Guiilermo_Furniture_Store_Scenario

Guillermo Furniture Store Scenario Marisa Anderson ACC/561 7/5/10 Alanna Jones Guillermo Furniture Store Scenario Guillermo’s furniture company withstood two financial setbacks during the 1990’s. In order to build and regain financial success, he has to decide which direction he wants his company to go using accounting best practices. He ultimately will have to decide which business venture will help him best balance his home and work life as well as succeed professionally. Decision-making process Budgets and Performance Reporting Guillermo needs a general-purpose accounting system to help him make decisions. He can utilize a management accounting process that, “produces info for managers within an organization that will identify, measure and communicate info that will help fulfill obligations, while financial processes produce info for external parties” (Horngren, 2008). Both types help create budgets and performance reports, “by pinpointing where actual results differ from expected plans and create solutions where needed” (Horngren, 2008, p.6). Budgets help focus which costs are available and how they will affect the company. According to his current expense statement, if his patented coating is used, it will increase production costs but the benefits will outweigh the costs. The cost-benefit balance is when, “estimated costs are weighed against probable benefits” (Horngren, 2008). Careful budgeting will provide a better way to coordinate and implement future business decisions while keeping his focus. Performance reports will provide necessary feedback regarding his operations because they compare results with actual plans. If he budgets properly, regular reporting will alert him of differing financials so that timely corrections can be made if needed and he’ll always know where he stands. Ethics Ethics and integrity will influence his decisions because they help ensure compliance. The Sarbanes-Oxley and Foreign Corrupt Practices Acts were created to decrease corrupt practices by demanding better checks and balances from higher leveled company officers. Guillermo can use a “code of conduct” to document and demand ethical standards required by his employee and company. Although a code of conduct is present, actual policies and practices influence behavior and entice people to have integrity for themselves and others. According to Horngren, 2008, there are four temptations that should not be followed if ethical behavior and accounting should prevail because each simply creates excuses and leads to bad decisions. They are not emphasizing short-term goals, ignoring the small stuff, being aware of economic cycles and not adhering to accounting roles. Proper ethical practices will build trust and production will move forward and not be halted. Ethical accountants can, “measure the costs of production and track the effects of continuous improvement programs” (Horngren, 2008, p.15). Ethics provide accurate book keeping that will give Guillermo a clear financial picture that will assist with future decisions. Relevance Relevant items of accounting include score keeping, asking attention-directing and problem solving questions. Score keeping will allow him to combine data while asking attention-directing questions that helps report and interpret data. These two are closely related and are relevant for proper organizational evaluation and performance while asking problem-solving questions helps determine the best course of action. Summary There are many accounting procedures that when used consistently and properly, will help Guillermo select and execute business decisions. To make an educated decision, he has to create a budget that includes all costs associated with each option. Upon review, he has to support and follow each with ethical business practices and personnel. When staffed properly he has to ensure that he and his accountants follow the most relevant accounting steps to record and allow for correctional revisions in a timely manner. Additionally, there are behavioral implications that affect employee feelings and actions so the cost-benefit theory should be acknowledged and measured to ensure employee success and happiness which in turn will promote efficiency. References Horngren, at. el. (2008). Introduction to Management Accounting (14th ed.). : Pearson-Prentice Hall.