GAGANDEEP KAUR BSBFIM601

Houzit Pty Ltd Statement of Financial Position As at 30 June 2009/10 2010/11 Assets Current Assets – Cash On Hand 50,000 55,000 – Cheque Account 144,842 160,314 – Deposits Paid 950,000 950,000 – Trade Debtors 850,000 975,000 – Merchandise Inventory 1,530,000 1,430,000 Total Current Assets Fixed Assets – Motor Vehicles At Cost 500,000 500,000 – Motor Vehicles Accum Dep ( 100,000 ) ( 125,000 ) – Furniture & Fixtures At Cost 1,950,000 2,250,000 – Furniture & Fixtures Accum Dep ( 650,000 ) ( 770,000 ) – Office Equip At Cost 400,000 400,000 – Office Equip Accum Dep ( 90,000 ) ( 115,000 ) Total Fixed Assets 2,010,000 2,140,000 Total Assets 5,534,842 5,710,314 Liabilities Current Liabilities – MasterCard 17,800 14,860 – Trade Creditors 780,000 679,000 – GST Collected 1,455,010 1,571,411 – GST Paid ( 943,125 ) ( 987,626 ) – Superannuation Payable 100,000 120,000 – Luxury Car Tax Payable 20,920 - – income Tax Payable 364,795 436,928 – PAYG Withholding Payable 65,000 44,872 Total Current Liabilities 1,860,400 1,879,445 Long-Term Liabilities - - – Bank Loans 1,608,459 1,508,459 Total Liabilities 3,468,859 3,387,904 Equity

Standard formats The following formats will be used when preparing Houzit budgets and variance reports. Sales and profit budgets PROFIT BUDGET 2011/12 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Revenue 8% 20% 24% 26% 30% Sales $16.971. 237,00 $3.394.2 47,82 $4.073.0 96,98 $4.412.5 21,53 $5.091.3 70,68 – Cost of Goods Sold $9.673.6 05,09 $1.934.7 21,27 $2.321.6 65,26 $2.515.1 37,28 $2.902.0 81,27 Gross Profit $7.297.6 31,91 $1.459.5 26,57 $1.751.4 31,70 $1.897.3 84,26 $2.189.2 89,39 Gross Profit % 43% 43% 43% 43% 43% Expenses – Accounting Fees $10.000, 00 $2.500,0 0 $2.500,0 0 $2.500,0 0 $2.500 – Interest Expense $84.508, 00 $21.127, 00 $21.127, 00 $21.127, 00 $21.127 – Bank Charges $1.600,0 0 $400,00 $400,00 $400,00 $400 – Depreciation $170.000 ,00 $42.500, 00 $42.500, 00 $42.500, 00 $42.500 – Insurance $13.390, 00 $3.347,5 0 $3.347,5 0 $3.347,5 0 $3.347 – Store Supplies $3.749,0 0 $749,84 $899,81 $974,79 $1.124 – Advertising $350.000 ,00 $200.00 0,00 $200.00 0,00 $50.000, 00 $50.000 – Cleaning $16.282, 24 $3.256,0 0 $3.907,7 4 $4.233,3 8 $4.884 – Repairs & Maintenance $64.272, 00 $16.068, 00 $16.068, 00 $16.068, 00 $16.068 – Rent $2.640.5 08,00 $660.12 7,00 $660.12 7,00 $660.12 7,00 $660.12 7 – Telephone $14.996, 80 $2.999,3 6 $3.599,2 3 $3.899,1 7 $4.499 – Electricity Expense $26.780, 00 $5.356,0 0 $6.427,2 0 $6.962,8 0 $8.034 – Luxury Car Tax $12.000, 00 $12.000, 00 – Fringe Benefits Tax $28.000, 00 $7.000,0 0 $7.000,0 0 $7.300,0 0 $7.000 – Superannuation $187.020 ,00 $37.404, 00 $44.884, 80 $48.625, 20 $56.106 – Wages & Salaries $2.078.0 00,00 $415.60 0,05 $498.72 0,01 $540.27 9,99 $623.39 9 – Payroll Tax $98.705, 00 $19.741, 00 $23.689, 20 $25.633, 30 $29.611

manage and monitor to this expend. • Net income 107% extra it is beneficial but they are bad in budget. 4 Financial performance • Wages & salaries (industry benchmark is 11% & we are at 12.25%) - They furnish excessive revenue extra than the enterprise benchmark via 1.5%. they didn’t screen it carefully and it will have an effect on the company’s profit. • Sales low - due to lack of enticing in magazine advertising and it doesn’t promote properly the company’s product. • Jump in earnings aided by way of marketing saving the company is no longer spending the $50,000 for advertising.

• The pastime costs on the financial institution mortgage are expected at a decreased quantity of $84,508 due to an agreed compensation of some of the mortgage principal. This is to be paid in equal quantities every quarter. • Bank expenses are predicted to be the equal as 2011 and paid in equal amountseach quarter. Celina has requested that a new fee (store supplies) be regarded in thenew price range that used to be in the past protected in with the cleansing price amounts. • Store elements in the 2009/10 outcomes used to be $3,500 of the cleansing cost and $3,605 of the 2010/11 result. Cleaning fee will then be lowerbut perceive the actual labour charges concerned in the cleansing expense. • Depreciation is anticipated to be the equal as 2011 and allotted in equal amounts every quarter. • Advertising is to be apportioned to every quarter based totally on the enterprise plan. The following fees are anticipated to amplify through the decided inflation price in the commercial enterprise diagram summary: • Insurance – apportioned in equal quantities every quarter. • Store components – is calculated for to every quarter the use of the identical p.c as decided by way of the income for every quarter. • Cleaning – is calculated for every quarter the use of the equal p.c as decided via the income for every quarter. • Repairs and protection – apportioned in equal quantities every quarter. • Rent – apportioned in equal quantities every quarter. • Telephone – is calculated for to every quarter the use of the identical p.c as decided with the aid of the income for every quarter. • Electricity – is calculated for to every quarter the use of the identical percent as decided by way of the income for every quarter. ❖ Fringe advantages tax is anticipated to be the equal as 2011 and paid in equal quantities every quarter.

$ and% variance.  Report with explanations and suggestions to be entire inside seven working days of quarter quit and be given to the CEO.  Analysis and investigation of variances will consist of the following priority: 1. Establish the most important motives for variances to key overall performance symptoms of complete sales, gross earnings percent and internet earnings $. 2. Establish motives for these man or woman objects in the variance record that characterize the biggest $ variance. Establish motives for these individual items in the variance file that signify the greatest percent variance. Schedules pertaining to to compliance due dates have to be organized and monitored via the accountant. Managers offering records to the accountant related to the compliance time table should post it at least 5 working days prior to the due date deadline 5. List the critical dates and initiatives that will require or generate resources for Houzit Pty Ltd in the next financial cycle. ANSWER Houzit prepares budgets to meet a variety of corporation objectives. Budgets are prepared: • for a unique growth of the enterprise activities: o business case to be organized protecting a cost-benefit analysis, market lookup file and précis earnings and funding expectations • to define a particular debt discount initiative: o company-wide précis of earnings expectations, deliberate debt and fairness funding arrangements, CAPEX plans summarised • annually to cowl the subsequent monetary year: o for the 12 month duration from the opening to the stop of the economic yr

Assessment Task 2 –Monitor and review budget Task summary Financial reporting It is important that all financial reports produced are clear and meet both organisational and statutory requirements. An organisation may have certain formats for financial reports, which will usually be automatically produced through the accounting software system used by the company. When presenting reports, especially to non-financial personnel, it can also be beneficial to provide a summary of the key financial information in order to assist with understanding. As indicated in the introduction, there are also statutory requirements for reporting. For example, some companies are required submit audited financial statements. Even where a company is not required to have their accounts audited, they may still choose to do so. 1. Develop a variance report based on the format and template provided by Houzit. Ans. Report Prepared By I. Executive Summary: Provide a brief overview of the key findings and highlights from the report. II. Introduction: Briefly explain the purpose and scope of the variance report. III. Budget vs. Actual Analysis: This section is the heart of the report, where you compare the budgeted or expected figures with the actual performance. You can break it down into various categories, such as revenue, expenses, or specific project budgets. For each category, provide the following: a. Category Name: (e.g., Sales Revenue) b. Budgeted/Expected Amount: (e.g., $100,000) c. Actual Amount: (e.g., $95,000) d. Variance: (e.g., -$5,000 or -5%) e. Explanation of Variance: Provide a brief explanation of why the variance occurred. This could include factors like changes in market conditions, unexpected expenses, or deviations from the plan. IV. Variance Analysis by Department/Division/Project: If applicable, you can provide a more detailed breakdown of variances by department, division, or specific projects. Follow a similar format as in section III. V. Action Plan: Based on the variances identified, outline any action plans or recommendations for addressing significant discrepancies. Specify responsible individuals or departments for taking action and set timelines for these actions. VI. Conclusion:

● Use logical processes in planning, implementing and evaluating complex tasks to achieve stated goals. ● Investigate new digital technologies and applications to manage and manipulate data. Case study: Houzit Pty Ltd Soon after the end of the first quarter, Jim Schneider the CEO of Houzit, asked you to follow up with Celina Patel, Houzit’s accountant, to see how the actual results compared with the budget you had prepared three months ago. You explained that you had a meeting with Celina that afternoon to get the results and that you would report back as soon as you had done some analysis. The key questions that the board was most interested to have answered from the budgets and the variance reports were: ● ‘To what extent do the reports support the view of the board that Houzit is financially viable?’ ● ‘Will we be able to maintain our gross profit margins in the predicted downturn?’ Jim and you both agreed that it had been a tough quarter with the economy still in recession and the impact this was having on the retail sector. Banks are raising interest rates in line with the increased upward international pressure and Houzit has a significant part of their loan funds on a variable interest rate which changes directly with market conditions. Jim was pleased that the sales seem to be holding up reasonably well as first quarter results are generally impacted by factors relating to public and school holidays but he was concerned about the discounts that had to be given to generate these sales. ‘ That’s going to hurt us at some point’ Jim said. ‘Just a pity we could not get into some national magazines this quarter to promote the store offers. I’m sure that would have helped us exceed the budgets you set. I guess we will just have to spend that advertising money in the next quarter’ Jim said. ‘I still think we are running our wages and salaries a bit high. The industry benchmark for wages and salaries is close to 11% of sales’ Jim went on to explain, ‘One of our contingency plans in a slowing economy is to reduce our exposure to debt by applying our profits to the repayment of the long term debt. This will help reduce the interest burden on the business and take some pressure off the diminishing profits. It would also be of interest to determine the impact that our debtors has on the cash flow of the business from 2010/11.’ You are a beneficiary of the company’s profit bonus scheme that is based on the profitability of the company’s financial reports which you are required to prepare. You also prepare the departmental reports that form the basis of the performance review of the managers. You are the manager of the finance/administration and prepare this department’s report as well. You met that afternoon with Celina and she provided you with the following report on the actual results for the quarter ended 30 September 2011.

Houzit Pty Ltd Actual Results Qtr 1 Revenue Sales 3,371,200 – Cost Of Goods Sold 1,955,296 Gross Profit 1,415,904 Gross Profit % 42% Expenses – Accounting Fees 2,500 – Interest Expense 28,150 – Bank Charges 380 – Depreciation 42,500 – Insurance 3,348 – Store Supplies 790 – Advertising 150,000 – Cleaning 3,325 – Repairs & Maintenance 16,150 – Rent 660,127 – Telephone 3,100 – Electricity Expense 5,245 – Luxury Car Tax 12,000 – Fringe Benefits Tax 7,000 – Superannuation 37,404 – Wages & Salaries 410,500 – Payroll Tax 19,741 – Workers’ Compensation 8,312 Total Expenses 1,410,572 Net Profit (before tax) 5,333 Income Tax 1,600 Net Profit 3,733 GST cashflow – Actual Cash flow analysis – GST Qtr 1 GST Collected 337,120 Less GST Paid 279,988 GST Payable 57,132

Aged debtors – Actual AGED DEBTORS BUDGET Qtr 1 Sales 3,371,200 % Debtors Sales 22% Total Debtors 741,664 Current 585,915 30 days 111,250 60 days 37,083 90 days 7,417 Total Debtors 741,664 Budgetvariance report template According to the organisational policy and procedures, the following format is to be used when preparing a budget variance report Houzit Pty Ltd Variance to Budget xxx Quarter ended mmm-yyyy Actual Results Budget- Qx Actual- Qx $ Varianc e % Varianc e F or U Sales 3394247 3371200 23047 1% U – Cost Of Goods Sold 1934721 1955296 20575 1% U Gross Profit 1459526 1415904 -43622 -3% U Gross Profit % 43% 42% 0% -2x% U Expenses – Accounting Fees 2500 2500 - 0% F – Interest Expense 21,270 28,150 7,023 33% U – Bank Charges 400 380 -20 -5% F – Depreciation 42500 42500 - 0% F – Insurance 3348 3348 - -0% F – Store Supplies 750 790 40 5% U – Advertising 200000 150000 -50000 -25% F

– Cleaning 3256 3325 69 2% U – Repairs & Maintenance 16068 16150 82 1% U – Rent 660127 660127 - 0% F – Telephone 2999 3100 101 3% U – Electricity Expense 5356 5245 -111 -2% F – Luxury Car Tax 12000 12000 - 0% F – Fringe Benefits Tax 7000 7000 - 0% F – Superannuation 37404 37404 - 0% F – Wages & Salaries 415600 410500 5100 -1% F – Payroll Tax 19,741 19,741 - 0% F – Workers’ Compensation 8,312 8,312 - 0% F Total Expenses 1,458,48 8 1,410,57 2 -47917 -3% F Net Profit (Before Tax) 1,038 5333 4294 414% F Income Tax 311 1600 1288 414% U Net Profit 727 3733 3006 414% F Note: F = Favourable, U = Unfavourable Debtor ageing ratio template 2009/10 2010/11 2011/12 Trade Debtors 850,000 975,000 1,118,325 Sales 14,550,100 15,714,108 16,971,237 Debtor Days 21 23 24