Shelter Partnership
...t of resources used for each of the various cost objects the organization has (Anthony, Hawkins and Merchant, 2003, p 556). The existing financial statement does not allow an evaluation of each cost center, e.g. the core business and the Resource Bank. It is difficult to follow the matching concept were income and costs are matched and entered into the books during the same accounting period. Because donations are not allocated to each business unit it is difficult to match them against the costs (Anthony, Hawkins and Merchant, 2003, p 56). Shelter Partnership Inc. does not account for all cost aspects relating to the Resource Bank, such costs as the warehouse rental, distribution of goods, etc. are not taken into consideration. For accounting purposes that is not required since there is no actual cost to the organization. However, that information is useful to make managerial decisions. Shelter Partnership Inc is concerned that the Resource Bank inventory is undervalued. There might be items that were donated without clear cost indicated and they had to be estimated. Applying a conservative value to the Resource Bank’s inventory seems therefore appropriate and follows the conservatism concept of accounting (Anthony, Hawkins and Merchant, 2003, p 53). Solving the Key Issues at Shelter Partnership Inc Ruth Schwartz should attempt to cost all elements of the operation. Costs occurring for a specific business unit can be considered as direct cost and is therefore directly allocated to the each unit. Overhead costs are considered indirect costs and are allocated based on the most accur...