QUESTION 1:
How do the income statement, statement of retained earnings, and the balance sheet interact? In preparing the four primary financial statements, in what order must the statement be prepared? Explain why.
QUESTION 2:
The trial balance is a foundation for the preparation of the financial statements. In addition to the income statement, statement of retained earnings and balance sheet, many organizations prepare a statement of cash flow. How specifically does this statement interact with the other three statements that you discussed? Does it provide information that the other statements do not? Anyone have thoughts about this?
QUESTION 3:
Now, bankers and business owners depend heavily on it to assess operations. How critical does everyone think the statement of cash flow is for organizational analysis?
QUESTION 4:
I have seen some companies that expense shipping costs and do not add them to the cost of the inventory. How does everyone feel about this? Is it better to include them in the cost of inventory or expense them right away? Which way is the correct way to present it?
QUESTION 5:
Certainly, the division of duties is critical to ensure that double entries or the errors that you mentioned are not created. How do you think this is done in an organization? What internal controls do you think are in place to help with this issue?
QUESTION 6:
Often future planning involves evaluation of inventory and the amount that is maintained on hand. Many organizations, including those that sell products online, spend lots of effort in the evaluation of COGS and inventory levels. My question is, how do companies gauge the amount of inventory that they should produce and keep on hand? For example, here is an article about a very successful company, Under Amour. Check it out and notice the references to COGS and inventory. What are your thoughts about the article? Anyone else?