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Running Head: Guillermo Furniture Scenario Guillermo Furniture Scenario University of Phoenix Budgets [pic] In creating a budget, a company attempts to forecast the future performance accurately as possible. A budget is a quantitative expression of a plan of action and an aid to coordinating and implementing the plan (Horngren, 2008 p. 13).” A budget requires detailed assumptions regarding future costs and returns on investment. Although, historical data can provide insight into future performance, it is by no means a reliable method that should be[pic] expected [pic]to[pic] provide consistent results. Essentially, historical data is a best guess. The level and validity of the assumptions are open to interpretation and assumptions, which are required to create budgets for a company, department, or given project. [pic]The role of the budget[pic] [pic]serves as a tool to evaluate performance, eliminate inefficiencies, and part of the business controls.[pic] Reviewing Guillermo budget and performance report facts, give insight into business practices and this information can dictate a company’s success or failure. Guillermo under estimates the budget for low end pieces and over estimates the demand for high end furniture. Guillermo can analyze purchase decisions and production habits to better serve customers and the company’s needs and be more responsive to seasonal product demands and services needed to make informed decisions based. The facts presented in budget and performance reports are vital to success “many accounting systems provide performance reports that compare actual results of decisions and activities with previously determined plans. By pinpointing where actual results differ from plans, performance reports can show managers how they are doing and show the managers’ superiors where to take action (Hongren, 2008 p. 6).” Performance Reports The most effective way Guillermo can use a performance report to implement a control system that provides information about how business is going, and to indicate how better results might be achieved. By making good use of both internal and external audits a company can identify inefficient areas struggling to perform. Procedures exist to minimize wastefulness, which when adopted promote efficient operation and conserve scarce resources. [pic]Guillermo should conduct an inventory every quarter to generate numbers for financial reports, tax records and to have[pic] the exact [pic]inventory to meet demand.[pic] “Performance [pic]reports provide feedback by comparing results with plans and by highlighting variances,[pic] which are deviations from plans (Hongren, 2008 p. 13).” Ethics [pic] Ethics is based on the concept of what reasonable people would do when faced with a similar situation. In business, the concept of ethics is a higher perception assigned to professionals. Ethics will influence Guillermo accounting decisions because customers know what to expect in relationship to what they paid.[pic] Ethics cannot be turned on and off. Mr. Guillermo characteristics deem him as an ethical businessman and being very concerned with the state of his business and want to have an active life with his family but not at the expense of his furniture quality and his reputation. The Institute of Management Accountants says that “ethics deals with human conduct in relation to what is morally good and bad, right and wrong. It is the application of values to decision making. These values include honesty, fairness, responsibility, respect and compassion (Horngren, 2008 p. 25).” Ethics is simply doing what is right, especially when no one is watching. Guillermo should implement ethical business practices to attract more customers and create brand loyalty. [pic]An[pic] [pic]ethical approach pays off in a long run.[pic] Accounting Information The accounting system supports both planning and control. The system records, measures, and classifies actions to produce performance reports. Once this is more accurately reflected, will provide Guillermo with realistic expectations and will help him assess the financial health of the company because of the new competition and the influx of new residents occurred. “Performance [pic]reports provide feedback by comparing results with plans and by highlighting variances,[pic] which are deviations from plans (Horngren, 2008).” Then based on the evaluation corrections and revisions can be made to the plan. Guillermo can use an accounting system to assist in delivery of accurate and an informative [pic]system that provides an efficient delivery of information needed to perform accounting work. [pic] “All managers have an obligation to use resources wisely. If used intelligently, accounting information contributes to efficient operations and helps both profit-seeking and nonprofit organizations achieve their objectives (Horngren, 2008 p. 10).” Conclusion For Guillermo to keep up with the new competition and he must make sure his budgets and performance reports are carefully studied and executed for the most profitable view for his business. Ethical behavior must always be maintained in all decisions made from every aspect of the company. Lastly, by following the current guidelines of accounting information Guillermo financial records will be acceptable. Reference: Horngren at el. (2008). Introduction to Management Accounting (14th ed.). New Jersey: Pearson-Prentice Hall.