than just calculating the value, a forest can be cruised to visually assess timber and determine potential fire hazards and the risk of fire. The results of this type of inventory can be used in preventative actions, wildlife surveys can be undertaken in conjunction with timber inventory to determine the number and type of wildlife within a forest. The aim of the statistical forest inventory is to provide information about the state and dynamics of forests for strategic. Merely looking at the forest for assessment is called taxation, surveying and taking inventory of trees originated in Europe in the late 18th century out of a fear that wood would run out. The first information was organized into maps used to plan out usage, in the early 19th century forest harvesters estimated the volume and dispersal of trees within smaller forests with their eyes. More diverse and larger forests were divided into sections of similar type trees that were individually estimated by visual inspection. These estimates were related together to figure out the entire forest’s available resources, as the 19th century progressed so did the measurement techniques. New relationships between diameter, height, and volume were discovered and exploited and these newfound relationships allowed for a more accurate assessment of wood types and yields of much larger forests. By 1891, these surveys were conducted through sample-based methods involving statistical averages, in the 20th century, the statistical method of sampling had become well established and commonly used. Further developments, such as unequal probability sampling, arose, laser Scanning both terrestrially and aerially are now used alongside more manual methods. As a result, sampling accuracy and assessment values became more accurate, a forest inventory does not only record the trees height, DBH and number for tree yield calculations. But it also records the conditions of the forest, so this would include, geology, site conditions, tree health and other forest factors. A timber cruise is a measurement of a stand used to estimate the amount of standing timber that the forest contains. These measurements are collected at sample locations called plots, quadrants, each of these individual sample areas is one observation in a series of observations called a sample
2.
Business
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A business is an organizational entity involved in the provision of goods and services to consumers. Businesses may also be social non-profit enterprises or state-owned public enterprises operated by governments with specific social, a business owned by multiple private individuals may form as an incorporated company or jointly organise as a partnership. Countries have different laws that may ascribe different rights to the business entities. The word business can refer to an organization or to an entire market sector or to the sum of all economic activity. Compound forms such as agribusiness represent subsets of the broader meaning. Businesses aim to maximize sales to have their income exceed their expenditures, resulting in a profit, the owner operates the business alone and may hire employees. A sole proprietor has unlimited liability for all obligations incurred by the business, partnership, A partnership is a business owned by two or more people. In most forms of partnerships, each partner has unlimited liability for the debts incurred by the business, the three most prevalent types of for-profit partnerships are, general partnerships, limited partnerships, and limited liability partnerships. Corporation, The owners of a corporation have limited liability and the business has a legal personality from its owners. Corporations can be either government-owned or privately owned and they can organize either for profit or as nonprofit organizations. A privately owned, for-profit corporation is owned by its shareholders, a privately owned, for-profit corporation can be either privately held by a small group of individuals, or publicly held, with publicly traded shares listed on a stock exchange. Cooperative, Often referred to as a co-op, a cooperative is a limited-liability business that can organize as for-profit or not-for-profit, a cooperative differs from a corporation in that it has members, not shareholders, and they share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives, cooperatives are fundamental to the ideology of economic democracy. In contrast, unincorporated businesses or persons working on their own are not as protected. Franchises, A franchise is a system in which entrepreneurs purchase the rights to open, franchising in the United States is widespread and is a major economic powerhouse. One out of retail businesses in the United States are franchised and 8 million people are employed in a franchised business. Real estate businesses sell, invest, construct and develop properties – including land, residential homes, retailers, wholesalers, and distributors act as middlemen and get goods produced by manufacturers to the intended consumers, they make their profits by marking up their prices. Most stores and catalog companies are distributors or retailers, transportation businesses such as railways, airlines, shipping companies that deliver goods and individuals to their destinations for a fee
3.
ABC analysis
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In materials management, the ABC analysis is an inventory categorization technique. The ABC analysis suggests that inventories of an organization are not of equal value, thus, the inventory is grouped into three categories in order of their estimated importance. A items are important for an organization. Because of the value of these A items, frequent value analysis is required. In addition to that, an organization needs to choose an appropriate order pattern to avoid excess capacity, B items are important, but of course less important than A items and more important than C items. Therefore, B items are intergroup items, there are no fixed threshold for each class, different proportion can be applied based on objective and criteria. ABC Analysis is similar to the Pareto principle in that the A items will typically account for a proportion of the overall value. Example of ABC class are ‘A’ items – 20% of the accounts for 70% of the annual consumption value of the items. ‘B’ items - 30% of the accounts for 25% of the annual consumption value of the items. ‘C’ items - 50% of the accounts for 5% of the annual consumption value of the items. User can execute ABC analysis based on user defined criteria and system apply ABC code to items, actual distribution of ABC class in the electronics manufacturing company with 4051 active parts. Using this distribution of ABC class and change total number of the parts to 14213. 5-week supply.925 week supply, a) A class item can be applied much tighter control like JIT daily delivery. Total delivery frequency also reduced to half from 16000 to 8200, result By applying weighed control based on ABC classification, required man-hours and inventory level are drastically reduced. Alternate way of finding ABC analysis, - The ABC concept is based on Paretos law, if too much inventory is kept, the ABC analysis can be performed on a sample. After obtaining the random sample the following steps are carried out for the ABC analysis, step 1, Compute the annual usage value for every item in the sample by multiplying the annual requirements by the cost per unit. Step 2, Arrange the items in descending order of the value calculated above. Step 3, Make a cumulative total of the number of items, step 4, Convert the cumulative total of the number of items and usage values into a percentage of their grand totals. Step 5, Draw a graph connecting cumulative % items and cumulative % usage value, the graph is divided approximately into three segments, where the curve sharply changes its shape
4.
Lead time
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A lead time is the latency between the initiation and execution of a process. For example, the time between the placement of an order and delivery of a new car from a manufacturer may be anywhere from 2 weeks to 6 months. In industry, lead time reduction is an important part of lean manufacturing, Lead time in publishing describes the amount of time that a journalist has between receiving a writing assignment and submitting the completed piece. Depending on the publication, lead times can be anything from a couple of hours to many months/years, Lead time is the length of time between detection of a disease through screening and the moment in time where it would have normally presented with symptoms and led to a diagnosis. A more conventional definition of time in the supply chain management realm is the time from the moment the customer places an order to the moment it is ready for delivery. In the absence of finished goods or intermediate inventory, it is the time it takes to manufacture the order without any inventory other than raw materials. In the manufacturing environment, lead time has the definition as that of Supply Chain Management. The shipping time is included because the company needs to know when the parts will be available for material requirements planning. It is also possible for lead time to include the time it takes for a company to process and have the part ready for manufacturing once it has been received. The time it takes a company to unload a product from a truck, inspect it, with tight manufacturing constraints or when a company is using Just In Time manufacturing it is important for supply chain to know how long their own internal processes take. Lead time is made of, Preprocessing Lead Time, It represents the required to release a purchase order or create a job from the time you learn of the requirement. Processing Lead Time, It is the required to procure or manufacture an item. It takes three days for company A to receive the part once shipped, and one day before the part is ready to go into manufacturing. If Company As Supply Chain calls Company B they will be quoted a lead time of 2 days for the part, if Company As Manufacturing division asks the Supply Chain division what the lead time is, they will be quoted 5 days since shipping will be included. If a line worker asks the Manufacturing Division boss what the time is before the part is ready to be used. In more detail Lead Time terminology has been defined in greater detail, the Supply Chain from customer order received to the moment the order is delivered is divided into five lead times. Order Lead Time - Time from customer order received to customer order delivered, Order Handling Time - Time from customer order received to sales order created. Manufacturing Lead Time - Time from sales order created to production finished, Production Lead Time - Time from start of physical production of first submodule/part to production finished
5.
Seasonality
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In time series data, seasonality is the presence of variations that occur at specific regular intervals less than a year, such as weekly, monthly, or quarterly. Seasonal fluctuations in a series can be contrasted with cyclical patterns. The latter occur when the data exhibits rises and falls that are not of a fixed period and these fluctuations are usually due to economic conditions and are often related to the business cycle. The period of time usually extends beyond a year and the fluctuations are usually of at least two years. Organizations facing seasonal variations, such as vendors, are often interested in knowing their performance relative to the normal seasonal variation. It is necessary for organizations to identify and measure seasonal variations within their market to help plan for the future. This can prepare them for the temporary increases or decreases in labor requirements and this may require training, periodic maintenance, and so forth that can be organized in advance. There are several reasons for studying seasonal variation, The description of the seasonal effect provides a better understanding of the impact this component has upon a particular series. After establishing the pattern, methods can be implemented to eliminate it from the time-series to study the effect of other components such as cyclical. This elimination of the effect is referred to as de-seasonalizing or seasonal adjustment of data. To use the past patterns of the variations to contribute to forecasting. The run sequence plot is a recommended first step for analyzing any time series, although seasonality can sometimes be indicated by this plot, seasonality is shown more clearly by the seasonal subseries plot or the box plot. The seasonal subseries plot does an excellent job of showing both the differences and also the within-group patterns. The box plot shows the seasonal difference quite well, but it does not show within group patterns, however, for large data sets, the box plot is usually easier to read than the seasonal subseries plot. The seasonal plot, seasonal subseries plot, and the box plot all assume that the periods are known. In most cases, the analyst will in fact, know this, for example, for monthly data, the period is 12 since there are 12 months in a year. However, if the period is not known, the plot can help. If there is significant seasonality, the plot should show spikes at lags equal to the period
6.
Economies of scale
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Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well. Economies of scale apply to a variety of organizational and business situations and at levels, such as a business or manufacturing unit. Some economies of scale, such as capital cost of manufacturing facilities and friction loss of transportation, the economic concept dates back to Adam Smith and the idea of obtaining larger production returns through the use of division of labor. Diseconomies of scale are the opposite, Economies of scale often have limits, such as passing the optimum design point where costs per additional unit begin to increase. Common limits include exceeding the nearby raw material supply, such as wood in the lumber, pulp, a common limit for low cost per unit weight commodities is saturating the regional market, thus having to ship product uneconomical distances. Other limits include using energy less efficiently or having a defect rate. Large producers are usually efficient at long runs of a product grade and they will therefore avoid specialty grades even though they have higher margins. Often smaller manufacturing facilities remain viable by changing from commodity grade production to specialty products, the simple meaning of economies of scale is doing things more efficiently with increasing size or speed of operation. Economies of scale often originate with fixed capital, which is lowered per unit of production as design capacity increases, in wholesale and retail distribution, increasing the speed of operations, such as order fulfillment, lowers the cost of both fixed and working capital. Other common sources of economies of scale are purchasing, managerial, financial, marketing, each of these factors reduces the long run average costs of production by shifting the short-run average total cost curve down and to the right. Economies of the scale is a concept that may explain real world phenomena such as patterns of international trade or the number of firms in a market. The exploitation of economies of scale helps explain why companies grow large in some industries, a lone car maker may be profitable, but even more so if they exported cars to global markets in addition to selling to the local market. Economies of scale play a role in a natural monopoly. There is a distinction between two types of economies of scale, internal and external, conversely, an industry exhibits an external economy of scale when costs drop due to the introduction of more firms, thus allowing for more efficient use of specialized services and machinery. Instead, he believes that economies will come from improving the flow of a service, in trying to manage and reduce unit costs, firms often raise total costs by creating failure demand. This law has an effect on the capital cost of such things as buildings, factories, pipelines, ships. In structural engineering, the strength of beams increases with the cube of the thickness, drag loss of vehicles like aircraft or ships generally increases less than proportional with increasing cargo volume, although the physical details can be quite complicated. Therefore, making them larger usually results in fuel consumption per ton of cargo at a given speed
7.
Accountant
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In many jurisdictions, professional accounting bodies maintain standards of practice and evaluations for professionals. Such professionals are granted certain responsibilities by statute, such as the ability to certify an organizations financial statements, non-qualified accountants may be employed by a qualified accountant, or may work independently without statutory privileges and obligations. The Big Four auditors are the largest employers of accountants worldwide, however, most accountants are employed in commerce, industry and the public sector. The Institute of Chartered Accountants of Scotland received its Royal Charter in 1854 and is the worlds first professional body of accountants, a Chartered Management Accountant must be a member of the Chartered Institute of Management Accountants. A Chartered Public Finance Accountant must be a member of the Chartered Institute of Public Finance, an International Accountant is a member of the Association of International Accountants. An Incorporated Financial Accountant is a member of the Institute of Financial Accountants, a Public Accountant may be a member of the Institute of Public Accountants. Registered Qualified Accountant is a member of Accountants Institute, excepting the Association of Certified Public Accountants, each of the above bodies admits members only after passing examinations and undergoing a period of relevant work experience. Once admitted, members are expected to comply with ethical guidelines, the ICAEW, ICAS, ICAI, ACCA and AAPA are five Recognised Supervisory Bodies RSB in the UK. It is illegal for any individual or firm that is not a Statutory Auditor to perform a company audit, the ICAEW, ICAS, ICAI, ACCA, AIA and CIPFA are six Recognised qualifying bodies statutory RQB in the UK. A member of one them may become a Statutory Auditor in accordance with the Companies Act. All six RQBs are listed under EU mutual recognition directives to practise in 27 EU member states, further restrictions apply to accountants who carry out insolvency work. In addition to the bodies above, technical qualifications are offered by the Association of Accounting Technicians, ACCA and AIA, other international bodies such as ACCA and Institute of Chartered Accountants in England and Wales enjoy recognition for the purposes of supporting their members in their careers. For instance, ACCA has achieved recognition by the Tax Practitioner Board, as Tax and BAS agents, Chartered accountancy is governed in Bangladesh by the Institute of Chartered Accountants of Bangladesh. And The Institute of Cost and Management Accountants of Bangladesh offers management accountant studies in Bangladesh, up to 2013, there were three nationally recognized accounting designations in Canada, Chartered Accountant, Certified General Accountant, and Certified Management Accountants. The national CA and CGA bodies were created by Acts of Parliament in 1902 and 1913 respectively, cGA-Canada integrated with CPA Canada on October 1,2014, completing the unification of Canada’s accounting profession at the national level. All recognized national and provincial accounting bodies in Canada have now unified under the CPA banner, the Canadian CPA designation is held by more than 200,000 members in Canada and around the world. Chartered accountancy is offered in India by the Institute of Chartered Accountants of India and this Institute was established in 1949 under the Chartered Accountants Act,1949 for the regulation of the profession of Chartered Accountants in India. The ICAI set up the Accountancy Museum of India in 2009 and it is currently located at ICAIs office in Noida
8.
Manufacturing
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Manufacturing is the value added to production of merchandise for use or sale using labour and machines, tools, chemical and biological processing, or formulation. Manufacturing engineering or manufacturing process are the steps through which raw materials are transformed into a final product, the manufacturing process begins with the product design, and materials specification from which the product is made. These materials are modified through manufacturing processes to become the required part. Manufacturing takes turns under all types of economic systems, in a free market economy, manufacturing is usually directed toward the mass production of products for sale to consumers at a profit. In a collectivist economy, manufacturing is more directed by the state to supply a centrally planned economy. In mixed market economies, manufacturing occurs under some degree of government regulation, modern manufacturing includes all intermediate processes required the production and integration of a products components. Some industries, such as semiconductor and steel manufacturers use the term fabrication instead, the manufacturing sector is closely connected with engineering and industrial design. Examples of major manufacturers in North America include General Motors Corporation, General Electric, Procter & Gamble, General Dynamics, Boeing, Pfizer, examples in Europe include Volkswagen Group, Siemens, and Michelin. Examples in Asia include Sony, Huawei, Lenovo, Toyota, Samsung, in its earliest form, manufacturing was usually carried out by a single skilled artisan with assistants. In much of the world, the guild system protected the privileges. Before the Industrial Revolution, most manufacturing occurred in rural areas, entrepreneurs organized a number of manufacturing households into a single enterprise through the putting-out system. Toll manufacturing is an arrangement whereby a first firm with specialized equipment processes raw materials or semi-finished goods for a second firm, manufacturing provides important material support for national infrastructure and for national defense. On the other hand, most manufacturing may involve significant social and environmental costs, the clean-up costs of hazardous waste, for example, may outweigh the benefits of a product that creates it. Hazardous materials may expose workers to health risks and these costs are now well known and there is effort to address them by improving efficiency, reducing waste, using industrial symbiosis, and eliminating harmful chemicals. The negative costs of manufacturing can also be addressed legally, developed countries regulate manufacturing activity with labor laws and environmental laws. Across the globe, manufacturers can be subject to regulations and pollution taxes to offset the costs of manufacturing activities. Labor unions and craft guilds have played a role in the negotiation of worker rights. Environment laws and labor protections that are available in developed nations may not be available in the third world, tort law and product liability impose additional costs on manufacturing
9.
Nonprofit organization
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A nonprofit organization is an organization whose purpose is something other than making a profit. A nonprofit organization is dedicated to furthering a particular social cause or advocating for a particular point of view. This is known as the non-distribution constraint, the decision to adopt a nonprofit legal structure is one that will often have taxation implications, particularly where the nonprofit seeks income tax exemption, charitable status and so on. The terms nonprofit and not-for-profit are not consistently differentiated across jurisdictions, in laymans terms they are usually equivalent in concept, although in various jurisdictions there are accounting and legal differences. The nonprofit landscape is varied, although many people have come to associate NPOs with charitable organizations. Although charities do make up an often high-profile or visible aspect of the sector, overall, they tend to be either member-serving or community-serving. e. It could be argued many nonprofits sit across both camps, at least in terms of the impact they make. For example, the support group that provides a lifeline to those with a particular condition or disease could be deemed to be serving its members. Many NPOs use the model of a bottom line in that furthering their cause is more important than making a profit. Although NPOs are permitted to generate revenues, they must be retained by the organization for its self-preservation, expansion. NPOs have controlling members or a board of directors, many have paid staff including management, whereas others employ unpaid volunteers and executives who work with or without compensation. In some countries, where there is a fee, in general. The extent to which an NPO can generate surplus revenues may be constrained or use of surplus revenues may be restricted. Some NPOs may also be a charity or service organization, they may be organized as a corporation or as a trust. Their goal is not to be successful in terms of wealth, NPOs have a wide diversity of structures and purposes. Some of the above must be expressed in the charter of establishment or constitution. Others may be provided by the authority at each particular jurisdiction. While affiliations will not affect a legal status, they may be taken into consideration by legal proceedings as an indication of purpose, most countries have laws that regulate the establishment and management of NPOs and that require compliance with corporate governance regimes
10.
Warehouse
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A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs and they are usually large plain buildings in industrial areas of cities, towns and villages. They usually have loading docks to load and unload goods from trucks, sometimes warehouses are designed for the loading and unloading of goods directly from railways, airports, or seaports. They often have cranes and forklifts for moving goods, which are placed on ISO standard pallets loaded into pallet racks. Stored goods can include any raw materials, packing materials, spare parts, components, or finished goods associated with agriculture, manufacturing, in Indian English a warehouse may be referred to as a godown. The origins of the warehouse are difficult to pinpoint, early civilizations relied on storage pits rather than large structures to protect seeds and surplus food. Sociologists like Alain Testart have argued that these early techniques were essential to the evolution of societies. Some of the earliest examples of warehouses that resemble the buildings of today are Roman horrea and these were rectangular buildings, built of stone, with a raised ground floor and overhanging roof to keep the walls cool and dry. Roman horrea were typically used to store grain, but other such as olive oil, wine, clothing. Though horrea were built throughout the Roman empire, some of the most studied examples are found in or around Rome, particularly at Ostia, a harbor city that served ancient Rome. The Horrea Galbae, a complex in the southern part of ancient Rome, demonstrates that these buildings could be substantial. The horrea complex contained 140 rooms on the floor alone. As a point of reference, less than half of U. S. warehouses today are larger than 100,000 square feet, however, dedicated warehouses could be found around ports and other commercial hubs to facilitate overseas trade. Examples of these include the Venetian fondaci, which combined a palace, warehouse, market. During the industrial revolution the function of warehouses evolved and became more specialised, some warehouses from the period are even considered architecturally significant, such as Manchesters cotton warehouses. Always a building of function, in the past few decades they have adapted to mechanisation, technological innovation, historically, warehouses were a dominant part of the urban landscape from the start of the Industrial Revolution through the 19th century and into the twentieth century. The buildings remained when their original usage had changed, there are four identifiable types of warehouses. The cotton industry rose with the development of the warehouse, Warehouses of that period in Manchester were often lavishly decorated, but modern warehouses are more functional
11.
Retail
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Retail markets and shops have a very ancient history, dating back to antiquity. Retailing involves the process of selling goods or services to customers through multiple channels of distribution to earn a profit. Retailers satisfy demand is identified through a supply chain, Once the strategic retail plan is in place, retailers devise the retail mix which includes product, price, place, promotion, personnel and presentation. In the digital age, a number of retailers are seeking to reach broader markets by selling through multiple channels. Digital technologies are changing the way that consumers pay for goods. Retailing support services may include the provision of credit, delivery services. Shopping generally refers to the act of buying products, sometimes this is done to obtain final goods, including necessities such as food and clothing, sometimes it takes place as a recreational activity. Recreational shopping often involves window shopping and browsing, it not always result in a purchase. Retail shops occur in a range of types and in many different contexts - from strip shopping centres in residential streets through to large. Shopping streets may restrict traffic to pedestrians only, forms of non-shop retailing include online retailing and mail order. Retail comes from the Old French word tailler, which means to cut off, clip, pare and it was first recorded as a noun with the meaning of a sale in small quantities in 1433. Like in French, the retail in both Dutch and German also refers to the sale of small quantities of items. Also see History of merchants, History of the market place, open air, public markets were known in ancient Babylonia and Assyria. These markets typically occupied a place in the towns centre, surrounding the market, skilled artisans, such as metal-workers and leather workers, occupied premises in alley ways that led to the open market-place. These artisans may have sold wares directly from their premises, in ancient Greece markets operated within the agora, and in ancient Rome the forum. In antiquity, exchange involved direct selling, merchants or peddlers, the Phoenicians, noted for their seafaring skills, plied their ships across the Mediterranean, becoming a major trading power by 9th century BCE. The Phoenicians imported and exported wood, textiles, glass and produce such as wine, oil, dried fruit, the Phoenicians extensive trade networks necessitated considerable book-keeping and correspondence. In around 1500 BCE, the Phoenicians developed an alphabet which was much easier to learn that the complex scripts used in ancient Egypt
12.
Consumer
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A consumer is a person or organization that uses economic services or commodities. In economic systems consumers are utilities expressed in the decision to trade or not, the consumer is the one who pays to consume goods and services produced. As such, consumers play a role in the economic system of a nation. Without consumer demand, producers would lack one of the key motivations to produce, the consumer also forms part of the chain of distribution. The law primarily uses the notion of the consumer in relation to protection laws. As of all voters are also consumers, consumer protection takes on a clear political significance. Concern over the interests of consumers has also spawned activism, as well as incorporation of consumer education into school curricula, there are also various non-profit publications, such as Which. Consumer Reports and Choice Magazine, dedicated to assist in education and decision making. In India, the Consumer Protection Act 1986 differentiates the consummation of a commodity or service for use or to earn a livelihood. Only consumers are protected per this act and any person, entity or organization purchasing a commodity for commercial reasons are exempted from any benefits of this act, U. S. Government National Consumer Protection Week
13.
Raw material
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As feedstock, the term connotes these materials are bottleneck assets and are highly important with regards to producing other products. This phenomenon, known as Dutch disease or the resource curse, an example of this is the geological scandal of the Democratic Republic of Congo as it is rich in raw materials, the Second Congo War focused on controlling these raw materials. Raw materials are used by non-humans, such as birds using found objects. Karl Marx, Capital, Vol.1, Part III, Chap
14.
Outlet store
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An outlet store or factory outlet is a brick and mortar or online store in which manufacturers sell their stock directly to the public, cutting out the middle-men. Traditionally, a factory outlet was an attached to a factory or warehouse. In modern usage, outlet stores are typically manufacturer-branded stores such as Gap or Bon Worth grouped together in outlet malls, the invention of the factory outlet store is often credited to Harold Alfond, founder of the Dexter Shoe Company. Outlets first appeared in the Eastern United States in the 1930s, factory stores started to offer damaged or excess goods to employees at a low price. After some time, the audience expanded to include non-employees, in 1936, Anderson-Little opened an outlet store independent of its existing factories. Until the 1970s, the purpose of outlet stores was to dispose of excess or damaged goods. In 1974, Vanity Fair opened up the first multi-store outlet center in Reading, throughout the 1980s and 1990s, outlet malls grew rapidly in the USA. A typical outlet mall in the USA is opened with between 100,000 to 200,000 square feet of retail space and this can gradually increase to 500,000 to 600,000 feet. The average outlet mall has an area of 216,000 feet, in 2003, outlet malls in the USA generated $15 billion in revenue from 260 stores. The number of US malls increased from 113 in 1988 to 276 in 1991, outlet malls are not an exclusively American phenomenon. In Europe, retailer BAA McArthurGlen has opened 13 malls with over 1,200 stores and 3 million square feet of retail space, stores have also been emerging in Japan since the mid to late 1990s. At factory outlets, the products sold are from one brand only, manufacturers who sell only their own products at a reduced price run factory outlets. On the other hand, retailers run outlet stores, and various brands are sold there, factory outlets have been around longer than outlet stores and were typically built next to the factories where the products were manufactured
15.
Petrolsoft Corporation
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Petrolsoft Corporation was a supply chain management software company with a focus on the petroleum industry. Petrolsoft Corporation was founded at Stanford University in 1989 by Bill Miller and it was later incorporated in 1992. Petrolsoft introduced demand-driven inventory management to the petroleum industry, the initial idea for Petrolsofts inventory management product came from founder David Gamboa familys cash flow problems at their chain of retail gasoline stations. Mr. Millers analysis showed that it was being caused by an imbalance of gasoline stocks. When they approached Chevron with their solution, they discovered this was more than just a family problem, the software solution to this problem became Petrolsofts initial product, based on inventory proportionality. Gordon Hartogensis, a Stanford computer science graduate, joined the company in 1993 as the partner to lead product development. Tank trucks in the oil industry are divided internally into 3 to 6 compartments of various sizes. Service stations typically sell three or four different grades of motor fuel, each delivered grade of motor fuel must have a dedicated underground storage tank. For example, a four compartment truck bringing up to four different products can be filled in 256 different ways, petrolsoft’s technology would choose the optimal way to restore inventory proportionality to the station based on its forecasts of sales by product grade. The period of time from the time of fitting in the tanks to the point of product run out was called the “delivery window”. The delivery window represented the delivery flexibility of when the load could arrive at the station so that it would fit in the tanks. This optimal automation of the replenishment process led to lower average inventories, better utilization of tank truck fleets, lower distribution costs. Petrolsoft grew quickly, eventually making the Inc.500 list of Americas fastest growing companies in both 1998 and 1999. In September 2000, following a sales effort, on-site pilot program. The Chevron contract was executed on September 30,2000 and announced on November 16,2000, in May 2001, Petro-Canada became the largest Canadian customer, utilizing the software to manage the majority of their company-owned sites located in Ontario and Quebec. In 2003, Petro-Canada extended the solution nationwide, irving Oil became the next largest Canadian customer, also executing a contract in 2001. Savings for these companies as a result of using Petrolsofts solutions was in the millions of dollars each year, prior to the implementation of Petrolsofts technology, the petroleum industry functioned as a push manufacturing system. That is, product was manufactured based on current market prices without regard to actual branded demand, once Petrolsofts demand forecasting based inventory management system was implemented, oil companies were able to track and aggregate demand from their end customers on a real time basis
16.
Chevron Corporation
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Chevron Corporation is an American multinational energy corporation. One of the companies of Standard Oil, it is headquartered in San Ramon, California. It was also one of the Seven Sisters that dominated the petroleum industry from the mid-1940s to the 1970s. Chevrons downstream operations manufacture and sell products such as fuels, lubricants, additives, the companys most significant areas of operations are the west coast of North America, the U. S. Gulf Coast, Southeast Asia, South Korea, Australia and South Africa. In 2010, Chevron sold an average 3.1 million barrels per day of refined products like gasoline, diesel, Chevrons alternative energy operations include geothermal, solar, wind power, biofuel, fuel cells, and hydrogen. In 2011–2013, the company planned to spend at least $2 billion on research, Chevron has claimed to be the worlds largest producer of geothermal energy. In October 2011, Chevron launched a 29-MW thermal solar-to-steam facility in the Coalinga Field to produce the steam for enhanced oil recovery, the project is the largest of its kind in the world. Chevron is also one of the first two brands to be Top Tier certified. The other is Tulsa, Oklahoma based QuikTrip, one of Chevrons early predecessors, Star Oil, discovered oil at the Pico Canyon Oilfield in the Santa Susana Mountains north of Los Angeles in 1876. The 25 barrels of oil per day well marked the discovery of the Newhall Field, in September 1879, Charles N. Felton, Lloyd Tevis, George Loomis and others created the Pacific Coast Oil Company, which acquired the assets of Star Oil with $1 million in funding. Pacific Coast Oil became the largest oil interest in California, by time it was acquired by Standard Oil for $761,000 in 1900. Pacific Coast operated independently and retained its name until 1906, when it was merged with a Standard Oil subsidiary, another predecessor, Texas Fuel Company, was founded in 1901 in Beaumont, Texas as an oil equipment vendor by Buckskin Joe. The founders nickname came from being harsh and aggressive, Texas Fuel worked closely with Chevron. In 1936 it formed a joint venture with California Standard named Caltex, to drill, the Texas Fuel Company was renamed the Texas Company, and later renamed Texaco. In 1911, the government broke Standard Oil into several pieces under the Sherman Antitrust Act. One of those pieces, Standard Oil Co. went on to become Chevron and it became part of the Seven Sisters, which dominated the world oil industry in the early 20th century. In 1926, the changed its name to Standard Oil Co. of California. Today Chevron is the owner of the Standard Oil trademark in 16 states in the western and southeastern U. S, to maintain ownership of the mark, the company owns and operates one Standard-branded Chevron station in each state of the area
17.
Just-in-time (business)
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Following its origin and development at the British Motor Corporation plant in Sydney in the mid-1950s, it was also adopted in Japan, largely in the 1960s and 1970s and particularly at Toyota. Alternative terms for JIT manufacturing have been used, iBMs was continuous-flow manufacturing, and demand-flow manufacturing, a term handed down from consultant John Constanza at his Institute of Technology in Colorado. But the wide use of the term JIT manufacturing throughout the 1980s faded fast in the 1990s, as just one testament to the commonality of the two terms, Toyota production system has been and is widely used as a synonym for both JIT and lean manufacturing. The exact reasons for adoption of JIT in Japan are unclear, plenert offers four reasons, paraphrased here. During Japans post-World War II rebuilding of industry,1, Japans lack of cash made it difficult for industry to finance the big-batch, large inventory production methods common elsewhere. Japan lacked space to build big factories loaded with inventory, the Japanese islands were lacking in natural resources with which to build products. Japan had high unemployment, which meant that labor efficiency methods were not a pathway to industrial success. Thus the Japanese leaned out their processes, in which the only materials housed in the factory were those on which work was currently being done. Plenart goes on to explain Toyotas key role in developing this lean or JIT production methodology, the other article, by Toyota authors in an international journal, provided additional details. Finally, those and other publicity were translated into implementations, beginning in 1980 and then quickly multiplying throughout industry in the United States and other developed countries. The principle speaker, Fujio Cho, in explaining the Toyota system, stirred up the audience, debates in professional meetings on JIT vs. MRP II were followed by published articles, one of them titled, The Rise and Fall of Just-in-Time. Less confrontational was Walt Goddards, Kanban Versus MRP II—Which Is Best for You. in 1982, Four years later Goddard had answered his own question with a book advocating JIT. Among the best known of MRP IIs advocates was George Plossl, but, as with Goddard, Plossl later wrote that JIT is a concept whose time has come. JIT/TPS implementations may be found in many articles from the 1980s. One article in a 1984 issue of Inc. magazine relates how Omark Industries emerged as an extensive JIT implementer under its home-grown name ZIPS. At Omarks mother plant in Portland, Oregon, after the force had received 40 hours of ZIPS training, they were turned loose. A first step was to eliminate a weeks lead time things ran smoother. People asked that we try taking another weeks worth out, after that, ZIPS spread throughout the plants operations like an amoeba
18.
Toyota
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Toyota Motor Corporation is a Japanese automotive manufacturer headquartered in Toyota, Aichi, Japan. In March 2014, the corporation consisted of 338,875 employees worldwide and. As of 2016, Toyota is the worlds second-largest automotive manufacturer behind German Volkswagen Group, Toyota was the worlds first automobile manufacturer to produce more than 10 million vehicles per year which it has done since 2012, when it also reported the production of its 200-millionth vehicle. As of July 2014, Toyota was the largest listed company in Japan by market capitalization, Toyota is the worlds market leader in sales of hybrid electric vehicles, and one of the largest companies to encourage the mass-market adoption of hybrid vehicles across the globe. Cumulative global sales of Toyota and Lexus hybrid passenger car models achieved the 10 million milestone in January 2017 and its Prius family is the worlds top selling hybrid nameplate with over 6 million units sold worldwide as of January 2017. The company was founded by Kiichiro Toyoda in 1937, as a spinoff from his fathers company Toyota Industries to create automobiles. Three years earlier, in 1934, while still a department of Toyota Industries, it created its first product, the Type A engine, and, in 1936, its first passenger car, the Toyota AA. Toyota Motor Corporation produces vehicles under five brands, including the Toyota brand, Hino, Lexus, Ranz, TMC is part of the Toyota Group, one of the largest conglomerates in the world. Toyota is headquartered in Toyota City, Aichi, the main headquarters of Toyota is located in a 4-story building in Toyota. As of 2006, the office has the Toyopet Toyota logo. Vinod Jacob from The Hindu described the headquarters building as modest. In 2013, company head Akio Toyoda reported that it had difficulties retaining foreign employees at the due to the lack of amenities in the city. Its Tokyo office is located in Bunkyo, Tokyo and its Nagoya office is located in Nakamura-ku, Nagoya. In addition to manufacturing automobiles, Toyota provides financial services through its Toyota Financial Services division, since 1950, the two entities had existed as separate companies as a prerequisite for reconstruction in postwar Japan. Shoichiro Toyoda presided over Toyota Motor Sales in preparation for the consummation of the merger occurred in 1982. Shoichiro then succeeded his uncle Eiji as the President of the organization that then became known as Toyota Motor Corporation. Announced the appointment of board members, this was a first for the corporation. Additionally, Vice Chairman Takeshi Uchiyamada replaced Fujio Cho as chairman, Toyota is publicly traded on the Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo exchanges under company code TYO,7203
19.
Financial accounting
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Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions pertaining to a business. This involves the preparation of financial statements available for public consumption, stockholders, suppliers, banks, employees, government agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes. Financial accountancy is governed by local and international accounting standards. Generally Accepted Accounting Principles is the framework of guidelines for financial accounting used in any given jurisdiction. It includes the standards, conventions and rules that follow in recording and summarizing. IFRS are issued by the International Accounting Standards Board, with IFRS becoming more widespread on the international scene, consistency in financial reporting has become more prevalent between global organizations. Financial accounting and financial reporting are often used as synonyms, according to the European Accounting Association, Capital maintenance is a competing objective of financial reporting. When producing financial statements, they must comply to the following, Relevance and it must be possible for accounting information to influence decisions. Unless this characteristic is present, there is no point in cluttering statements, materiality, information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. Reliability, accounting must be free from significant error or bias and it should be easily relied upon by managers. Often information that is highly relevant isn’t very reliable, and vice versa, understandability, accounting reports should be expressed as clearly as possible and should be understood by those to whom the information is relevant. Comparability can be ensured by applying the same accounting policies over time, the statement of cash flows considers the inputs and outputs in concrete cash within a stated period. During that same month, Ellen borrowed $20 from Tom, at the end of the month, Ellen bought a pair of shoes for $7. Theyd originally bought the tables for $25 each, and sold them at a price of $50 per table, the first table was paid out in cash however the second one was bought in credit terms. WikiTables cash flow statement for the month of June looks like this, Cash inflow and they didnt receive cash for the second table. Cash outflow, $50 - How much theyd originally bought the 2 tables for, opening balance, $0 Closing balance, $50 – $25 + $0 = $25–25=$0 - Indeed, the cash flow for the month of June for WikiTables amounts to $0 and not $50. Important, the cash flow statement only considers the exchange of actual cash, in the case of service organizations, they are called as profit & loss a/c as income statement. The right and left sides are equal in dollar amount
20.
Management accounting
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One simple definition of management accounting is the provision of financial and non-financial decision-making information to managers. Performance management—developing the practice of business decision-making and managing the performance of the organization, risk management—contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization. The Institute of Certified Management Accountants, Management accountants therefore are seen as the value-creators amongst the accountants. They are more concerned with looking and taking decisions that will affect the future of the organization, than in the historical recording. In 2014 CIMA created the Global Management Accounting Principles, the result of research from across 20 countries in five continents, the principles aim to guide best practice in the discipline. Focus, Financial accounting focuses on the company as a whole, Management accounting provides detailed and disagregated information about products, individual activities, divisions, plants, operations and tasks. Traditional approaches limit themselves by defining cost behavior only in terms of production or sales volume, in 1993, the Accounting Education Change Commission Statement Number 4 calls for faculty members to expand their knowledge about the actual practice of accounting in the workplace. Variance analysis is an approach to the comparison of the actual and budgeted costs of the raw materials. Other approach that can be viewed as innovative to the U. S. is the German approach, one of the more innovative accounting practices available today is resource consumption accounting. Consistent with other roles in corporations, management accountants have a dual reporting relationship. A function of management accounting in such organizations is to work closely with the IT department to provide IT cost transparency, given the above, one view of the progression of the accounting and finance career path is that financial accounting is a stepping stone to management accounting. Consistent with the notion of creation, management accountants help drive the success of the business while strict financial accounting is more of a compliance. Activity-based costing was first clearly defined in 1987 by Robert S. Kaplan and W. Bruns as a chapter in their book Accounting and Management, A Field Study Perspective. For example, increased automation has reduced labor, which is a direct cost, but has increased depreciation, the term Grenzplankostenrechnung, often referred to as GPK, has best been translated as either marginal planned cost accounting or flexible analytic cost planning and accounting. GPK is published in cost accounting textbooks, notably Flexible Plankostenrechnung und Deckungsbeitragsrechnung, in the mid- to late-1990s several books were written about accounting in the lean enterprise. The term lean accounting was coined during that period and these books contest that traditional accounting methods are better suited for mass production and do not support or measure good business practices in just-in-time manufacturing and services. The movement reached a point during the 2005 Lean Accounting Summit in Dearborn, Michigan. 320 individuals attended and discussed the advantages of a new approach to accounting in the lean enterprise,520 individuals attended the 2nd annual conference in 2006 and it has varied between 250 and 600 attendees since that time
21.
Purchasing
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Purchasing refers to a business or organization attempting to acquire goods or services to accomplish the goals of its enterprise. Though there are organizations that attempt to set standards in the purchasing process. Purchasing managers/directors, and procurement managers/directors guide the organization’s acquisition procedures, most organizations use a three-way check as the foundation of their purchasing programs. This involves three departments in the organization completing separate parts of the acquisition process, the three departments do not all report to the same senior manager, to prevent unethical practices and lend credibility to the process. These departments can be purchasing, receiving and accounts payable, or engineering, purchasing and accounts payable, or a plant manager, purchasing, combinations can vary significantly, but a purchasing department and accounts payable are usually two of the three departments involved. When the receiving department is not involved, it is called a two-way check or two-way purchase order. In this situation, the purchasing department issues the purchase order receipt not required, when an invoice arrives against the order, the accounts payable department will then go directly to the requestor of the purchase order to verify that the goods or services were received. This is typically what is done for goods and services that bypass the receiving department. A few examples are software delivered electronically, NRE work, consulting hours, historically, the purchasing department issued purchase orders for supplies, services, equipment, and raw materials. Then, in an effort to decrease the costs associated with the repetitive ordering of basic consumable items. These types of agreements typically have a duration and increased scope to maximize the quantities of scale concept. When additional supplies were required, a release would be issued to the supplier to provide the goods or services. Another method of decreasing administrative costs associated with repetitive contracts for common material, is the use of credit cards. P-card programs vary, but all of them have internal checks, Purchasing managers realized once contracts for the low dollar value consumables are in place, procurement can take a smaller role in the operation and use of the contracts. There is still oversight in the forms of audits and monthly statement reviews and these contracts are typically renewable annually. This trend away from the daily procurement function resulted in changes in the industry. The first was the reduction of personnel, there was no need for the army of clerks processing orders for individual parts as in the past. Another change was the focus on negotiating contracts and procurement of large capital equipment, both of these functions permitted purchasing departments to make the biggest financial contribution to the organization
22.
Cost of goods sold
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Cost of goods sold refers to the carrying value of goods sold during a particular period. Costs are associated with particular goods using one of several formulas, including identification, first-in first-out. Costs include all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, costs of goods made by the business include material, labor, and allocated overhead. The costs of goods not yet sold are deferred as costs of inventory until the inventory is sold or written down in value. Many businesses sell goods that they have bought or produced, when the goods are bought or produced, the costs associated with such goods are capitalized as part of inventory of goods. These costs are treated as an expense in the period the business income from sale of the goods. Determining costs requires keeping records of goods or materials purchased and any discounts on such purchase, in addition, if the goods are modified, the business must determine the costs incurred in modifying the goods. Such modification costs include labor, supplies or additional material, supervision, quality control, Principles for determining costs may be easily stated, but application in practice is often difficult due to a variety of considerations in the allocation of costs. Cost of goods sold may also reflect adjustments, among the potential adjustments are decline in value of the goods, obsolescence, damage, etc. When multiple goods are bought or made, it may be necessary to identify which costs relate to particular goods sold. This may be using an identification convention, such as specific identification of the goods, first-in-first-out. Alternative systems may be used in countries, such as last-in-first-out, gross profit method, retail method. Cost of goods sold may be the same or different for accounting and tax purposes, certain expenses are included in COGS. Expenses that are included in COGS cannot be deducted again as a business expense, depreciation Inventories have a significant effect on profits. A business that makes or buys goods to sell must keep track of inventories of goods under all accounting, Fred buys auto parts and resells them. In 2008, Fred buys $100 worth of parts and he sells parts for $80 that he bought for $30, and has $70 worth of parts left. In 2009, he sells the remainder of the parts for $180, if he keeps track of inventory, his profit in 2008 is $50, and his profit in 2009 is $110, or $160 in total. If he deducted all the costs in 2008, he would have a loss of $20 in 2008, the total is the same, but the timing is much different
23.
Inventory turns
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In accounting, the Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the cost of goods sold or net sales divided by the average inventory, Inventory turnover is also known as inventory turns, merchandise turnover, stockturn, stock turns, turns, and stock turnover. However, in instances a low rate may be appropriate. Conversely a high turnover rate may indicate inadequate inventory levels, which may lead to a loss in business as the inventory is too low and this often can result in stock shortages. Some compilers of industry data use sales as the numerator instead of cost of sales, cost of sales yields a more realistic turnover ratio, but it is often necessary to use sales for purposes of comparative analysis. Cost of sales is considered to be realistic because of the difference in which sales. Sales are generally recorded at market value, i. e. the value at which the paid for the good or service provided by the firm. In the event that the firm had a year and the market paid a premium for the firms goods. However, cost of sales is recorded by the firm at what the firm paid for the materials available for sale. Additionally, firms may reduce prices to sales in an effort to cycle inventory. In this article, the terms cost of sales and cost of goods sold are synonymous, an item whose inventory is sold once a year has higher holding cost than one that turns over twice, or three times, or more in that time. Stock turnover also indicates the briskness of the business, the purpose of increasing inventory turns is to reduce inventory for three reasons. Increasing inventory turns reduces holding cost, the organization spends less money on rent, utilities, insurance, theft and other costs of maintaining a stock of good to be sold. Reducing holding cost increases net income and profitability as long as the revenue from selling the item remains constant, items that turn over more quickly increase responsiveness to changes in customer requirements while allowing the replacement of obsolete items. This is a concern in fashion industries. When making comparison between firms, its important to note of the industry, or the comparison will be distorted. Making comparison between a supermarket and a car dealer, will not be appropriate, as supermarket sells fast-moving goods such as sweets, chocolates, however, a car dealer will have a low turnover due to the item being a slow moving item. As such only intra-industry comparison will be appropriate, some computer programs measure the stock turns of an item using the actual number sold
24.
Specific Identification
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Specific identification is a method of finding out ending inventory cost. It requires a physical count, so that the company knows exactly how many of each goods brought on specific dates remained at year end inventory. When this information is found, the amount of goods are multiplied by their purchase cost at their purchase date, in theory, this method is the best method, since it relates the ending inventory goods directly to the specific price they were bought for. Alternatively, management can choose to report income, to reduce the taxes they needed to pay. This method is very hard to use on interchangeable goods. For example, it is hard to relate shipping and storage costs to an inventory item. These numbers will need to be estimated, hence reducing the specific identification methods benefit of being extremely specific
25.
Weighted Average Cost
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Under the Average Cost Method, it is assumed that the cost of inventory is based on the average cost of the goods available for sale during the period. The average cost is computed by dividing the total cost of available for sale by the total units available for sale. This gives a unit cost that is applied to the units in the ending inventory. There are two commonly used average cost methods, Simple Weighted-average cost method and perpetual weighted-average cost method, Weighted Average Cost is a method of calculating Ending Inventory cost. It is also known as WAVCOs It takes Cost of Goods Available for Sale and this gives a Weighted Average Cost per Unit. A physical count is performed on the ending inventory to determine the number of goods left. Finally, this quantity is multiplied by Weighted Average Cost per Unit to give an estimate of ending inventory cost, the cost of goods sold valuation is the amount of goods sold times the Weighted Average Cost per Unit. The sum of these two amounts equals the actual cost of all purchases and beginning inventory. Moving-Average Cost is a method of calculating Ending Inventory cost, assume that both Beginning Inventory and beginning inventory cost are known. From them the Cost per Unit of Beginning Inventory can be calculated, during the year, multiple purchases are made. Each time, purchase costs are added to beginning inventory cost to get Cost of Current Inventory, similarly, the number of units bought is added to beginning inventory to get Current Goods Available for Sale. After each purchase, Cost of Current Inventory is divided by Current Goods Available for Sale to get Current Cost per Unit on Goods, also during the year, multiple sales happen. This deducted amount is added to Cost of Goods Sold, at the end of the year, the last Cost per Unit on Goods, along with a physical count, is used to determine ending inventory cost. Intermediate Accounting 8th Canadian Edition, page 447, Kieso, Weygandt, Warfield, Young, Wiecek, John Wiley & Sons Canada, Ltd,2007, ISBN 978-0-470-83979-9
26.
Moving-Average Cost
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Under the Average Cost Method, it is assumed that the cost of inventory is based on the average cost of the goods available for sale during the period. The average cost is computed by dividing the total cost of available for sale by the total units available for sale. This gives a unit cost that is applied to the units in the ending inventory. There are two commonly used average cost methods, Simple Weighted-average cost method and perpetual weighted-average cost method, Weighted Average Cost is a method of calculating Ending Inventory cost. It is also known as WAVCOs It takes Cost of Goods Available for Sale and this gives a Weighted Average Cost per Unit. A physical count is performed on the ending inventory to determine the number of goods left. Finally, this quantity is multiplied by Weighted Average Cost per Unit to give an estimate of ending inventory cost, the cost of goods sold valuation is the amount of goods sold times the Weighted Average Cost per Unit. The sum of these two amounts equals the actual cost of all purchases and beginning inventory. Moving-Average Cost is a method of calculating Ending Inventory cost, assume that both Beginning Inventory and beginning inventory cost are known. From them the Cost per Unit of Beginning Inventory can be calculated, during the year, multiple purchases are made. Each time, purchase costs are added to beginning inventory cost to get Cost of Current Inventory, similarly, the number of units bought is added to beginning inventory to get Current Goods Available for Sale. After each purchase, Cost of Current Inventory is divided by Current Goods Available for Sale to get Current Cost per Unit on Goods, also during the year, multiple sales happen. This deducted amount is added to Cost of Goods Sold, at the end of the year, the last Cost per Unit on Goods, along with a physical count, is used to determine ending inventory cost. Intermediate Accounting 8th Canadian Edition, page 447, Kieso, Weygandt, Warfield, Young, Wiecek, John Wiley & Sons Canada, Ltd,2007, ISBN 978-0-470-83979-9
27.
FIFO and LIFO accounting
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They are used to manage assumptions of cost sheet related to inventory, stock repurchases, and various other accounting purposes. FIFO stands for first-in, first-out, meaning that the oldest inventory items are recorded as sold first but do not necessarily mean that the exact oldest physical object has been tracked and sold. In other words, the cost associated with the inventory that was purchased first is the cost expenses first, with FIFO, the cost of inventory reported on the balance sheet represents the cost of the inventory most recently purchased. Under FIFO, the total cost of sales for November would be $11,050, the ending inventory would be calculated the following way, Thus, the balance sheet would now show the inventory valued at $5250. LIFO stands for last-in, first-out, meaning that the most recently produced items are recorded as sold first, LIFO is used only in the United States, which is governed by the generally accepted accounting principles. Section 472 of the Internal Revenue Code directs how LIFO may be used, in the example above, the company would expense the cost associated with the first 75 units at $59,125 more units at $55, and the remaining 10 units at $50. Under LIFO, the total cost of sales for November would be $11,800, the ending inventory would be calculated the following way, The balance sheet would show $4500 in inventory under LIFO. The difference between the cost of an inventory calculated under the FIFO and LIFO methods is called the LIFO reserve and this reserve is essentially the amount by which an entitys taxable income has been deferred by using the LIFO method. A number of tax proposals have argued for the repeal of LIFO tax provision. The Save LIFO Coalition argues in favor of the retention of LIFO, taxpolicycenter. org, Tax Topics, Repeal LIFO LIFO/FIFO
28.
Accounting
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Accounting or accountancy is the measurement, processing and communication of financial information about economic entities such as businesses and corporations. The modern field was established by the Italian mathematician Luca Pacioli in 1494, practitioners of accounting are known as accountants. The terms accounting and financial reporting are often used as synonyms, Accounting can be divided into several fields including financial accounting, management accounting, external auditing, and tax accounting. Accounting information systems are designed to support accounting functions and related activities, Accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are audited by accounting firms, and are prepared in accordance with generally accepted accounting principles. GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board in the United States, as of 2012, all major economies have plans to converge towards or adopt the International Financial Reporting Standards. The history of accounting is thousands of old and can be traced to ancient civilizations. By the time of the Emperor Augustus, the Roman government had access to detailed financial information, double-entry bookkeeping developed in medieval Europe, and accounting split into financial accounting and management accounting with the development of joint-stock companies. The first work on a double-entry bookkeeping system was published in Italy, both the words accounting and accountancy were in use in Great Britain by the mid-1800s, and are derived from the words accompting and accountantship used in the 18th century. In Middle English the verb to account had the form accounten, which was derived from the Old French word aconter, which is in turn related to the Vulgar Latin word computare, meaning to reckon. The base of computare is putare, which meant to prune, to purify, to correct an account, hence, to count or calculate. The word accountant is derived from the French word compter, which is derived from the Italian. Accountancy refers to the occupation or profession of an accountant, particularly in British English, Accounting has several subfields or subject areas, including financial accounting, management accounting, auditing, taxation and accounting information systems. Financial accounting focuses on the reporting of a financial information to external users of the information, such as investors. It calculates and records business transactions and prepares financial statements for the users in accordance with generally accepted accounting principles. GAAP, in turn, arises from the agreement between accounting theory and practice, and change over time to meet the needs of decision-makers. This branch of accounting is also studied as part of the exams for qualifying as an actuary. It is interesting to note that two professionals, accountants and actuaries, have created a culture of being archrivals
29.
Historical cost
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In accounting under the traditional historical cost paradigm, historical cost is the original nominal monetary value of an economic item. Historical cost is based on the measuring unit assumption. In some circumstances, assets and liabilities may be shown at their historical cost, the balance sheet value of the item may therefore differ from the real value. While historical cost is criticised for its inaccuracy, it remains in use in most accounting systems during low, various corrections to historical cost are used, many of which require the use of management judgment and may be difficult to verify. Depreciation affects the value of an asset on the balance sheet. The historical cost will equal the value if there has been no change recorded in the value of the asset since acquisition. Improvements may be added to the cost basis of an asset, Historical cost does not generally reflect current market valuation. Under the historical cost basis of accounting, assets and liabilities are recorded at their values when first acquired and they are not then generally restated for changes in values. Costs recorded in the Income Statement are based on the historical cost of items sold or used, rather than their replacement costs. For example, – a company acquires an asset in year 1 for $100, the asset is held at the end of year 1, when its market value is $120. At the end year 1 the asset is recorded in the sheet at cost of $100. No account is taken of the increase in value from $100 to $120 in year 1, in year 2 the company records a sale of $115. The cost of sales is $100, being the historical cost of the asset and this gives rise to a gain of $15 which is wholly recognized in year 2. It is standard under the historical cost basis to write down the value of inventory to a lower cost and these can include site preparation, delivery and handling costs, installation, assembly, testing, professional fees and the costs of employees directly involved in these activities. In IFRS, cost also includes the initial estimate of the costs of dismantling and removing the item, Cost may include the cost of borrowing to finance construction if this policy is consistently adopted. Cost is then subject to depreciation with to write off the cost of the asset over its useful life down to the recoverable amount. Certain financial instruments may be recorded at historical cost, any initial premium or discount is amortized into interest over time, and so the resulting value is often described as amortized cost. Monetary items such as cash balances, receivables and payables which are denominated in foreign currency are reported using the exchange rate under IFRS
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