Motor Vehicle Expenses and Loan Calculations

This assignment involves solving problems related to motor vehicle expenses that can be deducted as business-related expenses, and calculating the annual repayment amount for a long-term loan. The loan is compounded at 10% interest per annum, and the client needs to determine the zero closing balance after five years. Additionally, the manager has forgotten to collect a receipt of livestock, which can be added using the rectification of error method. The assignment requires accurate transactions to be recorded in the accounting system.

FNSACC501-Provide
Financial and Business
Performance Information
(Assessment 2)

Table of Contents
Part 1................................................................................................................................................3
1. Treatment of Business Expenses in regard to Tax Legislation................................................3
2. Allowance provided to businesses managed on behalf of a trust............................................3
3. Concept of Forecast Returns and Set-Up ................................................................................3
4. Adherence to Financial Policies by NFP Sector Organisations based on their statutory
returns..........................................................................................................................................3
5. Repayment amounts and current balance for XYZ..................................................................3
6. Four categories that client’s business performance objectives can be set up as......................4
7.Concept of GPFRU and its potential users...............................................................................4
8. Type of clients that can expect state and territory charges......................................................4
9. Calculating the amount of taxes and charges on land..............................................................5
10. Practices that businesses who pay Commonwealth taxes must adopt...................................5
TASK 2............................................................................................................................................5
1....................................................................................................................................................5
2....................................................................................................................................................5
3....................................................................................................................................................6
4....................................................................................................................................................6
5....................................................................................................................................................6
6....................................................................................................................................................6
7....................................................................................................................................................8
8....................................................................................................................................................8
9....................................................................................................................................................8
10..................................................................................................................................................9
11..................................................................................................................................................9
12..................................................................................................................................................9
13................................................................................................................................................10
14................................................................................................................................................10
15................................................................................................................................................11
16................................................................................................................................................11

17................................................................................................................................................11
18................................................................................................................................................12
19................................................................................................................................................12
20................................................................................................................................................13
21................................................................................................................................................13
REFERENCES..............................................................................................................................14

Part 1
1. Treatment of Business Expenses in regard to Tax Legislation
The business expenses are deductible under the Tax Legislation. Such costs incurred in
operating assesses business can be claimed them as long as they are directly related. If it is for a
business and private use, only a portion of such expense can be claimed and must be evidenced.
2. Allowance provided to businesses managed on behalf of a trust
Managing a business on behalf of a trust includes owning and operating business assets,
distribution of profits and complying with trust deed obligations. If a business is managed
through a trust structure, then there are many aspects in which benefits are ascertained. (Brigham
and Houston, 2012). Some of them are mentioned below:
 Trust is allowed to get 50% discount of their assets which are in possession from more
than 12 months.
 Freedom is provided regarding the usage of income.
3. Concept of Forecast Returns and Set-Up
Forecast returns are the estimated amount which is going to be acquired by the
organisation on their investments that are made in business projects. Set up can be defined as the
action which is used to establish some thing. It has been estimated by the client that in future
17% returns are going to be acquired in future for next 5 years on 3500000 pounds that are
invested in the business.
Years Investment Returns(17%) on investment
2018 3500000 595000
2019 3500000+595000 696150
2020 3500000+595000+696150 814496
2021 3500000+595000+696150+814496 952960
2022 3500000+595000+696150+814496+952960 1114963
2023 3500000+595000+696150+814496+952960+1114963 1304507

4. Adherence to Financial Policies by NFP Sector Organisations based on their statutory returns
Not for Profit organizations are those that do not fall in the purview of profit making
organizations. This means that they do not operate to make profits. Tax legislation requires a
periodic income tax returns to be filed by those NFPs that are not exempted from this tax head.
These include clubs, societies and associations. The determination of a business' charitable status
falls in the hands of Australian Taxation Office (ATO). Based on its legal structure, a company
may be required to adhere to Commonwealth, state and territory level. These require NFPs to
report corporate and financial returns with the authority under which they were incorporated,
fundraising activities, information regarding any concessions based on its status along with
financial, governance and performance for gaining and acquitting commonwealth, state and
territory grants and contracts. They are mostly exempted from filing annual GST returns unless
otherwise required to comply with the prevalent legislation.
5. Repayment amounts and current balance for XYZ
Given:
Loan Amount 500000
Number of Years 8
Rate (per annum) 10.00%
Calculation of annual instalment:
Year PV @ 10%
1 0.9090909091
2 0.826446281
3 0.7513148009
4 0.6830134554
5 0.6209213231
6 0.5644739301
7 0.5131581182
8 0.4665073802
Total 5.3349261979
Annual Instalment: 500000/5.3349261979 = 93722.01

Year
Beginning
Balance
Scheduled
Payment Principal Interest
Ending
Balance
Cumulative
Interest
1 $5,00,000.00 93722.01 43722.01 50000 456277.99 50000
2 4,56,277.99 93,722.01 48,094.21 45,627.80 4,08,183.78 95,627.80
3 4,08,183.78 93,722.01 52,903.63 40,818.38 3,55,280.15 1,36,446.18
4 3,55,280.15 93,722.01 58,193.99 35,528.02 2,97,086.16 1,71,974.19
5 2,97,086.16 93,722.01 64,013.39 29,708.62 2,33,072.76 2,01,682.81
6 2,33,072.76 93,722.01 70,414.73 23,307.28 1,62,658.03 2,24,990.08
7 1,62,658.03 93,722.01 77,456.21 16,265.80 85,201.83 2,41,255.89
8 85,201.83 93,722.01 76,681.64 8,520.18 0.00 2,49,776.07
Summary The Table shows the opening and closing balance of the loan for eight years
including Monthly Instalments, Interest Payments at the rate of 10% per
annum as well as Principle regarding the amounts. The interest is calculated
assuming Simple Interest Rate on balance amounts.
6. Four categories that client’s business performance objectives can be set up as
Four categories that can be used by clients to establish business performance objectives
are specific, achievable, measurable and valuable. If all these factors are considered while
formulating business objectives, then it may result in setting up them in an appropriate manner.
7.Concept of GPFRU and its potential users
GPFRU means General Purpose Financial Report Users. The main purpose of this
financial report is to provide the information that help in satisfaction of the needs of external
users who are unable to get the special reports for purpose of satisfaction of their special needs.
The three potential users can be listed as follows:
 Banks and other creditors.
 Shareholders involved in investment decisions.
 Independent Regulatory Authorities.
8. Type of clients that can expect state and territory charges

According to Australian taxation office and Office of Fair trading, clients which can expect
state and territory charges includes fundraisers. These fundraisers can be non-profit organisations
or the organisations engaged in lottery businesses. These businesses also include charitable
collections, fundraising lotteries, gaming activities etc.
9. Calculating the amount of taxes and charges on land
A client is liable to pay annual tax and charges on the land held by them based on its
worth. This is calculated based on different state and territory offices based on their related
criteria implemented in that area. ATO and other relevant websites provide accurate annual tax
amounts by multiplying land value with the tax rates.
For example: The tax is calculated on the total value of land which is exceed the limit of
land tax threshold. General threshold: $100plus1.6% of land value above the threshold, up to the
premium threshold.
10. Practices that businesses who pay Commonwealth taxes must adopt
Businesses falling under the legislation of Commonwealth Taxes must keep track of its
transactions by maintaining a record of receipts and other related evidences regarding sales and
purchase. This includes tax invoices, wage and salary records and GST related documents. Any
purchase, sale or repairing of capital assets such as buildings, office equipment should be
recorded duly. Every business activity's statements, income tax and FBT returns as well as
employee related information on superannuation, etc. must be duly kept in the documents of the
business entity. Such records must be maintained for at least five years either manually or on a
software in a language that is easily understandable (Chandra, 2011).
TASK 2
1.
a. Ans. Financial information sought, Size, Current information
b. Ans. Sole traders are specialist who has special skills and expertise in particular field and
normally runs small businesses a specific industry. Sole traders normally have inadequate time in
framing, preparing and analysing business data or information. They need normal advice and
help in preparation of balance sheet or financial statements, managing business loans and

overdraft, baking activities, various tax forms and returns, bank reconciling statement and
indicator to changes in various legislation including changes in taxation policies
2.
Ans. Under financial services sectors and industry client and group of client repeatedly
approached for information on a wide range of financial and business issues. Following are the
different type of financial options available for client to solve such financial and business issues:
Different types of financial options may include:
 Funding alternatives
 Long-term investments
 Purchases
 Adjustment of borrowings
 Asset liquidation
 Cost of capital
 Sources of finance
 Cost recoveries
 Debt and equity
 Dividends
3.
Forecast return table:
Year Forecast Return Actual Return
2011 128 125
2012 117 123
2013 115 115
2014 125 137
2015 122 122
2016 137 130
2017 140 141
2018 155 128

2019 157 155
Summary: Above table describes that in year 2011, 2016, 2018 and 2019 actual return is
less than forecasted return where as in year 2012, 2014, 2017 actual return is more than
forecasted return. In the year 2013 and 2015 actual return is equal to the forecasted return.
4.
In financial management variance analysis can help to discover that the actual rates are
significantly lower than the rates that are forecasted by the organisation. It is a tool which is used
by companies to analyse that it is performing well or not in the market (Renz and Herman,
2016).
5.
When actual returns of a company are lower than forecasted then it is considered that the
estimation power of the organisation is weak and the steps that are required to be taken in such
situation is to maintain the budget so that appropriate funds can be retained for critical situations.
6.
(a) Preparation of Quarterly Financial Management Questionnaire
The following questionnaire shows information regarding actual as well as proposed
business objectives:
Topic
Q1) What is the entity’s legal status / registration? Registered Unregistered
Q2) Does its shareholder's fund include a stake of
government?
Yes No
Q3) Has the company recently taken any kind of
external financing project?
Yes No
Q4) Is the organizational structure and governance
appropriate for the needs of the project?
Q5) Briefly describe the statutory reporting
requirements for the entity.
Q6) Are financial statements and reports prepared
for the entity?
Yes No

Topic
Q7) Did the business face any issues involving the
receipt, accounting and/or administration of
funds in the past?
Yes No
Q8) Are controls in place concerning the
preparation and approval of transactions in
adequacy?
Yes No
Q9) Does the business file its annual reports in the
form of BAS?
Yes No
Q10) Is this method able to project the true image
of the business among all stakeholders?
Yes No
(b) Preparation of Quarterly Financial Management Questionnaire
File Note
Date July 4, 2019
To/From: CEO, XYZ Company
On July 1, 2019 a call was received from the CEO of our client XYZ Company. The call was to
inform about the decision of ceasing services with our company as they have appointed a
financial manager to serve the purpose of creating financial reports. The company CEO has
asked for our help to guide and assist the manager to ensure smooth handover of the operations
to XYZ.
7.
File note
Date 01/10/19

To/ from Finance officer XYZ limited
Finance officer of XYZ limited contacted the organisation and said that the financial position
report has too much detail. They require the explanation for the changes and they know that
several new desks were purchased in previous quarter which was recorded in in asset register.
The company has analysed all the issues and then resolved them appropriately by providing
appropriate information to the clients.
8.
File note
Date 15/11/19
To/ from XYZ limited
A call is being received from XYZ limited in which the clients has registered a complaint
regarding the extra GST which was paid by them on their income. The organisation resolved the
issue by providing them information regarding the total income in which previous years’
income is being added.
9.
a. Financial manager is responsible for preparing the BAS based on the reports to assess
the amount of GST Payable/ (Receivable) from ATO and to create a summary for quick analysis
of GST.
b. Main reason for such interest is to a brief assessment of GST amount and to calculate
correct amount of refund or payable if any. Mangers use this as a MIS for understand overall
scenario.
c. Financial Managers at first create a format of BAS Summary Sheet. Then amount of
GST is calculated using GST Received on income, GST Paid on expenses and Plus PAYG on
wages. Thereafter such calculated amount is filled in summary BAS report to along with amount
of GST payable and Refund or receivable (Molina and Preve, 2012).

10.
Bank Reconciliation Statement
Particulars Amount
Bank Balance as per pass book 68000
Add: Items having effects of higher balance in cash book
Cheque issued but not presented:
Number 100 5000
Number 101 5000
Number 102 3000
Number 103 4000
Bank balance as per cash book 85000
11.
Given performance analysis describes that overall revenue is increased by 39% whereas
profit is increased by 22%. Total cost is 80.4% and 82.8% of total sales while cost of sales is
50% and 51.6% in year 2012 and 2013 respectively. Company is expenditure towards marketing
is increased by 33% and towards transport is increased by 40%. There is highest increase in
Wages cost which is 50%. Overall increase in profit is $10,000 showing better profitability
condition. Revenue or total sale is increased to $320000 with an increase of $90000. Cost of
sales is 50% of sales which indicates that contribution is also 50%. Wages cost are increased to
$45000 with an increase of $15000, which points out that wages are increased by 50%. Overall
total costs are increased by 43%. Percentage of total cost to sales is 80.4% and 82.8% in 2012
and 2013 respectively. Net profit percentage is 19.6% in 2013 and 17.2% in 2013 which
indicates that overall net profit margin is increased.12.
a. Cash Flow:
QRS Co. Motor vehicle expense account
Cost–benefit analysis using
Budget versus Actual Variance Reporting

October 2019
Month
Existing
Estimate Change to
Effect on:
Income
Effect on:
Expenses
Total Cash Out
Flow
July 700 - - 700
Aug 750 - - 750
Sept 800 - - 800
Oct 900 - - 900
Nov 950 830 120 - 830
Dec 800 680 120 - 680
Jan 800 680 120 - 680
Feb 800 680 120 - 680
Mar 800 680 120 - 680
Apr 800 680 120 - 680
May 800 680 120 - 680
June 800 680 120 - 680
Total 9700 5590 960 - 8740
b. The effect of change in income and expenses as calculated in cash flow describes that
estimated expenses is changed and this change is favourable(income) or unfavourable(expenses).
In given case existing estimated motor vehicle expenses are changed in actual and such changes
are favourable which leads to effect on income. By analysis of cash flow entity can assess actual
changes in cash flow and identify whether such change is favourable or not (Bernile and
Lyandres, 2011).
13.
There are various types of ratios that are used to measure financial stability of an
organisation. These are Debt equity, interest coverage, net cash transition period and debt to
market cap proportion. The most appropriate and widely accepted ratio to measure financial
stability is debt to equity ratio. It is highly considered as the tool which can represent the actual
financial stability of the enterprise. According to it organisations should spend external funds

more than internal funds as debts are required to be repaid and the equities can be retained for
problematic situations such as lack of monetary resources.
14.
XYZ Ltd
Financial Statement Extract
As at 30.6.2019
Item
Total assets $1,500,000
Current assets $300,000
Total liabilities $250,000
Profit $200,000
Debt Ratio Formula: Total Liabilities/ Total Assets
250000/1500000
16.67%
15.
According to the given report the analysis or extract report should be prepared after
completion of a financial year. Financial management process is a procedure which includes
period of preparing financial reports in current financial year and then analysing it by ratio
analysis and other methods in next financial year. This kind of report must be prepared at the
next financial year as the ratios of the company can be compared with industry averages after
completion of a whole accounting period. If a company is engaged in evaluation of financial
results at the end of an accounting year, this report can even be prepared at the end of an
accounting period as well.
16.
Financial Potential: $33000
Accumulated surplus $100,000
Business Activity Statement
XYZ company Cash Basis

Period: From....To........ . Date: xx/xx/xxxx
Tax Computation:
Total Accumulated Surplus $ 100000
Accumulated Tax@30% Amount $ 30000
Tax is charged @30% and there is no contingencies cash expected. Accumulated surplus
is $100000 which is taxable whereas Financial potential amounting $33,000 annually for the
previous three years is irrelevant for tax calculation.
17.
There are various reporting deadlines which are compulsory to followed by the business
organizations of Australia. Some of the most important and rigid includes tax returns, annual
report filing, GST returns fillings FBT fillings etc. If client fails to adequate file these obligatory
requirements within time limits then they have to face legal issues. For example, for not filling
tax return or incorrect tax return client has to pay 0.5 percent per month to a maximum of 25 %
of the amount owned (Allen, Hemming and Potter, 2013).
18.
XYZ Company’s Financial Plan Extract
1/7/20xx
Business name XYZ Ltd Notes
Primary contact David Connor
Financial Information sought Provide ongoing financial management plan especially
in the preparation of financial reports and checking
and preparing BAS.
Compliance XYZ is advised to comply with all the requirements of
ATO and ASIC.

Reporting deadlines Provide financial reports before 15 days of accounting year
ends and file all tax returns 25 days before the stimulated
deadline provided by ATO.
19.
Motor Vehicle expenses are business-related expenses that are deductible and can be
claimed by the business. This has resulted in over reporting of tax which would create wrong
forecasting of financial plan.
20.
The client is required to collect and add each and every transaction in the accounting
system because filing taxation reports the organisations should present accurate transactions so
that all the legislations can be followed. The manager has forgotten to collect the receipt of
livestock. This transaction can be added in the accounting system with the help of rectification of
error method. Bank accounts can be set off by formulating a bank reconciliation statement which
helps to determine that all the cash and bank transaction are recorded appropriately or not (Liao,
Liu and Wang, 2011).
21.
Long term loan amount = $ 100000
compounded at = 10%
FV = PVAF (1+i)ⁿ

Annual repayment amount = 100000/3.79078 = 26380
 Loan in an appropriate table showing the zero closing balance at the end of five
years:
Year
Outstanding
Balance Annual Payment Interest Principle Closing Balance
1 100000.00 26380 10000 16380 83620
2 83620 26380 8362 18018 65603
3 65603 26380 6560 19819 45783
4 45783 26380 4578 21801 23982
5 23982 26380 2398 23982 0