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Exam 9 September 2020, questions and answers

Accountancy (First Asia Institute of Technology and Humanities )

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1.What are the primary reasons for segmenting organizations?

The primary reasons for segmenting organizations are to promote internal
efficiencies through specialization of labor and effective cost allocation of resources and
to help the managers focus their attention on narrow areas of responsibilities to attain
higher levels of operating efficiency. For example, there are organizations who are
conducting operations in different countries, they do this in order to gain access to
resources of distribution. Accordingly, each management of the firm are then organized
around each geographical segment as a quasi-autonomous entity. In a more enclosed
function like in business, functional segmentation dissects the organization into certain
areas of responsibilities based on tasks given such as finance, accounting, marketing
and production. Thus, these functional areas are determined in relation to the flow of the
primary resources through the entity.

2. Why is it important to organizationally separate the accounting function from other

functions of the organization?
It is important that the accounting function is separate from other functions of the
organization so that the integrity of the accounting function will be maintained. Having it
completely separated from the rest will prevent any financial bias toward a department
to another. For instance, the purpose of accounting is to ensure such profit and loss
over the entity’s property and to provide all the records for all the operations of the entity
which affects the financial position of the business. Since only accounting personnel are
normally working on it and it restricts any intrusion from purchasing or marketing
departments, the accounting reports and records are maintained to measure the income
of the entity and are communicated only to managers and interested parties alike.
Therefore, it should not be shared to all the employees of the entity. Thus, accounting
records should be shared only to those employees concerned with such matters.

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