Costco Research Paper
Question
Describe and discuss how Costco differentiates between financial and managerial accounting, and identify the value of managerial accounting and the unique ethical responsibilities that inherent in the field. The research paper has to be based on the company which is Costco. This assignment is for my Business Managerial Class and we use Horngren's Financial & Managerial Accounting book, if that helps.


Solution
Managerial
Accounting as Applied by Costco Company
Managerial Accounting is a system put
in place by an institution to provide relevant information to its managers so
as to enable them to make an information-based decision for the efficient running of the organization. The
system specified standards, provide information for internal consumption and
uses both financial and non-financial information. Managerial accounting is,
therefore, flexible to the organizational (Horngren, et al. 14).
The effectiveness and success of an organization, such as Costco, will, therefore, rely on the on the strength of
such a system. Contrary to this, financial accounting is a branch of accounting
which deals with organization financial
transaction using prescribed guidelines in collecting, recording summarizing
and presenting the financial information in forms of report. Financial accounting puts it emphases on
providing accurate and fair view
financial position of the said organization to both internal and external
interested parties while the managerial information users are internal.
Costco Wholesale Corporation is the
world's second largest retailer after Walmart. The success of this retailer
lies behind its administrative accounting
system referred to us Costco Business Model with four essential features. First is the membership subscription in which
its customers subscribe with a service fee of $55 US dollars to cater for lower
prices (Horngren, et al. 44). The company, through the
application of economies of scale, can buy in bulk from selected suppliers whose products will be exclusive in
their retail at lower prices. The prices of her groceries' are always lower
compared to other retail compelling her customers to pay for subscriptions.
Secondly, the use of loss leaders whose price are always lower, and not like
other retails who lower the price of one product, gaining the confidence of her
clients. Thirdly, the retailer pays high wages, retirement scheme and other
social services to her workers. In return, her employees
are highly motivated, and the turnover is low compared to the rate in the
industry. Lastly, Costco always keeps a level number
of the product thus little store keeping
units ( SKUs). On return, her cost of order, tracking, and space is minimized
thus reducing operational cost. The managerial accounting model has made the
institution to grow rapidly in the United States and across the globe.
Managerial accounting has significant
values in the success of any business. Managers are
charged with responsibilities of driving the business to a greater
height. The success depends on the ability of the management to make a sound
information based decision necessitating managerial accounting. Managerial
accounting creates median values in an
organization namely planning, directing, motivating and controlling.
First and foremost, Managerial
accounting creates value in planning. Planning looks at what to be done, how, by who and when. Planning,
therefore, requires in-depth information
on both financial and non-financial matters. A functional managerial system
will, therefore, provide timely information to the responsible manager for
strategic planning thus creating value.
Number two on the list is creating
value in directing. Managers are responsible for the daily operation. They
assign tasks and must give direction on how to be completed. Managerial
accounting systems generate a procedure with specific responsibility guideline
essential for creating the sense of course.
Thirdly managerial accounting creates
value in motivating workers. Human resource forecast ensures that the
organization can obtain the right skill and number of people at the time need.
Information from managerial accounting is essential in creating a good mix of the workforce now and in the
future. Costco Company has been able to utilize managerial accounting
information thus creating value in her workforce trough high-wage, good healthcare,
and pension schemes.
The forth emerging importance of
managerial accounting is that it provide daily information essential in
controlling function. The managerial
accounting is responsible for the provision and analysis daily data. Data such
as performance reports, timesheets and operational statistics actuate control
measures in an organization (Needles, et al. 124).
Lastly on creating value is the
evaluation process. Change is inevitable in any forward-looking organization.
Managerial accounting information is therefore required so that the managers
can evaluate the course of the organization of the body in the light of its
objective. Costco can monitor and examine
new venture especially those abroad thus reacting appropriately. Financial and
non-financial information is necessary for such evaluation
Managerial accounting has its unique
ethos applicable to Costco. The first one is the competence of managerial
accountants. Managerial accountants ought to carry out their work with required
expertise, keeping in mind relevant laws, provide accurate support information
while considering limitation and constraints in their work (Merchant and Van 121)
Confidentiality of highest level
unless authorized or when legal enforcement is applied is a necessity.
Managerial accounting information is passed to relevant authorities using
appropriate channels that will maintain confidentiality. Those undertaking
managerial accounting roles are required by that ethos to refrain from the utilization of this valuable information for personal gain or illegal activities.
Integrity is an ethos that you cannot
go without mentioning in managerial accounting. The responsible accountants are
required to bring into the light of users all information likely to influence
their decision. Intentional delay or deficiency of such information is unallowed. Managerial accounting, therefore,
requires integrity of the highest order.
In conclusion, both managerial and
financial accounting are tools useful to the managers. While both touch on
financial matters, managerial accounting goes an extra mile to analyze non-financial information unique to the
organization for its running. Managerial accounting has unique values and ethos
that are essential to its application in any organization.
Works Cited
Horngren,
Charles T. Accounting. Pearson Australia, 2013.
Horngren,
Charles T, et al. Financial & Managerial Accounting. Prentice
Hall, 2012.
Merchant,
Kenneth A, and Der S. W. A. Van. Management
Control Systems: Performance Measurement, Evaluation and Incentives. Financial Times Prentice Hall, 2003.
Needles,
Belverd E, et al. Financial & Managerial Accounting. 2014.




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