Accounting
Task 1: Written Activity
T1.Q1:
In regards to taxation legislation, business expenses are treaded according to the nature of the business. In the business environment, each business has a different kinds of expenses. For example, a manufacturing business expenses on the raw material and plan. On the other hand service business does not do this (Kaplan and Atkinson, 2015).
T1.Q2:
In the business environment, trust is an essential element to run the business in an effective manner. A trust is a kind of business structure where a trustee runs the business on the behalf of the trust. A trust is not known as a separate legal entity. In this, it is possible that, a trustee can be a person or a company.
T1.Q3:
Typically, forecast return is an amount that indicates profit and loss at the end of a particular time period. The forecast return is calculated by concerning the various factors in the investment. In this, the role of the historical data is essential but it does not provide a guarantee.
T1.Q4:
A non-profit organisation is a kind of organisation but it has not aimed to earn profit. However, its operating nature is similar to a profit-based firm but it does not trade (Maher, et al. 2011).
For example, clubs and charity firms are NPOs. Financial policies are essential for non-profit organisations to clarify the roles, authority, and responsibilities to conduct the financial activities effectively. It is also helpful to represent the statutory report or return to the government.
T1.Q5: Method to represent a client’s performance objectives
Basically, there are different methods to present the cline’s performance objective. In this, some are Lie To The Learners, Infographics, videos, success stories, attention grabbers, scenarios and Gamification. Along with this, image and flip cards are also useful methods to present a client’s performance objective.
T1.Q6:
In order to control the cash flow, a business should determine its breakeven point. In this, it should know when its business will become profitable. According to this, it should manage its cash flow activities. Moreover, another cash flow control method is to use a cash flow worksheet (Needles and Crosson, 2013).
T1.Q7:
In order to prepare a business’s performance information, the legislative act 1991 and 2001-2 should be considered. It is essential to achieve the aim of the business’ performance information.
T1.Q8:
If a person needed information on finances, the auditor plays a significant role. The verified accountant provides the information on the finance. Along with this, are many financial institutions are available that provide financial information.
T1.Q9:
At the time of taking the financial advice, the client has always been objective to get the best solution of its problem. From the provided information, it is found that the aim of the client is to provide ongoing financial management especially in the reduction of annual income tax and checking goods and services tax and another legislative report (Noreen, et. al. 2011).
T1.Q10:
The term business assets refer to the property of the firm that can convert into cash at any time. The total value of the assets shows the financial health of the company. It can be divided into two types such as current assets and non-current assets. In this, business assets are the value of $550000 that includes the equipment, vehicles, building, inventories.
T1.Q11:
They provide information shows that there are five full time or equivalent staff. It means that the firm small enterprise. The business of the company is limited that shows its size.
T1.Q12:
At the same time, the available information also shows that the business of the client is related to veterinary services. It provides services for caring for the animals to the clients. It is sole proprietor business.
T1.Q13:
As the extra information, there is some information on the revenue, expenses, cash flow, and the number of years of operation. At the same time, the extra information depicts that internal report by part-time administrative staff. It also includes fortnightly payroll and payment of accounts and banking (Otley and Emmanuel, 2013).
T1.Q14:
There is various kind of financing options are available to clients towards the provision of business performance information. In this, clients can manage finance from the bank loan, debtors, advance from the customer, bank overdraft and personal finance.
T1.Q15:
| Mock actual $ | Forecast with 10% increase $ | |
| Business Assets | 550000 | 605000 |
| Revenue | 1000000 | 1100000 |
| Expenses | 680000 | 748000 |
| Cash flow | 50000 | 55000 |
T1.Q16:
In the review of financial management, it is found that business assets are the actual value of business assets is $550000 while the forecast value is 605000. In the same concern of this, actual revenue is $10000 that can be forecasted 1100000. In the same concern of this, expenses are 680000 that are forecasted 748000. The value of cash flow is 50000 that is forecasted to 55000.
T1.Q17:
Questionnaire
Whether there is a need to increase the number of employees to expand the business?
Whether there is a need to hire a professional accountant for the company to manage the financial transactions?
T1.Q18:
From the questionnaire, it is found that the company want to expand its business activities and for this, it also wants to increase the number of employees (Weygandt, et. al. 2015). Along with this, it is also noted that the firm also wants to hire a professional accountant.
T1.Q19:
In order to measure the financial stability debt to equity ratio is used. This ratio provides financial stability. Stability refers to the ability of the firm to manage its capital. Typically, a business firm manage its financial stability in two terms such as debt and equity.
T1.Q20:
The debt ratio shows the financial leverage of the company. It is calculated by dividing total liabilities by total assets.
Debt ratio = Total liabilities / Total assets
= 450000 / 2500000
= 0.18
T1.Q21:
In the above calculation, it is found that the debt ratio is 0.18. It shows that the performance of the company is good because the summary of the debt ratio is always expected to lower.
T1.Q22:
The result of failure in the meeting reporting deadline for the ATO is not a big issue. In this case, the client has to need to pay a penalty in the context of some money. The penalty is calculated by the rate of one penalty unit for each period of time.
T1.Q24:
| Month | Activity level -customer purchase |
| January | 960 |
| February | 880 |
| March | 734 |
| April | 420 |
| May | 990 |
| June | 1010 |
| July | 1012 |
Column Graph
Bar Graph
Task 2 Working Activities
T2.Q1:
Client information form depicts that the business of the client is providing building services to customers. This business is a sole proprietor that contains only one owner of the overall business. The business of the client has four full time or equivalent staff. A sole proprietorship is the simplest business form where a single person operates the business. It is not a legal entity and refers to a person that is only liable for its debt. Client information can be found on the client information form (Zimmerman and Yahya-Zadeh, 2011).
T2.Q2:
Different types of financing options are available for different clients in the business environment. The list of the financial option includes the equity share, trade credit, preference share, euro issue, debentures and lease finance. The financial options for a client can be divided into three types such as short term option of finance, medium-term and long term. In this, short term options are trade create, creditors, payables, factoring services, bill discounts etc. The options in the medium-term option are preference capital share, debenture/ bonds and medium-term sources from different financial institutions (Bogdan, et. al. 2012). The long term options of finance contain equity share capital, retained earnings, venture funding and asset cauterisation.
T2.Q3:
| 2015 | 2017 | |||
| Summary | Forecast | Actual | Forecast | Actual |
| Fixed cost | 20000 | 20000 | 20000 | 20000 |
| variable cost | 25000 | 26500 | 28000 | 29000 |
| Direct cost | 30000 | 29400 | 33000 | 33200 |
| Indirect cost | 17000 | 17800 | 19000 | 18600 |
| Total | 92000 | 93700 | 100000 | 100800 |
T2.Q4:
The rate of return shows the loss and profit over a time period in the business. At the time of low sales and recession in the industry, the actual rate of return happens low compared to the forecast rate of return.
T2.Q5:
After the recognition that the actual rate of the return is lower as compared to the forecast rate of return, the financial management team will evaluate each transaction clearly to find out the reason to lower the actual rate of return.
T2.Q6:
In the phone conversation with a client, the below points are noted:
The current objective is reporting
Creases as the financial officer will take over the duties
Prepare a manual to assist the finance office
Assist with preparing for and recording monthly governance board meetings
Prepare a quarterly financial management questionnaire
T2.Q7:
The financer officer of XYZ Company stated that there is too much detailed information is given in the financial position report. At the same time, the client also mentioned that the changes are also not recorded properly in the financial report.
It is recommended that the company should include additional information or any type of changes into the head which is known as miscellaneous expenses in which they can mention the new items and assets that is purchased by the company. Therefore, the company can communicate any additional information to the stakeholders. For adding any extra or any current facts into the company financial position statements then it is required to write down the information in the below part under the head of additional information or under the head miscellaneous expenses (Ongore & Kusa, 2013).
T2.Q8:
In order to provide effective financial service, it is essential to improve customer service. Along with this, there is a need to develop an effective system to record the complaint of clients. It will help to solve the quarry of clients.
T2.Q9:
- On the basis of available financial information, it can be said that the financial manager will take the responsibility of preparing the BAS. It is because there is sufficient and accurate information to prepare a business activity statement.
- The main reason of interest of the financial manager in preparing the BAS is that the main responsibility of the financial manager to prepare the BAS for all the money transactions of the firm.
- In the first step, the financial manager will select the best technique to prepare the BAS. After this, it will analyse the different transactions and compare the bills with the payment receipts. In the next step, the financial manager will
T2.Q10:
| Date | Description | Plus amount $ | Minus amount $ |
| 30 June | Closing account | 68000 | |
| Cheque issued but not presented | 17000 | ||
| 26 June | Deposit | 90000 | |
| 20 June | Cheque no. 98 | 80000 | |
| 30 June | Cheque no 99 | 85000 | |
| Available balance | 10000 | ||
T2.Q11:
The financial performances statement stated that the KLM Company is earning profit in 2013 with $55000 as compared to 2012 ($45000). It is because income from sales is also rising and it becomes possible due to the company increases their investment in marketing, transporting, distributing high wages (Bogdan et al., 2012). Thus, all these raise the expenses to the company. It directly contributes towards the profit as it is clearly indicating that the company is generating a profit of $55000 in 2013 with the difference of $10000. But it is also fact that KLM percentage of sales income is declining as compared to the previous year with 2.4%. It arises due to the rise in total cost which can have an impact directly on the percentage of profits. Likewise, from the previous year profit and today’s profit, there is no major differences is reflecting but with the increasing expenses on the yearly basis. It surely impacts the future profits of the company. Thus, in regards to this, it is suggested to reduce the maximum expenses by declining the initial cost of the product through using lean manufacturing, TQM techniques in order to control the cost.
T2.Q12:
| October 20xx | |||||
| Month | Existing estimate $ | Change to | Effect on | ||
| Income | Expenses | Cash Flow | |||
| July | 700 | 0 | 0 | 0 | |
| August | 750 | 0 | 0 | 0 | |
| September | 800 | 0 | 0 | 0 | |
| October | 900 | 0 | 0 | 0 | |
| November | 950 | 830 | Negative | Nothing | 120 |
| December | 800 | 680 | Negative | Nothing | 120 |
| January | 800 | 680 | Negative | Nothing | 120 |
| February | 800 | 680 | Negative | Nothing | 120 |
| March | 800 | 680 | Negative | Nothing | 120 |
| April | 800 | 680 | Negative | Nothing | 120 |
| May | 800 | 680 | Negative | Nothing | 120 |
| June | 800 | 680 | Negative | Nothing | 120 |
| Total | 9700 | 5590 | Negative | Nothing | 4110 |
T2.Q13:
In financial management, the debt to equity ratio is significant to measure the company financial leverage. It also enables the analyst to measure financial stability. In order to measure financial stability, a company’s total liability is divided by the total equity. It identifies that how much the company is using debt and equity in the capital. The debt-to-Equity Ratio has also helped the company in regards to perform financial stability. Likewise, this ratio identifies the company total debtors which help them to take their future decisions. Thus, it can be stated that both ratios play a significant role in financial stability (Saleem & Rehman, 2011).
T2.Q14:
Calculation of Debt Ratio
Debt ratio= Total Liabilities
Total Assets
As per given amount in question, the debt ratio is finding:-
$250,000/ $15, 00,000 = 0.166
It indicates the percentage of the amount of the total assets on the balance sheet is considered as creditors. The high debt ratio represents that the corporation has a high level of financial leverage (Heikal et al., 2014).
T2.Q15
The financial management report determines the actual financial health of a company. The financial management report of the client will be prepared after confirmation by the client. The process of reporting will start near the end of the financial year that will represent after the completion of the year. It will also include the financial aim and objective of the company in the future.
T2.Q16:
T2.Q17:
There are consequences that could arise with the not timely reporting deadlines. Firstly, it directly influences the profitability of the organisation. However, by not submitting the work on time, the company could not able to make the stakeholders happy. Due to that investors feel hesitant in regarding making an investment. So such practices impact the company effectiveness to generate high profits in this competitive market (Wei & Yermack, 2011).
T2.Q18:
The financial plan includes the investor’s current and future financial state through identifying the variables in order to predict the future cash flow both inflows and outflows, assets values and withdraws (Frow et al., 2010). Thus, all facts are present in the financial plan. So with the help of the financial plan, the company get to know about the financial sought information. On that basis, the company evaluated that whether they are capable enough to meet the reporting deadlines. However, a company with the plan could identify the areas where they are efficient and lacking areas and that’s help firms to decide the changes which need to bring for meeting the deadlines at the right time.
The financial information includes the facts related to the income, sales and revenue of the firm and on the basis, the future decision has been taken.
T2.Q19:
| Month | Activity level patient days |
| January | 5600 |
| February | 7100 |
| March | 5000 |
| April | 6000 |
| May | 7300 |
| June | 8000 |
| July | 6200 |
T2.Q20:
The underreporting motor vehicle fuel expenses have a deep impact on the business financial statement as deviation and variations will get occur in the total expenses of the company. Because of that company does not estimate the accurate expenses of the company which creates problems in calculating the total income and profit of the company. Thus, the reporting of motor vehicle fuel expenses is important due to it is bear by the company so it is considered a major expense of the company (Siyanbola, 2013).
T2.Q21:
The client should make the decision to create an effective bank transaction structure. It will decrease the taxation risk. XYZ should also identify the tax-friendly business structure. It will be beneficial for the client if it will plan ahead. XYZ should also try to become an excellent bookkeeper and learn business operations. Along with this, the client should do all essential activities on time and accurately.
T2.Q22:
Amount of loan = $100000
Interest rate = 10%
Total amount of loan over five year =
FV = PV (1+i)5
= 100000 (1+0.1)5
= 161051
Task 3: Question and Answer
T3.Q1
Under the taxation law, all the basic expenses such as general and administration expenses come under the law (Conboy, 2010). It can be office, rent, salaries, equipment and supplies, telephone and utility costs etc. in context to automobile expenses, it only comes from taxation law when an individual perform business-related work so such activity is considered under the business expenses. It is also found that business-related automobile is tax-deductible. Thus, it is recommended to the client to borrow their car expenses receipt so that company could bear the client expenses with tax-deductible.
T3.Q2
There is the minimal impact of the accelerated depreciation method on the value of the assets in regards to the double-declining balance of the assets that do not prove to be so valuable for the company at the time when they are selling the assets (Kahn, 2013). However, this method records the higher amount of depreciation in the early stage of the asset life and then it lowers the number of assets in the later period of time. At the end, lower depreciation has less impact on the revenues and assets of the company.
T3.Q3
Template of Spreadsheet to Present a Cash Flow Forecast Summary:-
This sheet helps the clients to get the information about the cash receipt and cash paid out by the company in each month and it is clearly mentioned in the below spreadsheet. Thus, it indicates that clients have a full understanding of the company growth with the help of a cash flow forecast summary (Noland, 2011). It is because such a summary provides the facts about how much cash are inflows or outflows from the company. So, it is recommended that each client should prepare the cash flow statement in order to understand how much the company is able to return from its investment.
T3.Q4
In order to control the budgets, firstly there is a need to define the functional units headed which is responsible for the activities and expenses of the units. Likewise, there are four types of responsibility centres which include Revenue centres, expenses centres, profit centres and investment centres etc (Edame & Okoi, 2014).
Another measure is that constantly measure and monitors the performances of the functional areas and analysis the investment which is occurred. Thus, these both are well-suited measures for budgeting control.
T3.Q5
There are five ways to reduce or control the business expenses such as wages, vehicles and telephones. These are as follows:-
Outsources method is the best option in which the company need to outsource the services from another company in order to reduce the direct expenses of the company.
For controlling the wages, it is required to negotiating with different stakeholders about their wages and tries to compensate them as per their performances (Kitchen & Knittel, 2011).
In the case of vehicle and telephone, it is required to re-evaluate the complex expenses and needing to more use of the digital platform for reducing the expenses related to vehicle and telephone.
T3.Q6
Accountants can ensure about the recommendation on the basis of the performances. However, if the particular individual gets the recommendation clear and incorporated well in their skills then it would reflect in his/ her performances (Murphy & Yetmar, 2010). Thus, based on the performances, an accountant can ensure that they have provided clear recommendations.
T3.Q7
The financial planning includes six steps that define the scope of a client’s objectives:-
FPSB’s financial planning process consists of six steps that professionals should consider as it covers all aspects of the financial situation while formulating the financial planning strategies. Therefore, such practice proved to be effective for the company in regards to summarise and achieve the scope of clients (Willis, 2011).
Establish and define the relationship with the clients
Collect the clients information
Analyze and assess the client’s financial status
Develop the financial planning recommendations and present it to the clients.
Implement the financial planning recommendations
Review the client situation.
T3.Q8
From the mention income statement, it can be stated that XYZ is earning profit in 2015 because income from sales is also rising and it becomes possible due to the company increase their investment in marketing, transporting, distributing high wages. Thus, all these raise the expenses to the company. It also contributes towards the profit as it is clearly indicating that the company is generating a profit of $55000 in 2015 with the difference of $10000 (Saleem & Rehman, 2011). But at the end there is a declining percentage of sales income and it becomes arise due to the rise in total cost which can have an impact directly on the percentage of profits. Likewise, from the previous year profit and today’s profit, there is no major differences is reflecting but with the increasing expenses on the yearly basis. It surely impacts the future profits of the company. Thus, it is recommended to reduce the maximum expenses by declining the initial cost of the product. It can be done through using sustainability practices and more use of the digital platform to advertise the product line.
T3.Q9
Trading account statement for the R Stubbs Trader:
In the books of R Stubbs Trader
Trading account for the period 1 January 19X5 to 31 December 19X5
| Particular | Amount Rs. | Amount Rs. | Particular | Amount Rs. | Amount Rs. |
| $ | $ | $ | $ | ||
| To Opening Stock | – | 9,872 | By Sales | – | 60,000 |
| To Gross Profit | – | 62748 | By Closing Stock | – | 12,620 |
Calculation of Cost of goods sold = opening stock + purchases + direct- closing stock.
60,000*25% =9872+x-12620
15000=9872+x-12620
-X=-2748-15000
-x= -17748
X= 17748
The purchase value for the year= is $17748 and the gross profit is $62748
References
Bogdan, S., Bareša, S., & Ivanović, S. (2012). Measuring liquidity on the stock market: Impact on liquidity ratio. Tourism and Hospitality Management, 18(2), 183-193.
Conboy, K. (2010). Project failure en masse: a study of loose budgetary control in ISD projects. European Journal of Information Systems, 19(3), 273-287.
Edame, G. E., & Okoi, W. W. (2014). The impact of taxation on investment and economic development in Nigeria. Academic Journal of Interdisciplinary Studies, 3(4), 209.
Frow, N., Marginson, D., & Ogden, S. (2010). “Continuous” budgeting: Reconciling budget flexibility with budgetary control. Accounting, Organizations and Society, 35(4), 444-461.
Heikal, M., Khaddafi, M., & Ummah, A. (2014). Influence analysis of return on assets (ROA), return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current ratio (CR), against corporate profit growth in automotive in Indonesia stock exchange. International Journal of Academic Research in Business and Social Sciences, 4(12), 101.
Kahn, D. A. (2013). A Proposed Replacement of the Tax Expenditure Concept and a Different Perspective on Accelerated Depreciation. Fla. St. UL Rev., 41, 143.
Kaplan, R. S., and Atkinson, A. A. (2015). Advanced management accounting. USA: PHI Learning.
Kitchen, J., & Knittel, M. (2011). Business use of special provisions for accelerated depreciation: Section 179 expensing and bonus depreciation, 2002-2009.
Maher, M., Stickney, C., and Weil, R. (2011). Managerial accounting: An introduction to concepts, methods and uses. USA: Cengage Learning.
Murphy, D. S., & Yetmar, S. (2010). Personal financial planning attitudes: a preliminary study of graduate students. Management Research Review, 33(8), 811-817.
Needles, B., and Crosson, S. (2013). Managerial accounting. USA: Cengage Learning.
Noland, T. R. (2011). The sum-of-years’ digits depreciation method: use by SEC filers. Journal of Finance and Accountancy, 5, 1.
Noreen, E. W., Brewer, P. C., and Garrison, R. H. (2011). Managerial accounting for managers. USA: McGraw-Hill Irwin.
Ongore, V. O., & Kusa, G. B. (2013). Determinants of financial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237.
Otley, D., and Emmanuel, K. M. C. (2013). Readings in accounting for management control. USA: Springer.
Saleem, Q., & Rehman, R. U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business, 1(7), 95-98.
Siyanbola, T. T. (2013). The impact of budgeting and budgetary control on the performance of manufacturing company in Nigeria. Journal of Business Management & Social Sciences Research, 2(12), 8-16.
Wei, C., & Yermack, D. (2011). Investor reactions to CEOs’ inside debt incentives. The Review of Financial Studies, 24(11), 3813-3840.
Weygandt, J. J., Kimmel, P. D., and Kieso, D. E. (2015). Financial and Managerial Accounting. USA: John Wiley and Sons.
Willis, L. E. (2011). The financial education fallacy. The American Economic Review, 101(3), 429-434.
Zimmerman, J. L., and Yahya-Zadeh, M. (2011). Accounting for decision making and control, Issues in Accounting Education, 26(1), 258-259.
