Introductory economics and finance Essay Example | Topics and Well Written Essays - 1000 words

Introductory economics and finance - Essay Example In USA, almost two thirds of the total production is consumed by the individuals for personal use whereas only one third is consumed by the governments. The free enterprise believes that the private ownership is the best form of the economy because it is able to operate more competently than its counterpart. They believe that when the economic forces are free to act, the supply and the demand of the product intersect to arrive at a competent price. At the same time, this intersection of demand and supply predicts the quantity of production. When the consumers demand more of a product then the economy is producing, the price of the respective good increases. This chance for profitability calls in for more organizations to produce the similar good. At the same time, when the supply of the good in the economy is more than the demand, the price falls as a result. Most of the organizations exit due to the decreasing profitability. Therefore, the market economy operates efficiently followi ng the market forces and reflecting on the wishes of the people (Samuelson, 1998). But there is too much freedom with no regulations that causes the problems and does not make it s viable form of economy for the allocation of resources. On the other hand, the socialist economy is more portrayed by the high state ownership and central planning. The economists believe that this form of the economy is less efficient because it does not reflect on the market forces or the price changes. In this form of economy, the means of the production are owned by the state and the workers. It focuses on ones capacity to produce and wants. Basically, it aspires to provide for more equitability in the economy (Samuelson, 1998). With no economic benefit to the individuals, the people are less efficient and unstable. It also breeds incompetence in the economy that will cause it lose in the long. At the same time, the state benefits call for unannounced immigrants and cause stagnation in the economy.

Accounting for Costa Company Essay Example | Topics and Well Written Essays - 750 words

Accounting for Costa Company - Essay Example expenses 4,500 Property taxes 6,500 Rent 22,000 Operating Income 84,100 1. The case of Costa Company reflects a case having one error in the valuation of closing inventory recorded in the company’s books and one omission of sale transaction. Both types of mistakes made by the company can have significant impact on the true reflection of the company’s financial position. As in the case of incorrect valuation of inventories being overstated has a negative impact on the book value of the company and at the same time it causes costs of goods sold to be understated. The understatement of cost of goods sold has a positive impact on the company’s profitability (Weygandt, Kimmel, & Kieso, 2010). This is often done by managers in order to fictitiously boost the company’s profits in the short term to gain certain financial benefits and later on losses are recorded in books, which would ultimately have a negative effect on shareholders’ value invested in the c ompany. Moreover, companies are often involved in changing methods of inventory valuation i.e. FIFO, LIFO, and Average Costing between accounting periods, which if performed without proper scrutiny could lead to major change in the value of the company’s closing inventory and hence, making the financial statements incorrect reflections of the business position. It is therefore necessary for businesses and regulators to ensure that companies maintain uniformity in the selection and application of the accounting standards. If it is deemed necessary then previous accounts must also be revised to reflect the true position of the company’s business (Fridson & Alvarez, 2011). On the other hand, omissions are regarded as certain transactions or amounts deliberately or non-deliberately left out of the company’s books and no entries are made by the company (Warren, Reeve, & Duchac, 2012). In the case of Costa Company, although the amount of sale transaction was not signi ficantly high, but certain transactions could surely mislead the company’s financial position reported to shareholders. This would cause understate profit of the company and hence, it would affect the equity position of the company which is reported as retained earnings in the company’s balance sheet (Porter & Norton, 2010). 2. From the income statement of Costa Company as prepared above it could be indicated that the company is generating a gross profit of $211,790 which is arrived at after deducting costs of goods sold after making adjustment to the closing inventory value from the company’s revenues, which are also adjusted for the missing transaction of $5,000. This reflects that the company is operating at high gross profit margin of almost 34% in the year 2012. After deducting all operating expenses and property taxes the company has generated a net income of $84,100. This is lesser than before which was recorded without taking into account errors and miss tatements. This indicates that if companies fail to take into business transactions or wrongly value and report an entry then this could lead to falsification of the entire financial statement and incorrect information passed onto shareholders who rely on the financial statements for their decisions (Fridson & Alvarez, 2011). This reflects that the company has a net profit margin of 13.5%. All these indicators reflect that the company is a profitable entity and shareholders can expect good returns on their investments in the company. 3. Costa Company 31-Dec-12 Balance Sheet Current Assets Accounts receivable 18,000 Cash 41,500 Inventory