I believe that Sear Stores uses one or more operating budgets in their accounting process. An operating budget refers to detailed projections of recognized expenses, estimated income and future costs based on the expected sales revenue (Gupta, 2013). Every organization whether large or small must have operating budgets since it have limited amount of resources to achieve all the planned objectives and goals. Same case with Sear organization, it has limited resources and have to use operating budgets for it to achieve its objectives (Hill, Jones & Schilling, 2014). Since the objective of Sear Stores is to become largest dealers in the world, then it has limited amount of resources to do so. Sear stores funding to finance these projects include income from operations, funding fromowners and funding from the financial institutions in form of loans (Zhang, 2014). Therefore, the management has the obligation to prepare operating budgets to be able to use the limited resources in an efficient manner. I believe that cash management is critical to every organization. Since Sear Stores is a healthy organization, it must have more than one operating budgets to be able to put more attention to the organization operations.
Do you believe that Sear Stores uses static and flexible budgets?
I believe that Sear Stores also use static and flexible budgets. A static budget is a budget with which the operations of a business start off. An example is that of Sear Stores with which business periods cover one year; therefore the static budget is prepared first before the one year period of operations starts off (Walther & Skousen, 2014). A flexible budget is prepared after the budget periods end. In the case of Sear Stores, the budget period is after one year. Sear Store prepares static and flexible budgets to make predictions about the sales, economic conditions and the market and other factors that affect its operations (Draheim, 2013). Then flexible budgets are used by Sear Stores to compare the predictions with the actual results of the operations.
Draheim, D. (2013). Towards total budgeting and the interactive budget warehouse (pp. 271-286). Springer Berlin Heidelberg.
Gupta, V. (2013). STUDY ON VISUAL MERCHANDISING FOR HOME FURNITURE RETAIL STORE. International Journal of Retailing & Rural Business Perspectives, 2(3), 555-565.
Hill, C., Jones, G., & Schilling, M. (2014). Strategic Management: Theory: An Integrated Approach. Cengage Learning.
Walther, L. M., & Skousen, C. J. (2014). Budgeting: Planning for Success. Bookboon.