ACC127 Accounting and Financial Literacy Report

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School

Charles Sturt University *

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Course

127

Subject

Accounting

Date

Jan 9, 2024

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docx

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Uploaded by CoachArt6885

ACC127 Accounting and Financial Literacy Claire Willoughby (117196561) Assessment 3 Report: Budgets and Business Reports Value: 20% Due Date: 20-Sept-2023 Return Date:13-Oct-2023 Length: 700 words +/- 10% Submission Method: EASTS Assignment Portal Word Count: 770

Table of Contents Issues with Business Forecast Budgets ................................................................................ 3 Affordability of Repayments ............................................................................................... 4 Additional Factors to be Considered ................................................................................... 5 Recommendation ............................................................................................................... 6 Conclusion .......................................................................................................................... 7 References ......................................................................................................................... 8 Appendix A ......................................................................................................................... 9 Appendix B ....................................................................................................................... 10 Appendix C ....................................................................................................................... 11 Appendix D ....................................................................................................................... 12 Appendix E ....................................................................................................................... 13 Appendix F ....................................................................................................................... 14 Appendix G ....................................................................................................................... 15 Appendix H ....................................................................................................................... 16 Appendix I ........................................................................................................................ 17

Issues with Business Forecast Budgets Financial Considerations The cash budget for September and October shows a substantial discrepancy between the forecasted cash inflows and outflows, resulting in a cash deficit of -$1492.94 and -$862.03, respectively (See Appendix A). This discrepancy suggests probable liquidity issues during these months, raising concerns about the business’s capacity to meet any short-term financial obligations. The balance of accounts receivable steadily increases with the seasonal demand of Pegasus Stables’ services throughout the reporting period (See Appendix B). Whilst this can indicate an increase in sales, this can also represent delayed cash receipts, which further affects the business’s capacity to pay current expenses. The budgeted sales exhibit a declining trend from May to August, representing a reduction in expected income over the year, potentially leading to financial difficulties if not addressed (See Appendix C). Whilst this is explained through the seasonal demands of services provided by Pegasus Stables, this necessitates an examination of sales strategies to ensure capability to cover expenses. Non-Financial Considerations A consideration of the effectiveness of the marketing and advertising in increasing cash inflow is crucial. The budget for both expenses is relatively consistent throughout the year (See Appendix D). Due to the declining trend in sales through May to August, evaluating the effectiveness of these strategies and considering adjustments to increase sales is essential. It is crucial to evaluate the purpose of the loan and how it affects business operations. Currently, the total loan repayment and principal both fall due in March of each year (See Appendix E). Whilst the purpose for the loan has not been disclosed, the consideration of other payment options may prove beneficial to the business, easing financial burdens across the year. This may also help to alleviate any financial stress the business experiences during the period in which sales trends have shown a decline and periods when expenses are recorded as higher. The acknowledgement of the allocation of depreciation across the 12-month reporting period is vital when evaluating business profitability. Depreciation is a non-cash expense, and therefore, does not affect the outflow of cash for the business. However, it has the potential to affect the overall financial situation of Pegasus Stables by providing a clear representation of the value of current assets, all of which are necessary for the operation of a service-based business (See Appendix F).

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