FNSACC405 Maintain Inventory Records Project: A Complete Solution

This document presents a comprehensive solution to an inventory management project, addressing key aspects such as authorization in purchasing, inventory controls (minimum level stock, stock review, just-in-time, batch control), and potential risks associated with inadequate authorization. It further explores segregation of duties, documents required for vendor registration (vendor registration form, GST number, invoice, sample), access controls in inventory acquisition, and independent checks (reconciliation, physical asset comparison, recalculation, report analysis). The project emphasizes maintaining accurate inventory records and mitigating risks through effective control measures. Desklib is a valuable resource for students seeking similar solved assignments and past papers to enhance their understanding and academic performance.

Running Head: INVENTORY 0
Inventory

INVENTORY 1
Table of Contents
Assignment 1...................................................................................................................................2
Question 1...................................................................................................................................2
Answer 1.....................................................................................................................................2
Question 2...................................................................................................................................4
Answer 2.....................................................................................................................................4
Question 3...................................................................................................................................5
Answer 3.....................................................................................................................................5
Question 4...................................................................................................................................6
Answer 4.....................................................................................................................................6
Question 5...................................................................................................................................7
Answer 5.....................................................................................................................................7
Assignment 2...................................................................................................................................8
Assignment 3...................................................................................................................................8
Assignment 4...................................................................................................................................9
References.....................................................................................................................................16
Articles/ Books/Journals.......................................................................................................16
Websites................................................................................................................................16

INVENTORY 2
Assignment 1
Question 1
Answer 1
The stages in purchasing where the authorisation is necessary are as follows.
Generally the procurement manager purchases the product so the authorisation from the
Procurement manager is necessary. The next stage is to select the supplier and the relevant
person of the each department shall be authorised for particular department. Procurement
management sends the invoice to the department of accounts and so authorisation is important
where payment is made. In the process of payment, it is important to check the threshold of the
payment. Fulfilment is the next stage where the goods are dispatched to the buying organisation.
Therefore proper authorisation from the supplier is required to be taken in order to record the
transactions properly.
At the time of issue of the receipt for delivering the goods the authorisation is also necessary
from the gate keepers and to whom they are handing over the goods shall also be authorised.
When the final payment is being made the supplier will typically generate an invoice which is
either sent along with the goods or separately later. This will be received by the finance
department and the authorisation from the finance department is necessary to pay for the goods
received.
Inventory control also known as the stock control is necessary to evaluate the stock in hand and
maintaining the same while required on urgent basis. It applies to every item that has been
produced and inclusive of raw materials, finished goods. It cover the stock in the process of the
production, during the purchase and delivery of the goods. It is necessary to have controls as
they ensure the right amount of stock is available at right time and can be transported at the right

INVENTORY 3
place. There are several controls used during the management of the inventory which are as
follows.
Minimum level stock: identification of the minimum stock level and the quantity has to be
reordered when the stock reaches at this level. The control is needed to evaluate the minimum
quantity required by the company and not to face the shortage or scarcity of goods1.
Stock Review
The regular review of stocks provides and extreme relaxation to the company as the regular
review determines the variances in the physical as well as the actual stock. The review gives a
reality check of the stock2.
Just in time
The just in time is necessary to reduce the cost by keeping the stock at a minimum level as the
item are delivered as an when they are required. It also helps in maintaining the lower count of
inventory easily and without any hassle3.
Batch control
Batch control is used to manage the production of the goods in batches. This method helps in
evaluating the right number of the components to cover the needs until the next batch starts.
Potential risk involved
The potential risks if the authorisation is not considered or not undertaken are as follows.
1 Youhua Frank Chen, Ye Lu and Minghui Xu, "Optimal Inventory Control Policy For Periodic-
Review Inventory Systems With Inventory-Level-Dependent Demand" (2012) 59(6) Naval
Research Logistics (NRL).
2 Soren Glud Johansen and Anders Thorstenson, "Optimal Base-Stock Policy For The Inventory
System With Periodic Review, Backorders And Sequential Lead Times" (2008) 1(1)
International Journal of Inventory Research.
3 Miller-Nobles, Mattison, Tracie L, Brenda L, and Ella, Matsumura Mae, Horngren's Financial
& Managerial Accounting: The Managerial Chapters. (Pearson, 2016).

INVENTORY 4
Loss of the goods: the goods might be lost if the proper authorisation is not taken from the
relevant authorised persons.
Excessive quantity: if the authorisation is missing there is no outlook on the record of the
quantity to be kept. There will be imbalance between the minimum quantity and the actual
requirements. At times it may happen that the excessive quantity is ordered against the
requirement and the stock in underlying in the warehouse.
Misuse of the stock: the stock can also be misused if it is in the hands of the unauthorised
person4. The unauthorised person may keep the stock for personal use as well.
Fictitious receipts
Fictitious receipts may also be generated if the authorised person is not there to sign the receipts.
The unauthorised person may default or embezzle the transactions of the inventory.
Question 2
Answer 2
Segregation of duties is a pillar of the internal control and the sustainable risk management. The
principles of the segregation of the duties are based on the responsibilities shared for a process or
a department. The decision of the work increases the value of the output and saves time. The
segregation of duties is must in order to ensure that the chances of frauds and errors are less
manageable. Proper segregation of duties are required to initiate the purchase orders,
maintenance of the journal and purchase orders, authorise the inventory purchases, scheduling of
the inventory production, verification of the process or the inventory are some of the activities.
Potential risk if this system was not placed
There are certain risks involved if the segregation of the duties is not possible amongst them the
first and the foremost is detection of frauds and errors becomes difficult if the segregation of
4 HBL, Perspective of an auditor on inventory control (2015) <https://hblcpa.com/an-auditors-
perspective-basics-of-inventory-controls/>

INVENTORY 5
duties is not possible. Segregation of duties allows at least one person to check all the
transactions that have been recorded and this way the authenticity of the transaction is
maintained. The lacks of segregation of duties will eventually lea dot lower productivity of the
company, the employees will feel neglected and the work will take more than the normal time to
complete the given task.

INVENTORY 6
Question 3
Answer 3
Documents required
Vendor registration form: the vendor registration form is required to get the basic details of the
vendor like the name the location of the office and the materials he deals. A proper script of the
same is used for the future purposes. It acts as evidence in case of the chances of the clashes.
The vendor registration form is basically a contract on the paper between the receiving party and
the vendor in order to keep entire detail about what stock and from which location the same has
been purchased.
Company owner gst numbr: the second document that is required is the detail of the GST
number of the vendor which will provide the authenticity of the supplier. it is a proof of whether
the dealer is authorised to sell the materials or not.
Invoice
Once the vendor has registered the next important document is the invoice which is generated in
three modes. The invoice is generated in three forms. First copy is for the purchasing party to
whom the goods are to be delivered. The duplicate copy is for the supplier, who sold the goods
and is keeping a track of the same5. The triplicate copy is handed over to the transporter for
moving the goods from one place to another.
5 Yibin Zhang et al, "Repealing The LIFO Inventory Accounting Choice? A Review Of LIFO
And Inventory Management" (2014) 04(06) American Journal of Operations Research.

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Sample
The documents also contain the sample document which is sent to test the sample. The samples
are sent to give a brief introduction of the product. The sample will determine the factors like
quality, texture and it will also enable the company to get an idea of the product initially.
Apart from these major documents there are several other documents which are prepared in
association with these such as brand ‘specification delivery clause, quality clause, purchase
order, comparative charts for the purpose of the comparison with the other dealers and the
samples provided by them.
Question 4
Answer 4
Access controls are the security techniques that determine who and what can view or use the
resources in any type of business environment. Basically, they are used in the field of physical
and information security which restricts the access to a particular place or resources. In the field
of inventory acquisition, access controls help in determining the person who has the right and
ownership of acquiring a particular inventory. Sometimes, where there is an agent-principal
relationship, agents purchase or acquire inventory on behalf of their principal but the actual
access and the ownership remains in the hands of principal only. He is only liable for each and
every type of risks and rewards occurring from such acquisition. Apart from this, there is a
difference between the date of acquiring the inventory and date of transferring the inventory. It is
not always necessary that both the dates are same6. Sometimes, the inventory is been sold on a
particular day but the transfer of the same is done on another. During such period, access
controls are applied which helps in determining the person who has the control over the stock
6 Marie Loughran, How to assess inventory management control risk (2015)
<https://www.dummies.com/business/accounting/auditing/how-to-assess-inventory-management-control-
risk/>

INVENTORY 8
and who can access it7. However, the time when the inventory is sold, the ownership rights are
also transferred to the buyer but he or she cannot use it since it is not transferred to the desired
place. In such situation, proper access controls are been applied while acquiring the stock.
Question 5
Answer 5
Independent checks are basically one of the control activities which are carried out with an
objective to ensure the reliability of accounting information and to establish efficiency in the
business operations. In case of purchasing inventory, various types of independent checks are
been done by the employees to make sure that correct and adequate amount of inventory is been
purchased and is according to the requirement8. However, this activity is just not the periodic
review of the stock but is far more than this as it has significant implications that put burden on
management and supervisors who are engaged in purchase and handling of company’s stock or
inventory9. Such checks are used as a method to confirm the accuracy and completeness of
inventory data. Following are the types of independent checks which are performed at time of
making inventory purchase
• Reconciliation
It is a process which takes records from different sources and compares them accordingly. This
check allows the company to derive the inventory data from various sources and compare them
to figure out the required amount which is to be purchased. It helps in identifying the amount of
shortage in the inventory of the company.
7 Richard Shepherd, Microsoft Access 2010 VBA Macro Programming (McGraw-Hill, 2011).
8 Susan F. Paparella, "Taking Another Look At Independent Double Checks" (2013) 39(6)
Journal of Emergency Nursing.
9 Prasanti, Mishra, Tax Issues Related To Change In Method of Accounting (2016) 5(2) The
contemporary tax Journal 1

INVENTORY 9
• Comparing physical assets with the records
It is another type of independent check in which the firm compares its inventory records with its
physical assets. It checks and tally the number of assets with the recorded one. This check is
usually done at time of purchasing additional inventory as it helps in knowing about the assets
which are present physically but not recorded and the assets that are mentioned in the records but
are not there physically. This ultimately helps the management to figure out the exact amount of
inventory they require purchasing for their business.
• Recalculating the amounts
this can help in discovering the errors happened manually while counting the amount of physical
inventory. Sometimes, it happens that the supervisor fails to count the inventory correctly which
ultimately has some bad results. So at time of purchasing the stock, the management must
recalculate the amount of its existing inventory.
• Analysing the reports
Managers are also required to properly and critically analyse and review the inventory records
and the data presented in the report. On the basis of such reports only, they can take appropriate
decision regarding the purchase of a stock10. Reviewing the reports timely will help in assessing
the errors and maintaining the accuracy and reliability of data. Managers must make an
independent check of these reports before and at time of making any sort of purchase.
Assignment 2
Excel File
Assignment 3
Excel file
10 Zydorowicz, Paulina, "Consonant Clusters Across Morpheme Boundaries: Polish Morphonotactic Inventory And
Its Acquisition" (2010) 46(4) Poznań Studies in Contemporary Linguistics

INVENTORY 10
Assignment 4
Questions
1 What is the difference between periodic and perpetual inventories? (50 words)
To track the quantity of the goods on hand there are two systems namely the perpetual and the
periodic inventory. The perpetual system is more mature in terms of sophistication yet it requires
more records to maintain the data unlike in periodic system. The periodic system relies upon the
occasional count of quantities physically, mainly to depict the balance of the inventory and the cost of
goods sold11.
2 What are the advantages of perpetual inventory? (50 words)
The main advantages of using the perpetual system are
-prevents stock outs,
-using this system a transparent understanding of the customer preferences is given to the business
owners.
-The system enables the business owners to centralize the management of the inventory for the variety
of the locations.
-the valuable information regarding the discounts and the purchase and the returns made by the
customers12.
3 List 2 programs that can be used for inventory? (2 points)
Barcode System
Radio Frequency Identification System
4 Define reconciliation. (30 words)
11 T. Trodd, "Under Perpetual Inventory" (2012) 36(1) Oxford Art Journal.
12 Michael, Berlemann, and Wesselhöft, Jan-Erik "Estimating aggregate capital stocks using the
perpetual inventory method." (2014) 65 Review of Economics 34

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It is a practice to check whether the balance is equivalent to the corresponding bank statement.
Reconciliation of the accounts determines which transactions shall be posted in which account and
helps in mitigating the mistakes created by the financial institutions.
5 What is an IPV, when does this occur? (30 words)
Invoice price variance is the difference between the invoice price and the purchase price. Generally
when the invoice is processed and aligned with the parameters of the organisation. IPV is determined
for the standard and average costing in a similar manner13.
6 Discus inventory cash flow assumptions. Why are they made? What must be kept in mind
when making these assumptions? (75 words)
13 Oracle Applications, Average cost Variance, Invoice price Variance (2015)
<https://docs.oracle.com/cd/A60725_05/html/comnls/us/cst/avgvari.htm>