Accounting in Tesco's Strategic Decision-Making Assignment Sample

Introduction

The cornerstone of any successful firm is strategic decision-making, which accounting enables insight into as well as financial health. It is imperative to evaluate its importance for the global retailer Tesco in addition to its criticality for monitoring, analysing, and disseminating financial data. Accounting helps Tesco maintain profitability, make the most of its resources, and spur growth in a number of ways, from cost monitoring to sales control. Among its primary duties are recording transactions, obtaining and assessing financial data, and notifying relevant parties of the outcomes. Knowing Tesco's accounting procedures helps to make sense of its financial situation and directs its strategic choices in the ever-changing retail industry.

Brief introduction of the company Tesco

Figure 1: Key information on Tesco

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Based in Hertfordshire, England, Tesco is a retail behemoth and one of the largest and most powerful grocery enterprises worldwide. From its modest beginnings as a market stand established by Jack Cohen in 1919, it has grown into a global enterprise offering daily services to millions of clients across many nations (tesco.com, 2023).

Tesco's success can be attributed to its unwavering emphasis on customer satisfaction, adaptability, and innovation. It created the contemporary supermarket, self-service shopping, and expanded its product line beyond food to include financial services, electronics, apparel, and more. Because of the brand's dedication to usability and accessibility, a variety of store designs, including Tesco Extra hypermarkets and Express convenience stores, have been developed to appeal to a broad spectrum of consumers.

Tesco's commitment to using data to inform choices forms the core of its business strategy. Retail was revolutionised by the company's Clubcard loyalty programme, which was launched in the 1990s and gathered priceless customer data to support targeted marketing initiatives and improve the entire customer experience. Beyond the functioning of its physical stores, Tesco has overcome obstacles and modified its approach. The company is present in both Europe and Asia as part of its global reach, yet its capabilities and difficulties differ depending on the region (tesco.com, 2023).

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Tesco has also made progress in sustainability, seeking to lessen its influence on the environment by cutting waste, sourcing products sustainably, and funding renewable energy sources. Additionally, the company has actively engaged with charitable groups and local communities through its philanthropic endeavours.

Tesco's incredible ascent from a little market stall to a major global retailer exemplifies not only financial success but also adaptability, creativity, and a strong customer relationship. Its history attests to its position as an industry mainstay and provides a case study in excellent retail techniques and strategic adaptability.

An explanation of the accounting principle and the importance of accounting for the business of Tesco

Figure 2: Accounting principles

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The fundamental rules that govern the process of documenting, examining, and totaling financial transactions inside an organisation are known as accounting principles (Lardo et al. 2022). One crucial rule is the accrual principle, which stipulates those transactions, regardless of when money changes hands, must be recorded as soon as they occur.

Maintaining and implementing the accounting rules are the 1st work to be done. First and foremost, the business can maintain accurate and transparent financial records by following these guidelines. Tesco's meticulous documentation of its earnings, expenses, assets, and liabilities enables it to produce reliable financial statements that fairly portray its true financial status. During the time of making decisions, this is advantageous to external stakeholders such as creditors, investors, and regulatory agencies as well as internal stakeholders such as management.

Furthermore, adhering to accounting principles guarantees adherence to all legal and regulatory mandates (Blythe, 2021). Tesco has operations in multiple nations, and the financial reporting requirements vary in each nation. By putting these suggestions into practise, Tesco can navigate complex regulatory frameworks, lowering its legal risk and maintaining stakeholder confidence. Accounting standards also improve Tesco's performance assessment and strategy formulation. Consistent principle-based financial data analysis enables the business to evaluate profitability, pinpoint areas for development, utilise resources effectively, and develop well-informed growth strategies.

Moreover, these principles simplify industry comparisons. By using consistent accounting principles, Tesco is able to evaluate its performance in relation to its competitors. As a result, Tesco is able to pinpoint its areas of strength and weakness and obtain insightful knowledge about how to position itself in the market. Put differently, Tesco bases its operations on the tenet that adhering to accounting standards ensures precision, openness, conformity, informed decision-making, and a solid foundation for sustained success in the ever-evolving retail sector.

An explanation of the main process of accounting in Tesco

Tesco uses several important accounting techniques to effectively handle its financial data.

First and foremost, transaction documentation is required at first. Using accepted accounting standards and procedures, all financial transactions, including sales, purchases, expenses, and investments, must be recorded in this step (Kotsupatriy et al. 2020). Tesco's vast operations necessitate thorough documentation throughout all of its locations and divisions.

After collection, the data is categorised and summarised. To do this, transactions need to be organised into groups based on factors like as assets, liabilities, equity, revenue, and expenses. Examination of the data have been done after that. Using methods from financial analysis, Tesco examines recorded data to evaluate profitability, liquidity, efficiency, and other important performance indicators (ZXhang et al. 2023). The decision-making procedures involved in resource allocation and strategic planning will benefit from this study.

Lastly, Tesco uses the data analysis to produce financial statements. Among the financial records that provide investors and regulatory agencies with clear, comprehensive information on Tesco's financial situation are the cash flow statement, balance sheet, and income statement. They also include a summary of the business's performance and financial situation.

Conclusion

Conclusively, it can be said that understanding Tesco's financial stewardship and commercial savvy can be gained by analysing its accounting significance. Tesco complies with accounting rules and keeps accurate records to guarantee compliance and well-informed decision-making. The company's rigorous accounting procedure, which entails diligent recording, categorization, analysis, and reporting, is the cornerstone of its steady financial performance. Tesco is a retail giant that can resolutely and strategically navigate the challenges facing the industry thanks to its commitment to accuracy, transparency, and strategic planning—all made possible by good accounting processes.

References

• Blythe, S.E., 2021. Auditors' Duty to Ensure Clients are Using Accounting Practices in Compliance with Generally Accepted Accounting Principles: A Case Study of Infinity Business Group, Inc.
• Kotsupatriy, M., Ksonzhyk, I., Skrypnyk, S., Shepel, I. and Koval, S., 2020. Use of international accounting and financial reporting standards in enterprise management. International Journal of Management, 11(5).
• Lardo, A., Corsi, K., Varma, A. and Mancini, D., 2022. Exploring blockchain in the accounting domain: a bibliometric analysis. Accounting, Auditing & Accountability Journal, 35(9), pp.204-233.
• Tesco.com, 2023. About us, Available at: https://www.tesco.com/ [Accessed on 25th November 2023]
• ZXhang, Y.X., Haxo, Y.M. and Mat, Y.X., 2023. Analyzing Tesco PLC Stock: A Comprehensive Evaluation of Growth Potential and Investment Opportunities. AC Investment Research Journal, 220(44).