Finance Assessment: Principles, Legislations, Costs, Budgets, GST, Cash Flow

This assessment covers various topics in finance including accounting principles, current legislations, different types of costs, budgeting, GST calculations, and cash flow management.

ASSESEMENT
(Finance)
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Table of Contents
MAIN BODY...................................................................................................................................3
Task 1. ........................................................................................................................................3
Task 2..........................................................................................................................................3
Task 3..........................................................................................................................................4
Task 4..........................................................................................................................................4
Task 5..........................................................................................................................................5
Task 6..........................................................................................................................................5
Task 7..........................................................................................................................................6
Task 8..........................................................................................................................................6
Task 9..........................................................................................................................................6
Task 10........................................................................................................................................8
Task 11........................................................................................................................................9
Task 12........................................................................................................................................9
Task 13......................................................................................................................................10
REFERENCES..............................................................................................................................12
APPENDIX....................................................................................................................................13
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MAIN BODY
Task 1.
 Revenue principle- This is an accounting principle in which income is recorded when it is
earned and regardless of when cash is received by business (Zeff, 2016). For example, if
a company sells goods to a customers and receive payment through credit card in
January. Due to some issues company does not receive cash till February. In this case that
credit card purchase is considered as cash because of this principle.
 Expense principle- It is an accounting principle that states that expenditures must be
identified in similar time frame as revenues to which they link. For example, income tax
is paid in current month by companies whether expenses are higher or low.
 Matching principle- The term matching principle can be defined as a type of principle
which states that revenues and expenses must be recognised together in similar time
period (Needles, Powers and Crosson, 2013). For example, a company buys a machine of
$50000 pounds with 5 years’ life and as per this principle machine cost must be matched
with revenues it creates.
 Cost principle- This accounting principle is an element of generally accepted accounting
principle (GAAP). As per this principle, the assets must be recorded on their cost in the
case if asset is new. For instance, when a retailer buys stock from vendor it records the
purchase on cash price which was actually paid.
 Objectivity principle- This principle is based on a concept that financial statements of
companies should be based on a solid evidence (Rutherford, 2016). For example, if
companies want to take loan from any bank then they will show prepared financial
statement as these are based on particular evidence.
Task 2.
The current legislations related to below mentioned items as per the official website of
Australian Tax office.
 Sales records- An electronic sales suppression tool is used in order to enable tax
avoidance by managing business transaction record and under reported revenues. As well
as for wholesales sale 29% rate of WET is applicable.
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 Purchase/expense records- Australian GST generally implies to sales of imported
products and services to consumers of Australia. The goods and service tax does not
implement on business purchases of imported services and digital items if company is
registered for GST in Australia.
 Year ended income tax records- The Australian tax office information for businesses
about the records companies need to explain all transactions regarding to information.
 Payments made to employees- If companies need to withhold amount from payment to
employees, consisting those who are overseas or foreign residents then they need to
complete a tax file number declaration (About records relevant to current legislations,
2019). On the other hand, in some situations company may need to complete withholding
declaration. These declarations may help them to work out how much amount of tax to
withholding by finding whether there are other factors which are needed to consider.
 PAYG withholding records relating to business payments- This is an obligation or
responsibility of an employer to gather PAYG withholding amount from payment made
to workers and entities so that they can meet their end year tax liabilities.
 Goods service tax (GST) – Australian goods and service tax can be apply to company for
retail sale of lower valued goods, services and digital commodities to Australia.
Task 3.
How often companies need to perform an audit trail?
The audit trail offers a vital component for detecting fraud. Rigid adherence to the
development of an audit trail provides evidence of the validity of trades. All commercial
payments must include a promoting report such as purchase orders and authorised receipts.
Basically, companies need the audit trail during different quarter of a financial year which may
be of two times.
Task 4.
Example of following costs:
 Direct cost- The examples of this cost are direct labour, material, commissions,
production supply etc.
 Indirect cost- Some example of indirect cost is rent, telephone charges, security expenses,
office expense etc.
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 Fixed cost- The example of fixed cost is rent, payment of loan, premium of insurance and
many more.
 Variable cost- The examples of this cost are commission on sale, raw material cost of
manufacturing, direct labour expenses etc.
 Semi-variable cost- It includes repairing cost, fuel & power expenses, monthly base
telephone charges, indirect labour cost etc.
Task 5.
Sales budget
Task 6.
The ways by that dissemination of budget takes place and how can a company negotiate any
changes needed to be done to budget.
There are different types of activities which are being used for dissemination of budget
such as specific conferences, workshops etc. As well as by help of media like posters,
presentation of project etc. In addition, a company can negotiate changes in the budget as per
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Budget Actual Variance
(Total)
Quantity $
Sales – Product A Units 900 950 50 (F) -
Sales – Product B Units 1 200 1 180 20 (A) -
Sales – Product C Units 1 500 1 650 150 (F) -
Sales – Product A $/Unit 10 9 - 1 (A)
Sales – Product B $/Unit 12 14 - 2 (F)
Sales – Product C $/Unit 15 16 - 1 (F)
Production – Product A Units 1000 1 100 100 (F) -
Production – Product B Units 1 200 1 320 120 (F) -

their need. Like if company makes projection of sales revenue of $1500 but in actual they earn
revenue of $1200. In this case, company can make correction in their budget.
Task 7.
Fees budget scenario:
Suburat Medical Centre
Fees budget – January 20X1
$
Fees receivable in cash (765 patient @ $25) 19125
Fees receivable from bulk billing (935 patient @ 19) 17765
Total fees 36890
Contingency plan if above company do not reach target of patients:
In the case if above company does not meet target of 1700 patients then then they should
increase their prices so that target profit can be achieved. This is so because on the number of
1700 patients, total fees are of $36890. If number of patients decrease, then they may increase
prices which can meet the target of fees.
Task 8.
Selling expense budget for the month of February 20XX for Dajan & Co:
Item $
Salaries (120000*4%) 4800
Depreciation (18000/12) 1500
Staff Insurance (4800*2.5%) 120
Advertising (19200/12) 1600
Vehicle Maintenance (120000*2%) 2400
Freight (120000*0.65%) 780
Total 11200
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Task 9.
P & L Statement IBC Pty Ltd
July 1, 2013 to June 30, 2014
Gross sales 346,400
Les: sales returns and allowances 1,000
A. Total Business Income 345400
Cost of Goods Sold:
Beginning Inventory, July 2012 160,000
Add:
Direct material 90,000
Direct labour 50,000
Factory overhead 2,000
Less:
Closing inventory, June 2013 100,000
B. Cost of Goods Sold 202000
C. Gross Profit (A-B) 143400
Expenses
Salaries 68,250
Utility bills 5,800
Rent 23,000
Office supplies 2,250
Insurance 3,900
Advertising 8,650
Telephone 2,700
Travel and entertainment 2,550
Dues and subscriptions 1,100
Interest paid 2,140
Commission paid 1,250
Owner’s drawings 11,700
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D. Total expenses 133290
Net Profit (C-D) 10110
Balance Sheet IBC Pty Ltd
July 1, 2013 to June 30, 2014
Assets
Cash 8,450
Accounts Receivable 65,000
Inventory 19,550
Land 65,000
Buildings 32,500
Plant & equipment 32,500
Less: Accumulated depreciation (16,900)
Goodwill 22,100
A. Total Assets 228200
Liabilities
Accounts payable 44,200
Bank overdraft 1,000
Short term loans 15,000
Mortgage 35,000
B. Total liabilities 95200
C. Net Assets (A-B) 133000
Owner’s equity
Opening equity 66,500
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Retained profit 66,500
D. Total owner’s equity 133000
Analysis of financial condition- On the basis of above prepared two financial statements, this can
be find out that financial position of IBC Pty limited is average. They have enough amount of net
profit to cover their expenses but they have not higher net profit to pay their stakeholders. Their
balance sheet is showing that company have higher amount of total assets in proportionate to
liabilities.
Recommendation- This company recommended to decrease their expenses because they have
expenses of $133290 which is too high as compare to revenues. If they will reduce their
expenses, then their net income will increase.
Task 10.
GST calculations:
In Australia the rate of GST is 12% on sea foods including fish.
Particulars Amount
GST received (24000*12%) 2880
GST paid (18000*12%) 2160
Net GST payable 720
Task 11.
GST and cash flow statement
Cash Receipts: $ $
Cash sales 80000
GST receipts on cash sales 8000
Credit sales - budget year 140800
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Credit sales - previous year 11000
Total Cash receipts 239800
Cash Payments:
Purchases 90000
GST payments on cash purchases 9000
Wages 120000
Net GST payable to ATO 12000
Other payments 33000
Total Cash Payments: 264000
Cash surplus/(deficit) (24200)
Opening bank balance
Closing bank balance
Task 12.
Part A: Accounts Receivable Collection Schedule and Cash Flow Statement:
November December January February March
Credit sales 39000 41600 23400 37700 27300
PART B: Cash flow plan
January Februar
y March
$ $ $
Balance b/fwd. 5590
Cash receipts (from credit sales) 23400 37700 27300
Total Funds Available 28990 37700 27300
Payments
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Accounts Payable 52650 53300 58175
Wages 3600 3470 3380
Total Payments 56250 56770 61555
Balance c/fwd. -27260 -19070 -34255
Task 13.
Based on the calculations in TASK 12 (A and B) what went wrong?
On the basis of above done calculation of accounts receivable schedule and cash flow
plan, this can be find out that total balance of cash is presenting negative result. As well as there
is lack of information about format of accounts receivable schedule and about supply.
What are the consequences of those wrongs?
The above mentioned issues during calculation of cash flow and accounts receivable
schedule affected produced statements in negative manner. This is so because of lack of
information about opening balance of all months, it becomes difficult to calculate value of total
funds available. As a result, total balance of cash was lower in three months. So these are the
consequences of above mentioned wrong.
What organisational protocols should be followed for reporting if loss is inevitable? Determine
and access resources systems to manage financial management processes within the work team?
In order to record losses which are inevitable, companies should follow protocol of
reserves. This is so because if businesses face losses continuously and if loss if inevitable then
they should follow protocol of preparing reserves like bad debts in which they can add on a sum
of money.
This is essential for business entities to manage their financial perspective in an effective
manner so that available monetary resources can be utilised completely. For this purpose,
companies may prepare budget by which they can track actual financial position. As well as by
help of budgets, it becomes easier for companies to track the variances between actual and
estimated outcomes. In the absence of proper budgeting of financial resources, this can be
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difficult to measure actual level of performance as well as to know about adverse variances.
Thus, budgeting is a way that can be helpful in order to manage financial management process.
What support can be provided to the team members to ensure that proper management of
finances is in action? How can the organisation to ensure that documented outcomes are
achievable, accurate and comprehensible in the near future?
In order to ensure that proper management of finance is in action, team member are
needed to be provide data of variance of budget. This is so because it can be helpful to them to
know about those aspects in which performance of company is weaker. As well as they can
ensure that there is effective management of finance is in action.
An organisation can assure that produced outcomes are achievable and accurate in the
future by evaluating their efficiency. This can be done by making comparative analysis of set
financial goals with availability of resources.
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REFERENCES
Books and journal:
Zeff, S. A., 2016. Forging accounting principles in five countries: A history and an analysis of
trends. Routledge.
Needles, B. E., Powers, M. and Crosson, S. V., 2013. Principles of accounting. Cengage
Learning.
Rutherford, B .A., 2016. Articulating accounting principles. Journal of Applied Accounting
Research.
Online:
About records relevant to current legislations, 2019 [Online] available
through:<https://www.ato.gov.au/>
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APPENDIX
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