Overhead cost – refers to operation costs which are not directly attributable to a specific product, service or activity (Hilton, 2016).
Cost of goods sold – these are direct cost relating to production of products sold including the material’s cost and cost of direct labor and even overhead which are used in creation of good or provision of service (Hilton, 2016).
Selling expenses are costs incurred mostly during selling process and include both the direct and indirect costs. The direct selling expenses arise upon selling a product while indirect costs during and after manufacturing process (Hilton, 2016).
Indirect expenses includes expenses incurred by an organization but which are not directly related to a particular function and examples are salaries and general services cost s(Hilton, 2016).
Reports on Financial accounting are normally prepared to be used by external stakeholders like creditors and creditors while reports on managerial accounting are prepared to be used by managers in a firm. Managerial accounting is focused towards the future for the purpose of planning but financial accounting basically offers a summary of financial transaction in the future. Financial accounting has to be verifiable and uphold objectivity hence does not allow for flexibility. Managerial accounting allows for flexible information systems so that it provides the kind of data needed by a specific individual even if it is not verifiable and objective as long as it is relevant to the problem to be solved (Hilton, 2016).
The basic elements of cost used in manufacturing include the direct labor, direct material and factory overhead. Direct materials include all the materials which are an essential part of finished goods and other direct costs that can be attributed to the acquisition of materials. Direct labor refers to all the costs of human resources involved in the manufacturing process such as wages, benefits and payroll taxes. The factory overheads refer to any other cost need in the manufacturing process that cannot be categorized in direct labor or material elements. The three basic elements are important aspects whose control enables a firm to gain competitive advantage and hence, remain profitable (Hilton, 2016).
The difference between employment total cost and the wage rate of an employment can be attributed to indirect employment costs which cannot be directly attributed to the manufacturing process. The $ 4.8 difference is an indirect labor cost related to any labor that offers support for the entire production process but cannot be directly attributed to the conversion of various materials into final products. Hence, this cost cannot be related directly to a given product or even in the provision of services and for this reason they cannot be conveniently traced in the process (Hilton, 2016). This kind of cost should be charged to the overhead costs.
Some costs are referred to as period costs because they are more closely related to passage time than they can be associated with a given transaction or production activity. Such costs are also charged to a given expense in that period that they were incurred. The periods costs can be inform of administrative costs including costs that have been incurred by the department of human resource, research and development of a product and the cost incurred while maintaining some machines for manufacturing. The research and administrative costs involve the creation of a new product or even in the improvement of an already existing product (Hilton, 2016).
Income statement from a manufacturing company differs from one from a merchandizing company with the basis of such differences being mostly being inventory existence. This involves how the cost of sales is shown in income statements for the firms. For the manufacturing company the differences arise from the fact that cost of sales is broken down into various categories. The first category includes expenses on raw materials and covers any materials, parts of components that are needed to make a product for the manufacturing company. The inventory process for the manufacturing company must also considered the goods-in-progress , available finished goods , the manufacturing labor cost and factory overhead in determination of cost of goods related expenses. For the merchandising company, the process involves subtracting cost of goods from earnings and accounting for the freight charges (Hilton, 2016). The expenses for the companies so much differences that their expense statements are called by different names.
A contribution margin income statement is prepared purpose for assisting management in making decision and hence its format is management oriented in terms of presenting expenses and revenues. This means that it does not follow the various standards set out by GAAP or rather does not fulfill any requirements for any external parties but serves the interests of internal parties. The contribution margin statement of income shows the cost behavior to managers and hence cannot for the requirements set under GAAP (Hilton, 2016).
The major differentiating factor between direct and indirect cost is that traceability of direct cost can be done to particular cost objects, cost object in this case referring to something that makes up the cost. Examples include a project, customer, service or product. Such costs are normally categorized as indirect or direct if they are associated with production activities but not administrative activities. Hence, a direct cost refers to cost which can be traced to a specific product in a manner that is considered economically feasible. Indirect cost on the other hand refers to a cost which is difficult to associate with a given product or service. When they are put together, direct costs are referred as prime costs while indirect costs are referred to as overheads (Hilton, 2016).
The main difference between controllable and uncontrollable costs is that a business has power to change the controllable costs while it cannot change the uncontrollable costs on the basis of a business decision. In addition, a company can only change controllable cost over the short term, but can change the uncontrollable cost over the long term. The various variable costs or incremental costs including fixed costs that have been stepped up are controllable costs while a fixed cost is usually an uncontrollable cost. For controllable costs they can mostly be changed by managers with power to make decisions while it is difficult to change uncontrollable costs in case of low decision making authority (Hilton, 2016).
Sunk costs refer to costs that have been incurred in the past and no decision can change them. Economically it is irrational to try to consider or even change sunk costs in decision making. Opportunity costs refers to any profit that a firm foregoes when one alternative is selected over another and they can be considered in decision making even though it may be hard to identify them (Hilton, 2016).
Part II
Home Depot is a retail firm offering various products for including products for home improvement, garden and lawns and building materials. The firm operates different stores which offer full services and other warehouse-type stores where the aforesaid products are sold. Other services provided by the company include installation services through contracting independent contractors. The retail stores also provide professional customers such as remodel and repair contractors and other support and special services.
The presentation of the financial information in the income statement of Home Depot’s 2016 annual report follows the various accounting standards established by GAAP. The income statement follows the required format so that it offers a summary of various transactions including revenue and expenses which have occurred during the financial period of one year. It follows the minimum disclosures where components are presented in a way that external users can use it easily. It only discloses the summary of various components of income statement and avoids representation of all the revenues and expenses in detail. It therefore, provides general information to serve the needs of users. This is unlike the financial statements for managerial accounting where not accounting standards are followed in presenting the various components of revenues, expenses and costs. Unlike the income statement, the information in managerial account would address a particular issue using detailed components.
For the purpose of making important business decision, I would require more detailed information on the performance of the company including the financial ratios and trends in financial performance. The financial ratios would be necessary for the purpose of controlling costs and determining the revenue growth and profitability. In addition, other sources of income apart from sales revenue would also be important.
References
Hilton, R. W. (2016). Managerial accounting. New York
The financial Plan highlights Walmart’s projected financial statement and the assumptions developed when generating them. This financial statement and analysis have been developed for the first operational year. The plan assumes that the market development phase will commence on the 1st of January 2017 with the operational year ending on 31st December 2017. Following the projected statements is followed by a detailed analysis in regard to the operative statements to justify how the assumptions and projections were developed. The purpose of this report is to justify the recommended market expansion into Vietnam electronics specialty industry while demonstrating the projected financial and operations for the first operational year. Walmart is the leading retailing firm in the globe and will particularly be focused on the provision of electronic specialty retailing services to consumers within Vietnam. Based on the financial projections the expansion has been recommended as a beneficial and potential one that will grow the company’s income source and market. This is report will present an analysis of the made financial assumptions and justification of the projected positive net worth.
Income statement for the year ended December 31st 2018
Start Up costs Year (0)
Revenue and Expenses Costs Year (1)
Legal $1,000
Insurance $300
Rent $500
Consultants $5,000
Research, Training and Development $800
Equipment $4,000
Others $5000
Total Expense $16,600
Startup Assets $400,000
Short-term
Long-term assets $0
Revenue/sales $1,000,000
Less Cost of goods Sold $350,000
Gross Profit $650,000
Less Operating expenses $140,000
Depreciation $10,000
………………..
Earnings Before Interest & Taxes $400,000
Less Interest Expense $150,000
……………..
EBIT $250,000
Less income tax $80,000
……………..
Net Income $170,000
Total Assets $416,600
Net Income/profit $170,000
Total Requirements $433,200
Revenue Forecast and Assumptions
Walmart is a stable retailing company that is categorized to be the global leader based on its resources, market share and revenue generation. In this case, the startup capital will be acquired directly from the company’s revenue without creating any form of debt that might alter the anticipated outcomes. The company will provide 1,000,000 dollars to support the business to commence in the selected Vietnam market for the electronic specialty. The most important assumptions that guides the success of the company are that it will operate in a consistently developing market without any major recession, no predictable changes in electronic purchases and no national instability that might threaten the steadiness and fitness of the nation and its public thus affecting business growth.
Sales revenue will make up 90 to 95 percent of the total acquired revenue for the first operational year with the rest being acquired from consultation services. Salaries, marketing, and rent are the primary expenses while depreciation is still an additional important cost that is bound to rise as the operations of the firm begin to rise. Despite the fact that the purchase of electronic specialty items are expensive and thus, a consistent replacement will necessary so that the cost of depreciation can be reduced significantly and sustain the competitive position (Sofat, 2016). In addition, so that a stable gross margin can be maintained, salaries and promotion expenses are unlikely to grow within the foremost operational years unless the flow of cash from sales increases significantly and outweigh the set expectations (Pride, 2017).
With an increased flow of revenue, while the expenses remain relatively stable with minimal expansions as the operations increases in general, revenue will experience an equal increase for every evaluation year (Weihrich, Koontz & Cannice, 2013). It is anticipated that the revenue will double by the fourth operational year with corresponding positive balances amid cash flow and expenses. The performance financial assumptions are grounded on that the firm will acquire annual revenue progress rate of about 8 percent annually for the first three years and the company will not acquire any additional debt charges as the starting capital will be acquired from its revenue.
Cost Forecasts and Assumptions
It is projected that the operating expenses will be lower than the revenue as the market is not yet mature despite the existing competition. Most of the expenses will be incurred from salaries and marketing operations. In that, the company will need to employ a significant number of employees since the market is new and more focus will be conducted on marketing which will see to create awareness and familiarity. For the first year cost of goods sold is projected to be worth 350,000 dollars since the company will still be trying to establish itself firmly with a revenue of 1,000,000 dollars which implies that the gross revenue will be 650,000 dollars. The company will focus mainly on marketing while trying to reduce its operating expenses by the time it turns to the second operational year in order to support its economies scales and the need to provide affordable products as a way of overcoming competition.
The company will spend 10 and 15 percent in respect of both salaries and marketing. On the other hand, rent will account for 5 percent of the revenue since the stores will only be located limitedly for the first year while trying to assess those areas that are characterized by higher opportunities. In order for the objective of increasing sales while augmenting satisfaction to be achieved there is a need to focus more on promotion. In addition, based on the need for awareness and high marketing and the ever-changing economy 5 percent of the revenue will be invested in research, training as well as development programs. In that, the employees need to feel appreciated and motivated while still in operation. In this context, by investing in training this will seek to increase their knowledge and develop their skills to deal with the ever-changing market (Mupepi & IGI Global, 2017). There is also a need for more research in regard to the market needs and the anticipated changes so that the firm can adjust its capacities to suit the general need of the market. These expenses will reduce with time because the workers will be well informed in regard to their roles as well as expenses (Conaway & Laasch, 2014).
Financial Results
Based on the above analysis it is clear that the first operational year will be a positive one that is characterized by good returns. In that despite the fact that the company will be required to invest more in regard to marketing and salaries in the quest of supporting its affordable strategy and lower operating expenses the strategic approach will be essential in overcoming such hurdles. The company will incur some startup expenses of about 433, 200 dollars plus the starting up capital that is necessary for supporting its business operations. From the revenue of 1,000,000 dollars that the company will generate in the first operative year the expenses will be minimal which will result in a net worth of $170,000 and a gross profit of 650,000 dollars. This result demonstrates that the venture in the market is a positive one that can be increased with time to suit the anticipations of the global retailing leader.
The income statement indicates that at the end of the first operational year, the net income will be a positive one and consistently rising by the end of 2018. From the income statement table, the highlighted expenses and revenue ratios indicate an authoritative financial increment and a remarkable opportunity for investment opportunities, creating more expansions and focusing on additional growth which is very viable based on the made predictions. The positive assumptions are mainly driven by the fact that Walmart is a large corporation that is associated with more resources and a reputable name. In addition, the market to be ventured is a stable one that is characterized by a high populace and increased buying potential (Galka & Baran, 2016).
Conclusion
Based on the analysis above it is apparent that the venture will yield positive results by resulting in net gain and no losses. This is a financially viable entry approach since the market is stable with a higher number of consumers and this support the objective of high items sales. In addition, the venture is considered to be viable based on its low operating expenses that will support the goal of providing affordability and convenience. The major risks from the assumptions are based on high marketing and salaries expenses based on the need to familiarize with the market and its consumers. The factors that should be monitored closely in a balanced scorecard are employee’s satisfaction, positive consumer relationship and reduced costs of operations. In that this factors might affect the performance and potential of the business.
References
Conaway, R. N., & Laasch, O. (2014). Principles of responsible management: Global sustainability, responsibility, and ethics. South Western.
Galka, R. J., & Baran, R. J. (2016). Customer Relationship Management: The Foundation of Contemporary Marketing Strategy. Taylor & Francis. 401-403
Mupepi, M., & IGI Global. (2017). Effective talent management strategies for organizational success.24-27
Pride, W. M. (2017). Foundations of business. Cengage Learning
Sofat, R. (2016). Strategic financial management. Place of publication not identified: Prentice-Hall of India.
Weihrich, H., Koontz, H., & Cannice, M. (2013). Management: A global, innovative, and entrepreneurial perspective. McGraw Hill.
The American Corporate Law provides for five kinds of entities that may be established and which are legally recognized (Hurst, 27). The first one is sole proprietorship which is an entity founded, owned and run by one person. This structure of this business simple with few legal cost and is not subjected to corporate tax. All the liabilities and debts of the entity are borne by the propriety. Another entity is a partnership, which can either be general or limited, and this case, two or more persons come together and form an agreement which can either be implied or expressed, to found a venture for purpose of making a profit. In accordance with U.P.A§ 7(15) a limited partnership, the personal liabilities for every partner in terms of the debt are limited to their contribution in the investment. The other entity is a Limited Liability Company, and in accordance with LLC§ 18 (7) is a structure where the founders are not held liable for liabilities or debts of the company and follow the flow-through taxation to owners (Bagley & Dauchy, 67). There are advantages related to this entity in that it allows owners to be flexible in the company's operations. In addition, members are protected from the company's liabilities while there are few formalities related to operations of the company. Individuals in Limited Company are subject to various personal tax rates.
The other entity is a Corporation, which according to DGCL § 102(a), has a charter that restricts its name and range of activity. The law protects corporate stakeholders from any liability and some like employees may take advantage of various tax- free benefits like health insurance coverage. A C corporation is subjected to double taxation, which involves profits taxes and then shareholder dividends' taxes. The fifth entity is a Small Business Corporation whose provision aims at providing tax advantage to small corporations as long as requirements of IRS Code are satisfied. There is a limit on the number of owners of this corporation. For this corporation, a waiver of corporate applies and this is indicated in returns for personal federal income tax returns. This aims at preventing the case of double taxation. The Small Business Corporation is the smallest entity provided for in the state law (Bagley & Dauchy, 67).
Recommendation
The best entity option, for now, is a Small Business Corporation which the proprietors can easily manage given that they do not have enough capital to start a large entity. This will allow them to operate their business with limited funds before the firm start earning any profits. In the future, the business should be converted to a Corporation when the increase in operations start being experienced due to growth and expansion. In addition, it is important the entrepreneurs be flexible while choosing the right entity so as to allow for a wider option in case circumstance changes that would lead to change in their strategies in investments. The changes that may need flexibility includes the amount of resources available and prevailing number and state of the proprietors. Such changes may demand a bit of flexibility on the recommended choice of the entity owners.
There are various documents that members may need which can guide them on issues relating to ownership and business operation. These include: a document for Company Bylaws which defines issues such as business structure , roles of all members and management of the business : Operating Agreement for the Small Business Corporation and future Corporation that describes obligations of owners , decision making , profit and loss allocation methods: A non-disclosure agreement that outlines private matters of the entity to ensure confidentiality , maintaining secrets, customer details , crucial investment and financial information in the business : a memorandum to act as a formal document in which various terms of operation and relations are properly laid down and other important agreements (Moye, 130).
The formation of SBCs is the best recommendation since all members are US residents and even Deng Ziqi, an alien resident but Chinese citizens have not plan to leave. There are advantages that make Small Business Corporation the best entity for carrying out the business currently. The entity has benefits to the owners mostly due to legal protection and tax benefits that shareholders enjoy. For the entity, it can take into consideration of deductions, profits, and taxes and have the shareholders view them before apply federal taxation law (Bagley & Dauchy, 68). The arrangement also allows the business to avert double taxation since taxation is done only after tax returns have been filed by the shareholders. Even though federal directions relating to taxation are not followed by all states in the US, in most states, a Small Business Corporation is exempted from double taxation in many of the states. There is a greater risk associated with using an S Corporation in relation to tax status since only some corporations are deemed eligible for the tax benefits provisions. For the Corporation, there is no practical future risk which may lead to re-characterization of the business for the purpose of tax (Bagley & Dauchy, 68).
It is not advisable for the company to have other entities of shareholder starting owning interest in it. In such a case, the other entities will still be outsiders which mean that there is no basis for relation with the form. The may be unnecessary pressure for the entity with an aim to take control. Unless such an entity aims at providing capital where limited interest may be allowed, the connection should not be maintained. For the purpose of managing debt for the start-up, it would be important for the shareholders to bear the debt on behalf the company to enable it to break-even first ((Bagley & Dauchy, 69). This means that entity should only start repaying the debt after break-even point, to allow for growth and stabilization.
A Small Business Corporation is a legal entity that is separately created through state law. It files for a special treatment through IRS election so that for taxation purpose it is treated as a partnership. In this case, the shareholders are the owners who will bear the tax burden which will be passed through the entity. For the entity, the arrangement serves its interest right given that there is no double taxation as would happen for the income of a C corporation (IRS, 1). This means that a Small Business Corporation will not be expected to bear the burden of corporate income tax that allows for the business to have stable growth at the early stages of the formation. The huge savings on tax provides large sums of funds that can be used for the expansion of the business operation of the business. Weighing the considerations for tax related to the formation of the various types of entities supports the idea of registering the SBC. A financial report document may be required to be attached to the returns.
Works cited
Bagley, Constance E, and Craig E. Dauchy. The Entrepreneur's Guide to Business Law. Mason, Ohio: South-Western, 2012. Print. 67-69
Hurst, James W. The Legitimacy of the Business Corporation in the Law of the United States, 1780-1970. Clark, N.J: Lawbook Exchange, 2004. Print. 27-31
Moye, John E. The Law of Business Organizations. Clifton Park, NY: Thomson/Delmar Learning, 2004. Print. 130-140
Key variables within the study and analysis Summary
The article addresses cost benefits evaluation variables in relation to the Juvenile Breaking Cycle Initiatives (Cowell, Lattimore & Krebs, 2010). These programs are mainly objected at managing and controlling treatment and welfare services among minors and young individuals with high possibilities of drugs abuse or re-offense. The study was, therefore, aimed at improving the current regulations and rehabilitation procedures for drugs abuse in relation to the juvenile offenders based on the fact that the population is associated with re-occurring social issues that necessitate firm and expanded initiatives. The existing cost variables in the study was established to be high (Cowell, Lattimore & Krebs, 2010). As anticipated by most administrations the expenses reduction cannot balance further controls as well as treatments of the populace (Cowell, Lattimore & Krebs, 2010). In addition, the investigation included several demographic based variables in regard to the juvenile wrongdoers like race, gender, and age. Based on the study the primary variables that were included are cognitive health issues diagnosis, substance abuse history, treatment and counseling, potential abuse risk and previous association with the juvenile system.
Continue or Discontinue the Program, Based On the Evidence Provided In the Analysis, and Why
Despite the fact that the analysis proved that the administrators should not anticipate for any balancing of the expenses directly I would continue with the program. This is because the existing proof proposes that no cost balance would be acquired directly but the Juvenile justice expenses might ultimately be equal to the normal expenses. It is apparent that close to every organization is focusing on programs that are aimed at lowering its operating expenses to create more economic advantages. Continuing the program would not automatically create the anticipated cost balance but it would eventually lead to lesser operation expenses (Cowell, Lattimore & Krebs, 2010). In that, with time the number of recidivism within the system would lower as well as substance abuse risks which imply that fewer materials will be required. This would generate costs reduction in general while still creating behavioral changes among those that are involved and the community in general.
Potential Consequences of Your Decision for the AffectedCommunity
The result of the program indicated that the juvenile respondents within the program are less vulnerable to re-offenses when equated with those outside the program. In addition, the initiative was graded as an effective one because it proved its economic and cost benefits (Cowell, Lattimore & Krebs, 2010). In this case, my decision to retain the program would impact the touched community positively by creating social reforms and saving Juvenile justice based expenses. This is because when the program is supported to continue it implies that those incorporated in the program will be transformed in regard to behaviors and perception thus leading to fewer cases of re-offenses (Cowell, Lattimore & Krebs, 2010). In addition, the program would seek to lower the chances of substance abuse among minors by rehabilitating and seeking to monitor every individual behavior. This would, therefore, imply that the community would require fewer resources in supporting the program which can thus be categorized as an economic benefit. The best way to create change is playing part in creating it and in this case given that juveniles are vulnerable to retaliation and behavioral change the decision to retain the program would eventually create economic and cost benefits balance by reducing the associated expenses and creating more free revenue for economic growth.
References
Cowell, A., Lattimore, P., & Krebs, C. (2010). A Cost-Benefit Study of a Breaking the Cycle Program for Juveniles. Journal of Research in Crime and Delinquency, 47(2), 241-262
In reference to corporate funding, liquidity ratios define the capability of firms to disbursing short run debts obligations while utilizing cash on hand or even short run assets (Lee, Lee & Lee, 2009). In this context, investors, moneylenders normally assess the liquidity of the company as a signal of financial safety. On the other hand, managers normally assess the liquidity while assessing the performance of the company. In this case, when the ratio of liquidity is higher this implies that from the managers, moneylenders, and investors the corporation is better off to a certain degree (Lee, Lee & Lee, 2009). It is, therefore, reliable to note that liquidity ratios should always fall within the given range.
On the other hand in reference to financial leverages lenders and investors prefers it to be minimal given that it can lead to bankruptcy (Khan & Jain, 2008). When the coverage ratios are higher the investors, money lenders and managers perceive this as a positive occurrence given that the company has a higher ability to funds its operations and services. Activity ratios are better when high given that they are utilized to describe the performance of the company. Shareholders return ratios are better when high given that the objective of every corporation is to maximize the earning of shareholders (Khan & Jain, 2008). However, when they are high the lenders are affected negatively, therefore, they prefer when they are low. Given that the profitability ratios refers to the general efficiency by a company to utilize its resources. When there is efficiency there is high earning something that benefits managers and investors while lenders are negatively impacted. In other words, lenders prefer when the financial efficiency of a company is low to increase their earning while investors are objected at increasing profitability while improving performance (Khan & Jain, 2008).
References
Lee, A. C., Lee, J. C., & Lee, C. F. (2009). Financial analysis, planning & forecasting: Theory and application. Singapore: World Scientific.
Khan, M. Y., & Jain, P. K. (2008). Cost accounting and financial management for CA Professional Competence Examination. New Delhi: Tata McGraw-Hill Publishing Company Ltd.
The cost-plus pricing is a strategy that allows firms to ensure there is a margin of the products after considering all cost involved in distribution process. Estimation of the production cost is quite important for the firm which makes it possible for the firm to set prices that will yield the desired rate of return. For the supply contracts, the strategy is quite easy it terms of calculations where the desired profits is simply added to the production cost to obtain the price. The strategy is preferred for the supply contracts since a full coverage of cost is provided so that a rate of return that is consistent is maintained amidst uncertainty on the future production cost. There is allows a markup that always ensure there is a rate of return that is positive (Burton & Holden, 2013). This is because a justification can easily be shown of the price increment by the increase in cost.
The cost plus strategy encounters various problems that make it quite inefficient at times. To begin with, the rate of return targeted has little incentive for cost reduction or for improving level of profitability using price differentiation. The management o the firm can easily be passive toads pricing decisions and in turn laziness is facilitated so that there is failure to take advantage of changing profits levels as the consumer and the market changes. The adoption of this strategy acts as an incentive for cost maximization and a lot of potential profits are wasted (Burton & Holden, 2013). The pricing strategy does not consider competing product prices. In case the substitute product sells at lower prices, the cost plus strategy may not be the best in enhancing competitiveness of the firm’s products in the market. The strategy also ignores the buyer or consumer in terms of what the product is worthy to them. The buyer may be ready and willing to pay a higher price for the same products. The pricing method is not appropriate in terms of being responsive to various changes that happen in market and this may be a hindrance to long-term success (Burton & Holden, 2013).
Gina should argue against the increase in price if it becomes clear that Bhagat Inc is not reducing costs and does not attempt to balance the high cost of labor through adjustment of various inputs present. The major reason for contesting is the contacted signed with the supply which is binding and should not be contested. As long as her firm is honoring the terms of the contract as stipulated, an arbitrary increase in the price of the product should be contested.
The increase in the price of spare machine parts by the supplier may be justified in the long-run. This is because the supply entered into an agreement with the labor union on wage increment well aware of the contract it had with Rich Manufacturing Company. The increment on the prices may not also be considered in the short-run but may take time to be incorporated into the general cost.
An increase in price of machine parts by $3 will have a direct impact in the production cost of the Gina’s company. This means that she will have to make production decisions that will ensure the additional cost is captured in the overall cost of final products. If the additional cost will have a significant effect on the firm’s profitability, prices will have to be adjusted.
References
Burton, M., & Holden, R. (2013). Pricing with confidence: 10 ways to stop leaving money on the table. Hoboken, N.J: Wiley.
Operations and Management Plan for accounting firm
The goal is to provide the best accurate report of financial position of the firm and business consulting services to clients at affordable prices. The business will provide consultation and accounting services especially to small and medium sized firms and it will be based on trustworthiness and reliability as major values. The firm will comprise of three positions that consist of a manager, marketer and financial analyst who will ensure that the operations of the firm are performed effectively.
The role of the manager will involve overseeing the overall activities of the firm, making strategic decisions that support the growth of the firm and dealing with client issues or complaints. In addition, the manager will oversee the use of resources and corporate with the others in making strategic decisions.
The roles of the marketer will involve using different platforms including technological platforms to find out potential clients through learning the target market, developing marketing tactics and ensuring that activities are focused towards the plan. The will also ensure the firm operate within different markets and different organizations so as to attract as many clients as possible and that the clients are retained.
The roles of the financial analyst includes ensuring all the financial report for the client are prepared, using the information to provide guidance to individuals and businesses in making their investment decisions and assessing the performance of the various investments including bonds and stocks. The analyst will ensure development of necessary accounting system and integration of digital technology in it.
The firm will be located in a large city with numerous small and medium sized business so as to having a strong starting base. The services of the firm will be offered through visitation to their business premises.
Measurement focus involves the various financial events and financial transactions that should be included in accounting records and hence, the financial statements. It involves the inflow and outflow of various institutional resources. The major measurement focuses which are normally used in government reporting are ‘Economic Resources Measurement Focus’ and ‘Current Financial Resource Measurement focus’. The former refers to where outflows, inflows and balances that indicate or affect the net position of a given entity are all reported in a financial statements’ set. This focus is applied in trust and proprietary funds and for the overall financial reporting of government resources (Graham, 2010). On the other hand, Current Financial Resource Measurement Focus refers to where the current financial resources comprising of inflows, outflows and balances that are expendable are reported on financial statements. This focus is exclusively used in financial reporting and accounting for the governments, both state and local, and is only used in showing the financial position of government funds and the results of the funds operations (Graham, 2010).
In addition, Modified Accrual Basis is used government funds accounting and combines both accrual basis and cash basis. In this method, recognition of revenue is done when they are available and measurable. The recoding of expenditures is done on Full Accrual Basis since they can be measured the moment they are incurred. This is the traditional basis of accounting for preparing the financial statements of government funds (Bogui, 2008). For the expenditures, the modified accrual basis reports prepaid items and inventories as expenditures the moment they are purchased instead of capitalizing the as assets. The prepaid items and inventories may be reported initially as assets and their recognition is then differed until they are consumed (Bogui, 2008).
The employment outlook in accounting for the next five years is perceived to be growing especially due to the development in technology, innovations and the demand for a stable economy. Accounting is the entry and the documentation including the analysis of the cash outflows and inflows. Accounting is the methodology of registering the transactions made, storing the financial records, performing the audits internally, reporting, analyzing and managing the financial records and also advising with regards to the tax system (Marino, 2014). Accountants spend most of their time handling a large number of financial data which is in raw form. A compilation of the same data is done and a presentation is made according to how it should be to the managers or the clients who possess little or no knowledge of accounting. Accounting is essential since it provides important information in terms of the resources which are available for a firm, how well to apply the resources through finances, and also the ultimate results of the resources and the finances used.
Majoring in accounting is very beneficial since there are very many opportunities which are open for a person who has majored in this profession. Courses in managerial accounting, financial, accounting methods and periods, practice and theoretical auditing, filing individual federal income tax, local taxation, business entities and many other courses are beneficial to accounting. Once one is equipped with the best tips for accounting, the employment outlook for any accounting professionals will increase the level of capability and also the type of accounting a person might be interested in studying (Reifschneider et al., 2015). One will have the professional capacity and capability of working in the service firms, non-profit organizations, corporations, government agencies, new and minor start-up business settings and any type of business that requires a person with the accounting skills. There is security in terms of the job offers since there is a high demand for persons with accounting skills.
2.0 Introduction
The development in terms of the growth in the economy, political class and science and technology has caused an increase in the level of accounting skills and specialization according to job specifications. Certain trends such as the specialization to a specified profession in accounting like taxation have caused the demand for the accountants to grow significantly over the years. Accounting is one of the professions where there has been an increase in the demand for accountants and people specializing in specific career choices (Reifschneider et al., 2015). However, accounting outlook faces various challenges that cause a difference in the field of accounting. Over the previous decades, advancement in technology and the transformation in almost every aspect of a business such as marketing, web design, human resource, and management have led to the demand for advanced means and methods of accounting.
In the past, the accounting industry was faced with a lack of advancement and only using the outdated means when it comes to its formulation (Marino, 2014). The powerful new technology has advanced the level of accounting and therefore making the accounting to be a profession to consider. Complacency, frustrations, lack of the automated services and the emphasis on the innovations has all caused an immense disruption in the accounting profession. The challenges in accounting increase the need to have the accountants advanced in terms of making sure that they keep in line with the developments made.
3.0 Factors affecting the accounting profession
3.1 Complacency
Complacency is one of the major problems and a sign which signifies a change in the accounting profession. In every major or minor business, relying on the past events makes it look more of not adaptive to the trends and advancements in technology. The outside world from the business which is successful will always take a keen interest in wanting to know more of what the business is doing to succeed (Smith, 2017). If a business starts to use some of the strategies that it used in the past to succeed, the general world takes a valid interest and identifies ways and weaknesses to that business and similarly claim over the issue. An opportunity to pull down the business or else engage in making it rise is assured by the success of the business.
3.2 Frustrations
Frustration is also another factor that is affecting the current market trends and the diversification in accounting. With the vendors now interested in joining the force in this field, customers will also become frustrated with the kind of services being offered by the specific business entities. Customers will always demand a better service and this increases the chances for the business to be faced with challenges (Reifschneider et al., 2015). This is specifically so because the vendors in the involved business do not have any alternatives and the only hope for improvement is too expensive and almost not available. These occasions present an opportunity for the outside world to grow in their curiosity and offer the services that the current business cannot offer.
3.3 Lack of automation services
In every sector of a business today, automation is very critical since it creates a chance for the business to grow and offer quick services. The manual form of operating a business is very expensive and the increase in the business requirements there is the need for an automation of the services. The growth of a business is highly dependent on the specific ways a business in running its internal services (Волот & Росохач, 2016). Automation is very important since it allows the business and the accounting techniques to be done accurately and precisely for the growth of the business. To reduce on the frustrations which have led to the loss of customers and also the available chances to improve on the business, automation is essential and critical in every sense.
3.4 Emphasizing on the innovation
When business starts to grow, there is the need to have an improvement in the technology and innovation. Large companies which have the capability to invent their own ways of innovations will respond quickly to the changes. This is the advantage of having a career that can assist a business to grow. In accounting, if the level of accounting is still very manual then the business entity is likely to be at it low in every sense. When the business has adopted the automated and the advanced methods of accounting, then there is a chance that the business will gradually increase in terms of the holding volumes in internal capacity (Волот & Росохач, 2016). Growth is essential to a business and this is due to the kind of internal services done to the business such as an increase in the level of accounting. When innovation takes place in the business, there is the possibility that there is a positive disruption in the business. Handling of accounts will now be enhanced and also the management of the accounts will now be increased. In the accounting industry, in the next five years, there will be a demand for advanced accounting and the available skilled personnel’s will have to get involved and get equipped with the latest technology.
4.0 Factors likely to cause a positive difference in the accounting profession
4.1 Better connectivity for the clients
The current world is all customer-oriented and the rate against which the customers are in need of quality service has increased drastically. The advancement in technology such as the cloud services, remote connections, internet, and the accountants will now have the capability to grow and connect to all the clients over the internet in a very successful manner. Most of the businesses have adopted these services in the accounting field and they have taken advantage of the available chances to successfully run the business (Boritz et al., 2013). Online connection to the customers and the business world is important to increase the convenience and the rate of working, therefore, increasing the earning capability of the business. Accounting industry will experience growth and diversification especially due to the need for customers and the clients to have better services. The level of services in the industry requires the business entities to have the possibility of handling and communicating to the customers at any time. This is a challenge currently since there are no reliable internet services and the businesses are not taking the initiative of improving their current state of technology (DRURY, 2013). Many businesses are very reluctant to adopt the new means of handling the accounting records and this has created a challenge for the businesses to perform accurate and timely recording of the accounts.
4.2 Data entry that is automated
Automation of the services especially the accounting services is very important and a driving factor to book keeping and in the general accounting. The known method of data entry that is manual has reduced significantly and this has lead to the adoption of automation in some of the business entities. Automatic import of data and the electronic transmission of the documents have allowed the businesses to grow significantly (Boritz et al., 2013). In the next five years, if the level of the account recording will be automated, there is a high chance that the business will improve in terms of the services it offers and the methodology used to earn revenues. Robust software solutions and the technical knowledge of the business have allowed the accounting industry to have the capability of deleting and entering data in a complete remote connection. Efficiency is improved and the business is able to use the available human capital completely in order to achieve the best results at the close of the day.
Data entry through automation will result in a change in the automation services and the workflows. Automation in many ways leads to major challenges which affect the business. Faster transmission and processing of information will ultimately lead to real time reporting and also timely providence of the financial results (Волот & Росохач, 2016). Improvement in terms of giving accurate information is created since there will be less human error due to automation of the services. Accounting is one of the crucial parts in the business and when there are errors in the system and the end results, there is the possibility of the business to run into losses and thereby give force information to the involved party. Having less accurate information is very risky since the business can overspend more than it can make making it lose out at the close of the period. The created automated services have the capability of having the business to grow especially due to the reduced costs and the order in which every magnitude affects the business. The reduced cost is as a result of having the business conducting timely and accurate data entry into the system. Storage of the information and data already in the system is also very important for future use.
4.3 The growth in the Do-It-Yourself approach
Accounting software’s is one of the major areas where the business has grown over the years. In the next five years accounting outlook is expected to grow to a very high level specifically due to the improvement and the level of handling any business. Accounting techniques and the career has also improved generally due to the availability of materials to assist in making the best from a minor concern. QuickBooks is one of the major inventions that have transformed the accounting sector (Волот & Росохач, 2016). Many small and large businesses are adopting the QuickBooks methodology which is located in the cloud to store and handle their mathematical concerns. Web tutorials, videos from the YouTube, search engines and webinars have increased the capability of the businesses and the interested parties to be able to access anything over the internet.
This knowledge has allowed the businesses to grow significantly and to greater levels in accounting and the needs for bookkeeping. The need to move the accounting records and techniques from the manual form to the online forms does not mean that the business will lay off all the available manpower in the business (Smith, 2017). The need to have the accounting records improved and significantly automated is to have the chance for the business to grow and avoid the minor errors with the aim of success. The software developed is cheap and very user friendly making it lead to a reduction in the amount of money an accountant can be worth in a month from the business.
4.4 Powerful insights and machine learning
Accountants have the capability of sorting out the data and produce a great deal of work and eventually based on the already known information, deliver a predictive insight about the business. As science and technology advances including the artificial intelligent as well as machine learning techniques, there is the possibility of the accountants to have an access to the insights in real time and which can be used in adding value to the clients and the business (Волот & Росохач, 2016). In the next five years, there is the possibility of the accounting techniques to be advanced to higher and greater levels which will similarly see the business rise above the normal levels. Every accountant will have the capacity to look into insight and the big data systems and have the capability of giving a clear outline about the business in the future. The ability to lay out the future of the business is based on the intelligence an accountant has that will assist in knowing what to do and what to conclude in any given data set.
4.5 Specialization
In every field of learning, there is the need for specialization in order to add on to the current knowledge and capability. Accounting is one of the fields where specialization is very important and which allows the personnel to have a variety of chances to serve as an accountant. Capable customers and business owners are cutting down the cost of running businesses through choosing from the best available personnel’s. For example, from the social media field one can be able to filter and only see what is interesting to them and the content of the chosen data (Boritz et al., 2013). The users of the Smartphone’s have the capability of choosing what they want to view and the apps one wants to install to their systems.
In the field of accounting, specialization is taking its core and the over bundled packages are being replaced with enhanced and better services. Every business in the world wants to spend on the services that are essential such as the bookkeeping and accounting records which they need for the growth of the business. This requirement is now causing a change in the business world and in the accounting profession where each person now wants to specialize in the best means possible for making an impact in the business (Smith, 2017). Specialization is leading to the developers of the accounting software’s to adjust their prices and also the products they are offering in the market. Currently, adopting such services is very expensive compared to the manual methodology of the business. Modernization of the businesses and having every aspect of the business automated is very crucial in ensuring that the cost is reduced and the work load is made simpler through use of the latest technologies.
5.0 Accounting outlook earning capacity in the United States
The geographical location and the experience of a person largely determine the earning capacity of the person. There are some additional factors which will influence the level of compensation of an accounting opportunity such as the negotiating skills; company size and the type of industry a person want to work. Accountants in many cases are paid a considerable huge amount of money compared to other people who are in the same professional and with a similar education capability and requirements. The median annual wage of the accounting field in the year 2015 stood at $67,190. An average of at least 10 percent of the accountants including the auditors in the same year earned a total of at least $119 000 and above (DRURY, 2013). The job opportunity grew to above 11 percent and in the next five years the job opportunity levels is supposedly speculated to be increasing to a higher level of more than 25 percent. For example in a state like New York the level of accounting is considered to be on the rise from about 5 percent to about 12 percent and the earnings for an year has improved from $80 000 to more than $87 000. Montana is the best in terms of the performance from a level of $50 000 in the year 2014 to about $64 000 in the year 2017.
Over the past for years since the year 2014 to 2017, there has been growth in the earning capability of the accountants. In the next five years, the level of growth in the accounting field is suspected to be growing with a percentage of not less than 17 percent. The individuals who have the skills in CPA (certified public accounts) and a masters degree are considered to be at an advantage compared to other individuals who only hold the lower level of education in the accounting professions (DRURY, 2013). A person who has a CPA recognition certificate has a higher chance of landing a good job with a considerable good salary and the chances for having a promotion at the workplace is also very high. Accounting in the next five years is one of the careers many people should consider the growth in the economy and the diversification of the current businesses is on the rise.
In most businesses, the future promises and advancements in technology will require the current employees to advance their knowledge, especially in the CPA field. Managers and the heads of companies will now require accountants who are qualified and who have combined the knowledge of accounting and advanced certification by the public accounts (Marino, 2014). Handling of data and data entry is currently done manually but in a five years time, automation of services will cause a change in many areas of accounting. Having the records entered and arithmetically arranged by the responsible systems will allow the business to grow significantly.
Many accountants who are able to find their way up to the top of the organization they are employed increases the chances of them being paid high bonuses and also improved salaries. Top talents in the organizations are in high demand and this is due to the involved organizations looking for a cheaper and effective way of doing business (Boritz et al., 2013). The flooding accountants who do not have higher levels of educations such as the master’s qualifications are at a disadvantage since it will be hard for them to secure a job opportunity as accountants.
6.0 Conclusion
Employment outlook accounting is one of the major areas of considerations for individuals who have the urge to get higher returns and advantages in terms of monetary terms. In the field of accounting, the opportunities available for growth and advancements are many but there are also chances available when it comes to offering such services (Волот & Росохач, 2016). When one major with a degree in the accounting field, the chances are any and so is the monetary value. The economic factors of having the best knowledge and understanding in accounting are specific and according to the current trends.
7.0 Recommendation
The current trends and requirements to have a cheap and reliable source of running the businesses have created a chance for the organizations to make more revenues. Technological advancements in the field of accounting have enabled both the managers and the accountants to eliminate errors in the business. In the next five years, the economy of the United States is suspected to have grown similarly and this is highly attributed to the fact that accounting is taking shape in every business (Волот & Росохач, 2016). The years when fraud used to make the economy of a country to be at its lowest due to lack of accuracy is finally coming to an end. Individuals interested in creating an impact in the coming years should consider taking a profession that is mostly according to the accounting field. Certification of the accountants is also very important and therefore the needs to have the interested persons get the certificates timely with the knowledge and understanding of the current trends.
References
Bebbington, J., Unerman, J., & O'Dwyer, B. (Eds.). (2014). Sustainability accounting and accountability. Routledge.
Boritz, J. E., Hayes, L., & Lim, J. H. (2013). A content analysis of auditors' reports on IT internal control weaknesses: The comparative advantages of an automated approach to control weakness identification. International Journal of Accounting Information Systems, 14(2), 138-163.
DRURY, C. M. (2013). Management and cost accounting. Springer.
Hoyle, J. B., Schaefer, T., & Doupnik, T. (2015). Advanced accounting. McGraw Hill.
Marino, R. (2014). Introduction. In The Future BRICS (pp. 3-18). Palgrave Macmillan UK.
Reifschneider, D., Wascher, W., & Wilcox, D. (2015). Aggregate supply in the United States: recent developments and implications for the conduct of monetary policy. IMF Economic Review, 63(1), 71-109.
Smith, M. (2017). Research methods in accounting. Sage.
Trends, C., & Williamson, O. (2016). The Issue. Benefits, 615, 446-3303.
Vengosh, A., Jackson, R. B., Warner, N., Darrah, T. H., & Kondash, A. (2014). A critical review of the risks to water resources from unconventional shale gas development and hydraulic fracturing in the United States. Environmental science & technology, 48(15), 8334-8348.
Волот, О. І., & Росохач, О. В. (2016). Features of modern automated accounting information system and their using in USA companies.
How could an organization measure the effectiveness of their pay-for-performance plans? There are many ways through which an organization can measure the effectiveness of its pay-for-performance (Paludi, 2012). Employer turnover rates is one of the ways of measuring the effectiveness of pay-for-performance. After the adoption of pay-for-performance by a company, the company should pay attention to the turnover rates of its employees. If the employee turnover rates rises, then this means the plan is not effective for the company (Aquila & Rice, 2012). On the other hand, if the employee turnover rates is low, then it means the plan is good and effective for the company. However, this method measuring the effectiveness of pay-for-performance may not be effective, because the employees’ turnover rates might be low during the first month after the implementation of the plan, but after a period of two to three months, the turnover rates might rise (Cummings & Worley, 2015).
Secondly, the company can also use revenue productivity to measure the effectiveness of the plan (Armstrong, Brown & Reilly, 2010). This is can be done through checking on the productivity of the plan after implementation, and comparing it to the previous performance of the company, prior to the implementation of the plan. If the company is ripping huge profits, and its productivity has also increased, then the plan will be a success. However, if the productivity and profits realized by the company drops, then the plan will not be successful (Aquila & Rice, 2012).
Finally, the company can also check on the improvements of the losses it makes. If the company’s losses reduce, then it means the plan is effective (Cummings & Worley, 2015). However, if the losses double after the implementation of the plan, then pay-for-performance will not be effective at all. Measuring the losses realized by the company is often used in order to understand if the plan is having any effects in the growth and development of the company (Aquila & Rice, 2012).
From an employee's perspective, what are the disadvantages of using a pay-for-performance plan?
Employees’ work in teams in order to improve the performance of the company, and to accomplish a lot of tasks within the shortest time (Cummings & Worley, 2015). In these teams, some employees may benefit solely from the efforts of other employees. For instance, a team of employees may be assigned a supervisor whose work will be to supervise the way the employees work (Armstrong, Brown & Reilly, 2010). Supervisors may therefore take advantage of their authority, thus offering little to no support to the team, hence making the team members to suffer, but in the end, if the team meets its required quarters, then all the team members including the supervisors will be rewarded equally (Aquila & Rice, 2012).
Employees working in different departments cannot be required to reach the same levels in order to be rewarded (Paludi, 2012). This consequently means, some employees work in departments which cannot favour improvements, hence making them to perform poorly as compared to other employees (Aquila & Rice, 2012). For instance, IT technicians and sales agents should not be required to meet the same level in order to be rewarded. This is basically because of the factors which may affect sales, in either a country or a region. A country which faces an economic crisis is likely to be affected by inflation, thus making the sales of goods and products in the market to drop drastically. In the same country, internet systems may be good, thus favouring the jobs of IT technicians, making them to achieve more due to meeting their levels of requirement (Cummings & Worley, 2015). This consequently leads to discouragement, whereby some employees tend to give up, hence increasing the turnover rates of the employees in the company. The management of the company should therefore consider the factors which may affect the performance of a certain employee, hence rewarding all the employees equally (Aquila & Rice, 2012).
From an employer's perspective, what are the disadvantages of using a pay-for-performance plan? Employers tend to also suffer from pay-for-plan performance, since it affects the performance of the company in general. The following are the disadvantages of the plan on the employer:
Weakening Quality
Employees work very hard in order to increase their pay, thus focusing on quantity rather than on quality (Aquila & Rice, 2012). Most employees consequently sell products in large quantities without considering the quality of services offered to the customers. In addition, when it comes to the production department, most employees tend to produce more products, thus compromising the quality of the products, a move which makes the company to lose its customers (Cummings & Worley, 2015).
Poor Employee Coordination
Employees tend to work in order to reach their goals, thus focusing only on individual tasks, a move which leads to poor coordination of the employees in the workplace (Armstrong, Brown & Reilly, 2010). The employees consequently concentrate on ways of improving their performance, thus reaching their goals (Aquila & Rice, 2012). On the other hand, the employer suffers, since certain tasks in the company cannot be accomplished due to poor coordination between the employees (Paludi, 2012). Furthermore, the company may receive proper strategies from the employees, due to their focus on achieving individual goals. This may also create enmity amongst the employees, making some of them to do things in order to make others to fail, which translates to the failure of the company (Cummings & Worley, 2015).
Reference
Aquila, A. J., Rice, C. L., & American Institute of Certified Public Accountants. (2012). Performance is everything: The why, what, and how of designing compensation plans. New York: American Institute Of Certified Public Accountants.
Cummings, T. G., & Worley, C. G. (2015). Organization development & change.
Armstrong, M., Brown, D., & Reilly, P. A. (2010). Evidence-based reward management: Creating measurable business impact from your pay and reward practices. London: Kogan Page.
Paludi, M. A. (2012). Managing diversity in today's workplace: Strategies for employees and employers. Santa Barbara, Calif: ABC-CLIO.
Pay-for-performance is a method used by companies to foster hard work amongst the employees. This method allows the management of the company to pay the employees based on their performance. Employees may either become disadvantaged or benefit from the method, based on the efforts they put in.
Introduction
Most companies have adopted the use of pay-for-performance in order to improve the production and revenues earned from the company. The employers and the employees however tend to suffer, and it is for that reason, that this paper will discuss how to measure the effectiveness of pay-per-performance, disadvantages of the plan on the employees perspective, and employers perspective.
Question 1 There are many ways through which an organization can measure the effectiveness of its pay-for-performance (Paludi, 2012). Employer turnover rates is one of the ways of measuring the effectiveness of pay-for-performance. After the adoption of pay-for-performance by a company, the company should pay attention to the turnover rates of its employees. If the employee turnover rates rises, then this means the plan is not effective for the company (Aquila & Rice, 2012). On the other hand, if the employee turnover rates is low, then it means the plan is good and effective for the company. However, this method measuring the effectiveness of pay-for-performance may not be effective, because the employees’ turnover rates might be low during the first month after the implementation of the plan, but after a period of two to three months, the turnover rates might rise (Cummings & Worley, 2015).
Secondly, the company can also use revenue productivity to measure the effectiveness of the plan (Armstrong, Brown & Reilly, 2010). This is can be done through checking on the productivity of the plan after implementation, and comparing it to the previous performance of the company, prior to the implementation of the plan. If the company is ripping huge profits, and its productivity has also increased, then the plan will be a success. However, if the productivity and profits realized by the company drops, then the plan will not be successful (Aquila & Rice, 2012).
Finally, the company can also check on the improvements of the losses it makes. If the company’s losses reduce, then it means the plan is effective (Cummings & Worley, 2015). However, if the losses double after the implementation of the plan, then pay-for-performance will not be effective at all. Measuring the losses realized by the company is often used in order to understand if the plan is having any effects in the growth and development of the company (Aquila & Rice, 2012).
Question 2
Employees’ work in teams in order to improve the performance of the company, and to accomplish a lot of tasks within the shortest time (Cummings & Worley, 2015). In these teams, some employees may benefit solely from the efforts of other employees. For instance, a team of employees may be assigned a supervisor whose work will be to supervise the way the employees work (Armstrong, Brown & Reilly, 2010). Supervisors may therefore take advantage of their authority, thus offering little to no support to the team, hence making the team members to suffer, but in the end, if the team meets its required quarters, then all the team members including the supervisors will be rewarded equally (Aquila & Rice, 2012).
Employees working in different departments cannot be required to reach the same levels in order to be rewarded (Paludi, 2012). This consequently means, some employees work in departments which cannot favor improvements, hence making them to perform poorly as compared to other employees (Aquila & Rice, 2012). For instance, IT technicians and sales agents should not be required to meet the same level in order to be rewarded. This is basically because of the factors which may affect sales, in either a country or a region. A country which faces an economic crisis is likely to be affected by inflation, thus making the sales of goods and products in the market to drop drastically. In the same country, internet systems may be good, thus favoring the jobs of IT technicians, making them to achieve more due to meeting their levels of requirement (Cummings & Worley, 2015). This consequently leads to discouragement, whereby some employees tend to give up, hence increasing the turnover rates of the employees in the company. The management of the company should therefore consider the factors which may affect the performance of a certain employee, hence rewarding all the employees equally (Aquila & Rice, 2012).
Question 3. Employers tend to also suffer from pay-for-plan performance, since it affects the performance of the company in general. The following are the disadvantages of the plan on the employer:
Weakening Quality
Employees work very hard in order to increase their pay, thus focusing on quantity rather than on quality (Aquila & Rice, 2012). Most employees consequently sell products in large quantities without considering the quality of services offered to the customers. In addition, when it comes to the production department, most employees tend to produce more products, thus compromising the quality of the products, a move which makes the company to lose its customers (Cummings & Worley, 2015).
Poor Employee Coordination
Employees tend to work in order to reach their goals, thus focusing only on individual tasks, a move which leads to poor coordination of the employees in the workplace (Armstrong, Brown & Reilly, 2010). The employees consequently concentrate on ways of improving their performance, thus reaching their goals (Aquila & Rice, 2012). On the other hand, the employer suffers, since certain tasks in the company cannot be accomplished due to poor coordination between the employees (Paludi, 2012). Furthermore, the company may receive proper strategies from the employees, due to their focus on achieving individual goals. This may also create enmity amongst the employees, making some of them to do things in order to make others to fail, which translates to the failure of the company (Cummings & Worley, 2015).
Conclusion
This paper has discussed how to measure the effectiveness of pay-per-performance, among the methods listed include the following: observing employee turnover rates, observing the levels of revenue and productivity, and observing the losses. In the second part, the paper discussed several issues related to disadvantages of the plan on the employees’ perspective. In this section, it was evident that some departments may not be favored by the economic situation pf the country, thus making employees in certain departments to earn more than others. In the last part, the disadvantages of the plan based on the employer’s perspective included focusing on quantity and not quality.
References
Aquila, A. J., Rice, C. L., & American Institute of Certified Public Accountants. (2012). Performance is everything: The why, what, and how of designing compensation plans. New York: American Institute Of Certified Public Accountants.
Cummings, T. G., & Worley, C. G. (2015). Organization development & change.
Armstrong, M., Brown, D., & Reilly, P. A. (2010). Evidence-based reward management: Creating measurable business impact from your pay and reward practices. London: Kogan Page.
Paludi, M. A. (2012). Managing diversity in today's workplace: Strategies for employees and employers. Santa Barbara, Calif: ABC-CLIO.
Employment outlook accounting major in the next five years
Executive summary
The employment outlook for accounting is positive for the next five years, since employment opportunities are expected to increase. The accounting role is perceived to be an important part of decision making process of any organization since budgeting, costing and financial reporting determines the performance. The various factors affecting accounting outlook includes; clients need for connectivity, accounting softwares development, automation in data and the general change in technological innovations. With expected growth in economy especially the U.S economy, there is the likelihood of growth in the overall job market for accounting over the next five years. Accounting has various strengths that include potential for growth and demand for accountants and some weaknesses that include constant need for training and monotony in work. The role of this project is to discuss accounting employment outlook in the next five years amidst changing job markets. The need for constant knowledge on technological advancement and how it affects accounting and changing workplace needs are issue in the project. Accountant should constantly train to improve their knowhow and get certification.
Introduction
The emerging trends in economy, business, science and technology and politics are changing the professional accountants’ landscape, with some of the trends having the whole profession and others certain specialist roles and areas. The degree of this impact and the anticipated results vary in various ways. As the global economy experiences these changes, and with growing optimism on economic recovery, the accounting profession has experiencing such changes and which comes in terms opportunities and the development of this profession. A keen look into the various developments in the industry implies that it is critical to adapt to the current market, and be ready to embrace the opportunities that arise. This can be seen in the technological changes that have played a major role in changing accounting professional outlook. The various emerging drivers have had an impact on what is expected of accountancy, the value of existing and new interpersonal and technical competences in all the areas which comprises of corporate reporting, audit and assurance, financial management, tax, strategic performance and planning and the areas touching on governance, ethics and risks. This mean that accountants have to advance on their technical and interpersonal competences in order to meet the changing needs of the local and global markets and which must be addressed through accounting profession.
Work treatment of accounting
The role and how it is perceived at the workplace depends in different factors and the how it influences the overall performance of an organization. A mark that distinguishes accountancy profession is how it accepts to performance responsibilities in the interest of the public (Gilbertson, Lehman, Harmon, 2013). The professional accountant is not only expected to fulfill the employer’s work needs or that of a client but work in accordance with some laid down work ethics ( Meymandi, Rajabdoory & Asoodeh, 2015). The core responsibility placed on accountants is to prepare financial and economic information in a way that it is useful to management for planning and controlling the operations of the organization to achieve the desired standard (Acton, 2012). Hence, accounting is treated as an integral part of the overall decision making process in the organization and actualizing these decisions. Without accounting, it would be hard for businesses to determine it is faring in terms of profitability. It’s therefore viewed as a way in which an organization keeps its own score in the market.
Factors affect accounting outlook
In recent years, new technologies have emerged and changed all aspects of businesses and in this regard the accounting profession. Various factors have affected availability if job opportunities in the market and how various how accounting is viewed by the industry. There are, therefore, various trends that have driven the changes in the industry and include; clients need for connectivity so that just like any other processes, accountants are expected to be able to connect with clients and other teams; automation in data entry is a major driving aspect in bookkeeping and accounting so that disappearance of manual data is requiring development of technical knowhow for the accountants; another factor influencing the outlook includes the growth of development of accounting softwares and moving of accounting to online platforms which is requiring a high level of knowledge (Turner, Weickgenannt, & Copeland, 2017). The need for specialization is a major factor determining the outlook of the accountancy and so that businesses are only keen on paying those bookkeeping and accounting services that they need (Brooks & Dunn, 2017). These factors are determining the development of accounting field and even the requirement for accountants to gain knowledge so that they are absorbed in the market.
Employment outlook in accounting for the current years
Outlook for accounts and auditors
Median pay -2016
$68,150 annually $32.76 each hour
Entry level (education)
Bachelor's Degree
Work experience
-
Employment positions (2014)
1,332,700
2014-2024 job outlook
Faster than average – 11 percent
2014-2024 –employment change
142,400
With expected growth in economy especially the U.S economy, there is the likelihood of growth in the overall job market. The outlook of accounting professional jobs is major determined by technology that is enhancing productivity and automation, which the major factors are affecting the need for accounting skills. It is expected that an increase in job marketing for accountants including bookkeepers and auditing clerks will be experienced. In fact, by 2020 accounting occupations are expected to a high of about 2,150,000 jobs when compared to about 1,898,000 jobs that were available in 2010 (U.S. Bureau of Labor Statistics, n.d). This means that the outlook for accounting job is to be good for those individuals aspiring to be accountants and more so, those possessing industry-wide certification may be preferred to those who are not certified accountants. Accounting job opportunities will continue opening up over the next 10 years as per the data presented by US Bureau of Labour Statistics, and this will be because of increasing nature of concerns for corporate finance. The projections holds that employment opportunities for accountants including auditors is expected to increase by around 13 % for the 2012-2022 period, a growth which as fast as average for the other jobs in the market (U.S. Bureau of Labor Statistics, n.d).
The forecasts also indicate that the employment growth for these professionals is expected to be linked to the status of the economy since as the economy is expanding, accountants will be needed for preparation and examination of financial reports. Moreover, a lot of focus is being placed on accounting roles in reaction to various corporate scandals and financial crises in recent times. It is expected that stricter regulations and laws will be put in place, especially across the financial sectors and due to this demand for services provided by accountants and auditors as firms try to conform to such new standards. Lending standards that are more stringent can be expected to increase and the importance of auditing services will be high, since this is a major way for firms to show their creditworthiness. Those accountants with professional certification especially CPAs ( Professional public Accountants) may have the best prospects of being absorbed into these jobs (Randstad Professionals 2016).
Many organizations will continue to employ those individuals who are highly qualified in accounting knowledge and have wide experience and those who are certified for the purpose of overseeing fiscal services. In addition, hiring accountants is being done increasingly on fixed term or temporary contracts, a trend that can also be observed in other occupations in the entire business sector. Businesses are taking stiff measures aimed at reducing staffing cost and employing people on the basis of fixed terms to help out in specific projects or temporary increment in workloads (NATIONAL ASSOCIATION OF COLLEGES AND EMPLOYER, 2015). The emphasis here is the need for accountants to maintain professional networks that are strong so that they to position themselves to embrace new emerging opportunities. The various sectors have show good signs for growth including the technology, finance, construction, property and banking after the economy experienced economic hardship in 2007-2008 period.
The demand for accountants in these sectors has increased considerably and this trend is expected to continue in the near future as long as the sectors maintain this growth. However, as some sectors are experiencing growth, others are expected to stagnate and this may fail to offer great prospects for accountants and auditors in such sectors. Such cases can be seen in gas and oil extraction industry, where employers have been reporting lowest growth and outlook for those college graduates of 2016. Some firms in the industry have also experienced reduced growth with nearly 60 % and therefore, a decline in the level of employment for college graduates (Randstad Professionals 2016). This is not surprising given that lower gas and oil prices affect this industry directly. This shows that prospects for employment in these sectors are not expected to be high in the foreseeable future and accountants may not look to the industry as providing good employment opportunities. The data above data serves to indicate the positive impact of a strong economy on the future of accounting profession and how it is expected to provide opportunities for the accountancy professionals. As long as the economic outlook is bright in future, the accountants will continue to encounter employment opportunities in their field. However, the projections are not guarantee of how the future of accountancy will be but a reflection or description of what is to be expected under various circumstances and assumptions. In case the assumptions in the market are not fully realized, it is expected that actual values will be different from employment projections. A major assumption is the equilibrium in the labor market, so that supply of labor will meet the needs in the same market apart from some frictional unemployment level (Randstad Professionals 2016).
Accounting’s strength and weakness
Accounting as a profession has its major strengths and various weaknesses that those who choose to pursue it as a career might encounter. To begin with, pursing accountancy as a career may be among the best ways of investing in one’s education. There is a potential for such a person to experience personal growth and development since the this field allows one to choose careers in various industries both in private and public sectors or even being self-employed (Feldman & In Rupert, 2013). The various areas in the accountancy include auditing, bookkeeping and financial consultations in different sectors of the economy. Ones a person becomes a Certified Public Accountant, many opportunities open up for them and from there they can kick-start their career progression. There are many opportunities a job in accountancy with every firm needing the services of an accountant (Florida National University, 2015). Accountants play a vital role in ensuring that businesses are within set budget and no deviation from set cost limits.
While it is not guaranteed that a person will find employment after graduation, demand for accounting and related services ranks quite high. Accounting is all about resource management, handling organization’s finances which make demand for such services to be high. Due to such demand, the accounting career path is quite clear which makes it a good choice for those interested. This is a major strength for accounting since one should pursue a profession that provides opportunities for growth and personal development both in employment self-employment (Feldman & In Rupert, 2013). With a foundation of accounting skills and continuous education, a person has the options of practicing as an auditor, budget analyst, Tax accountant, CPA and even a payroll clerk (Florida National University, 2015). There are also opportunities for a person to advance towards managerial positions especially as financial planner and analysts in an organization.
Moreover, the range of payment for accountants is quite high due to the nature of this profession right from the beginning. In addition, anybody can do so well in this profession including women who may feel left out in other important professionals and actually, this profession is regarded as among the major professions where women can grow and earn well. Strength is that, in this profession, one can choose not to be employed but pursue their business interests. As a professional, one may become an entrepreneur after obtaining enough experience and establishing a large network across various businesses in the market. It’s one of those professions that can be on its own, and whether one decides to provide specialized or consultation services, options are many relating to financial affairs.
However, there some weakness or cons that can be associated with accounting as a profession. Accounting can be said to be a dull and is considered among the less glamorous field that requires ongoing education, due to the nature of daily work that involves math and investigating. The nature of accounting is that one is not given much time to explore on their knowledge meaning that there is little room for innovation, which can explain why it is hard to hear of a prominent accountant. In addition, the work may be seasonal with much work being on the specific times of the year with deadlines. The responsibilities taken by an accountant have huge impact on the firm and this may come with stressful work environment (Ferguson, 2008). For any person, the monotony in accounting career would make the most weakness of this profession.
Accounting qualification
The qualifications required for an accountant includes education, training and certifications. It is required that an accountant possess the right academic knowledge on accounting, bookkeeping and auditing which helps in understanding of the basic principles. Technological knowledge especially on computer and accounting software is also important although such skills may be provided by the employer during work training (U.S. Bureau of Labor Statistics, n.d).one is required to have a Bachelor’s Degree in accounting or any other related area is for many of accounting positions. Having a bachelor’s degree in related subjects provides a quick route to obtaining the right qualification with professional accounting body. This kind of qualification makes it possible for a person acquire chartered status that will show the employers that they have skills and training to carry out related tasks. It is also necessary for graduates to gain work experience through internship programs that will prepare them for the real work place in organizations. Such qualifications will be necessary in imparting the necessary knowledge to potential accountants and thereby fulfilling the education and training requirements for the profession.
Related accounting jobs
Accounting jobs are not only related to working alone in large organizations’ offices. There is a diverse range of jobs that are well paying and which are within the accounting filed. Other than tasks related to bookkeeping, majority of accountants can carry out tasks that are more complex like payroll reporting and auditing of fraud. They are also involved in preparing financial information and reporting on the same for business shareholders and the government institutions. Simply the work of accountants is to allow individuals and businesses in understanding and evaluation of financial expenditures and even profitability. The accounting profession is therefore tasked with ledge management and compilation of the accounts of a company. It simply involves the preparation of all books of an organization while making update on accounting records through daily computations. An accountant compiles the financial data, and prepares reports on such information in a manner that can be understood by the users including regulators. The accountant also prepares tax reports and assist owners in submitting their tax dues (U.S. Bureau of Labor Statistics, n.d).
Accountant certification
As aforementioned, certification is very vital for accountants in their career growth and development. It is an essential aspect that assists a person in differentiating himself at the market place and serves as an indicator to the employer that one has necessary skills required in performance of accounting tasks. Some specific credentials have become quite desirable in the market and comprises of Certified Public Accountant, Certified Internal Auditor, Certified Management Accountant, Certified Information Systems Auditor and Chartered Accountant (Half, n.d). In coming years, firms are likely to place high value on certification as a way of differentiating high performing candidates. The overall impact will be advantageous to accountants since they will be provided with an opportunity to earn more and embrace many opportunities that may arise. This is because employers value such certifications and are in search of those individuals whose knowledge can be demonstrated in niche areas when they combine work experience, formal education and training acquired in the process of certification (Half, n.d).
Conclusion
Accounting profession has undergone various changes that have been brought about by emerging trends in economy, business, science and technology and politics, which is transforming the practicing platform. These changes have changed what is expected of the accountants in the work place especially because of the constantly evolving needs of organizations and businesses. Accounting tasks and responsibilities are treated as very essential since through them, performance of the organizations is evaluated. It is projected that accounting employment opportunities will continue to increase in future and the certified professions are the likely to benefit more.
Recommendation
The changing market needs for accountancy including the technological advancement calls for constant training for any professionals. Those starting out on this profession should take time to research on what is required , what is needed to remain relevant during employment and undertaking certification courses to be competitive in the job market.
References
Turner, L., Weickgenannt, A., & Copeland, M. K. (2017). Accounting information systems: Controls and processes. 36-41
Meymandi, A. R., Rajabdoory, H., & Asoodeh, Z. (2015). The Reasons of Considering Ethics in Accounting Job. Economics, 2(2), 136-143.
Gilbertson ,C,. Lehman, M.,Harmon,D.,(2013). Century 21 Accounting: General Journal, Introductory Course. Cengage Learning. 6-7
Brooks, L. J., & Dunn, P. (2017). Business and professional ethics for directors, executives & accountants. 474-476
Feldman, D., & In Rupert, T. J. (2013). Advances in accounting education teaching and curriculum innovations: Vol. 14.3-10
Acton , (2012).The Only Three Reasons Entrepreneurs Need Accounting and Finance. Retrieved from: https://www.forbes.com/sites/acton/2012/09/15/the-only-three-reasons-entrepreneurs-need-accounting-and-finance/#691a10e232cd
Ferguson, (2008).The Top 100: The Fastest-Growing Careers for the 21st Century. Infobase Publishing.3-4
Accounting internal control refers to the procedure of assuring accomplishment of the organizational objectives in operational efficiency as well as effectiveness, dependable financial communication, law, rules and guidelines compliance (Bragg, 2009). The extensive concept of internal accounting control incorporates all that is engaged in the control of the organizational risks. This is the path via which the organization’s resources are distributed, regulated and measured. Internal control of accounting plays a crucial role in the general detecting and the prevention of fraud occurrence as well as the protection of the company’s resources which are both intangible such as corporate image and intellectual property the physical ones like machines and human resources. The objectives of internal control at the organizational level are mainly associated to the dependability of financial communication, acquiring timely responses on the success of the strategic or operational goals as well as the compliance with rules, guidelines and respective laws (Bragg, 2009). On the other hand at the transaction specified level, internal control mainly deals with the acquired actions in the achievement of particular goals. Internal control procedures result in the reduction of variation which results to having predictable results (Bragg, 2009).
Adequacy of Five Internal Controls
Internal controls are guidelines and procedures that are set in enhancing continuous accounting systems dependability and they are created in the preventing the occurrence of fraud. To start with, duties separation is one of the internal control which incorporates the splitting of responsibilities, reporting, auditing, deports as well as book records maintenance (Bragg, 2009). The more that the respective duties are divided the lower the chances that are held by any staff in committing of fraudulent operations. The other one refers to controls access to the differing accounting systems through the creation of lockouts, electronic admission logs, and passwords. This strategy is essential and effective in preventing the unauthorized users to away from the system while offering the opportunity for conducting the system’s usage audit in the establishment of errors or weaknesses (Bragg, 2009).
Physical audits normally incorporate the hand counting of cash as well as other physical properties that are tracked within the accounting system like materials and portfolio (Macintosh & Quattrone, 2009). This system is essential given that physical counting can reveal the hidden weaknesses in the balance of account while sales cash account can be done at every time to ensure accountability. Documentation involves the utilization of standardized documents for the financial exchanges which are essential in the maintenance of consistency in keeping records (Macintosh & Quattrone, 2009). Accounting reconciliation, on the other hand, can help in creating and sustaining accounting systems balances in those accounts possessed by others like suppliers and banks.
Organization’s Types of Vulnerabilities to Theft and Fraud
McDonalds Company is vulnerable to the occurrence of fraud for one because its duties are not highly separated. When duties are all provided to a small number of individuals this implies that the potential of conducting fraudulent operations is high (Macintosh & Quattrone, 2009). The corporation should, therefore, focus on further duties separation. The control of cash control should additionally be limited and only a few trusted employees who are accountable for any loss that is permitted to handle the finances. Also, the company fails to conduct proper documentation of the accounts possessed by suppliers and other stakeholders in assessing the accuracy and dependability of resources. The inadequate and the missing controls can best be fixed by the implementation of further duties separation, standardized documentation and access control to limit the number of those having access to financial records, resources, and cash.
References
Bragg, S. M. (2009). Accounting control best practices. Hoboken, N.J: Wiley.
Macintosh, N. B., & Quattrone, P. (2009). Management accounting and control systems: An organizational and sociological approach. Hoboken, N.J: Wiley.
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