Guillermo Scenario

Running head: GUILLERMO SCENARIO

Guillermo Scenario

ACC/561 University of Phoenix

December 21, 2009

Guillermo Scenario

As a small business, Guillermo Furniture must make some major adjustments to the current business practices to remain competitive in the furniture industry. To enhance the ability of keeping the doors of Guillermo Furniture open, a long-term business strategy must be put into action. Guillermo will need to review reports regarding budgeting and performance as decisions are made. As adjustments are made from the data in the budget and performance reports, Guillermo will need to ensure ethics remain an important factor and not permit unethical practices to influence any accounting decisions. A final important aspect Guillermo will need to understand is how accounting principles and other information are necessary when making decision regarding the continued success of Guillermo Furniture.

A budget is a numerical portrayal of an established course of action (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg, 2008). For management to understand the financial position for not only the current year but also previous years requires the creation of a budget. Similar to planning a trip, a budget provides a pathway for the company to achieve their financial goals. A budget will illustrate how money is spent, allow early detection of possible opportunities for improvement, and “convey strategies and expectations” from senior level management down to others and up to senior level management from other areas of the company (Horngre, at el., 2008, p 296, para 2).

To obtain a clear picture of the financial standing of Guillermo Furniture, Guillermo will need to compare sales figures to projected sales figures to evaluate accurately the performance of the store. Several important qualities a budget provides are the ability to evaluate performance, formulate plans, and to create a method of communication. Effective operational...