BSBFIM601 AT1

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Southern Cross University *

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5007

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Accounting

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Jan 9, 2024

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assessment Prepare budgets Procedure Part 1 1. Read and analyse the case study information (including business plan summary and previous financial data) and complete the following. a. Develop a sales budget, profit budget, cash flow budget and debtor ageing summary using electronic spreadsheets (as separate worksheets) making sure each budget is divided into quarterly periods and that you use previous financial data to determine allocations for resources. i. Ensure each budget you prepare complies with the organisational and policies and procedures as provided. SALES BUDGET : Please refer to the excel sheet attached PROFIT BUDGET : Please refer to the excel sheet attached CASH FLOW BUDGET : Please refer to the excel sheet attached DEBTOR AGEING SUMMARY : Please refer to the excel sheet attached b. Develop budget notes that include: i. identification of reasons for previous profits and losses There is an increase in advertising budget by $70,000 over the 2010/11 results in the hope that the company can secure a greater market share in a constricting market A reduction the expected gross profit rate by 1% on the 2010/11 that result to lower prices of the products would help maintain the sales growth even in difficult trading conditions Increase in wages and salaries by $172,500 on 2010/2011 Reduction of principal of loan by a payment of $100,000 on the 31 st December 2011 New luxury car costing $97,466 including GST to replace the five year old vehicle currently used by the chairman Royalty tax due to the purchase of car

assessment ii. your comment on the effectiveness of existing financial management approaches The existing financial approach of the manager is not effective the reason includes lack of market research, unavailability of adequate information and unnecessary expenditures. iii. all assumptions and bases that have been made or used to form budgets Sales growth of 8% are expected from previous financial year Increase of all cost at the rate of inflation to 4% per annum Bank charges expected to be the same as 2011 Fringe benefits tax is expected to be same as 2011 or as previous year Depreciation is expected to be the same as 2011 iv. any relevant notes regarding implementation and monitoring of budget expenditure. Approval and authorisation of timesheet, service invoices and linked to purchased orders, reconciliation of company books and 3 rd party accounts Part 2 1. Communicate information regarding the budget and answer a series of eight questions (see end of this task) in written or oral form as agreed with your assessor.

assessment Prompt questions Based on the information provided in the case study answer the following questions in the space provided below: 1. Identify the current statutory requirements for tax compliance and list and calculate the tax liabilities for Houzit Pty Ltd under taxation legislation. a. Superannuation 9% of wages & salaries Wages & Salaries = $2,078,000 Superannuation = 9% of $2,078,000 = (9*2,078,000)/100 =$187,020 b. Payroll Tax: 4.75% of wages & salaries Wages & Salaries = $2,078,000 Payroll Tax = 4.75% of $2,078,000 = ( 4.75 x 2,078,000)/100 =$98,705 c. Workers Compensation: 2% of wages & salaries Wages & Salaries = $2,078,000 Workers Compensation = 2% of $2,078,000 = (2 x 2,078,000)/100 = $41,560 d. Company Tax: 30% of Net Profit before tax Net Profit before tax = $1,456,261 Company Tax = 30% of $1,456,261 = (30 x $1,456,261)/100 = $436,878

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assessment 2. Identify the current compliance requirements and liabilities for this organisation under the Corporations Act 2001 .  Maintain a registered office, place of business & directors – It is requirement of ASIC that the business should maintain a registered office, where it is their place of business and should have board of directors.  Company abide by ASIC rules – company should abide the rules by ASIC because if they will not abide the rules ASIC will suspend their business.  All financial information to be kept for recordkeeping purposes for 7 years – all information of all companies should be kept in safe place like computers that has password or in volt for security and legal purposes and if needed for a purpose they have all the records.  Annual lodgement of statements & returns with ASIC about activities of the company – annual statement and return should be send or lodge to ASIC. Failure of lodgement will have penalties. To avoid this penalty or late fees, company should lodge on time.  Company Directors to act in ethically & morally correct ways and make decisions in good faith – company director

assessment should act ethically and morally and promote company as a whole rather than making decisions based on their personal benefit that may create legal liabilities for the company  Use company name on all documents – company name should be registered and have legal copy right and should not copy their name by other company  Notify ASIC of any changes – Company should notify ASIC any changes with business so that the record will be updated and the company will not break the Corporation Act  Keep records of meetings – company should have records of all their employees and record of all minutes meetings for legal purposes  Financial reporting & auditing for Public Companies – all the public companies are required to report all their financial report 3. Review commercially available financial management software to select the most suitable software for Houzit Pty Ltd. Ensure you diagnose software options by comparing two commercially available software titles against the capabilities of the existing technology for the organisation and against the prioritised requirements, and outline the reasons that lead you to this recommendation.  XERO – a New Zealand domiciles public technology company, it offers a cloud-based accounting software platform for small and medium-sized businesses. Xer’s products are based on the

assessment software as a service (SaaS) model and sold by subscription, based on the type and number of company entities. Xero accounting software uses a single unified ledger, which allows users to work in the same set of books regardless of location or operating system. Its key features include automatic bank feeds, invoicing, account payable, expense claims, fixed asset depreciation, purchase orders, bank reconciliations, and standard business and management reporting but it lacks the complexity to manage larger business processes and requirements.  MYOB – is an Australian multinational corporation that provides tax, accounting and other business services to small and medium business. It is complete cloud-based ERP solutions which provide powerful, cohesive and end-to-end business management system. I choose MYOB rather than XERO because MYOB the benefits of MYOB is the information flows between functions, reducing duplication of effort, manual data entry and real-time business insights. 4. Explain how you can apply the following principles of accounting in developing the budgets required for this task: a. matching principle It can achieve if the company able to measure and report correctly on its profitability. Company’s profitability determines

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assessment its financial strength, sustainability and growth capacity of the business. b. account groups – are compose of:  Assets – items that are value to the company; Tangible and Intangible  Liabilities – are payables that the company owed to other organization/company  Equity – the right of the owner to the company. It is the only one left if the business will be sold to pay it’s liabilities  Revenue – all forms of income or receivables  Expenses – cost or payables c. time periods – this is a time table of all business decision-makers this includes:  daily sales report  weekly gross profit report  monthly statement of account or Financial Performance report  quarterly and half-yearly Statement of Financial Performance, Statement of Financial Position and cash flow report for shareholders  yearly tax and annual company reports for government agencies This should be done for the company to see if they are profitable or not.

assessment 5. Explain and discuss the implications of probity when preparing and revising budgets. The organisation and its managers should posses the quality of having strong moral principles, honesty and decency. They should act with integrity in all financial dealings or decision-making should be true and fair at all times to promote the company as a whole. It is important that the relevant legislative and statutory requirement is observed. The company and its body should consider ASIC legislative requirements that financial records should be retained for period of 7 years and failure to comply with this will breach the requirements of the Corporation Act

assessment 6. List the critical dates and initiatives that will require or generate resources for Houzit Pty Ltd in the next financial cycle.  Superannuation – Quarterly on the 28 th of January, April, July & October,  BAS statement paid – 21 st day of the month or quarterly tax period ends  Company Tax – 21 st after the end of each quarter  Goods & Services Tax – 31 st October (Monthly and quarterly depending to the size of the company)  Principal on loan - $100,000 on 31 st December  Increase advertising budget by $70,000  Increase wages & salaries by $172,500  LCT – will be paid on the 1 st quarter of the next year. 7. List the items you would recommend for inclusion in the budgets for Houzit Pty Ltd.  Healthcare- Includes the healthcare budget for its employees’ benefits.  Training fees- This must also include for the employees that will maintain proper updates from workforce

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assessment  Travel expenses – organization day to day activities must also included in the budget, like petty cash flow  Store supplies – Create budget for store supplies  Water bills – to be included budget.  Commission for a person regarding sales 8. List the new or modified internal controls that could improve risk management for Houzit Pty Ltd including the maintenance of audit trails.  There maybe internal control issues on how new customers are secured  The discounts given to customers are indicated as net amount on the invoice, but no record indicated from standard prices  Cash in the drawer with the registered print outs are not the same in figures in cash registers in the stores  Some overtime amount in the timesheets are not approved by the line manager  Not all items of equipment in the service invoice are signed or linked to purchased order

assessment  Not all assets had a unique code  When there is an error in the budgeting report, minimal feedback communication from the shop to head office has been recognized  Monthly debtor reconciliations were not done and sometimes all  Sometimes the cash was held in the store for a day or two because cashiers are asked to do their own reconciliations and banking in busy times  Job roles are not clearly defined to staff the reason why their responsibility and liability are not identified  Cash receipt were not pre-numbered and there was little rostering of duties Director of the boards ensure that audit trails were created and maintain. These includes: Under the authority of a department manager there were a signing of timesheets of all employees Numbered cash receipts book should be maintained Sequenced cheques must be use as a systematic way to prove all amount paid out Make sure the proper coding of all transactions against appropriate general ledger account and cost centre Make sure company books and third-party bank statements are performed and reconcile each other