Finance assignment sample (BSBFIM601)

Finance assignment sample (BSBFIM601)

Houzit Pty Ltd.
BSBFIM601
Assessment Task 1
……..
3/23/2018
Contents Annual budget with budget components. 3 Sales & profit budget 3 Cash flow budget 4 Profit Loss Actual 4 Budget Notes. 5
  1. Analysis of the past cash flow trends. 5
  2. Identify & explain reasons for previous profits and losses. 6
iii. Critical dates and initiatives. 6
  1. All financial bids, estimates, assumptions and basis. 6
  2. Implementation and monitoring of budget expenditure. 7
  3. Current statutory requirements and the tax liabilities. 8
vii. Financial management software. 8 viii. Effectiveness of the organisation’s existing financial management approaches. 9
  1. Items for inclusion in the budgets. 9
  2. Internal controls. 9
Knowledge Test questions. 10 Principles of accounting and financial systems. 10 Requirements for financial probity while managing finance. 10 Explain Australian, international and local legislation and conventions that are relevant to financial management in the organization. 10 Requirements. 10 References. 12 Annual budget with budget components Sales & profit budget
Houzit Sales and Profit Budget FY 2011/12
Particulars 2011/12 Q 1 Q 2 Q 3 Q4
Revenue 20.0% 24.0% 26.0% 30.0%
Sales  $      1,69,71,237  $       33,94,248  $       40,73,097  $       44,12,521  $       50,91,371
– Cost of Goods Sold  $         96,53,274  $      19,30,655  $      23,16,786  $      25,09,851  $      28,95,982
Gross Profit  $         73,17,962  $       14,63,593  $       17,56,311  $       19,02,670  $       21,95,388
Gross Profit % 43.12% 43.12% 43.12% 43.12% 43.12%
Expenses
 Accounting Fees  $              10,000  $              2,500  $              2,500  $              2,500  $              2,500
Interest Expense  $              84,508  $            21,127  $            21,127  $            21,127  $            21,127
Bank Charges  $                1,600  $                 400  $                 400  $                 400  $                 400
Depreciation  $           1,70,000  $            42,500  $            42,500  $            42,500  $            42,500
 Insurance  $              13,390  $              3,348  $              3,348  $              3,348  $              3,348
Store Supplies  $                3,749  $                 750  $                 900  $                 975  $              1,125
Advertising  $           3,50,000  $         2,00,000  $            50,000  $            50,000  $            50,000
Cleaning  $              16,282  $              3,256  $              3,908  $              4,233  $              4,885
Repairs & Maintenance  $              64,272  $            16,068  $            16,068  $            16,068  $            16,068
Rent  $         26,40,508  $         6,60,127  $         6,60,127  $         6,60,127  $         6,60,127
Telephone  $              14,997  $              2,999  $              3,599  $              3,899  $              4,499
 Electricity Expense  $              26,780  $              5,356  $              6,427  $              6,963  $              8,034
Luxury Car Tax  $              32,164  $              6,433  $              7,719  $              8,363  $              9,649
Fringe Benefits Tax  $              28,000  $              7,000  $              7,000  $              7,000  $              7,000
Superannuation  $           1,87,020  $            37,404  $            44,885  $            48,625  $            56,106
Wages & Salaries  $         20,78,000  $         4,15,600  $         4,98,720  $         5,40,280  $         6,23,400
Payroll Tax  $              98,705  $            19,741  $            23,689  $            25,663  $            29,611
Workers’ Compensation  $              41,560  $              8,312  $              9,974  $            10,806  $            12,468
Total Expenses  $         58,61,535  $      14,52,921  $      14,02,891  $      14,52,876  $      15,52,847
Net Profit (Before Tax)  $         14,56,427  $            10,672  $         3,53,420  $         4,49,794  $         6,42,542
Income Tax  $           4,36,928  $              3,201  $         1,06,026  $         1,34,938  $         1,92,763
Net Profit  $         10,19,499  $              7,470  $         2,47,394  $         3,14,856  $         4,49,779
Cash flow budget
GST Cash Flow Budget
Cash Flow Analysis 2011/12 Q 1 Q 2 Q 3 Q 4
GST Collected  $                     16,97,124  $      3,39,425  $      4,07,310  $      4,41,252  $      5,09,137
GST Paid  $                     13,11,489  $      2,88,939  $      3,14,086  $      3,34,159  $      3,74,306
GST payable  $                       3,85,635  $         50,486  $         93,224  $      1,07,093  $      1,34,831
Profit Loss Actual
Houzit Pty Ltd
Particulars 2007/08 2008/09 2009/10 2010/11 2011/12
Sales 1,24,74,336 1,34,72,315 1,45,50,100 1,57,14,108 16971237
– Cost Of Goods Sold 68,60,901 74,09,773 80,02,555 87,99,900 9653274
Gross Profit 56,13,465 60,62,542 65,47,545 69,14,208 7317962
Expenses
– Accounting Fees 5,500 6,500 8,500 9,000 10000
– Interest Expense 45,000 65,000 96,508 90,508 84,508
– Bank Charges 1,200 1,300 1,580 1,600 1600
– Depreciation 1,70,000 1,70,000 1,70,000 1,70,000 170000
– Insurance 12,500 12,500 12,500 12,875 13390
– Store Supplies 3749
– Advertising 50,000 1,00,000 2,80,000 2,80,000 350000
– Cleaning 12,560 15,652 18,700 19,261 16282
– Repairs & Maintenance 40,250 52,600 60,000 61,800 64272
– Rent 24,65,000 24,65,000 24,65,000 25,38,950 2640508
– Telephone 9,862 12,523 14,000 14,420 14997
– Electricity Expense 22,500 23,658 25,000 25,750 26780
– Luxury Car Tax 12,400 32164
– Fringe Benefits Tax 26,000 26,000 26,000 28,000 28000
– Superannuation 1,48,500 1,60,737 1,66,500 1,71,495 187020
– Wages & Salaries 16,49,998 17,85,965 18,50,000 19,05,500 2078000
– Payroll Tax 78,375 84,833 87,875 90,511 98705
– Workers’ Compensation 33,000 35,719 37,000 38,110 41560
Total Expenses 47,70,245 50,17,987 53,31,563 54,57,780 5861535
Net Profit (Before Tax) 8,43,220 10,44,554 12,15,982 14,56,428 1456427
Income Tax 2,52,966 3,13,366 3,64,795 4,36,928 436928
Net Profit 5,90,254 7,31,188 8,51,188 10,19,499 10,19,499
Budget Notes Finance assignment help (BSBFIM601) i. Analysis of the past cash flow trends Debtor ageing summary
Aged Debtors Budget
Aged Debtors Budget Total Qtr 1 Qtr 2 Qtr 3 Qtr 4
Sales  $                            1,69,71,237  $          33,94,247  $          40,73,097  $          44,12,522  $          50,91,371
% Debtors sales 20.0% 20.0% 20.0% 20.0%
Total debtors 100%  $            6,78,849  $            8,14,619  $            8,82,504  $          10,18,274
Current (84%) 84%  $            5,70,234  $            6,84,280  $            7,41,304  $            8,55,350
30 Days (10%) 10%  $                67,885  $                81,462  $                88,250  $            1,01,827
60 Days (5%) 5%  $                33,942  $                40,731  $                44,125  $                50,914
90 Days (1%) 1%  $                  6,788  $                  8,146  $                  8,825  $                10,183
 
Debtor Ageing Ratio
Particulars 2009/10 2010/11 2011/12
Trade Debtors  $                            8,50,000.00  $       9,75,000.00  $     33,94,247.33
Sales  $                      1,45,50,100.00  $ 1,57,14,108.00  $ 1,69,71,236.64
Debtor Days 21.32 22.65 73
The debtor days ratio measures how quickly cash is being collected from debtors. The longer ratio shows the greater number of days in collecting from debtors like customers. Based on the above table, it can be determined that there is an increase in debtor days as company is adopting lenient policy for the customers by allowing them to pay their liabilities on longer duration. However, it may cause an increase in number of customers due to longer debtor days but it may also cause lack of cash within the firm. It is because the delayed payment collection may affect the cash position of the firm that may influence its routine operations. ii. Identify & explain reasons for previous profits and losses Based on internal analysis and PEST, it can be stated that sales growth may be possible due to effective sales and marketing efforts of Houzit. Apart from this, better capacity of the company in terms of cost reduction through introduction of advanced technologies may also help the firm to keep operational cost low and enhance profitability. Favourable political policies and increasing disposable income of people may also help to increase the demand of the products of the firm and contribute to its sales and profits growth. In addition, the focus of the firm on customer satisfaction and innovation in the products may also raise the demand of the products of company that may contribute to sales and profits of the firm. iii. Critical dates and initiatives
  • 31-12-2011 – Amount of $100,000 paid for loan
  • 2011-2012 – Increase in advertisement budget by $70,000
  • 2011-2012- Increase in wages and salaries by $172,500
  • Cash flow effect of the GST payable per quarter to be prepared (scheduled compliance payment date is the 21st day after the end of the quarter)
iv. All financial bids, estimates, assumptions and basis
  • Luxury car tax rate at 33% based on sales ratio Insurance, repairs and maintenance, Rent – apportioned equally in each quarter.
  • Store supplies, cleaning, Telephone and Electricity, Wages and salaries using the same % as determined by the sales for each quarter.
  • Cost of goods sold is the inverse of the gross profit rate
  • Accounting fees, interest charges, bank charges paid equally in each quarter.
  • Sales growth 8% annually
  • % Debtors of total sales: 20%
  • Sales in quarters 2011/12 in the same % as sales 2010/11
  • GST collected at 10% of sales
  • GST paid at 10% of particular expenses
  • Depreciation same as 2011 and allocated equally in each quarter.
  • Advertising is to be apportioned to each quarter based on the business plan.
  • Inflation rate 4% affecting expenses
  • Same fringe benefits tax as 2011 and paid equally each quarter.
  • The statutory requirements are:
    • Superannuation: 9% of wages and salaries for each quarter
    • Payroll tax: 4.75% of wages and salaries for each quarter
    • Workers compensation: 2% of wages and salaries for each quarter
    • Tax rate 30%
v. Implementation and monitoring of budget expenditure Proper meetings and time to time update are significant to monitor the budget expenditures while dealing with sensitive information. Comparison between actual and forecasted budget is also significant to monitor budget expenditure. vi. Current statutory requirements and the tax liabilities For tax compliance, the current statutory requirements incorporate superannuation at 9%, worker compensation at2% and payroll tax at4.75% of wages and salaries for each quarter. In addition, tax rate is 30% of net profit after tax. For complying tax related statutory requirements, it is required to prepare three monthly rolling forecast of cash flows. The calculation of the tax liabilities for Houzit Pty Ltd is as follows:
2011/12 Q1 Q2 Q3 Q4
Net Profit (Before Tax) $1456427 $10672 $353420 $449794 $642542
Income Tax (30%) $436928 $3201 $106026 $134938 $192763
vii. Financial management software The current financial management software system does not provide sufficient analysis of revenue and expenditure. This makes it difficult for making informed estimates of future profits. For this, the following software can be used by the firm:
  Freshbooks QuickBooks Online
Users Small business owners Small as well as large businesses
Client experience 99% 94%
Score 9.8 9.2
Cost $15 $10.36
Pricing type Monthly /annually Monthly
Features Online invoicing Expense tracking Time tracking Projects Payments Accounting Reports & Taxes Basic features + additional features on tailored pricing
OS Supported All OS supported All OS supported
Available Support Support through phone and live and training Support through phone and live
Free trial No 30-day free trial
Language USA Different countries
(Source: Comparisons.financeonline.com, 2017) QuickBooks Online can be recommended due to its cost effectiveness, availability in different languages and requirement of only basic features plus additional features based on tailored pricing. viii. Effectiveness of the organisation’s existing financial management approaches The existing financial management approaches are not effective due to inability to provide adequate financial information that lead to wrong decisions. Company is also based on the ‘gut feel’ of the experienced traders on the board and of the senior managers to estimate the financial performance. Although, these approaches focus on the business activity statement (BAS) schedule regualted by the Australian Tax Office. In addition, it also considers security measures to store financial data. ix. Items for inclusion in the budgets
  • Store supplies
  • Office expense
  • Luxury car tax
  • Water bills
  • Utilities
x. Internal controls
  • Authentication by the line manager
  • Signed or linked Service invoices for equipments to a purchase order
  • Checking process
  • Fix unique codes to assets
  • Feedback lines of communication
  • Monthly Debtor reconciliations
  • Allocation and segregation of duties
Knowledge Test questions Principles of accounting and financial systems Matching principle needs to be adopted in budget preparation due to matching revenues respective to expenses during a financial year. Time periods principle is related to budget formation on monthly, quarterly and annual basis. Quarterly accounting is useful for internal stakeholders while annual accounting basis is crucial for the external stakeholders. Requirements for financial probity while managing finance Probity is valuable to implement and monitor the budget expenditure. It is also required to check ethical point of views regarding implementation and monitoring of budget expenditure. Explain Australian, international and local legislation and conventions that are relevant to financial management in the organization The Corporations​ ​Act​ ​2001 is relevant to financial management of the company because it prepares disclosure reports, asset valuation and financial report. It complies with requirement of preparing general ledger for business transactions, cash records including bank statements, sales and purchase records, inventory records, goods and returns tax, superannuation​ ​records, payroll tax and tax returns with calculations. Current liability, fringe benefits tax for non-cash benefits and income tax are levied on earnings which need to paid by the company. Requirements
  1. Goods and Services Tax:
  1. Company Tax:
To qualify for the lower 27.5% tax rate in 2016–17, there is need to accomplish following requirements:
  • Aggregated turnover of less than $10 million
  • Carry on a business.
  1. Pay As You Go:
  • Employ people
  • Employ other workers such as contractors with a voluntary agreement
  • Payments to businesses that do not quote their ABN
References Finance assignment help (BSBFIM601) Australian Government (2018) [Online] Available at:  https://www.business.gov.au/info/run/tax/register-for-pay-as-you-go-payg-withholding  (Accessed 23 March 2018) Comparisons.financeonline.com (2017) [Online] Available at: https://comparisons.financesonline.com/freshbooks-vs-quickbooks-online  (Accessed 23 March 2018) Crosson, S. V., & Needles, B. E. (2013) Managerial accounting. Cengage Learning. Davies, T., & Crawford, I. (2011) Business accounting and finance. Pearson. DRURY, C. M. (2013) Management and cost accounting. Springer. Ward, K. (2012) Strategic management accounting. Routledge.    

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