#12277 - 24 Hrs

Jen Everhart Accounting 301

8 Week Accounting Rotation at Boston Beer Company

Executive Summary This report is the first in a series of reports to document an eight-week rotation in the accounting department at the Boston Beer Company. The purpose of the rotation is to gain an understanding of accounting concepts and language, with the goal of empowering managers to make more logical and more informed financial decisions. During the next eight weeks tasks include:

• analyzing financial statements • communicating accounting information • researching and applying the best accounting and internal control practicing to

business transactions • evaluating ethical issues and integrating them into financial and managerial

decisions • applying critical thinking and communicating analytical business and accounting

information to management Introduction During the first week of the accounting rotation tasking included reviewing underlying assumptions of accounting principles, learning how the debit/credit accounting system identifies, records, summarizes and reports business transactions, researching each of the general financial statements, reviewing Boston Beer Company’s SEC 10-K report, and learning about accrual and cash-basis accounting. During the week, practice problems including multiple choice and fill in the blank problems were completed to test mastery of the overall topics. Each section below will go over the main topics and concepts learned throughout the week. Accounting Basics In this paragraph I would summarize concepts from chapter 1 of principles of accounting.com Financial Statements Balance Sheets

Before tackling the balance sheet, one must understand an accounting fundamental of how to calculate income; revenues minus expenses equal income.

One can see from this year’s balance sheet that assets and liabilities both increased from last year to this year and that the total stockholders’ equity increased approximately 37 million dollars. Accountants use periodicity assumption meaning that they compile data over a designated period, in this case a calendar year to provide investors, creditors and business managers a snapshot in time to make applicable decisions. People often mistake the balance sheet as a document that shows how much money a company made or lost in the designated period. This is not the case, a balance sheet simply shows things the company owns that are of value (assets), money the company owes to others (liabilities) and how much money the company would have if they sold all of their assets and paid off their liabilities (equity).

Income Statements

The previous paragraph briefly talked about how a balance sheet can be mistaken to show how much a company makes or loses, the statement that shows us this is the income statement.

The first thing that stands out in the income statement is that gross revenue is over 1 billion dollars, an impressive amount of money. Looking further down, the company loses half of that just to the cost of producing the goods they sold. In the snapshot that is the income statement we don’t see the individual calculations of expenses, for example if we wanted to conduct and audit to see how payroll is calculated we could follow a paper trail back from this statement to the adjusting process, trial balance, accounts payable ledger with subsidiary accounts to the journal entries and finally the source documents such as the check disbursed to the employee. By the end of 2018 net income was 92,663,000 dollars. Is this all cash? How did we use that cash? These questions can be answered in a separate statement called the statement of cash flows.

Statement of Cash Flows

To determine how much cash the company has on hand we need to look at the statement of cash flows. As we said earlier the income statement will show our net income but to see cash on hand, how we used that cash in investing and if we received cash from selling stocks or taking a loan out, we must look to this statement.

We can see under net cash by operating activities that our approximately 93 million dollars in net income from the income statement can be added to our depreciation expenses as well as other assets leaving us with the 163-million-dollar figure. The investing activity shows the amount of money possibly spent on brewing equipment or other applicable investments such as land or a new brewery building. The last of the three main sections is the financing activities which shows the cashflows from selling and purchasing of stocks in this case purchasing. The most interesting part of the statement for me was change in cash from year to year showing a loss of 25 million dollars in 2017 and an increase of 42 million in 2018. Does this mean the company lost 25 million dollars in 2017? I don’t think so per se because you would have to look at all the statements to build a clear picture of the company’s financial status.

Consolidated Statement of Equity

Sometimes a company will consolidate their statement of retained earnings and changes in equity into one statement. This statement is called the consolidated statement of equity.

This statement’s main purpose is to present and easy to read top-down view from one year to the next in the case of The Boston Beer Company. Looking at the common shares column as an shares. The company was debited 227,000 stock options and credited with 350,000 class A common stocks while converting 100,000 class B stocks to Class A. This activity left the company with 23,000 more shares than the previous year. The interesting part to me is you can see in the retained earnings column that the company spent 88.3 million dollars on the 350,000

shares which shows you of the 92.6 million dollars in net income that we discovered on the balance sheet the company reinvested 88.3 million dollars back in to the company which kept their retained earnings fairly close to the previous years.

Information Processing: Debits and Credits In this paragraph I would summarize concepts from chapter 2 of principles of accounting.com

Income measurement In this paragraph I would summarize concepts from chapter 3 of principles of accounting.com

Conclusion

The first week of the accounting rotation at The Boston Beer Company was successful in providing a basic understanding of accounting. Learning that accounting is based on one simple equation was quite interesting. There was an enormous amount of information covered during the week and the SEC 10-K report was a bit overwhelming. However, practicing some of the concepts by completing multiple choice and fill in the blanks was helpful. The next seven weeks is sure to be challenging but there is much knowledge to be gained!

References: (be sure to cite all sources properly)

http://www.principlesofaccounting.com/ Chapters 1-3

The Boston Beer Company SEC Form 10K (2018)