Acc 561 Week 4 Guillermo

Topics: Ethics, Budget, Business ethics Pages: 7 (1305 words) Published: July 30, 2011
Guillermo Furniture Store Analysis
University of Phoenix
ACC 561
July 2011

Guillermo Furniture Store Analysis
This document presents the major components of a budget that includes the risks associated with sales forecasts, and an analysis of ethical considerations in the preparation and subsequent use of the budget. Consideration is given for the requirements of the organizations code of ethics in the use of any performance tools. Major Budget Components

A master budget is an extensive analysis of the first year of the long-range plan. The master budget summarizes planned activities of departments and subunits of an organization. The master budget is a formal measurable expression of management's plans. This budget is also a visionary plan for the upcoming period or future, and allows well-organized change rather than disorganized reaction to change. The two major components of a master budget are operating and financial budget. The operating budget focuses on the income statement that includes supporting schedules of a sales, purchase, cost of goods sold, operating expenses budget, and the budgeted income statement. The financial budget focuses on the results of the operating budget and other plans such as capital budgets and debt repayments will have on cash and the budgeted balance sheet (Horngren, Sundem, Stratton, Burgstaler, & Schatzberg, 2008).  Operating BudgetFinancial Budget

Sales Forecasting Risk Assessments
According to Horngren, et. al. (2008) the sales budget is defined as the basis for the master budget, whereas the sales forecast is defined as, “a prediction of sales under a given set of conditions.” Using history is the most popular way of forecasting sales demands or revenue. History does not necessarily repeat itself for numerous reasons such as changing trends for one example. This is a major risk and could be quite costly in forecasting the future (Chase, 1993). Guillermo’s risk in using his own history is that the past demand has changed with the new competition. Guillermo must clearly understand what the drivers of the sales demand are for his furniture so that he can make predictions on the future. His other risks to consider when creating the sales forecast involve evaluating the effects of increased competition regarding sales prices, and accounting for the increased costs in labor. Preparatory and Subsequent Ethical budget Considerations Businesses around the world try to develop, compare, and implement the best ethical codes. However, employers need to use performance tools in regular intervals to check for any unethical behaviors. Organizations, from top to bottom, have a sense of moral responsibility. According to Valentine and Barnett (2003), a formal code of ethics may increase positive perceptions of the ethical values of the organization. Top management must explicitly follow all ethical codes and ensure that they are implemented throughout the organization. If top management does not act ethically, employee behavior may deplete throughout the entire organization. Employers and their managers must ensure each member of the staff is aware of the ethical codes, and he or she performs an ethical analysis regularly. Ethical Performance Tools for Budgeting The ethics code is “a set of guidelines which are designed to set out acceptable behaviors for members of a particular group, association, or profession” (Wisegeek, 2011). It outlines those actions or activities that ensure the business operates in an honest and forthright manner. Oftentimes a code of ethics is an industry-specific document such as in health care, accounting, or in the legal profession.

Through applying elements of a code of ethics during the budgeting process, incentives to lie or cheat in preparing the document can be...
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