Thesis on "Accounting Function for a Chosen Organization"

Thesis 23 pages (6160 words) Sources: 5 Style: Harvard

[EXCERPT] . . . .

Accounting Function for a chosen organization

This paper will be aimed at providing a full background of the financial situation at General Motors, focusing on the role of the accounting function within this organization and the results it produces. The paper will be structured in five different chapters.

In the first chapter, following an introduction that will aim to give some background on the organization that will be discussed in the paper, including relevant information on its history, evolution and current status on the market, we will aim to focus on the accounting function in the organizational structure of General Motors and identify how this is integrated, what kind of resources it is being allocated, how it interacts with other entities within the organization etc.

The second chapter of the paper will provide an overview of the business from a financial perspective. In this chapter, we will focus both on yearly trends for some of the most important elements on the income statement, the cash flow statement and the balance sheet, as well as on financial ratios that can provide good insight into profitability or asset management trends.

The third chapter of this paper will be revolving around the concept of management accounting and how it is working at General Motors. This part of the paper will focus on budgeting and how the budgeting system works, on costing structures and calculated prices at GM.

Finally, the fourth part of the paper will concentrate on the operations management analysis. A significant part of this chapter of the paper will be represented by a wide SWOT analysis, aimed at providing relevant information about the strengths, opportunities, weaknesses and threats that General Motors is facing, both internally and externally.

Chapter I: The Accounting Function

Company Background

The General Motors Corporation was established in 1908 by William C. Durat and it is currently headquartered in the heart of the automobile industry, Detroit, Michigan. The company mainly produces cars and car parts (generally engines) and distributes them throughout the entire world through a wide and complex logistics network. Historically, the organization has undergone numerous changes and has generally succeeded in its endeavors, managing to establish itself as the leader of the automobile industry both nationwide as well as internationally. More recently however, due to the economic crisis and the focus placed on satisfying the customer, the organization has extended its offering to also include financial services which help the customer find a more convenient means of paying for the purchased automobile. In 2008, General Motors employed an estimated 266,000 individuals worldwide; these numbers are however expected to decrease as the organization faces the severe challenges of the contemporaneous economic crisis.

2007 has been a year of both gains and losses for the second largest automobile producer in the world. Despite the fact that the growth was a reduced one, it is crucial that it was manifested. In this order of ideas, the net revenues from the sales of automobiles increased from $171,179 million in 2006 to $178,199 million in 2007; the increase totals up to 4.1%. On the other hand, the income from financial operations decreased from $34,422 million in 2006 to less than 3,000 million by 2007. Their global production of automobiles and engines increased slightly throughout 2007 as compared to 2006, but the overall figures for the net revenues reveal a decrease.

Despite the fact that the financial highlights reveal mainly losses, the General Motors representatives argued that 2007 meant a good year from other standpoints, rather than financials. In this line of thoughts, they proclaim that they used the past twelve months to restructure the organization and prepare it for the changes that are prone to occur. The aim of the endeavor was to increase the company's adaptability to the changes in the micro and macro environments, to help it respond more effectively and efficiently to the internationalized economic crisis, but also to support the organization in reaching its future profitability objectives. "While these results are disappointing [the financial highlights], in many respects the bigger story for GM in 2007 is what went on behind the numbers - under the hood, if you will. Look under the hood, and we see that 2007 was a 'tipping point' for GM in terms of structuring the company and building the product technology momentum necessary to position us for sustained profitability and growth in the rapidly changing global auto industry."

Company Objectives

Just like any other for-profit organization, General Motors strives to increase its profits. Their approach in doing this has however changed throughout the years. In its early existence, the organization would increase revenues by producing and selling similar products. Today, the focus on achieving the financial desiderates is based on the full satisfaction of the customers' needs and wants, the satisfaction of their staff members and also that of the stakeholders. All their endeavors are integrated in strategies that are socially responsible.

The corporate objectives are best summarized by the General Motors mission statement: "G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment."

Key Resources

In terms of financial resources, the organization mainly uses its profits and reinvests them in new ventures which end up generating additional income. In terms of commodities, some of these are produced by the organization, while the large majority is purchased from national and international suppliers. General Motors was the first automotive company to establish a supplier diversity program in 1968, with the aim of creating a diverse network of suppliers which share common goals with the Detroit-based car manufacturer. Foremost, the strategy was aimed to support the growth and development of small size purveyors. "It is General Motors' policy to help minorities, women, and small business [...] achieve economic equality by fostering and encouraging diverse enterprise. We recognize that an effective means of accomplishing this is through the placement of appropriate business with diverse suppliers of goods and services."

Another key resource revolves around the technologies employed in the manufacturing of the GM vehicles. These are generally emerged from the United States and the organization benefits largely from its headquarter location in the heart of the automobile industry, which ensures its easy access to the latest developments. Finally, in terms of the human resource, this was historically set in the U.S. As the forces of globalization and market liberalization emerged however, the company began to open plants and consolidate distribution networks across the globe. The workforce at GM is then an internationally diverse one.

Role of Accounting

The primary specification that has to be made when discussing the accounting function at General Motors is that the company's statements are developed in accordance with the specifications of the legally implemented and required accounting standards and principles.

The accounting function at General Motors is a dual one. First of all, the operations help financially evaluate the past achievements in terms of gains and/or losses. By looking at the operations undergone in a past period, the accountants at GM are able to identify the profitability of a certain endeavor. Secondly, and probably the most important role of the accounting function is that of further supporting the organization reach its overall objectives. This is achieved as the accounts offer an objective view of the past and make assumptions for the future. Based on the observed past trends and the estimations made, the company's management will be able to make the best informed decisions and develop and implement the most suitable strategic approaches.

The accounting departments at General Motors make use of the same resources as the entire organization. In this order of ideas, they require financial resources to properly function; they employ human resource and they make use of technological applications to conduct their operations. They however do not require a consumption of commodities.

The accounting division is perfectly integrated within the corporation and interacts with all divisions to retrieve the information required in their analyses. After developing its reports, the accounting division interacts mainly with the management in delivering the retrieved information and making the recommendations they find most suitable.

Much of the accounting function is based on estimations made by the department, meaning then that these estimations have to be objective and unbiased. Most of the projections refer to the employee wages; commodity necessary and consumption; future investments in technologies (including both machines and software); levels of the pensions and other benefits that have to be offered to the retired or downsized employees; deferred taxes; sales incentives; policy, warranty and recalls; derivatives; impairment of long lived assets; the valuation of financial services offered by the organization (valuation of leases on the operating vehicles or lease residuals). It is however probable that the foreseen numbers are different from the future reality. Keeping this possibility in mind then,… READ MORE

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