Acc 561 Week 4 Guillermo
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 Budget Financial 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
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 Budget Financial 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
References: Chase, C. W. Jr. (1993, June). Ways to improve sales forecasts. The Journal of Business Forecasting Methods & Systems, 12(3), 15.