FNSACC523_AE_Sk2of3

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TAFE NSW - Sydney Institute *

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523

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Accounting

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Apr 3, 2024

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Assessment event 2 of 3: Skills Unit code and name FNSACC523 – Manage budgets and forecasts Qualification code and name FNS50222 – Diploma of Accounting Student name Student number Document title: FNSACC523_AE_Sk2of3 Page 1 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Version: 20230403 Date created: 23 November 2022 © 2023TAFE NSW RTO Provider Number 90003 | CRICOS Provider Code: 00591E This assessment can be found in the: Learning Bank The content in this document is copyright © TAFE NSW 2023 and should not be reproduced without the permission of TAFE NSW. Information contained in this document is correct at the time of printing: 1 April 2024. For current information please refer to our website or your Teacher/Assessor as appropriate. Document title: FNSACC523_AE_Sk2of3 Page 2 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Assessment information Table 1 – Assessment information Information Details Assessment event overview This assessment event aims to assess your performance in skills and knowledge required to prepare, document, and manage budgets and forecasts. It involves forecasting estimates and monitoring budgeted outcomes. The unit applies to individuals who use specialised knowledge and analytical skills to prepare and manage strategic organisational information. This assessment is in 1 part:  Part 1: Scenario And is supported by:  Assessment checklist  FNSACC523_AE_Sk2of3_Appx_1 _ Templates.zip , which contains: o FNSACC523_AE_Sk2of3_Appx1_Coffee Ramp_Budget and Performance Report_template o FNSACC523_AE_Sk2of3_Appx2_Coffee Ramp_Budget_Commentary_templateAppendix 3 Coffee Ramp Strategic Analysis Template o FNSACC523_AE_Sk2of3_Appx3_Coffee Ramp_Strategic Analysis_template.  Azure Beach Accountants and Financial Services Long URL: https://share.tafensw.edu.au/share/file/af8bbb5c-6264- 44fb-9520-25e8ad0434dd/1/ABAFS.zip/index.html  Azure Beach Accountants and Financial Services Budget Policy Long URL: https://share.tafensw.edu.au/share/logon.do?.page=items/b581f384- 532f-47f4-9803-a95c223fc9bb/1/?attachment.uuid%3Dfc0c0ac1- 2980-4361-9238-adf239264f83 Unit Refer to the Unit assessment guide (UAG) before attempting this Document title: FNSACC523_AE_Sk2of3 Page 3 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

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Information Details assessment guide (UAG) assessment event. The UAG contains information including assessment requirements and how to achieve a satisfactory result. Submission instructions When you complete this assessment, submit it for marking as directed by the assessor. Refer to the Submission Checklist at the end of the assessment to ensure you have submitted all requirements. It’s important to keep a copy of all the electronic and hardcopy assessments you submit to TAFE NSW and complete the assessment declaration when submitting the assessment. Document title: FNSACC523_AE_Sk2of3 Page 4 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Task instructions The assessor will use the criteria in the tasks to determine if you have satisfactorily completed this assessment event. Follow these instructions to ensure you demonstrate the required knowledge and skills. Part 1: Scenario To complete this part of the assessment, read the scenario and complete the following task/s. Scenario: This scenario is based on the simulated organisation Azure Beach Accountants and Financial Services . You are currently working in an Assistant Accountant role with Azure Beach Accountants and Financial Services. Part of your role includes the preparation of budgets for clients within the service industry. Within the scope of your role, you can provide support to small businesses on budgetary objectives, milestones and performance indicators as well as budget preparation. You have received a new client who has started up a local café business – Coffee Ramp. The café owner’s name is Charlie Moore. The client wants you to prepare an annual budget for the café for 2023/2024 but has no experience in budgeting. Your initial responsibility here is to support Charlie with a strategic understanding of what is needed to set up a budget. You have had a brief conversation on the phone with Charlie. In this conversation, you discuss with Charlie how he is planning on growing his business in the coming year. He has identified a goal of a 10% increase in sales by developing a more targeted advertising campaign within the local area. One idea that he has is to provide weekly specials on the sandwich board to encourage customers to purchase something additional with their coffee. You agree with Charlie about this strategy and believe that this is a realistic objective. Charlie also advises you that he will not be renewing the lease of the coffee machine for 2023/24 as he has purchased a new machine which will be operational by 1 December 2023. The cost of the new machine will be $55,000 and is expected to have a useful life of 10 years. Document title: FNSACC523_AE_Sk2of3 Page 5 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Document title: FNSACC523_AE_Sk2of3 Page 6 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

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Additional Information Azure Beach has conducted research into the Cafe and Coffee Shop Industry in the local area and you can use this additional information to complete your budget. Refer to 2.9.2 of Azure Beach Accountants and Financial Services Budget Policy for detail on understanding the current and future market conditions. Long URL: https://share.tafensw.edu.au/share/file/af8bbb5c-6264-44fb-9520- 25e8ad0434dd/1/ABAFS.zip/index.html Based on this information, the following is relevant to your client:  Seasonal breakdown of sales is generally: o January – March: 35% o April – June: 20% o July – September: 15% o October – December: 30%  Cost of sales (variable costs) will move in line with sales  Casual staff are employed according to seasonal fluctuations  Award wage increase for permanent staff of 2% in 2023/24  Increase in expenses due to inflation and other factors as follows: o Utilities: 3% (paid quarterly) o Insurance: 2.5% (paid annually in December) o Cost of Azure Beach Accountants and Financial Services budgeting services $2000, due quarterly o rental increase of 3% paid monthly. You have requested that Charlie send an income statement for 2022/2023 via email and have agreed with him that the final budget will be presented as a quarterly breakdown of the total Annual Budget. In line with the Azure Beach Budget Policy, you have indicated to Charlie that the draft budget will be ready for him to review in 5 business days and that this will be emailed to him along with a detailed commentary of the underlying assumptions and calculations that have been performed in the preparation of the budget. Document title: FNSACC523_AE_Sk2of3 Page 7 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Income statement 2022/2023 – Coffee ramp Table 2 – Income statement Coffee Ramp Income Statement For the year ended 30 June 2023 Sales  First Quarter  Second Quarter  Third Quarter  Fourth Quarter 58,700 84,600 85,900 56,800 286,000 Café supplies  Coffee ingredients  outsourced sandwiches Outsourced cakes 60,500 25,900 28,700 115,100 Gross profit 170,900 Wages  permanent staff  casual staff (seasonal) 35,500 47,550 83,050 Advertising  social media 1,250  sandwich board 250 1,250 250 1,500 Rent of Premises  Drummoyne, Sydney 20,000 20,000 Lease of Coffee Machine 15,000 15,000 Admin  Wages 0.2 FTE Bookkeeper  Staff amenities  stationery 12,400 1,000 1,100 14,500 Utilities  electricity  water  internet/phone/database costs  waste removal 2,700 750 1100 1100 5,650 Insurance  public liability  contents 1,000 2,700 3,700 Total Expenses 143,400 Net profit 27,500 Document title: FNSACC523_AE_Sk2of3 Page 8 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Task 1: Prepare and Present a budget A. Prepare Budget  Using the FNSACC523_AE_Sk2of3_Appx1_Coffee Ramp_Budget and Performance Report_template found in FNSACC523_AE_Sk2of3_Appx_1_Templates.zip , prepare an annual budget for 2023/24.  This Excel Spreadsheet should include all appropriate formulas and calculations including links across worksheets to provide clear evidence of all assumptions and calculations made.  You are required to break down the annual budget into quarters according to the seasonal data provided. You may also refer to information regarding operating trends in section 2.3 of Azure Beach Accountants and Financial Services Budget Policy . If no other information is provided, then allocate the budget evenly across quarters.  Ensure that all additional information that has been provided by Charlie and based on the Azure Beach research and other policies is included in the calculations, notes and assumptions. B. Present Budget and Provide Commentary  After preparing the budget, you will be able to assess whether the financial goals that were agreed upon for Coffee Ramp are appropriate.  Using FNSACC523_AE_Sk2of3_Appx2_Coffee Ramp_Budget_Commentary_template found in FNSACC523_AE_Sk2of3_Appx_1_Templates.zip , identify and present financial goals for the following: o Sales target o gross profit margin o operating expenses o Net profit margin.  Clearly document the budget objectives and milestones that have been agreed upon and provide commentary on the final budget overall, explaining to your client the reasons for the seasonal movement in quarterly net profit.  As part of this commentary, identify any potential risks and contingencies and establish how risks may affect the business and parameters. Before final submission to your client, all budget documentation should be reviewed for accuracy, relevance and compliance with section 2.8 of Azure Beach Accountants and Financial Services Budget Policy .  Ensure you use language appropriate for a new business owner with a limited understanding of budgets. Address this budget document to the owner as the Document title: FNSACC523_AE_Sk2of3 Page 9 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

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appropriate audience and note the timeliness of your delivery of the budget according to Charlie’s wishes. To complete this task successfully, the student must submit:  Completed EXCEL Spreadsheet for FNSACC523_AE_Sk2of3_Appx1_Coffee Ramp_Budget and Performance Report_template found in FNSACC523_AE_Sk2of3_Appx_1_Templates.zip including all relevant assumptions and calculations for the budget to be provided to the client  Completed FNSACC523_AE_Sk2of3_Appx2_Coffee Ramp_Budget_Commentary_template found in FNSACC523_AE_Sk2of3_Appx_1_Templates.zip detailing the overall assumptions, milestones, risks and contingencies. Document title: FNSACC523_AE_Sk2of3 Page 10 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Task 2: Prepare a performance report, variance analysis and recommendations Scenario - Additional Information 12 months after the preparation of the annual budget, you are now required to complete a performance report and some detailed analysis for Coffee Ramp so that the budget can be again prepared for the following year. In your meeting with Charlie, he advised you that a competing coffee shop opened opposite Coffee Ramp at the end of the third quarter and he can see that there has been a drop in sales which he believes has resulted from his regular customers trialling the new shop. Charlie has provided you with the following actual data that he has collected from his accounting system: Document title: FNSACC523_AE_Sk2of3 Page 11 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Coffee Ramp Budget Table Quarterly income statement for the year ended 30 June 2024 Items 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2023/24 Full Year Actual Sales 105,432 64,322 44,980 79,800 294,534 Less Cost of Sales 42,175 25,620 18,765 34,522 121,082 Gross profit 63,257 38,702 26,215 45,278 173,452 Gross Profit % 60% 60% 58% 57% 59% Less operating expenses: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2023/24 Full Year Actual Permanent Staff Wages 9,128 9,128 9,128 9,128 36,510 Casual Staff Wages 17,821 10,872 7,603 13,489 49,785 Advertising 375 375 375 375 1,500 Rent 5,150 5,150 5,150 5,150 20,600 Administration 3,625 3,625 3,625 3,625 14,500 Utilities 1,463 1,463 1,463 1,463 5,850 Insurance 3,887 3,887 Accounting Fees 500 500 500 500 2,000 Depreciation of Equipment 1,375 1,375 1,375 1,375 5,500 Total operating expenses 39,436 36,375 29,218 35,104 140,132 Net profit 23,821 2,327 -3,003 10,174 33,320 Net Profit % 23% 4% -7% 13% 11% Document title: FNSACC523_AE_Sk2of3 Page 12 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

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A. Prepare Performance Report  Using FNSACC523_AE_Sk2of3_Appx1_Coffee Ramp_Budget and Performance Report_template EXCEL template found in FNSACC523_AE_Sk2of3_Appx_1_Templates.zip prepare a Performance Report for 2023/24.  This Excel Spreadsheet should include all appropriate formulas and calculations including links across worksheets. B. Provide recommendations and strategies  Using FNSACC523_AE_Sk3of3_Appx3_Skyward_Budget_Report_Presentation_template found in FNSACC523_AE_Sk2of3_Appx_1_Templates.zip , present the following: o Provide Charlie with some strategies to cope with the decrease in sales. o Identify any potential risks and corresponding recommendations to manage these risks o Provide Charlie with recommendations and strategies for improving and ensuring effective budgeting processes. To complete this task successfully, the student must submit: o A completed EXCEL Spreadsheet for the FNSACC523_AE_Sk2of3_Appx1_Coffee Ramp_Budget and Performance Report_template found in FNSACC523_AE_Sk2of3_Appx_1_Templates.zip including variance analysis calculations and commentary o A completed FNSACC523_AE_Sk3of3_Appx3_Skyward_Budget_Report_Presentation_templat e found in FNSACC523_AE_Sk2of3_Appx_1_Templates.zip including suggested strategies, an outline of potential risks and budget process recommendations. Document title: FNSACC523_AE_Sk2of3 Page 13 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Assessment checklist The Assessment checklist lists the requirements for each task in this assessment as outlined in the student’s assessment instructions. The assessor will use this checklist to ensure all required tasks have been completed and submitted and provide feedback for each task. Note that S = Satisfactory and U/S = Unsatisfactory. Table 3 – Assessment feedback Part 1 – Did the student S or U/S Feedback Task 1 – Design a budget  Establish budget objectives and confirm their consistency with organisational policies and procedures.  Identify and include milestones and performance indicators in budgets to monitor financial performance and break down annual budgets into seasonal periods according to operating trends.  Identify required data for forecasts and anticipate changes in circumstances.  Establish assumptions and parameters and review for accuracy, relevance and compliance with S ☐ U/S ☐ S ☐ U/S ☐ S ☐ U/S ☐ Document title: FNSACC523_AE_Sk2of3 Page 14 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Part 1 – Did the student S or U/S Feedback organisational policies and procedures.  Identify financial risks and propose protection strategies according to organisational policies and procedures.  Present data in a clear format appropriate for budget reporting.  Complete reports for specified periods and projects within agreed timeframes  Identify feasibility of forecasts by comparing projections with market growth and development  Distribute budget report to required personnel. S ☐ U/S ☐ S ☐ U/S ☐ S ☐ U/S ☐ S ☐ U/S ☐ Document title: FNSACC523_AE_Sk2of3 Page 15 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

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Part 1 – Did the student S or U/S Feedback  Performs mathematical calculations and uses a range of mathematical problem-solving techniques to analyse, estimate, and forecast financial data.  Researches, consolidates and evaluates a range of information and financial data, identifying key aspects needed for work requirements and analysing trends.  Prepares specific and logically structured written and graphical information for a range of audiences and purposes.  Uses clear and concise language, incorporating correct spelling, grammar, terminology, and conventions, to convey accurate information.  Uses the main features and functions of digital technologies to access, extract and share S ☐ U/S ☐ S ☐ U/S ☐ S ☐ U/S ☐ S ☐ U/S ☐ S ☐ U/S ☐ Document title: FNSACC523_AE_Sk2of3 Page 16 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Part 1 – Did the student S or U/S Feedback information to achieve required outcomes. S ☐ U/S ☐ S ☐ U/S ☐ Task 2 – Prepare a performance report, adjusted budget and recommendations  Complete reports for specified periods and projects within agreed timeframes.  Analyse budget variances according to organisational procedures and make recommendations to address variances to client or designated person.  Review budget processes and implement process changes as required. S ☐ U/S ☐ S ☐ U/S ☐ S ☐ U/S ☐ Document title: FNSACC523_AE_Sk2of3 Page 17 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Part 1 – Did the student S or U/S Feedback  Performs mathematical calculations and uses a range of mathematical problem-solving techniques to analyse, estimate, and forecast financial data.  Uses clear and concise language, incorporating correct spelling, grammar, terminology, and conventions, to convey accurate information. S ☐ U/S ☐ S ☐ U/S ☐ Document title: FNSACC523_AE_Sk2of3 Page 18 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

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Submission checklist Submit the following for marking: ☐ This completed Assessment 2 of 3: Skills Document title: FNSACC523_AE_Sk2of3 Page 19 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

Additional evidence for verification of assessment Assessors may ask additional questions to clarify your understanding during or after an observation. You may be asked questions:  to clarify your understanding. (For example, ‘Why did you select that piece of equipment?’)  to capture contingencies that may form part of the demonstration (for example, dealing with faults or unexpected events)  to prevent a work, health, and safety incident. If additional questions are required, these questions and your responses will be recorded in this table. Table 4 – Additional evidence Additional question/s asked by the assessor Maps to Part or Task: Student response to the additional question/s Document title: FNSACC523_AE_Sk2of3 Page 20 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

This page is not required for online assessment submissions Student assessment declaration This assessment is my original work and has not been:  copied from any source without proper referencing  written for me by any other person except where such collaboration has been approved by a teacher or assessor. Student signature and date Assessment feedback ☐ Reasonable adjustment was in place for this assessment event. If so, please provide details of any reasonable adjustment strategies that were implemented: Reasonable adjustment strategies : Assessment outcome ☐ Satisfactory ☐ Unsatisfactory Comments : Assessor name, signature and date Student acknowledgement of assessment outcome Would you like to make any comments about this assessment? Student name, signature and date Document title: FNSACC523_AE_Sk2of3 Page 21 of 21 Resource ID: SEMX_22_003_FNSACC523_AE_Sk2of3 Version: 20230403

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