In the regards to taxation legislation, a business expenses are treaded according to the nature of the business. In the business environment, each business has different kind of expenses. For example, a manufacturing business expenses on the raw material and plan. On the other hand service business does not this (Kaplan and Atkinson, 2015).
In the business environment, trust is essential element to run the business in the effective manner. A trust is a kind of the business structure where a trustee runs the business on the behalf of trust. A trust is not known as the separate legal entity. In this, it is possible that, a trustee can be a person or a company.
Typically, forecast return is an amount that indicates to profit and loss in 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 guarantee.
A non profit organisation is a kind of organisation but it has not aim 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, club and charity firm are NPO. Financial policies are essential for non profit organisation 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 client’s performance objective.
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 management its cash flow activities. Moreover, another cash flow control method is to use a cash flow worksheet (Needles and Crosson, 2013).
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.
If a person needed information on financial, auditor plays significant role. The verified accountant provides the information on the finance. Along with this, are many financial institution are available that provide financial information.
At the time of taking the financial advice, client has always 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 other legislative report (Noreen, et. al. 2011).
The term business assets refer to property of the firm that can convert into cash 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 value of $550000 that includes the equipment, vehicles, building, inventories.
The provide information shows that there are five full time or equivalent staff. It means that firm small enterprise. The business of the company is limited that shows its size.
At the same time, the available information also shows that the business of client is related to veterinary services. It provides services for caring the animals to the clients. It is sole proprietor business.
As the extra information, there is some information on the revenue, expenses, cash flow, and number of year 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 account and banking (Otley and Emmanuel, 2013).
There are various kind of financial options are available to clients towards the provision of business performance information. In this, client can manage finance from the bank loan, debtors, advance from customer, bank overdraft and personal finance.
|Mock actual $||Forecast with 10% increase $|
In the review of financial management, it is found that business assets are actual value of business assets is $550000 while 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 55000.
Whether there is need to increase the number of employee to expand the business?
Whether there is need to hire professional accountant for company to manage the financial transactions?
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 professional accountant.
In order to measure the financial stability debt to equity ratio is used. This ratio provides the financial stability. Stability refers to the ability of the firm to manage is capital. Typically, a business firm manage its financial stability in two terms such as debt and equity.
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
In the above calculation, it is found that 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 lower.
The result of failure in the meeting reporting deadline for the ATO is not a big issue. In this case, client has to need pay penalty in the context of the some money. The penalty is calculated by th rate of one penalty unit for each period of time.
|Month||Activity level -customer purchase|
Client information form depicts that the business of the client is providing building services to customer. This business is sole proprietor that contains only one owner of overall business. The business of client has four full time or equivalent staff. Sole proprietorship is the simplest business form where a single person operates the business. It is not a legal entity and refers to person that is only liable for its debt. Client information can be found on the client information form (Zimmerman and Yahya-Zadeh, 2011).
Different types of financial 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 source from different financial institutions (Bogdan, et. al. 2012). The long term options of finance contains equity share capital, retained earnings, venture funding and asset saucerisation.
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 forecast rate of return.
After the recognise that actual rate of the return is lower as compared to forecast rate of return, the financial management team will evaluate the each transaction clearly to find out the reason to lower actual rate of return.
The phone conversation with client, the below points are noted:
Current objective are 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
Financer officer of XYZ Company stated that there is too much detail information is given in the financial position report. At the same time, client also mentioned that the changes are also not recorded properly into the financial report.
It is recommended that company should include additional information or any type of changes into the head which is known as miscellaneous expenses in which they can mention about the new items and assets that is purchased by the company. Therefore, company can communicate about 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 addition information or under the head miscellaneous expenses (Ongore & Kusa, 2013).
In order to provide effective financial service, it is essential to improve the customer service. Along with this, there is need to develop an effective system to record the complaint of clients. It will help to solve the quarry of clients.
- On the basis of available financial information, it can be said that financial manager will take the responsibility of preparing the BAS. It is because there is sufficient and accurate information to prepare business activity statement.
- The main reason of interest of the financial manager in preparing the BAS is that the main responsibility of financial manager to prepare the BAS for all the money transaction 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
|Date||Description||Plus amount $||Minus amount $|
|30 June||Closing account||68000|
|Cheque issue but not presented||17000|
|20 June||Cheque no. 98||80000|
|30 June||Cheque no 99||85000|
The financial performances statement stated that the KLM Company is earning profit in 2013 with $55000 as compare to 2012 ($45000). It is because income from sales is also rising and it become possible due to 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 differences of $10000. But it is also fact that KLM percentage of sales income is declining as compare to 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 through declining the initial cost of product through using the lean manufacturing, TQM techniques in order to control the cost.
|Month||Existing estimate $||Change to||Effect on|
In the financial management, debt to equity ratio is significant to measure the company financial leverage. It also enables the analyst to measure the financial stability. In order to measure the financial stability, company’s total liability is divided by the total equity. It identifies that how much company is using debt and equity in the capital. Debt-to-Equity Ratio is also helps 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 the ratios are plays a significant role in financial stability (Saleem & Rehman, 2011).
Calculation of Debt Ratio
Debt ratio= Total Liabilities
As per given amount in question, the debt ratio is finding:-
$250,000/ $15, 00,000 = 0.166
It indicates the percentage of the total assets amount on the balance sheet is considered as creditors. The high debt ratio is represents that the corporation has a high level of financial leverage (Heikal et al., 2014).
The financial management report determines the actual financial health of a company. The financial management report of the client will be prepared after the 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.
There are consequences that could arise with the not timely reporting deadlines. Firstly, it directly influences the profitability of organisation. However, with the not submitting the work on time, company could not able to make the stakeholders happy. Due to that investor feel hesitant in regarding to make an investment. So such practices impact the company effectiveness to generate high profits in this competitive market (Wei & Yermack, 2011).
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 into the financial plan. So with the help of the financial plan, company get to know about the financial sought information. On that basis, company evaluated that whether they are capable enough to meet the reporting deadlines. However, 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 on the right time.
The financial information includes the facts related to the income, sales and revenue of the firm and on the basis future decision has been taken.
|Month||Activity level patient days|
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 problem 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 as major expenses of the company (Siyanbola, 2013).
The client should make the decision to create a effective bank transaction structure. It will decrease the taxation risk. XYZ should also identify the tax friendly business structure. It will be beneficial for client if it will plan ahead. XYZ should also try to become an excellent bookkeeper and learn business operation. Along with this, client should do all essential activities on time and accurately.
Amount of loan = $100000
Interest rate = 10%
Total amount of loan over five year =
FV = PV (1+i)5
= 100000 (1+0.1)5
Under the taxation law, all the basic expenses such as general and administration expenses are come under law (Conboy, 2010). It can be office, rent, salaries, equipments and supplies, telephone and utility costs etc. in context to automobile expenses, it only come taxation law when individual perform the business-related work so such activity is considered under the business expenses. It is also find 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.
There is minimal impact of the accelerated depreciation method on the assets value in regards to double-declining balance of the assets that does 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 lower the amount of assets in the later period of time. At the end, lower depreciation has a less impact on the revenues and assets of the company.
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 mention in the below spreadsheet. Thus, it indicates that client have a full understanding about the company growth with the help of cash flow forecast summary (Noland, 2011). It is because such 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 company able to return from its investment.
In order to control the budgets, firstly there is 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 the well suited measures for the budgeting control.
There are five ways to reduce or control the business expenses such as wages, vehicle and telephone. These are as follows:-
Outsources method is the best option in which company need to outsources the services from other company in order to reduce the direct expenses of the company.
For controlling the wages, it is require to negotiating with different stakeholders about their wages and tries to compensate them as per their performances (Kitchen & Knittel, 2011).
In case of vehicle and telephone, it is require re-evaluating the complex expenses and needing to more use of digital platform for reducing the expenses related to vehicle and telephone.
Accountant can ensure about the recommendation on the basis of the performances. However, if the particular individual gets the recommendation clearly 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.
The financial planning includes six steps which 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 financials status
Develop the financial planning recommendations and present it to the clients.
Implement the financial planning recommendations
Review the client situation.
From the mention income statement, it can be stated that the XYZ is earning profit in 2015 because income from sales is also rising and it become possible due to 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 differences of $10000 (Saleem & Rehman, 2011). But at the end there is declining the percentage of sales income and it become 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 through declining the initial cost of product. It can be done through using the sustainability practices and more use of the digital platform to advertise the product line.
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.
Purchase value for the year= $17748 and gross profit is $62748
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