I would first like to appreciate you for taking me through this challenging course, which I hope, will be beneficial in future. I can say that I learned a lot in different areas of accounting. There are certain topics in particular that I found interesting, and hope will be applicable in the future since I know then theoretically but not practically, for example, budgeting and variances. These two were fascinating to me because I got to know the importance of budgeting. I also got to understand that without a budget companies cannot operate successfully and make profits. The budget allows for new loans to be acquired or old ones to be settled. Practically without a well-calculated budget, the company cannot make any progress. Cost variances are vital for the success of any business because as covered in the course they determine the price of shares and are used to measure the success of any organizations. It is vital to keep all these records as they are all used to assess how the company is doing and what can be included for it to do better.
Another topic that also caught my attention is the centralized and decentralized operation systems and their advantages and disadvantages. In a centralized system, the directors make all the decisions without the involvement of the junior staff. This type of operating structures is suitable for small businesses. I also learned that big organizations usually rely on the decentralized where all the employees are involved in the decision-making process.
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If I were to open my own business, I would choose to use the decentralized structure because I would want my employees to feel as if they are part of it. This is an advantage of the decentralized structure but also has its disadvantage because the decision-making process may take too long. Certain matters require immediate answers, and before everybody takes a vote, the matter can be out of hand. Despite this disadvantage, I would still prefer this method not for decision-making purposes only but also to show staff members that they are valued at the company. I would use centralized structure if I were opening up a small business where am needed to make all the crucial decisions concerning the firm.
I would also ensure that I always draft a formal budget before the end of every year because a real budget dictates how much will be used for advancement versus how much for paying off loans. I also understood the importance of a budget in business, for example, it is not the operations that dictate the budget but rather the budget that dictates the activities. The budget gives a go ahead for the money to be used towards specific projects and also decides which department should be allocated the least money.
A budget can also be produced to suppliers and creditors to act as proof of the company’s credibility. When acquiring a loan, it is exerted to proof to the creditors how efficient the organization is when it comes to repaying the funds borrowed. The reason for the failure of most small businesses is because they lack sufficient funds to run operations, and all this can be traced back to the budget. Had the sole-proprietor properly distributed the money for specific purposes then probably the business would have been more successful. Most owners do not even bother drafting a budget but just allocate resources where they see necessary, which could have an adverse impact on other areas that he/she might not notice, may need funds to upgrade or run efficiently.
Reference
Horngren, C.T., Datar, S.M., & Rajan, M.V. Cost Accounting: A Managerial Emphasis , 15th Edition. New York: Pearson Higher Education
