James L. Gibson, W. Warren Haynes's Accounting in Small Business Decisions PDF

By James L. Gibson, W. Warren Haynes

Accounting in Small company Decisions offers the 1st large-scale empirical exam of the way small enterprises use accounting information to make working judgements.

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The concept of homeostasis introduced in Chapter l seems to describe the way some of the nursery managers make use of accounting information. If their annual income seems "unreasonably" low-that is, if it falls short of some predetermined standard of appropriate income-the managers become interested in action that will correct the situation. They may then go over their price lists for the coming year and raise prices on items they "feel" are not making the requisite profit. ). Their ability to raise prices is conditioned 25 by market demand; they are unable to raise prices on some unprofitable lines.

If critical differences appear, the buyer and merchandising manager discuss the reasons and reach agreement. Once a plan is accepted, the buyer takes full responsibility for the operation of his department. In this store, budgeting is a tool for administrative controlnot merely for financial control. Smaller stores do not extend the budget beyond provision of a buying guide. Its effect on merchandising decisions It is difficult in small stores to distinguish budgeting 47 from the whole process of merchandising decisions.

All the firms covered by this study are concerned with demand and the competition underlying demand in their decisions. Some of the managers stress cost considera2 It is possible that even this phase of accounting is not of great importance in decision making. When nurserymen talk about "income," they probably are not always referring to a figure on the income statement. In small firms there is usually some knowledge of income before the accountant makes up his statements. 26 tions at the beginning of the interviews, but all of them give examples of how demand factors tend to dominate some decisions.

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Accounting in Small Business Decisions by James L. Gibson, W. Warren Haynes

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