Generally Accepted Accounting Principles and Tesco Essay

P5:

I am going to use the group income statement and balance sheet for Tesco plc for the period of 2012/13. I will interpret the contents of these statements and explain what it means for the company. 1. Sales revenue: The amount realized from selling goods or services in the normal operations of a company in a specified period. If Tesco is very successful it will find that its sales revenue can be called revenue, net revenue, net sales or sales. Before Christmas the sales revenue sales would go up. In 2012 Tesco had revenue of £63,916m and by 2013 they had revenue of £64,826m which means that their revenue had increased by £910.000 this is a good figure because the revenue had increased.
2. Cost of sales: cost of sales could refer on both manufacturing and retailing, manufacturing wise cost of sales means the sum of direct material, direct labour, and factory overheads incurred in making product. Retail wise cost of sales means the purchase price of merchandise. This is the direct costs that can be attributed to the sales revenue generated during the trading period. The cost of sales can be worked out by using the following formula: opening stock + purchase – closing stock. It is the director or variable cost during the trading period of one year. Tesco would have high costs of sales as it is successful in business. Cost of goods sold is an expense charged against sales to work out a gross profit. In 2012 Tesco’s had a cost of sales of £58,519 million this is a negative figure and in 2013 the revenue increased to £60,737, this is because raw materials and wages had increased. This is a substantial amount of money that Tesco has created and in one year they increased revenue by £2,218m. Therefore Tesco has been increasing their revenue which led to a better profit. This is a good sign to the company as it shows that every year Tesco has been improving in their figures.
3. Gross profit: The difference between revenue and the cost of producing goods or services sold. It is sometimes expressed as a percentage. Gross profit is the sales revenue minus the cost of sales. This is for a trading period, usually one year. Cost of sales can include manufacturing expenses, raw materials. In 2012 Tesco had £5,397m of gross profit and in 2013 the number decreased by £1308m as the gross profit for 2013 is £4089m. This would worry the manager of Tesco and the shareholders as they would not get much out of their dividend.
4. Expenses: expenses in the money spent or cost incurred in an organization's efforts to generate revenue, representing the cost of doing business. Expenses may be in the form of actual cash payments (such as wages and salaries), a computed expired portion (depreciation) of an asset, or an amount taken out of earnings (such as bad debts). Expenses are summarized and charged in the income statement as deductions from the income before assessing income tax. Whereas all expenses are costs, not all costs (such as those incurred in acquisition of income generating assets) are expenses. Expenses figures are usually written in brackets as they are negative numbers as they are to be added up but to be taken away. In 2012 Tesco had a total expense of (£1,612m) and in 2013 they had a total expense of (£1,562m). This shows within a year Tesco’s spent £50m less.
5. Operating profit before tax: This is the total revenue earned from trading activities at Tesco minus the costs for carrying out those activities. This is also called net profit. This is the total profit Tesco earned before they pay their tax to HMRC. In 2012 Tesco had operating profit up to £4,182m and by 2013 it decreased to £2,188m. This shows that the operating profit decreased by £1994m.

6. Non-curent assets (Fixed assets)
(Fixed assets) These are items that worth something to Tesco and could be used again and again. For example, the buildings, offices, factories, equipment; such as the EPOS and stock system, trolleys, shelving systems

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