ACC 240: Fundamentals of Accounting- Full Course Discussions (Topic 1 –Topic 7 Discussions)
ACC 240: Fundamentals of Accounting- Topic 1 DQ 1
Assessment Description:
Specify your major and identify your career plans. Explain how accounting might help you in your career if you are not planning to be an accountant. What information provided in financial reports would help you in your business?
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 1 DQ 1.
Hello class,
I am currently pursuing a Bachelor of Science in Nursing (BSN) degree and I also work as an Emergency Room (ER) nurse. Upon graduating, I plan to continue working as a registered nurse in an emergency room setting. While I am not studying to become an accountant, I believe understanding basic accounting principles will help me in my nursing career. During my duties as an ER nurse, I will be in charge of patient care while at the same time being charged with the responsibility of overseeing and supervising the patient flow. This will call for the understanding on how best to use the existing resources in the hospital most efficiently. Moreover, financial reports can help me understand how budget and staffing decisions impact patient outcomes and quality of care as explained by Akinleye et al. (2019). Through the identification of the funds flow, expenditure, and quantifiable outcomes such as operating cost, it will be possible to offer value based care rather than protracting the cost.
Additionally, I am confident that the knowledge of basic accounting will assist me in making prudent purchase decisions and effectively managing costs. Cleverley et al. (2023) posit that evaluating metrics in income statements and balance sheets can guide budget-friendly procurement of medical supplies, selecting lower-cost treatment alternatives, and utilizing available discounts. This supports my goal of delivering affordable, high-quality care to my patients despite fiscal constraints common to hospitals. With financial skills, I will also recognize early signs of operational inefficiencies and collaborate with management to undertake corrective actions to optimize department performance and outcomes. Furthermore, I can work with department leaders to right-size staffing models based on patient volume and accurate predictions gleaned from financial data. This shows that while I am not pursuing accounting as my career, gaining familiarity with financial reports and metrics has clear professional benefits for my role as an ER nurse.
References
Akinleye, D. D., McNutt, L. A., Lazariu, V., & McLaughlin, C. C. (2019). Correlation between hospital finances and quality and safety of patient care. PloS One, 14(8), e0219124. https://doi.org/10.1371/journal.pone.0219124
Cleverley, W. O., Cleverley, J. O., & Parks, A. V. (2023). Essentials of Health Care Finance. Jones & Bartlett Learning.
ACC 240: Fundamentals of Accounting- Topic 1 DQ 2
Assessment Description:
Accounting is often referred to as “the language of business.” Explain in your own words what that expression means.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 1 DQ 2.
Hello class,
In my opinion, the expression "accounting is the language of business" captures the idea that accounting serves as the primary means of communication for businesses and their financial operations. Put simply, accounting is how companies document, quantify, and report on their economic activities and financial position. This means that accounting provides the framework and standardized terminology that allows entities involved in business to meaningfully discuss finances. Terms such as revenues, expenses, assets, liabilities, equity, income, and cash flows are, by virtue of their meanings in accounting, clear and easily understandable irrespective of the fields of operations or activities. In my view, it is due to this common language and set of rules that businesses, investors, creditors, regulators for example are able to assess and make sense of the state of affairs or performance of business organizations.
To support my argument, scholars such as Bigel (2022) state that through mechanisms like income statements, balance sheets, statements of cash flows, and other structured reports, accounting converts raw financial data into meaningful information that tells a story. It transforms numbers into a narrative format that non-accountants can follow and gives useful context to things like profitability, liquidity, leverage, and growth. This is by translating complex financial workings into straightforward analyses easily digestible by both specialists and laypeople.
In addition, there are other views from scholars like Boiral et al. (2020) who argue that, accounting “language” might refer to the set auditing practices that enhance transparency, credibility, and accountability. This is the planned and structured approach of capturing and categorizing business transactions that can be independently and accurately assessed by a third party. This makes it easier for organizations and their various users to build trust hence aiding in decision making, regulation and efficiency in the market. Nonetheless, by providing a common financial terminology and reporting structure, it can be argued that accounting serves as the universal language that allows all players in the business world to communicate, understand, and utilize the same financial information.
References
Bigel, K. S. (2022). Introduction to financial analysis. https://pressbooks.pub/introductiontofinancialanalysis/
Boiral, O., Heras-Saizarbitoria, I., & Brotherton, M. C. (2020). Professionalizing the assurance of sustainability reports: the auditors’ perspective. Accounting, Auditing & Accountability Journal, 33(2), 309-334. https://doi.org/10.1108/AAAJ-03-2019-3918
ACC 240: Fundamentals of Accounting- Topic 2 DQ 1
Assessment Description:
Describe the three line items of the multistep income statement. Explain why it would be important for a company to break out its income in this manner.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 2 DQ 1.
Hello class
The multistep income statement is a detailed financial report that breaks down the profitability of a company into three mainline items or sections (Lessambo, 2022). These three main line items include; revenue (also called Gross Sales), Cost of Goods Sold (COGS), and expenses. Revenue reflects the total amount of money received by a company from its actual sales of goods and services during a certain period. This top-line number captures all operating income generated by the business. Conversely, COGS refers to the direct costs attributed to producing the goods and services that were sold to generate that revenue (Wicaksono & Anwar, 2023). It includes things like material and production labor involved in manufacturing the products. By subtracting COGS from revenue, it derives the Gross Profit of the company, which is an important indicator of profitability at the early stages of operations before other costs are considered.
Additionally, expenses encompass all the operating costs and non-production outlays that occur over the period such as rent, utilities, sales and marketing expenditures, management salaries, and shipping among others (Lessambo, 2022). Deducting total expenses from gross profit arrives at operating income, thus demonstrating the real profitability from core business activities before taxes and financing are factored in. Breaking out the income statement into the above three steps provides important incremental information and analysis opportunities for a company. It allows management and investors to assess revenue trends, compare gross margins across products or divisions, isolate the relative cost structures, pinpoint areas of inefficiency, and benchmark expense ratios over time. This multi-step approach provides deeper insights beyond just a single "bottom line net income" number (Qui, 2020). Magni et al. (2020) adds that it identifies where value is created or destroyed within different stages of operations, thus empowering more informed management and investment decisions.
References
Lessambo, F. I. (2022). Analysis of the Statement of Income. In Financial Statements: Analysis, Reporting and Valuation (pp. 163-172). Cham: Springer International Publishing. https://doi.org/10.1007/978-3-031-15663-2_12
Magni, C. A., & Magni, C. A. (2020). Financial Statements. Investment Decisions and the Logic of Valuation: Linking Finance, Accounting, and Engineering, 83-158. https://doi.org/10.1007/978-3-030-27662-1_3
Qiu, W. (2020). Value-relevance of the multiple-step income statement–an analysis of earnings components.
Wicaksono, A., & Anwar, C. (2023). Analysis of Cost of Goods Sold Calculation in MSMEs Pahala Geprek & Chicken. International Journal of Global Accounting, Management, Education, and Entrepreneurship, 4(1), 124-128. https://doi.org/10.48024/ijgame2.v4i1.102
ACC 240: Fundamentals of Accounting- Topic 2 DQ 2
Assessment Description:
Describe what a classified balance sheet is. Also, explain why a classified balance sheet might be more advantageous to financial statement readers than the simple balance sheet.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 2 DQ 2.
Hello class,
A classified balance sheet subdivide the total assets and liabilities into current and non-current forms and as such are more detailed than the basic or simple balance sheet (Kimmel et al., 2020). In a classified balance sheet, assets are arranged in two categories: current assets, and non-current; and on the same note, liabilities are also grouped as current liabilities and long-term liabilities. This extra classification is useful to the reader of the financial statements since the analysis of those statements allows a quick measure of assessment about the company’s short-term solvency and long-term liabilities (Kimmel et al., 2020). Specifically, the classified format offers a clear picture of how much capital is devoted to current operations versus long-lived investments. Additionally, it separates obligations that must be settled in the next 12 months versus those with due dates further out.
From a liquidity perspective, current assets can be more readily converted into cash than long-term assets to meet upcoming current liabilities. Renaldo and Sevendy (2023) argue that segregating these line items aids in evaluating working capital management and the likelihood of balance sheet distress. It gauges if current resources are sufficient to cover short-term needs. This classified view may also provide advance warning signs if current ratios fall below industry benchmarks. On the liability side, breaking out short versus long-term debt schedules allows for a refined analysis of solvency, repayment capacity, and refinancing risks (Gupta et al., 2023). This is important information for creditors and credit rating agencies. Further, it assists with modeling pro-forma debt structures under various interest rate scenarios.
Overall, the multi-layer classified format enhances transparency and enables more meticulous financial modeling, forecasting, and systematic performance benchmarking over peer firms and across quarters/years. In my opinion, a classified balance sheet yields actionable insights beyond what a simple balance sheet alone offers investors and stakeholders. As a result, classified statements tend to be preferred by financial professionals and regulators.
References
Gupta, M. J., Makwana, C., Naik, S., & Rao, W. R. (2023). Fundamentals of Financial Management. AG Publishing House (AGPH Books).
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2020). Financial Accounting: Tools for Business Decision Making. John Wiley & Sons.
Renaldo, N., & Sevendy, T. (2023). Development of intermediate accounting teaching materials: financial accounting and accounting standards. Reflection: Education and Pedagogical Insights, 1(1), 1-12.
ACC 240: Fundamentals of Accounting- Topic 3 DQ 1
Assessment Description:
Not all events that occur in a business on a daily basis constitute financial transactions that are recorded. Give an example of a business transaction that would not be recorded and explain why it would not need to be recorded.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 3 DQ 1.
Hello class,
One example of a common business event that does not necessarily constitute a financial transaction requiring an accounting record is routine maintenance of fixed assets like office equipment. While maintaining assets is important for operations, routine repairs, and service checks, it may not alter the financial position of the firm and thus would not demand journal entries. According to accounting principles, for an activity to qualify as a transaction there must be a measurable economic impact involving an exchange of value that affects the financial statements (Raicevic, 2021). However, simple upkeep that preserves the existing usefulness of an asset does not alter its recorded book value, original cost, or estimated useful life. As long as such maintenance is treated as an operational expense for the period without elongating an asset or changing its service potential, then recording a journal entry would be unnecessary paperwork.
Additionally, this example aligns with the accounting concept of conservatism, which according to Anagnostopoulou et al. (2021) specifies that potential gains are never anticipated, while losses are provisioned for in advance if reasonably estimable. Thus, by not setting up maintenance as a transaction, it avoids overstating assets before deriving corresponding future benefits. I believe this approach is prudent and prevents inflating accounting numbers prematurely to portray a stronger position than reality. Moreover, periodic maintenance also tends to be recurring minor costs that are factored into depreciation expense allocation rather than itemized individually. This smoothens reported earnings rather than create fluctuations from low-dollar transactions.
In my opinion, routine asset preservation deemed too immaterial and frequent to measure precisely would fall outside the domain of accounting transactions. This is because record-keeping aims to objectively reflect economic impacts as they occur to inform investment judgments while omitting operational tasks that do not alter the quality or lifespan of company resources. This conforms with the materiality concept fundamental to producing a practical, useful depiction of financials.
References
Anagnostopoulou, S. C., Tsekrekos, A. E., & Voulgaris, G. (2021). Accounting conservatism and corporate social responsibility. The British Accounting Review, 53(4), 100942. https://doi.org/10.1016/j.bar.2020.100942
Raičević, J. (2021). Accounting policies in the function of quality assessment of financial statements. Economic Themes, 59(3), 357-373.
ACC 240: Fundamentals of Accounting- Topic 3 DQ 2
Assessment Description:
Briefly describe each element of the accounting equation. Explain why it is necessary for the equation to remain in balance.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 3 DQ 2.
Hello class,
According to Weygandt et al. (2019), the accounting equation is a fundamental tool that equates the assets of a company to the claims against those assets. This equation is made up of three elements which include; assets, liabilities, and the owner's equity. Cade et al. (2019) refer to assets as economic resources owned or controlled by a business that are expected to provide future benefits. They include both long-term tangible goods as well as short-term liquid holdings. Conversely, liabilities refer to debts or obligations that must be settled by sacrificing assets or incurring expenses in the future (Cade et al., 2019). Common liabilities are accounts payable, accrued expenses, notes payable, and long-term debt.
The final component of the equation is owner’s equity, which may be defined as the owner’s investment in the company, together with the retained earnings, minus any current liabilities. Equity makes sure that assets are sufficient to cover all the liabilities. Apart from understanding what each element entails, it is crucial to note that for the equation to remain balanced, the following must always be true:
Assets = Liabilities + Owner's Equity
This equation is important because it checks the mathematical accuracy of the books of account and provides evidence for the source of financing of reported assets. This means that an unbalanced equation suggests that journalizing was done improperly or mathematical errors were made or that the account balances have not been totaled to show all increases or decreases in value over the period. Additionally, remaining in equilibrium confirms the "dual aspect" concept that for every financial transaction, both an asset or expense and either an equity or revenue account are affected (Barth et al., 2023). This gives stakeholders faith in the ability of the company to apply accounting principles uniformly and avoid errors or intentional manipulation that compromise the integrity of reported data.
References
Barth, M. E., Li, K., & McClure, C. G. (2023). Evolution in value relevance of accounting information. The Accounting Review, 98(1), 1-28. https://doi.org/10.2308/TAR-2019-0521
Cade, N. L., Koonce, L., Mendoza, K. I., Rees, L., & Tokar, M. B. (2019). Assets and liabilities: When do they exist?. Contemporary Accounting Research, 36(2), 553-587. https://doi.org/10.1111/1911-3846.12479
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial Accounting. John Wiley & Sons.
ACC 240: Fundamentals of Accounting- Topic 4 DQ 1
Assessment Description:
Describe the difference between gross profit and income from operations. Why would a company be concerned with gross profit rather than just overall income from operations?
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 4 DQ 1.
Hello class,
After rigorous research, I found out that gross profit and income from operations are important profitability metrics calculated at different stages of a company's income statement. Gross profit is the excess of revenues over the direct costs associated with producing the goods and services sold to generate those revenues. It is calculated as revenues minus the cost of goods sold (Jayathilaka, 2020). Thus, gross profit reflects profits made after direct production costs but before operating expenses are considered. Conversely, income from operations, which is also called operating income, goes a step further by deducting all operating expenses like sales, administrative costs, and depreciation from the gross profit figure. As a result, it represents the profits earned through actual business operations before including any non-operating, non-recurring, or interest and tax items (Jayathilaka, 2020).
Additionally, I learned that there are a few key reasons why companies closely monitor gross profit in addition to operating income. First, analyzing gross margins can reveal the true costs of production and the effectiveness of procurement and supply chain management over time. This has direct implications for pricing strategies since the cost of goods sold is a controllable expense. Moreover, higher gross margins also translate to more flexibility in covering operating expenses which are often fixed costs that fluctuate less in the short run (Fonseca et al., 2022). This means that gross profit acts as a cushion against unforeseen expense increases or revenue declines from macro factors that are beyond the control of a company like economic downturns.
Finally, gross profit separates the assessment of production efficiency from the governance of discretionary overhead costs (Jayathilaka, 2020). This helps pinpoint where value is generated within distinct business processes to improve resource allocation and boost profitability at the source. Therefore, I believe optimizing gross margins receives considerable focus from managers too in addition to net operating income.
References
Fonseca, S., Guedes, M. J., & da Conceição Gonçalves, V. (2022). Profitability and size of newly established firms. International Entrepreneurship and Management Journal, 18(2), 957-974. https://doi.org/10.1007/s11365-020-00730-6
Jayathilaka, A. K. (2020). Operating profit and net profit: measurements of profitability. Open Access Library Journal, 7(12), 1-11. https://doi.org/10.4236/oalib.1107011
ACC 240: Fundamentals of Accounting- Topic 4 DQ 2
Assessment Description:
Explain what is meant by the term “sustainable income.” Why is it important to distinguish between sustainable income and actual net income? Is one more important than the other? Please explain.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 4 DQ 2.
Hello class,
To quantify sustainable income, Nosratabadi et al (2019) defined it as an income stream that is reasonably stable, reliable, and sustainable over the long run without undue cost and without spending beyond one's income to acquire it. This has a vital role to play in the overall financial analysis since it helps in the actual determination of the earning capacity of a firm and leaves out the special incidences that can make the income statement appear to be healthier than it actually is.
The distinction between sustainable income and actual net income is important for several reasons. Actual net income, as reported in financial statements, includes all revenues and expenses for a given period, including non-recurring items. In contrast, sustainable income focuses on the core, ongoing operations of a business. According to Nizam et al. (2024), this difference helps investors, analysts, and managers better understand a company's long-term financial health and performance prospects. For example, a company might report high net income in a particular year due to the sale of a major asset or a one-time tax benefit. While these events boost the bottom line, they do not represent the ability of the company to generate consistent earnings from its core business activities. Sustainable income would exclude such non-recurring items, thus providing a clearer picture of the company's ongoing financial performance.
In my opinion, neither sustainable income nor actual net income can be considered universally more important than the other, as they serve different purposes. Actual net income is crucial for statutory reporting, tax calculations, and understanding the overall financial position of a company at a given point in time. This is because it provides a comprehensive view of all financial activities within a specific period. On the other hand, sustainable income is particularly valuable for long-term analysis and decision-making. It helps in forecasting future performance, valuing companies, and assessing the stability of dividend payments. Nonetheless, investors and analysts often use sustainable income metrics, such as normalized earnings to make more informed investment decisions (Popescu et al., 2021).
References
Nizam, M. K., Pathoni, D., Chilmi, M. F., & Nurhaliza, N. (2024). Exploring the Impact of Operating Cash Flow, Financial Leverage, and Sustainability Accounting on Earnings Persistence: A Study of Manufacturing Firms in the Jakarta Islamic Index (JII). Glopendi Journal of Innovative Management and Accounting, 1(1), 17-29.
Nosratabadi, S., Mosavi, A., Shamshirband, S., Zavadskas, E. K., Rakotonirainy, A., & Chau, K. W. (2019). Sustainable business models: A review. Sustainability, 11(6), 1663. https://doi.org/10.3390/su11061663
Popescu, I. S., Hitaj, C., & Benetto, E. (2021). Measuring the sustainability of investment funds: A critical review of methods and frameworks in sustainable finance. Journal of Cleaner Production, 314, 128016. https://doi.org/10.1016/j.jclepro.2021.128016
ACC 240: Fundamentals of Accounting- Topic 5 DQ 1
Assessment Description:
Explain the difference between fixed and variable costs and give two examples of each. Can a company budget for variable costs? Explain.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 5 DQ 1.
Hello class,
There are two broad categories of cost that businesses encounter in their operations, they include; fixed costs and variable costs. Gold et al., (2022) has classified fixed costs as those that are incurred regardless of the level of production or sales, and do not vary in the short-run in response to changes in the level of output or sales-revenue. Examples of fixed costs include rent or lease payments for facilities and salaries of permanent staff. Conversely, variable cost is defined as costs that fluctuate with the activity level, that is, costs that increase or decrease with the amount of production or sales volume (Gold et al, 2022). This implies that if the level of output increases, the variable costs also increase on the same note, if the level of output decreases, it is mirrored with the decrease in the variable costs. Some examples of variable costs include material costs which are used in the manufacturing process, and commissions that are paid to the sales agents. According to Syahputri et al. (2023) it is essential to differentiate between these two costs due to different financial analyses such as break-even analysis and cost-volume-profit analysis.
Even though companies are well aware of fixed costs since they are relatively easier to budget due to their nature, it is a fact that companies can actually budget for variable costs as well. Variable costs are usually estimated by assuming the level of production or sales for the given period and then determining the cost according to the experiences or the norms of the specific industry. This process is known as flexible budgeting and it allows companies to create budgets that adapt to different levels of activity (Syahputri et al., 2023). To control variable costs, companies apply methods such as cost-volume analysis to recognize trends and costs changes, regression analysis to define cost patterns and relations, and activity-based costing to assign costs in a more precise manner (Syahputri et al., 2023).
In regard to the information above, I believe that companies that analyze their fixed and variable costs are in a better position to control their costs and make right estimations with regards to production levels and resource allocation. On the one hand, fixed costs are predictable and certain, making them easy to budget for and incorporate into revenue predictions; on the other hand, variable costs require competent handling in as much as their adjustment best suits the changing needs or responding to challenges within the market.
References
Gold, H. T., McDermott, C., Hoomans, T., & Wagner, T. H. (2022). Cost data in implementation science: categories and approaches to costing. Implementation Science, 17(1), 11. https://doi.org/10.1186/s13012-021-01172-6
Syahputri, D. R. A., Audrine, K., Darmawan, L. V., & Muda, I. (2023). Flexible budget as a development tool for manufacturing industry. Brazilian Journal of Development, 9(12), 31340-31355. https://doi.org/10.34117/bjdv9n12-053
ACC 240: Fundamentals of Accounting- Topic 5 DQ 2
Assessment Description:
Explain the basic components of cost-volume-profit (CVP) analysis. Why is it important to determine a company’s break-even point?
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 5 DQ 2.
Hello class,
The Cost-Volume-Profit (CVP) analysis is an important financial planning technique that helps a business manage the interrelation between cost, volume, and profit (Lulaj & Iseni, 2019). Some of the key factors used in CVP analysis include sales price, sales volume of product or service, variable cost, fixed cost, and profit (Haller & Bentley, 2022). This kind of analysis enables the managers to determine how alterations in these factors impact on the total financial performance of an organization. A key concept within CVP analysis is the contribution margin, which is the difference between the sales price and the variable cost per unit. The contribution margin shows how much of each sales dollar is available to cover fixed costs and generate profit (Nariswari et al., 2020).
One of the most useful aspects of CVP analysis is calculating the company's break-even point. The break-even point is the level at which the total sales are equal to the total costs hence registering zero profit (Sintha, 2021). Thus, there is a need to identify the break-even point with the following benefits in mind. First, it helps assist the managers in risk analysis by enlightening the minimum levels of sales which are fundamental in avoiding Operating risks; hence, providing invaluable information concerning the amount of financial risk inherent in the company (Sintha, 2020). Furthermore, break-even analysis intensively impacts decisions about pricing strategies, as it demonstrates the relative volume needed to break even with a given price. Moreover, when considering new projects or expansions, break-even analysis helps evaluate the feasibility and potential returns of these investments (Sintha, 2021).
Altogether, CVP analysis and the use of the break-even point are important tools that help to develop a valuable vision to guide the process of strategic management in connection with different aspects of business functioning. I believe that when this information is properly understood, it can enable managers to effectively provide the right price for their products, control costs, and set realistic profit levels for the company's bottom line, all in an effort to make the company more competitive.
References
Bastomi, M., Sudarmiatin, S., & Hermawan, A. (2023). Cost Volume Profit (CVP) Analysis As A Profit Planning Tool At Lay Cang MSMEs. Asian Journal of Management, Entrepreneurship and Social Science, 3(02), 144-160.
Lulaj, E., & Iseni, E. (2019). Role of analysis CVP (Cost-Volume-Profit) as an important indicator for planning and making decisions in the business environment. European Journal of Economics and Business Studies, 4(2). https://doi.org/10.2478/ejes-201-0043
Nariswari, T. N., & Nugraha, N. M. (2020). Profit growth: impact of net profit margin, gross profit margin, and total assets turnover. International Journal of Finance & Banking Studies (2147-4486), 9(4), 87-96. https://doi.org/10.20525/ijfbs.v9i4.937
Sintha, L. (2020). Importance of Break-EVEN analysis for the micro, small, and medium enterprises. International Journal of Research-GRANTHAALAYAH, 8(6).
ACC 240: Fundamentals of Accounting- Topic 6 DQ 1
Assessment Description:
In your own words, explain what a budget is and why it is important for a business to have a budget.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 6 DQ 1.
Hello class,
In my opinion, a budget is a comprehensive financial plan that outlines the expected revenues, expenses, and financial goals of any organization for a specific period. Arnold and Artz (2019) postulate that it serves as a roadmap for financial decision-making, resource allocation, and performance evaluation. In simple terms, a budget can be described as a formal quantitative reflection of corporate strategies since it is the way how business goals are articulated in monetary terms. Additionally, it contains information on various aspects of operations of a firm such as sales forecast, cost of production, overhead costs, capital expenditure, and cash flow estimates. Budgets are not static documents; they are dynamic tools that can be adjusted as circumstances change, thus allowing businesses to adapt to evolving market conditions and internal challenges (Dahana, 2020).
The importance of budgeting for businesses cannot be overstated. First of all, budgets give a clear financial direction which makes all the activities of the company consistent with its strategies. They compel managers to look for the future, predict risks that might occur, and work in order to avoid or mitigate them. Arnold and Artz (2019) notes that this forward-looking perspective serve as the basis for anticipating existing or emerging cash flow problems, lack of resources, or new investment options. Secondly, budgets serve as a control mechanism thus allowing managers to compare actual performance against planned targets. This comparison enables timely identification of variances and facilitates corrective actions hence ensuring the company stays on track to meet its financial objectives (Klopp, 2023).
A well-constructed budget is more than just a financial forecast it is a powerful management tool that enhances decision-making, promotes accountability, and drives organizational performance. Thus, budgets are critical to the achievement of favorable financial outcomes in businesses since they enable the articulation of the financial plan, implementable control, and coordination mechanisms, and support strategic initiatives.
References
Arnold, M., & Artz, M. (2019). The use of a single budget or separate budgets for planning and performance evaluation. Accounting, Organizations and Society, 73, 50-67. https://doi.org/10.1016/j.aos.2018.06.001
Dahana, M. A. (2020). Analysis of the budget planning process and budget execution process. European Journal of Business and Management Research, 5(4). https://doi.org/10.24018/ejbmr.2020.5.4.426
Klopp, R. (2023). Assessment and Recommendations for Company X's Budgeting Process: Evaluating Current Practices and Identifying Further Improvements.
ACC 240: Fundamentals of Accounting- Topic 6 DQ 2
Assessment Description:
Budgets are developed months before the end of the current year and are best guess estimates of future performance. What do you think might be some pitfalls of budgeting, and how can they be avoided?
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 6 DQ 2.
Hello class,
From my life experiences as an Emergency Room (ER) nurse, I now understand that budgets, despite being effective tools for managing financial resources, have some drawbacks. The first one is the uncertainty of the company's performance in the future, it is challenging to predict different outcomes in a fluctuating business environment. This uncertainty often gives way to wrong estimations, thus leading to the wrong allocation of resources or setting of unachievable performance milestones. To address this problem, what companies can adopt is rolling budgets or continuing forecasts, which enable frequent review and amendment based on existing circumstances (Kunnathuvalappil, 2020).
Another weakness is that budgets are sometimes set and fixed, and this negates flexibility, creativity, and the ability to adapt to change in the market. This rigidity can result in managing activities for the purposes of achieving short-term specific targets irrespective of the consequences on long-run value. To mitigate this, organizations can implement beyond budgeting strategies or zero-base budgeting techniques as they embrace intangible qualities that encourage the continuance of the evaluation of expenses and priority (Promise, 2023). Additionally, budget padding, where managers intentionally overestimate expenses or underestimate revenues to create a safety buffer, is another common issue. This practice can cause resource waste and inhibit the possibility of evaluating the true performance. Aceron (2019) posits that to reduce the incidence of the practice, companies should engage in a participative budgeting process that includes several levels of management and pursuant to which all parties are held accountable to the budgetary process.
When managers become aware of these limitations and biases, they then have the tools needed to counteract them which can in turn help organizations improve the budgeting process, forecasting capability, resource utilization, and organizational performance. This approach will also allow companies to be more responsive to market conditions, integrate strategic planning with financial management, and establish better information to work from.
References
Aceron, J. (2019). Pitfalls of aiming to empower the bottom from the top: The case of Philippine participatory budgeting. Accountability Research Center. Accountability Working Paper, 4.
Kunnathuvalappil Hariharan, N. (2020). Rethinking budgeting process in times of uncertainty.
Promise Akor ORDU, D. I. E. T. (2023). Public Sector Budgets: Types, Processes, Implementation and Controls; Issues and Prospects. Journal Homepage: https://gjrpublication. com/gjrbm, 3(06).
ACC 240: Fundamentals of Accounting- Topic 7 DQ 1
Assessment Description:
Incremental analysis is used to help companies make decisions involving a choice among alternative courses of action. People use incremental analysis in their own personal decision making as well. Provide a hypothetical example from your personal life of how you might use incremental analysis in making a decision.
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 7 DQ 1.
Hello class,
After conducting research on how different companies utilize incremental analysis, I realized that as an Emergency Room (ER) nurse and nursing student, there are instances where I find myself applying incremental analysis to various aspects of my life, both personal and professional. One hypothetical example where I might use this decision-making tool is when considering whether to pursue an advanced nursing degree, such as a Master of Science in Nursing (MSN). In this scenario, As a first step, I would clearly define the costs and returns linked to achieving an MSN in contrast with my existing level of education. The incremental costs would include fees, books, possible loss of earnings, and time spent in studying. On the plus side, there is the possibility of salary raise, wider job options, and increased knowledge as well as skills that would be helpful in handling out the patients.
Further, I would then analyze these factors incrementally. For instance, if the MSN program costs $30,000 and takes two years to complete, I would calculate the annual cost of $15,000. Then, I would compare this to the potential salary increase, which might be around $20,000 per year based on industry averages (AACN, 2019). Over time, the incremental benefits would outweigh the costs. However, the analysis would not stop at financial considerations. I would also consider the intangible aspects like increased morale of working on the job and providing superior care to patients. While such advantages are not as easy to measure financially, they go a long way towards influencing the decision making process.
Thus, by systematically evaluating those incremental costs and benefits, I believe I could make a more rational decision as to whether or not I should pursue an MSN. This approach aligns with the principles of incremental analysis in managerial accounting, demonstrating how this tool can be applied to personal decision-making in healthcare careers (Krishnan & Krishnan, 2023).
References
American Association of Colleges of Nursing (AACN). (2019). Fact Sheet: The Impact of Education on Nursing Practice. https://www.aacnnursing.org/news-data/fact-sheets
Joshi, S., & Krishnan, R. (2023). Managerial accounting and decision-making. Handbook of Financial Decision Making, 277-295. https://doi.org/10.4337/9781802204179.00026
ACC 240: Fundamentals of Accounting- Topic 7 DQ 2
Assessment Description:
Making decisions often involves financial and nonfinancial factors. Provide a hypothetical example from your personal life of a situation in which you would consider both financial and nonfinancial factors. What factors would be considered?
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SOLUTION to ACC 240: Fundamentals of Accounting- Topic 7 DQ 2.
Hello class,
As an Emergency Room (ER) nurse, I frequently encounter situations where both financial and nonfinancial factors play crucial roles in decision-making. A hypothetical example from my personal life where I would consider both types of factors is deciding whether to accept a night shift position in the ER or maintain my current day shift schedule. From a financial point of view, I would start with the aspect of pay that is in line with working at night. Commonly, shift allowances for night shift vary from $5 to $15 for each shift (Stimpfel et al., 2019). This additional income could make a difference as it can be used to pay off student loans earlier or even save for future education. I would also consider the aspect of being able to save on the costs of transport as there would be favorable traffic patterns during certain time of the day than during others.
However, the nonfinancial factors in this decision are equally important. Working night shifts can disrupt circadian rhythms, potentially leading to sleep disorders, fatigue, and decreased overall well-being (Boivin et al., 2022). Understanding the significance of health promotion for healthcare practitioners to deliver the finest care to patients is critical for me as a healthcare professional. Thus, I would need to analyze the implications of this change in terms of physical health, mental health, and the opportunity for job performance. Additionally, I would consider the impact on my personal relationships and social life. Night shifts could limit my ability to spend time with family and friends who operate on traditional schedules.
Nonetheless, the decision as to whether to accept a night shift position in the ER or maintain my current day shift schedule would necessitate weighing of monetary benefits against self and employment interests and ideal career interests. I believe that by looking not only at the financial perspective but also at the non-financial one it is possible to make a better choice that will conform to my life goal and values.
References
Boivin, D. B., Boudreau, P., & Kosmadopoulos, A. (2022). Disturbance of the circadian system in shift work and its health impact. Journal of Biological Rhythms, 37(1), 3-28. https://doi.org/10.1177/07487304211064218
Stimpfel, A. W., Fletcher, J., & Kovner, C. T. (2019). A comparison of scheduling, work hours, overtime, and work preferences across four cohorts of newly licensed registered nurses. Journal of Advanced Nursing, 75(9), 1902-1910. https://doi.org/10.1111/jan.13972