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News Update: Starbucks Declares First-Ever Cash Dividend
Shares of Starbucks Corporation (NASDAQ:SBUX) are trading 1.3% higher to $25.75 premarket Wednesday after the company announced that its Board of Directors has approved the initiation of a cash dividend to its shareholders of $0.10 per share, to be paid on April 23, 2010, to shareholders of record on the close of business on April 7, 2010. While future dividends will be subject to Board approval, Starbucks announced that it is initially targeting a dividend payout range of 35% to 40% of net income. The board also authorized the repurchase of 15 million shares of the company’s common stock, in addition to the 6.3 million that remain for repurchase under previous authorizations. Troy Alstead, executive vice president and CFO, commented, “We are confident in the overall financial strength of our business and the strong cash flow it continues to generate. Starbucks solid cash position and cash flow outlook enable the Company to invest in future profitable growth through stores, innovation and new platforms, while also returning cash to our shareholders through the initiation of a dividend and future share repurchases.”
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Trading and Profit and Loss Account
Trading Account
As already discussed, first section of trading and profit and loss account is called trading account. The aim of preparing trading account is to find out gross profit or gross loss while that of second section is to find out net profit or net loss.
Preparation of Trading Account
Trading account is prepared mainly to know the profitability of the goods bought (or manufactured) sold by the businessman. The difference between selling price and cost of goods sold is the,5 earning of the businessman. Thus in order to calculate the gross earning, it is necessary to know:
(a) cost of goods sold.
(b) sales.
Total sales can be ascertained from the sales ledger. The cost of goods sold is, however, calculated. n order to calculate the cost of sales it is necessary to know its meaning. The ‘cost of goods’ includes the purchase price of the goods plus expenses relating to purchase of goods and brining the goods to the place of business. In order to calculate the cost of goods ” we should deduct from the total cost of goods purchased the cost of goods in hand. We can study this phenomenon with the help of following formula:
Opening stock + cost of purchases – closing stock = cost of sales
As already discussed that the purpose of preparing trading account is to calculate the gross profit of the business. It can be described as excess of amount of ‘Sales’ over ‘Cost of Sales’. This definition can be explained in terms of following equation:
Gross Profit = Sales-Cost of goods sold or (Sales + Closing Stock) -(Stock in the beginning + Purchases + Direct Expenses)
The opening stock and purchases along with buying and bringing expenses (direct exp.) are recorded the debit side whereas sales and closing stock is recorded on the credit side. If credit side is Jeater than the debit side the difference is written on the debit side as gross profit which is ultimately recorded on the credit side of profit and loss account. When the debit side exceeds the credit side, the difference is gross loss which is recorded at credit side and ultimately shown on the debit side of profit & loss account.
Usual Items in a Trading Account:
A) Debit Side
1. Opening Stock. It is the stock which remained unsold at the end of previous year. It must have been brought into books with the help of opening entry; so it always appears inside the trial balance. Generally, it is shown as first item at the debit side of trading account. Of course, in the first year of a business there will be no opening stock.
2. Purchases. It is normally second item on the debit side of trading account. ‘Purchases’ mean total purchases i.e. cash plus credit purchases. Any return outwards (purchases return) should be deducted out of purchases to find out the net purchases. Sometimes goods are received before the relevant invoice from the supplier. In such a situation, on the date of preparing final accounts an entry should be passed to debit the purchases account and to credit the suppliers’ account with the cost of goods.
3. Buying Expenses. All expenses relating to purchase of goods are also debited in the trading account. These include-wages, carriage inwards freight, duty, clearing charges, dock charges, excise duty, octroi and import duty etc.
4. Manufacturing Expenses. Such expenses are incurred by businessmen to manufacture or to render the goods in saleable condition viz., motive power, gas fuel, stores, royalties, factory expenses, foreman and supervisor’s salary etc.
Though manufacturing expenses are strictly to be taken in the manufacturing account since we are preparing only trading account, expenses of this type may also be included in the trading account.
(B) Credit Side
1. Sales. Sales mean total sales i.e. cash plus credit sales. If there are any sales returns, these should be deducted from sales. So net sales are credited to trading account. If an asset of the firm has been sold, it should not be included in the sales.
2. Closing Stock. It is the value of stock lying unsold in the godown or shop on the last date of accounting period. Normally closing stock is given outside the trial balance in that case it is shown on the credit side of trading account. But if it is given inside the trial balance, it is not to be shown on the credit side of trading account but appears only in the balance sheet as asset. Closing stock should be valued at cost or market price whichever is less.
Valuation of Closing Stock
The ascertain the value of closing stock it is necessary to make a complete inventory or list of all the items in the god own together with quantities. On the basis of physical observation the stock lists are prepared and the value of total stock is calculated on the basis of unit value. Thus, it is clear that stock-taking entails (i) inventorying, (ii) pricing. Each item is priced at cost, unless the market price is lower. Pricing an inventory at cost is easy if cost remains fixed. But prices remain fluctuating; so the valuation of stock is done on the basis of one of many valuation methods.
The preparation of trading account helps the trade to know the relationship between the costs be incurred and the revenues earned and the level of efficiency with which operations have been conducted. The ratio of gross profit to sales is very significant: it is arrived at :
Gross Profit X 100 / Sales
With the help of G.P. ratio he can ascertain as to how efficiently he is running the business higher the ratio, better will be the efficiency.
Closing Entries pertaining to trading Account
For transferring various accounts relating to goods and buying expenses, following closing entries recorded:
(i) For opening Stock: Debit trading account and credit stock account
(ii) For purchases: Debit trading account and credit purchases account, the amount being the et amount after deducting purchases returns.
(iii) For purchases returns: Debit purchases return account and credit purchases account.
(iv) For returns inwards: Debit sales account and credit sales return account
(v) For direct expenses: Debit trading account and credit direct expenses accounts individually.
(vi) For sales: Debit sales account and credit trading account. We will find that all the accounts as mentioned above will be closed with the exception of trading account
(vii) For closing stock: Debit closing stock account and credit trading account After recording above entries the trading account will be balanced and difference of two sides ascertained. If credit side is more the result is gross profit for which following entry is recorded.
(viii) For gross profit: Debit trading account and credit profit and loss account If the result is gross loss the above entry is reversed.
Profit and Loss Account
The profit and loss account is opened by recording the gross profit (on credit side) or gross loss (debit side).
For earning net profit a businessman has to incur many more expenses in addition to the direct expenses. Those expenses are deducted from profit (or added to gross loss), the resultant figure will be net profit or net loss.
The expenses which are recorded in profit and loss account are ailed ‘indirect expenses’. These be classified as follows:
Selling and distribution expenses.
These comprise of following expenses:
(a) Salesmen’s salary and commission
(b) Commission to agents
(c) Freight & carriage on sales
(d) Sales tax
(e) Bad debts
(f) Advertising
(g) Packing expenses
(h) Export duty
Administrative Expenses.
These include:
(a) Office salaries & wages
(b) Insurance
(c) Legal expenses
(d) Trade expenses
(e) Rates & taxes
(f) Audit fees
(g) Insurance
(h) Rent
(i) Printing and stationery
(j) Postage and telegrams
(k) Bank charges
Financial Expenses
These comprise:
(a) Discount allowed
(b) Interest on Capital
(c) Interest on loan
(d) Discount Charges on bill discounted
Maintenance, depreciations and Provisions etc.
These include following expenses
(a) Repairs
(b) Depreciation on assets
(c) Provision or reserve for doubtful debts
(d) Reserve for discount on debtors.
Along with above indirect expenses the debit side of profit and loss account comprises of various business losses also.
On the credit side of profit and loss account the items recorded are:
(a) Discount received
(b) Commission received
(c) Rent received
(d) Interest received
(e) Income from investments
(f) Profit on sale of assets
(g) Bad debts recovered
(h) Dividend received
(i) Apprenticeship premium etc.
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Building Portfolios with Realistic Returns FRAT VidEx
Building Portfolios with Realistic Returns in Mind May 26th, 2009, By ChuckC at TheMarketsUpChuck.com A portfolio needs to be designed to accomplish specific and realistic goals and objectives in order to be successful. Unfortunately, since the advent and domination of Modern Portfolio Theory, true investing principles are being ignored in favor of a more statistical approach. Instead of constructing portfolios with precise rate of return targets that are achievable based on practical real world attributes, we asset allocate. To me, this means over-diversifying into way too many so-called asset classes that are too over-generalized to be of true value. First, stocks are classified by size as if all companies of a certain capitalization are the same. Then they are further generalized into so-called value or growth based once again on certain statistical measurements related mostly to price action. This is often very misleading because actual characteristics of growth or value are related to fundamentals not price volatility. As operating businesses, public or private companies will go through phases of business growth and development, relative to their industries, that define their investment attributes. For example, young fast growing companies rarely pay a dividend. When in the fast growth phase they tend to utilize all their capital resources to fund their continuing growth. Therefore, they dont pay dividends and attract investors seeking appreciation rather than income …
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Company lends you money — new dangers in Div 7A
QUESTION: In 2004/5 I warned you that your clients could turn around and sue if you, as their accounting professional, failed to alarm them of the perils of Division 7A of the Income Tax Assessment Act 1936 www.austlii.edu.au On 13 June 2007, the Tax Laws Amendment (2007 Measures No 3) Bill 2007 www.comlaw.gov.au was passed by the senate. It appears that Division 7A is no longer a problem. Is this the case? ANSWER: Division 7A tries to stop gifts or “fake loans” from your company to you and your family. Companies pay tax at 30%. Humans pay tax at the top marginal tax rate of 46.5%. It is therefore useful to have the company pay only 30% tax and then “lend” you the money. You then never pay off the loan. This was easy to do under section 108 (pre-Div 7A loans). You can keep your pre-Div 7A loans fresh by building a Debt Recognition (including pre-Div7A Loans) www.lawcentral.com.au statement at LawCentral www.lawcentral.com.au. Division 7A stops your company from making tax-free distributions of profits (gifts and fake loans) to you and your associates. For the 620000 companies in Australia, the rules were too harsh. Innocent mistakes couldn’t be rectified leading to an effective tax rate of almost 100%. Accountants were being unfairly sued by uneducated and angry clients. Most of the recent changes are advantageous to your clients. Innocent breaches can often be rectified at a later time. 1. Keep franking credits For me, the best change is removing the automatic debiting …
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Onbux Tutorial – Rent 100 Referrals on 30 days.avi
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