ACCT3001 Accounting Behavior and Control Portfolio: Solution

This portfolio provides solutions related to accounting behavior and control, focusing on inventory management, participative budgeting, and a comparison of private, public, and non-profit organizations. It addresses concerns about proposed changes to profit statements based on stock levels, advocating for alternative inventory management strategies like Just-in-Time and FIFO. The document discusses the advantages and disadvantages of participative budgeting, highlighting its impact on motivation and potential for conflict. Finally, it contrasts the goals of private sector organizations (profit maximization), public sector organizations (sustainable development), and non-profit organizations (community welfare). Desklib offers this document, along with other study resources, to aid students in their academic pursuits.

Accounting behavior and control

Table of Contents
Question 1........................................................................................................................................3
Question 2........................................................................................................................................6
Involvement of other partners in the budget setting process.......................................................6
Advantages of Participative Budget............................................................................................6
Disadvantages of participative budget.........................................................................................7
Question 3........................................................................................................................................8
Private sector organization..........................................................................................................8
Public Sector organization...........................................................................................................8
Non-for-profit organization.........................................................................................................9
References......................................................................................................................................11

QUESTION 1
To
The CFO
Jordan Fit
Subject: Discussion relating to reason behind having serious reservation relating to proposed
changes as well as alternative options which can be considered by the organization.
Respected Sir,
The present situation of Jordan Fit is not viable. As the company is facing financial pressure at
present time and due to same there is decrease in company’s share price. It has been accessed
that the holding stock of saleable products in store is one of the significant area to be considered
as it is highly cost consuming and required to be controlled. In order to cope up with the situation
decision has been taken to introduce a change in profit statement relating to individual store. The
new charge will be based on the amount of stock being held by each store for particular year.
The higher the stock, the higher the charge and same will have negative impact on the profit
statement. The present issue is relating to inventory management. Inventory management can be
refereed as act of monitoring the company’s stock. The main goal behind same is to reduce the
cost of holding inventory through assisting business owners to make them aware about the
appropriate time for replenish product or to purchase more goods or product1. The main reason
behind reservation relating to new mechanism is that it will only provide information relating to
1 Dinesh, and Rosas, Inventory Control Systems: Design Factors, 13-32

the stock held by each store for a particular period i.e. one year. Further, the issue is relating to
high cost of maintaining stock and not the quantum of stock available with each department.
The fact cannot be denied that the store having higher sales will have higher stock2. Thus, due to
new provision on one hand bonus will be provided to store manager on the basis of sales figures.
On the contrary another phase there will be higher charge due to new provision will have higher
stock in quantum. The same will increase the overall expenditure of the retail store and will
increase obstacles within firm. Another important reason behind reservation of new mechanism
is that it will not provide any solution to the issue relating to the dead stock, and there is no
solution relating to higher cost of stock which could be beneficial for the organization.
Store Management comprises the activities relating to store keeping and stock control. It is
necessary that both the activities should be done in appropriate as well as economical manner so
that organization might not face issue such as stock out or extra storage cost3. Stock control
activities should be encompassed in daily routine of the organization which comprises ensuring
the right type and quality of goods needed in the store. Through, accomplishing these activities
in appropriate manner, sales department will always be available with the products required by
customers. Even principle of FIFO (First in First Out) can also be applied as principal of
2 Allah, Zarei, and Sarker, An optimal control of inventory under probablistic replenishment
intervals and known price increase, 777-791.
3 Daniel, and John, Implication of Choice of Inventory Valuation Methods on Profit, Tax and
Closing Inventory,1639-1645.

inventory management by the company4. Through this procedure the expectancy of stock out
percentile will be decreased and it will be easy for the manage inventory too. Physical inventory
records should be in practice and that too be maintained at reasonable intervals. The practice of
same at appropriate intervals will let the store know about discrepancy if any existing in the
store5. The company can apply the Just in time approach for the inventory management system.
In this system, the company can forecast the demand of the product and on the basis of this,
order should be placed6. This strategy assists the company for the enhancement of its
effectiveness and reduction in the waste, because good are acquired only at the time of
requirement in the production process. By this, company can reduce its inventory management
cost. Further, the company can achieve the long term benefit by this approach such as saving in
the cost, reduction in production cost, and better satisfaction to its consumers.
Further, the senior manager and the manager of each store receive the bonus on the basis of
percentage on the sales instead of net profit. It is advisable that, company should change its
policy of bonus. It should be based on the percentage of the sales. By this, the manager are
motivated towards for increasing the sales of goods, as the sale increases, they will be able to
obtain the higher bonus. Further, bonus on sales, enhances the motivation among managers. On
the other hand, if the bonus is based on the net profit, then there are chances in the manipulation
4 Luiza, Toma, and Founanou. Applied Analysis of the Impact of Inventory Valuation Methods
on the Financial Situation and Financial Performance,67-76
5 Meenu. Inventory management accounting for obsolete inventory,55.
6 José Luís Quesado, et al, Just in Time, 25-38.

in the sales and cost figures of the company. Along with this, company should implement the
comparative performance analysis, and provide the financial as well as non-financial incentives
to the employees. On the basis of comparative analysis performance, the manager obtains the
higher bonus, whose sales performance is more than as compare with other managers.
Apart from the all above aspects, the company should try to improvise the overall business
performance. It is recommended that, they should try to reduce the unessential overhead
expenses and enhance its marketing and promotional techniques, by which the sales can be
boosted up. Since, the inventory plays a very important role in the overall assets of the company.
Therefore, they should implement better technique for the management of inventory. There are
several cost associated with the inventory, thus proper management assist in cost saving and
ultimately increase the profitability of company.
From: Senior Management Accountant
Signature: _____________
Date: March 30, 2019
QUESTION 2
Involvement of other partners in the budget setting process
Participative budgeting is the framework in which other partners are actively included in the
budget setting process, as they are affected by the budget. The objective of the participative
budget is bifurcation of the responsibility to subordinates manger7. In other words, it can be said
7Matthias Schäffer, and Skiba. Antecedents of Participative Budgeting, 1-27

that, in this process, budget is created by considering the participation of subordinates and on the
basis of information provided by the subordinates. There are some advantages and disadvantages
of involvement of other partner in the budget setting process, which are described below –
Advantages of Participative Budget
 In this approach, subordinates transfer the information to their upper authority; they can
discuss their issues to the authority by directly contacting with them. By this, the upper
authority can get to know about the problems and can provide the ideas for addressing the
issues. Further, at the time of handling any complex task, the transfer of information
plays a very important role, because any difficult task required the greater participation of
all manager of their department. They can explain their departmental activity,
requirement, issues and some other aspect in a proper manner8.
 This approach also creates the motivation among the manager. The other manager feels
the responsibility, by which they can perform the activity in an effective manner.
Further, the compliance of budget in the whole company will be easy, as all mangers
participated in the budget setting process.
Disadvantages of participative budget
Apart from the several advantages, participative budget has some disadvantages also. This
approach is very time-consuming, because it requires several meetings of all managers, and
further it is not necessary that they agree on the same aspect. Therefore, sometimes this approach
8 Martos, Isabel, and Lapsley. Democracy, governmentality and transparency: participatory
budgeting in action. , 1006-1021.

leads to the conflict between the managers. Delay in setting of budget and the conflict among
managers make the adverse impact on business9.
Along with this, participative approach requires the negotiation, and if the negotiation does not
reach to an conclusion, then upper authority may have decide the final decision, by this the
morale of subordinates will decrease. Moreover, it is detrimental to the interest of business10.
On the basis of above analysis, it has been concluded that, involvement of other managers in the
budget setting process, is beneficial as well as non-beneficial for the company.
QUESTION 3
Private sector organization
AMP limited is wealth Management Company. Headquarter of the company is situated in
Sydney, Australia. The company is engaged in providing financial advisory services,
management of the investment product, unit linked private and employer sponsor plan with
retirement benefit, life insurance, superannuation, and banking. The goal of the company is to
help their customers for the management of their finance and accomplish their objective. With
regards to it, another goal of the company is to enhance and improve the satisfaction of
consumers, maintaining the efficiency of business, invest to sustain and increase platform for
competitiveness, use modern capabilities to design customer focus offers, including advice,
9 Katrin. Interdependence, participation, and coordination in the budgeting process, 1-28.
10 Femilia. The impact of Participative Budgeting on Budgetary Slack, 822-830.

services and products, create customer goal oriented business by emphasis on cost control,
enhance the quality of advisory services, and enhance channel choice.
Public Sector organization
National Australian bank is one of the largest banks in Australia, which offers a variety of
banking services of its customers. This bank maintains a strong brand reputation due to its
exceptional services. The objective of this bank is to building a better organization for its
customers, therefore the company has established a center for addressing the problem of
consumers in a quick manner. Further, it provides support to regional or rural areas customers,
consisting of no branch closer on draught declared areas. The company also provides the support
to community by making the investment in schools, roads, and hospitals. Further, it works with
the small, medium and large organization and provides assistance through each stage of business
life cycle.
Non-for-profit organization
A transparent hand is one of the top non-for-profit organizations in Australia. It is engaged in
providing the surgeries to poor patient applying a global crowd funding platform. This stage
offers the visibility to poor patient and creates bonding of trust between donor and parties along
with maintenance of full transparency. The main objective of transparent hand is to provide the
free surgeries to patient who has not enough money for the surgery. With the help or donors and
charity, the organization generates revenue and it ensures that all the money applied to needy
patient.
On the basis of above analysis, it has been seen that the goal of the private organization is guided
towards the maximization of its profit. All the activities conducted by the company assist in

generation of more income11. On the other hand, the main goal of public company is to maximize
the profit along with the sustainable development12. Sustainable development assist the company
for fulfilling the human development objective, while at the same time it ensures the
sustainability of natural environment and eco system, on which the community and economy is
based. Moreover, the main goal of the non-for-profit organization is the welfare of the people13.
It primarily exists to offer the help or resources to a particular segment with a specific
requirement. They generally offer the public objectives such as improvising the life of
community14. On the basis of above analysis, it has been concluded that all three sectors has
different goals.
11 Vincent, Hoffmans, and Wubben, Stakeholder engagement for responsible innovation in the
private sector: Critical issues and management practices, 147-164.
12 David and Sensoy, Cyclicality, performance measurement, and cash flow liquidity in private
equity, 521-543.
13 Agyenim, Akamavi, and Ndoro, Measuring performance of non
‐profit organisations: evidence
from large charities, 59-74.
14 María José, Álvarez, Rey, and García. Business–nonprofit partnerships: do their effects extend
beyond the charitable donor-recipient model?, 379-400.

REFERENCES
Blok, Vincent, Linda Hoffmans, and Emiel FM Wubben. "Stakeholder engagement for
responsible innovation in the private sector: Critical issues and management practices." Journal
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1 (2016): 59-74.
Brun-Martos, Maria Isabel, and Irvine Lapsley. "Democracy, governmentality and transparency:
participatory budgeting in action." Public Management Review 19, no. 7 (2017): 1006-1021.
Ionescu, Luiza, Maria Toma, and Mathurin Founanou. "Applied Analysis of the Impact of
Inventory Valuation Methods on the Financial Situation and Financial Performance." Valahian
Journal of Economic Studies 9, no. 1 (2018): 67-76.
Mahlendorf, Matthias D., Utz Schäffer, and Oliver Skiba. "Antecedents of Participative
Budgeting–A Review of Empirical Evidence." In Advances in Management Accounting, pp. 1-
27. Emerald Group Publishing Limited, 2015.
Pinto, José Luís Quesado, João Carlos O. Matias, Carina Pimentel, Susana Garrido Azevedo, and
Kannan Govindan. "Just in Time." In Just in Time Factory, pp. 25-38. Springer, Cham, 2018.
Robinson, David T., and Berk A. Sensoy. "Cyclicality, performance measurement, and cash flow
liquidity in private equity." Journal of Financial Economics 122, no. 3 (2016): 521-543.

Sanzo, María José, Luis I. Álvarez, Marta Rey, and Nuria García. "Business–nonprofit
partnerships: do their effects extend beyond the charitable donor-recipient model?." Nonprofit
and Voluntary Sector Quarterly 44, no. 2 (2015): 379-400.
Shenoy, Dinesh, and Roberto Rosas. "Inventory Control Systems: Design Factors." In Problems
& Solutions in Inventory Management, pp. 13-32. Springer, Cham, 2018.
Simeon, Edori Daniel, and Ohaka John. "Implication of Choice of Inventory Valuation Methods
on Profit, Tax and Closing Inventory." Account and Financial Management Journal 3, no. 07
(2018): 1639-1645.
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inventory under probablistic replenishment intervals and known price increase." European
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Verma, Meenu. "Inventory management accounting for obsolete inventory." IUP Journal of
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process." Business Research (2019): 1-28.
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