**You should complete all other courses in the Fundamentals of Accounting Specialization before beginning this course.** The capstone project will be set in the context of a realistic small-business enterprise, and will require you to think deeply and apply the accounting concepts presented in the other courses in the Fundamentals of Accounting. While navigating the daily operations of the business, you will have an opportunity to consider the accounting implications of the economic events encountered, as well as how these economic events should be communicated to decision makers. If you enjoy this business course and are interested in an MBA, consider applying to the iMBA, a flexible, fully-accredited online MBA at an incredibly competitive price offered by the University of Illinois. For more information, please see the Resource page in this course and onlinemba.illinois.edu.
Internal Decision Making Introduction
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Del curso dictado por University of Illinois at Urbana-Champaign
Fundamentals of Accounting Capstone
1 calificaciones
University of Illinois at Urbana-Champaign
1 calificaciones
Curso 5 de 5 en SpecializationFundamentals of Accounting
De la lección
Milestone 5: Internal Decision Making
How will you use the information that you have gathered and analyzed thus far to make decisions?
Conoce a los instructores
Sharon P. Cox, Ph.D.Lecturer
Department of Accountancy
Welcome back to the capstone course,
I know you also did a good bit of work in a Module 4.
You got to see how some of those pieces came together.
And actually see, potentially, what your income statement might look
like if you were going through the process of trying to predict the future.
So, that's kind of an exciting process.
Being able to complete a financial statement is a big accomplishment.
And there's a reason for it, it's not just to torture you.
We actually want you to do a little bit more than just do that financial
statement.
And so, this is your map to success.
This is how you plan your business.
This is what you're going to look at to say, wow, I only planned $5,000 for
electricity, my bill is going up, what's going to happen?
Clearly, I need to adjust something.
And so, that you don't find out at the end of the month you don't have enough money
in your checking account because your electricity bill went up.
So this is the map to success.
Not only in terms of what's in your checking account but
this can also provide incentive to how you work with your employees.
Because then you will have a better picture of, okay,
when our employee's are working in a certain manner, they're more productive.
And you can see that when you have hard results
in this budgeted financial statement.
And then once we actually get into a financial statement in the next milestone.
So, this is, as I say, it's the map to success, it's the key.
To be a good business person, you have great instincts but
you also have to deal with some hard numbers.
So, that is the reason why you did Module 4.
And now you want to think about it.
So if it's your key to success, what are you going to actually do with it?
Okay?
So you're going to use that budgeted statement,
you're going to make it work for you so that you can make good decisions.
As I said, you find out electricity is much over budget,
you'll want to prepare for that in advance.
You don't want to find that out when it's too late.
You want it to work for you because, as you saw in Module 4,
you did a lot of analysis with,
what if your CVP analysis, what if something changes?
And so that can also be part of this map to success.
Because then you can look at ways that really will improve your bottom line and
make sure that you do pay yourself first.
So, that is the reason why you go through this process.
It takes time, but it is fruitful for you.
This, for you, right now, this is your example, this is your chance to practice.
The wonderful thing about a budgeted statement,
it's only seen inside the entity.
You make a mistake, it doesn't matter.
You can redo it, you can realize what your mistake is, it just doesn't matter.
So, that's really the nice thing about any internal document.
You want to have good information, but you also know that
it's not like a class where you're going to get graded on it, okay?
So, you're going to have this real example, it's a very risk-free
environment to take this exercise and go all the way through.
So, that's what you will spend your time on in Module 5.
The nice thing about that is,
you're going to use a lot of work that you did in Milestone 2.
So, you put in some serious hours in Milestone 2.
And you may have been updating that as you've gotten feedback, and that's great.
So, when you start Milestone 5, you have a good starting point, you don't have
to start fresh to find your expenses, you've already thought that through.
So now it's just putting it in a nice format, quite honestly.
So that it might be a little bit easier to map your success when
you're seeing it in that very formal way.
So, again, this will be your something that you can work with for
your existing business, if you jump in and
do something new, you will get an idea of how you do this on your own.
So that is the key, that you want to take your information,
as Gary told you, and you want to make good decisions.
Good decisions come from good information.
So, again, a lot of you have gut instinct but
if you also have numbers, you can do a reality check, okay?
So, how will you take a look at each other's work and
give that good feedback that I'm looking for, that I know you're looking for?
Once again, if you have updated your business description, that's great.
We'd like you to post that again.
Also, you want to post it again because it could be someone
whose never read your particular project before.
So they need to know what business you're working on, so
they can put it all into context.
They need to look at when the decisions you proposed,
do they really match that budgeted income statement?
Sometimes we look at something for so
long, we convince ourselves that it's the right thing, that's the right answer.
And so, having that second set of eyes will help you say, this is what
I thought it means but you know what, it may have a slightly different implication.
That I can't just say I'm going to increase sales commission
because I forgot how I may not be able to pay my fixed-costs.
So, you want to make sure that you really
are using the right information in the best way.
Not only that, you want to be able to communicate it.
So, when you have that peer review, if they understand what you're saying,
they maybe have a better time to understand, I do get the connection.
At some point,
you are going to need to talk to someone about your financial information.
And the more you can communicate it to another person,
the more smoothly you communicate to another person,
the more you're going to be able to get what you're asking for.
So, whether it be a friend that you want to have come and invest, if you want to
go the formal route to a bank, you need to present yourself in the best possible way.
Not just the external financials that we'll do in Milestone 6,
but simply the way you talk about it.
And writing is a good way to practice what you're going to say.
So, we're also going to look at, in Milestone 5,
the quality of how you explain yourself, looking at the communication.
Is it logical,
as I said, that the decision being made is backed up by the numbers?
And is it not well written as if it could get a 100% from an English teacher but
well written from the point of view logical, succinct?
Business language is quick and to the point.
We don't have time to read novels.
We want it something that we can understand quickly.
So that should take a little bit of pressure off.
We're not looking for essays at this point.
So, that is how you will use that budgeted income statement.
And by looking at the peer review, you can see a little bit more as to what are you
really going to get out of this, that you will have a tool to go forward.
That's the whole point.
We want you to have tools to go forward.
So at that point, you are so close, you are almost there.
You can start looking forward to having a little bit of free time.
And I look forward to getting back with you to you to start Milestone 6.
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