University of Phoenix
October 11, 2010
Guillermo Navallez is a furniture maker who has made furniture for years near his Sonoran home and he is considering making business decisions to have a competitive advantage ( Guillermo Scenario, n.d). This paper states how Guillermo would use budgets and performance reports in his decision-making, how ethics might influence his accounting decisions and shed light on the accounting information that is most relevant for Guillermo to consider when making decisions.
How Guillermo would use budget and performance report
According to Horngren, Sundem, Stratton, Burgstahler, & Schatzberg,(2008), “budget is a quantitative expression of a plan of action.” Budget would assist Guillermo to coordinate and to implement its plans. Guillermo has expressed his plan to improve profit margin and to gain a competitive advantage in the furniture industry. Since accounting system supports both planning and control, Guillermo should utilize accounting system to monitor his transactions. Initially, Guillermo detected a shrink in his profit margin. Guillermo must plan his action; quantify its expected expenditure and revenue, stating all the expected financial implications of his proposed plans.
Guillermo should utilize accounting system to record, measure and classify his actions. These actions will form performance reports. If Guillermo would invest in opportunities available to him, he should keep good financial records of all business actions. He would be able to compare the plan with the performance reports provided by the actions. The variances would then form the basis on which the control will be implemented. Performance report will inform Guillermo on how the company is performing.
How ethics might influence Guillermo... [continues]
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