Acc_561_Guillermo_Wk_1

Guillermo Furniture Store University of Phoenix Guillermo’s Furniture Store is located in Sonora, Mexico, owned by Guillermo Navallez. The company is currently experiencing many business activities. Those actives include the principles of finance and the ability to recognize financial incremental costs and benefits, options, and actions. This paper will present how these accounting activities could benefit to Guillermo Furniture Store. Budgets and Performances Reports Guillermo can use budgets and performance reports in his decision-making process. The principles of finance describe typical behavior in financial transactions and provide guidance for decision making. Decision-making is not a separate function from management. The fact is decision-making is tied together with the other functions, such as Coordinating, Planning, and Controlling. Management decision making is often a matter of comparing two or more alternative courses of action. Through this process Guillermo would be able to determine the financial difference between the alternatives is to identify the differential costs and revenues. To recognize differential cost (differential revenue) is the difference in total cost (revenue) between two alternatives. When managers analyze the differential costs between a given alternative, often the status quo (that is, the existing situation), and a proposed alternative, they often refer to this as incremental analysis. Incremental (additional) costs and benefits of the proposed alternative compared with the given alternative. Incremental benefits are the additional revenues or reduced costs generated by the proposed alternative. When there are multiple alternative courses of action, managers often compare one particular action against the entire set of alternatives. Outlay cost requires a future cash disbursement. Outlay costs include costs for items such as materials and labor. Opportunity cost applies to a resource that a company already owns or that it has already committed to purchase. It is the maximum available contribution to profit forgone (or passed up) by using such a resource for a particular purpose. The opportunity cost of such resources depends on the potential uses for the resources, not on the amount paid for them. Example, Guillermo researched foreign competition and their high-tech solution to find ways to overcome their profit lose because of the competition. He found that if he used a computer controlled laser lathe to produce exact cuts in wood, and purchased robots to perform precise movement, and assembly he could decrease production costs. But taking this model into consideration Guillermo found that it would be very expensive. Ethics influence accounting decisions Regulation of accounting systems seeks to ensure the reliability of the information that accountants provide. However, no regulation can be as effective in ensuring reliability as holding accountants to high ethical standards. A reputation for high integrity develops slowly and requires much effort, but reputations can be quickly lost. The accounting profession is now trying to rebuild its reputation. With accounting information different individuals can’t see its quality. A company may not be notice for years that something is wrong—probably not until it’s too late to do anything about it. Thus, business owners rely on the integrity of accountants to assure themselves that the information about a company is correct. If companies cannot trust the accountant, then the information is nearly worthless. Information most relevant By examining the budget both past and present budget Guillermo can make decisions that based on this data, when making decisions about Guillermo Furniture will be able to compete with a new competitor that has entered the furniture market and is based overseas. Accounting uses control systems designed as management control system that meets the organization’s needs. Managers must identify responsibility centers, develop performance measures, establish a monitoring and reporting structure, weigh costs and benefits, and provide motivation to achieve goal congruence and managerial effort. The management control system should be on Guillermo’s business goals; thus, reflecting Guillermo’s long term and short term goals. Measurability is vital in control systems because financial and nonfinancial goals have to be measured to be effectively managed. The following measurements should be monitored, and reported. This will allow Guillermo to make the most beneficial business decisions for his company.