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Decision Making And Accounting Theories

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Decision Making And Accounting Theories

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Business owners find that they always have to put on business hats when they are starting up or managing their businesses. Those in business are often faced with various decisions which they have to make some of which are particularly important when it comes to the profitable existence of any business. Decisions result to success there is no successes that can be realized until a decision is made (Wicks,2013). People in business make so many decisions each day which include financial decisions, structure, strategic decisions, manpower decisions, operational decisions and many more. However, it is only once in a while that a leader makes a decision that is game changing which shifts not just a strategy of a single business but brings in a new perspective of how everyone else operates their business. Some of these business ideas are very powerful and have great impacts which are far reaching. Most of these big decisions are normally counterintuitive in that they go against the conventional wisdom. Therefore smart leaders end up being wise leaders when they have a foresight or are courageous enough to make decisions that are counterintuitive and unpopular. The paper will look at some important business decisions that have been made in recent times.it will look at some of the factors that were taken into account before arriving at these decisions.it will also look at the effects some of these decisions have on various stakeholders with reference to accounting theories.

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Business decisions

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When thinking of strategic decisions that are critical and have changed a company’s course we often think of big bets or one time events that completely changed the direction or course of a company’s history. Thesedecisions guide not only immediate action but also actions in future. Some of the choices made in a particular decision end up inspiring future decisions.

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The current CEO of Xerox Ursula Burns is very proud of the rich heritage and famous products which are produced by the company.as the CEO she is not quite nostalgic about the past rather she is concentrating so much on building a new future for the company. She wants to avoid getting the organization into the trap that led to the collapse of Kodak. Some of the important decisions he has made in recent times include the outsourcing of manufacturing and cutting back or a complete elimination of marquee products. She is steering the company into new areas such as business process management. Since this is a digital era has decision has brought about a reinvention of Xerox as a provider for high tech solutions in the era (Kaipa,& Radjou,2013).

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Another great decision is that made by Sam Walton of holding meetings on Saturday mornings. These meetings are usually all employees and this decision has brought about a culture of quick information as well as decision making process. This has resulted to Wal-Mart being among the biggest companies in the world. Today up to 40% of the employees in Wal-Mart have embraced the personal sustainability project and they have changed their lifestyle so as to embrace practices that are sustainable (Kruse,2013).These two decisions are similar in that they brought positive changes within the organizations. First the decision by Xerox CEO has made the organization’s presence be felt all over the world especially in the digital era. This is similar to that of Wal-Mart as the decision fostered a good corporate culture and thus its presence is being felt all over the world. A difference in these tow decisions is that for Xerox the decision is an operational decision. This is because the decision involves how the business is being run. Operationaldecisions involve choice of suppliers and channels for distribution of products.in the case of Xerox the CEO decided to outsource manufacturing and eliminating marquee products.at the same time there was a decision to move the company into new areas such as business process management which is something new for the company. On the other hand the decisions that Sam Walton of Wal-Marttook involved employees. Employees are a very important part of any organization and therefore they either impact the organization positively or negatively.

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Factors taken into consideration

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There are various factors that are usually taken into consideration before any decision in business is made. When we look at the first example of Xerox we can say that technological advancement played a role in the decision that was made by the CEO. First of being a digital era it means that a lot of advancement has taken place in the digital world. This means that Xerox have to ensure that they are relevant and their presence is felt in the world. Secondly there was a company Kodak which was in existence before Xerox and it failed. Therefore another force that drove the decision to be made is that the CEO did not want Xerox to fall in the same trap that Kodak fell which saw its collapse. Another driving force was making the company more competitive. This is through outsourcing manufacturing and eliminating marquee products. Diversification was also a driving force that saw the CEO wanting to move the organization into new areas. Through all these forces Xerox made its presence felt in the market and is now known as a result to the decision that was made by the CEO.

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When we look at Wal-Mart we can say that the driving force for the decision made was creation of an employee culture.as stated earlier employees are important in every organizations and without tem the operations of the organization can not run smoothly. Through these meeting a culture of quick dissemination of information as well as decision making process was fostered. This led to smooth operations in the organization since information is passed on very efficiently leading to a smooth decision making process. Another driving force for the decision is harmony within the organization. This is achieved through the culture that is created through seating together in the 6.am meetings and incase there are any differences that might arise they are settled easily (Krippendorff,2013).

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Accounting theories

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The basic accounting theories are usually held together through a conceptual accounting framework. The conceptual framework which is usually part of Financial Accounting Standards Board statement of the concepts of financial accounting normally establishes some objectives of any businesses financial reporting. Any decision that is made within any organization comes with its effects. These effects are felt by the various stakeholders that are found within the organization. Some of the important stakeholders in any organization are employees, customers, shareholders,suppliers and so on. There are various accounting theories such as usefulness. Financial accounting information is the underlying theory and purpose of any financial reporting or accounting. These are in the form of financial statements which should give information which is useful regarding making decision’s in the organization. The underlying theory of financial reporting providing information that is useful when making decision takes into account that reporting is not in existence in political, legal, economic and social environments (Freedman,2013).When given a different perspective underlying theories of accounting consider that accounting rules should be flexible enough in order to allow any changes in the environment. When looking at the usefulness in the case of Xerox we can say that the shareholders in the organization are the ones who will be affected by this decision. This is because the decision to outsource manufacturing and creation of business process management requires some finances. Any decision regarding finances must be approved by stakeholders.

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Another theory of accounting is qualitative characteristics. The conceptual accounting framework recognizes that accounting information should always be reliable, relevant, consistent and comparable. Relevance means that the information quality should give a difference any information maker; reliabilitymeans those who use the accounting information should be sure of the accuracy of the information. Consistency and comparability are both beneficiaries of generally accepted accounting principles (Freedman,2013). Therefore when it comes to any decision that will touch on the finances the accounting information should always be reliable,relevant,consistent and comparable.in the case of Xerox it means that the decision made regarding outsourcing manufacturing requires that accounting information have all these characteristics in order to ensure that the suppliers who are now the outsourced manufacturing company are fully aware of the financial position of the organization. For the case of Wal-Mart accounting information should also have these characteristics since information is easily available to all during the meetings. Thisincreases accountability in the organization and employees will feel as though they are part of the organization.it will also lead to quicker and better decision making.

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At the end of the day the customers are the most important people for any organization. This is because the organizations are there so that they can offer products or services to customers. Without them there will be no where they can take what they have to offer. All these decisions made by organizations affect the customers since they are the ones who use products from companies directly. For instance the decision to outsource manufacturing by Xerox will lead to better products being available for customers. Thedecision by Wal-Mart leads to creation of an employee culture which will lead to the employees serving customers in a better way.

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References

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Kaipa,P. & Radjou,N. (2013). 7 Business Decisions That Looked Bad but Turned Good. Retrieved August 27, 2013 fromhttp://www.cnbc.com/id/100634625Freedman,J. (2013).What Are the Basic Accounting Theories?Retrieved August 27, 2013 fromhttp://smallbusiness.chron.com/basic-accounting-theories-55960.htmlWicks,D. (2013).Top 5 Biggest Decisions Business Owners Make. Retrieved August 27, 2013 fromhttp://smallbusiness.chron.com/top-5-biggest-decisions-business-owners-make-10131.htmlKrippendorff,K. (2013). The Greatest Business Decisions of All Time. Retrieved August 27, 2013 fromhttp://www.fastcompany.com/3001870/greatest-business-decisions-all-timeKruse,K. (2013). The Top 5 Business Decisions of All Time. Retrieved August 27, 2013 fromhttp://www.forbes.com/sites/kevinkruse/2013/05/22/business-decisions/

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