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Part A Development of budget Budget of sales and profit Analysis of cash flow and GST Debtor ageing analysis Sales for each item Development of budget notes Various expenses met by the entity during previous year, major expenses were fees paid to the accountant, insurances, rent and advertising. It shall comply with the Corporations Act 2001 and GST regulations as per the Corporations Act 2001 (King et al., 2015). For Houzit Pty Ltd, the management in existence is considered to carry out the budgeting approach in correct manner

Running head: MANAGE FINANCE
Manage finance
Name of the student
Name of the university
Student ID
Author note

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Table of Contents
Assignment 1...................................................................................................................................2
Part A...............................................................................................................................................2
a. Development of budget.........................................................................................................2
b. Development of budget notes...............................................................................................4
Part B...............................................................................................................................................5
1. Statutory compliance for complying with tax......................................................................5
2. Liabilities and compliance as per Corporation Act 2001.....................................................5
3. Software for financial management......................................................................................6
4. Accounting principles...........................................................................................................6
5. Implication of the term probity.............................................................................................7
6. Initiatives and critical dates..................................................................................................7
7. Recommendation for including items...................................................................................8
8. Modified list in context of internal control...........................................................................8
Assessment 2...................................................................................................................................9
a. Budget related issues............................................................................................................9
b. Variance................................................................................................................................9
c. Comparing financial performance......................................................................................11

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d. Recommendation................................................................................................................12
e. Procedure for financial management..................................................................................12
Reference.......................................................................................................................................13

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Assignment 1
Houzit Pty Ltd that is located in Brisbane carries on its operations through 15 retail
chains. Dealing in homeware products, it is the leading retailer that caters to the requirement for
offering renovated and new dwellings in greater Brisbane area. Aim of the task is to prepare the
budget for the entity and compare the same with actual income and expenses to find out the
variances (Sazonov, Lukyanova & Popkova, 2013).
Part A
a. Development of budget
Budget of sales and profit

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Analysis of cash flow and GST
Debtor ageing analysis
Sales for each item

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b. Development of budget notes
 Various expenses met by the entity during previous year, major expenses were fees paid
to the accountant, insurances, rent and advertising. Amount of expenses were amounted
to $ 14,53,525 and the resultant profit amounted to $ 55,246.80 with the sales revenue of
$ 33,62,828.
 Efficient management of the resources will lead to good management of finance and will
help in efficient budget preparation which in turn will minimize the variance amount
among the actual expenses and budgeted expenses. For Houzit Pty Ltd, the management
in existence is considered to carry out the budgeting approach in correct manner except
for some expenses like luxury car tax expenses, interest expenses and bank charges. In
case of other variances the same are negligible. Hence, it can be determined that the
management’s approach regarding budge preparation is efficient (Andre, Lam &
O'Donnell, 2016).
 Assumption made for preparing budgets are as follows –
 There will be fall in the gross profit by 1% as it is estimated that sales can be grown at the
cost of lowering the price of sales.
 Sales rate growth will be maintained as per the previous year
 Rate of inflation will go up by 4% each year

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 Budget is required to be analysed as well as compared with actual expenses on
continuous basis at periodical interval. In addition, at the time of preparing the budget the
preparer shall consider the market demand, industry scenario and economic scenario
(Berk et al., 2013).
Part B
1. Statutory compliance for complying with tax
Different regulation and rules are applicable to the corporations carrying on business in
Australia. These regulations and rules shall comply with by corporations to collect adequate
amount of tax from the firms earning profits. In addition, Houzit is liable for paying fringe
benefit tax, superannuation tax and luxury car tax for financial year 2019/20. Further, the entity
pays 9.5% superannuation on total wages payment for the workers. It is further stated that ATO
requires that an entity shall make a payment to superannuation on behalf of the employees to
maintain flow of earnings after retirement continually. In addition, the firm shall pay 4.75%
payroll tax for while the amount of wage is more than $850,000. It shall also pay luxury car tax
at 33% and fringe benefit tax (Ato.gov.au, 2019).
Computation of tax

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2. Liabilities and compliance as per Corporation Act 2001
The corporation those are registered with ASX shall comply with regulations mentioned
below as per Corporation Act 2001 –
 It shall prepare financial report in accordance with the accounting standards as prescribed
 It shall provide the debtors with actual records in context of its performances to allow
them assessing the firm’s financial viability
 Firm’s capital must be used efficiently to meet the liabilities (Legislation.gov.au, 2019).
3. Software for financial management
As it is mentioned by Houzit, their existing software is not compatible with analysis of
the expenses and revenues and projecting the profit is difficult, it must switch to new software
that will be able to resolve the issues. Software those can be used to resolve these issues are as
follows –
 MYOB – it is easy to use and simple and is used largely by the SMEs. Further the same is
focussed on the business procedures as well as its work flows. Moreover MYOB is ready
with GST and can carry out the computation of GST (Curtis, 2015).
 XERO – It is simple and can be used easily and the futures can be extended easily for
enhancing its usefulness. This is the cloud computing software and can carry out
reconciliation, preparation of invoices, sending quotes, creating expense claims and
recording the receipts (King, 2015).
Analysing 2 software it can be stated that Houzit shall use MYOB software as the same is
easy to use and simple for installation compared to XERO.

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4. Accounting principles
a. Matching principle – it determines that all the expenses shall matched in same accounting
period with the revenues it assists in earning. Matching principle combines with accrual
accounting where expenses and revenues are reported soon after they are incurred
irrespective of whether the cash is paid or received for the same or not (He & Shan,
2014).
b. Accounting groups – it involves grouping of same types of accounts into one group. It
helps in differentiating account groups required for preparation of budget. Main reason
for the same is that in case the income items are added in expenses, the budget in whole
will be misstated (Henttu-Aho & Järvinen, 2013).
c. Time periods – it is the differentiation of accounting into different periods covering
quarter, year or month. In case financial transactions are not segregated into appropriate
time periods, transactions with its amounts will be reported into another period (Henttu-
Aho & Järvinen, 2013).
5. Implication of the term probity
Probity term is relative and is not able to be defined in accordance with managerial as
well as economic framework. It takes care for the rights and interest of the community and
protects them. Further, it defends the users and assists them to know the actual position of the
firm (Sazonov, Lukyanova & Popkova, 2013).
6. Initiatives and critical dates
For budget preparation most appropriate date is the right after the preceding year’s
budget release and after comparing the budget with the incomes and expenses in actual. It must
take into account –

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 Houzit shall prepare the budget with the application of new software
 Different assumption those will be considered by the accountant shall have strong bases
so that the same can minimize the gap among the budget amount and actual amount
(Droms & Wright, 2015).
7. Recommendation for including items
Different items to be taken into consideration for preparing next year’s budgets are –
 Improvement of safety and privacy policy that will reduce manipulation level likely to be
taken place in the preparation of budget
 Valuation shall be on true and fair basis and must be realistic for reducing the variance
 Implementation of accounting system must be with the aim of preparing accurate budget
8. Modified list in context of internal control
The entity can use audit trail that will be able to trace transaction related items reported
by the firm. For maintaining internal control recommendations are –
 Financial records shall be reconciled on regular periodic basis that will bring down
errors, frauds and misstatements.
 Financial data shall be accessible to authorised persons only
 Inventories must be physically verified to minimize the fraud
 Dates and numbers for transaction shall be put properly to have easy access (De
Simone, Ege & Stomberg, 2014).

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Assessment 2
a. Budget related issues
i. Significant issues
In case of Houzit, most significant concern is the feasibility of gross margin. Customer’s
spending power will be lowered as the entire nation is suffering from inflation and retail sector is
most visible victim of the same. In addition, to increase the sales discounts are offered at high
rate that in turn minimize the profits. Moreover, rising rate of interest will adversely impact the
cash flows of the entity.
b. Variance
i. Variance in budget

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ii. Variance reasons
Instead of favourable sales variance the entity has unfavourable variance in net profit and
the major reason for the same is high rate of discount. Price of raw material purchased by the
entity also increased as the price went up owing to recession. Further, rising rate of interest will
adversely impact the cash flows. Reason behind the unfavourable store supplies variance was
resource cost increase. Hence, all these factors lead to significant variance for budget as
compared to actual (Hope & Fraser, 2013).

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c. Comparing financial performance
Irrespective of increase in sales bottom line profit has been reduced owing to high
discounts that is offered by the entity are eating up the profits. Moreover, for the slow economic
growth payments made to the employees are considerably high as compared to the 11% industry
average. Further, the firm had to spent higher amount towards advertising for increasing the
demand. However, despite of all these facts the entity was able to earn positive earnings
(Sazonov, Lukyanova & Popkova, 2013).
Ratio analysis –
Debtor ageing analysis and its impact on cash flow

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d. Recommendation
Houzit shall analyse the performance taking into consideration both previous and current
budget that will enable it to understand the trends of expenses. In case it plans to introduce any
new product budget shall be revised until real figures are available in context of sales and
production. Apart from that, for working on any short term project, budget shall be revised to
meet short term goals.
e. Procedure for financial management
It is found that entity is offering large credit period which needs to be reduced to enhance
the liquidity position. It must keep track of the transaction in context of issuing invoice through
using the automated system for managing credit. In addition, the wage payment shall be revised
and instead they can introduce performance basis incentives. Further, for tracking required data
and processing the financial management efficiently it must implement MYOB accounting
software.

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Reference
Andre, S.M., Lam, M. & O'Donnell, M., (2016). Budgetary Slack: Exploring the Effect of
Different Types, Directions, and Repeated Attempts of Influence Tactics on Padding a
Budget. Academy of Accounting and Financial Studies Journal, 20(3), p.147.
Ato.gov.au., (2019). Working out the LCT on an import. [online] Available at:
https://www.ato.gov.au/Business/Luxury-car-tax/Working-out-the-LCT-amount/
Working-out-the-LCT-on-an-import/ [Accessed 02 Oct. 2019].
Berk, J., DeMarzo, P., Harford, J., Ford, G., Mollica, V. & Finch, N., (2013). Fundamentals of
corporate finance. Pearson Higher Education AU.
Curtis, V., (2015). MYOB Software for Dummies-Australia. John Wiley & Sons.
De Simone, L., Ege, M.S. & Stomberg, B., (2014). Internal control quality: The role of auditor-
provided tax services. The Accounting Review, 90(4), pp.1469-1496.
Droms, W.G. & Wright, J.O., (2015). Finance and accounting for nonfinancial managers: All
the basics you need to know. Basic Books.
HE, W. & SHAN, Y., (2014). International Evidence On the Matching Principle Between
Revenues And Expenses. American Accounting Association. In Annual Meeting and
Conference on teaching and Learning in Accounting. Atlanta, Georgia, August (pp. 2-6).
Henttu-Aho, T. & Järvinen, J., (2013). A field study of the emerging practice of beyond
budgeting in industrial companies: an institutional perspective. European Accounting
Review, 22(4), pp.765-785.

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Hope, J. & Fraser, R., (2013). Beyond budgeting: how managers can break free from the annual
performance trap. Harvard Business Press.
King, A., (2015). Xero soothes auditors on automation.
Legislation.gov.au. (2019). Corporations Act 2001 . [online] Available at:
https://www.legislation.gov.au/Details/C2018C00275 [Accessed 2 Oct. 2018].
Sazonov, S.P., Lukyanova, A.V. & Popkova, E.G., (2013). Towards the Financial Budgeting
Governance in Transitive Economies. World Applied Sciences Journal, 23(11), pp.1538-
1547.