BSBFIN501_Assessment task 1 v1.0

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Warwick *

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BSBMKG510

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Accounting

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May 24, 2024

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docx

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ASSESSMENT TASK 1: WRITTEN QUESTIONS T ASK SUMMARY You need to answer all of the written questions correctly. Your answers must be word processed and sent to the assessor. R ESOURCES AND EQUIPMENT REQUIRED TO COMPLETE THIS TASK  Access to textbooks and other learning materials.  Computer with Microsoft Office and internet access. W HEN AND WHERE DO I NEED TO COMPLETE THIS TASK ? This task may be done in your own time as homework, or you may be given time to do this task in class (where applicable). W HAT DO I NEED TO SUBMIT ?  Your answers to each question in this task. I NSTRUCTIONS All questions must be answered correctly in order for you to be assessed as having completed the task satisfactorily. WHAT DO I NEED TO DO IF I GET SOMETHING WRONG ? If your assessor sees that you have not completed all parts of the task completely and satisfactorily, the details of resubmission will be discussed with you when you are advised of the outcome of this task. You will only need to redo the parts of the task that are incorrect; however, you will need to resubmit the entire assessment again. Written answer question guidance The following written questions use a range of “instructional words” such as “identify” or “explain”, which tell you how you should answer the question. Use the definitions below to assist you to provide the type of response expected. Note that the following guidance is the minimum level of response required. Analyse: when a question asks you to analyse something, you should do so in detail, and identify important points and key features. Generally, you are expected to write a response one or two paragraphs long. Assessment 1 BSBFIN501 Student Assessment Guide v1.0 1

Compare: when a question asks you to compare something, you will need to show how two or more things are similar, ensuring that you also indicate the relevance of the consequences. Generally, you are expected to write a response one or two paragraphs long. Contrast: when a question asks you to contrast something, you will need to show how two or more things are different, ensuring you indicate the relevance or the consequences. Generally, you are expected to write a response one or two paragraphs long. Describe: when a question asks you to describe something, you should state the most noticeable qualities or features. Generally, you are expected to write a response two or three sentences long. Discuss: when a question asks you to discuss something, you are required to point out important issues or features and express some form of critical judgement. Generally, you are expected to write a response one or two paragraphs long. Evaluate: when a question asks you to evaluate something, you should put forward arguments for and against something. Generally, you are expected to write a response one or two paragraphs long. Examine: when a question asks you to examine something, this is similar to “analyse”, where you should provide a detailed response with key points and features and provide critical analysis. Generally, you are expected to write a response one or two paragraphs long. Explain: when a question asks you to explain something, you should make clear how or why something happened or the way it is. Generally, you are expected to write a response two or three sentences long. Identify: when a question asks you to identify something, this means that you are asked to briefly describe the required information. Generally, you are expected to write a response two or three sentences long. List: when a question asks you to list something, this means that you are asked to briefly state information in a list format. Outline: when a question asks you to outline something, this means giving only the main points, Generally, you are expected to write a response a few sentences long. Summarise: when a question asks you to summarise something, this means (like “outline”) only giving the main points. Generally, you are expected to write a response a few sentences long. Provide answers to all of the questions below: 1. Explain the basic principle of double entry bookkeeping. The basic principle of double-entry bookkeeping is that for every transaction, there are at least two accounts involved - a debit and a credit. This principle ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced. Assessment 1 BSBFIN501 Student Assessment Guide v1.0 2

2. Describe the principle of cash accounting and one advantage and one disadvantage of this method of accounting. Cash accounting is a method where transactions are recorded only when cash is exchanged. One advantage of cash accounting is that it is simple and straightforward, making it easier for small businesses to manage. However, a disadvantage is that it may not provide an accurate picture of a company's financial health since it does not consider accounts receivable or accounts payable. 3. Describe the principle of accrual accounting and one advantage and one disadvantage of cash accounting Accrual accounting, on the other hand, recognizes transactions when they occur, regardless of when the cash is exchanged. An advantage of accrual accounting is that it provides a more accurate representation of a company's financial position by matching revenues with expenses in the same accounting period. A disadvantage is that it can be more complex and require more record-keeping compared to cash accounting. 4. Explain the two accounting principles on which the calculation and reporting of deprecation is based. - Matching Principle: Depreciation is allocated to match the cost of an asset with the revenues it generates over its useful life. This principle ensures that expenses are recognized in the same period as the related revenue. - Conservatism Principle: Depreciation allows for the conservative reporting of a company's financial position by recognizing the decline in value of assets over time, reflecting a more realistic picture of their economic worth. 5. Identify and explain three key features of A New Tax System (GST) Act 1999. - GST Rate: The Act specifies the rate of Goods and Services Tax (GST) to be applied on taxable supplies. - Input Tax Credit: It outlines the conditions under which businesses can claim input tax credits on GST paid for business purchases. - Tax Invoices: The Act sets out requirements for tax invoices that need to be issued by suppliers for taxable supplies, enabling recipients to claim input tax credits. 6. Identify and then explain the four main taxation and superannuation obligations for a business. Briefly discuss each obligation. - Income Tax: Businesses are required to report their income and pay income tax on profits earned. - Goods and Services Tax (GST): Businesses registered for GST must collect GST on taxable supplies and remit it to the tax office. Assessment 1 BSBFIN501 Student Assessment Guide v1.0 3

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- PAYG withholding: Employers must withhold tax from employee wages and remit it to the tax office. - Superannuation Guarantee: Employers are obligated to contribute to eligible employees' superannuation funds. 7. According to GST legislation, list four items that do not attract GST. - Basic food items such as fruits, vegetables, and bread - Exports of goods and services outside of Australia - Medical services provided by doctors and hospitals - Education services supplied by schools, universities, and other educational institutions 8. Explain the process by which a business reports GST to the Australian tax office. - Regular Lodgement: Businesses must regularly lodge Business Activity Statements (BAS) either monthly or quarterly, reporting GST collected and paid. - Payment: After reporting GST amounts, businesses need to pay the net GST amount to the tax office by the due date. 9. What is the penalty rate to be applied if a supplier does not provide an ABN? If a supplier does not provide an Australian Business Number (ABN), the penalty rate that can be applied is the 47% withholding rate. This means the payer must withhold 47% of the payment for tax purposes and remit it to the tax office. 10. A non-profit organisation needs to register for GST after it has a turnover of more than how much? A non-profit organization needs to register for GST after it has a turnover of more than $150,000. Once the turnover exceeds this threshold, the organization is required to register for GST and comply with GST regulations. 11. List the key information that must be included on a tax invoice for sales of $1,000 or more.  Seller's Identity: Name, address, and Australian Business Number (ABN) of the seller.  Buyer's Identity: Name and address of the buyer.  Invoice Details: Invoice number, date of issue, description of goods or services, quantity, price, and total amount payable.  GST Information: Amount of GST included in the total price. 12. Identify and explain three types of financial statements and their purpose.  Income Statement (Profit and Loss Statement): Shows the organization's financial performance over a specific period by detailing revenues, expenses, and net income or loss.  Balance Sheet: Provides a snapshot of the organization's financial position at a specific point in time, showing assets, liabilities, and equity. Assessment 1 BSBFIN501 Student Assessment Guide v1.0 4

 Cash Flow Statement: Tracks the inflow and outflow of cash within the organization, indicating the liquidity and financial health of the business. 13. Describe the type of entity that is required to have financial reports audited. An entity that is required to have financial reports audited is typically a public company. Public companies are usually required by law to have their financial reports audited by independent auditors to ensure accuracy and transparency in financial reporting. 14. Explain the purpose of a financial audit and auditor’s report. The purpose of a financial audit is to provide assurance to stakeholders that the financial statements are free from material misstatement and present a true and fair view of the organization's financial position. The auditor's report is a formal document issued by the auditor that outlines their opinion on the fairness of the financial statements based on the audit conducted. 15. Describe why companies may choose to develop budgets.  Financial Planning: Budgets help companies plan and allocate resources effectively to achieve financial goals.  Performance Evaluation: Budgets provide a benchmark for measuring actual performance against planned targets.  Resource Allocation: Budgets assist in prioritizing spending and resource allocation to optimize operational efficiency and profitability. 16. Explain the main steps in the budgeting process.  Setting Goals: Define financial objectives and targets for the budgeting period.  Gathering Information: Collect data on revenues, expenses, and other financial factors.  Preparing Budget: Develop a detailed plan outlining expected income and expenditures.  Review and Approval: Analyze the budget for accuracy and feasibility and obtain approval from relevant stakeholders.  Implementation: Put the budget into action by allocating resources according to the plan.  Monitoring and Control: Regularly track actual financial performance against the budget, adjusting as needed. Assessment 1 BSBFIN501 Student Assessment Guide v1.0 5

17. List 5 ways to improve cash inflow and give examples. Ways to improve cash inflows Example Offer Discounts for Early Payment Encourage customers to pay invoices early by offering a small discount. Reduce Overheads Cut unnecessary expenses to free up more cash for operations. Increase Sales Implement marketing strategies to boost sales revenue. Improve Inventory Management Optimize inventory levels to reduce holding costs and increase cash flow. Negotiate Payment Terms Negotiate longer payment terms with suppliers to improve cash flow. 18. Explain the use of electronic spreadsheets in developing budgets and give two of their key features. - Formulas and Functions: Spreadsheets allow for easy calculations and automatic updates based on changes in data. - Data Analysis Tools: They provide tools for organizing, analyzing, and presenting financial information effectively. 19. Explain three key principles relating to the management of a chart of accounts. - Consistency: Ensure a consistent structure is maintained to facilitate accurate financial reporting. - Relevance: Tailor the chart of accounts to the specific needs and operations of the business. - Hierarchy: Organize accounts in a logical hierarchy to allow for easy categorization and tracking of financial transactions. 20. Explain the purpose of a profit and loss statement and give two of its key features. - Revenue Section: Details the sources of income for the business, including sales, services, and other revenue streams. - Expense Section: Outlines the costs incurred by the business in generating revenue, such as operating expenses, salaries, and interest payments. Assessment 1 BSBFIN501 Student Assessment Guide v1.0 6

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What do I need to hand in for this task? Have I completed this? Your answers to each question  Assessment 1 BSBFIN501 Student Assessment Guide v1.0 7