Manage Finance: Budgeting, Financial Management, and Taxation in Australia
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This guide covers budgeting, financial management, and taxation in Australia. It includes a sample sales and profit budget, assumptions for budget preparation, and monitoring and implementation of budget expenditures. It also discusses taxation laws such as Goods and Services Tax, Payroll Tax, Fringe Benefits Tax, and PAYG withholding, as well as accounting principles and probity. Additionally, it provides insights on MYOB and QuickBooks accounting software and the Corporation Act 2001.
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Running head: MANAGE FINANCE
Manage Finance
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Manage Finance
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1MANAGE FINANCE
Table of Contents
Task 1...............................................................................................................................................2
Part1.................................................................................................................................................2
Part 2................................................................................................................................................4
Answer 1..........................................................................................................................................4
Answer 2..........................................................................................................................................4
Answer 3..........................................................................................................................................5
Answer 4..........................................................................................................................................5
Answer 5..........................................................................................................................................6
Answer 6..........................................................................................................................................6
Answer 7..........................................................................................................................................7
Answer 8..........................................................................................................................................7
Task 2...............................................................................................................................................8
Reference.......................................................................................................................................11
Table of Contents
Task 1...............................................................................................................................................2
Part1.................................................................................................................................................2
Part 2................................................................................................................................................4
Answer 1..........................................................................................................................................4
Answer 2..........................................................................................................................................4
Answer 3..........................................................................................................................................5
Answer 4..........................................................................................................................................5
Answer 5..........................................................................................................................................6
Answer 6..........................................................................................................................................6
Answer 7..........................................................................................................................................7
Answer 8..........................................................................................................................................7
Task 2...............................................................................................................................................8
Reference.......................................................................................................................................11
2MANAGE FINANCE
Task 1
Part1
SALES and
PROFIT
BUDGET
2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
Revenue 100% 20% 24% 26% 30%
Sales $16,971,236 $3,394,248 $4,073,097 $4,412,521 $5,091,370
– Cost of Goods
Sold $9,673,604 $1,934,721 $2,321,665 $2,515,137 $2,902,081
Gross Profit $7,297,632 $1,459,527 $1,751,432 $1,897,384 $2,189,289
Gross Profit % 43% 43% 43% 43% 43%
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 $170,000 $42,500 $42,500 $42,500 $42,500
– Insurance $13,390 $3,348 $3,348 $3,348 $3,348
– Store Supplies $3,749 $937 $937 $937 $937
– Advertising $350,000 $200,000 $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 $2,640,508 $660,127 $660,127 $660,127 $660,127
– 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 $12,000 $12,000 $0 $0 $0
– Fringe Benefits
Tax $28,000 $7,000 $7,000 $7,000 $7,000
– Superannuation $187,020 $37,404 $44,885 $48,625 $56,106
– Wages & Salaries $2,078,000 $415,600 $498,720 $540,280 $623,400
– Payroll Tax $98,705 $19,741 $23,689 $25,663 $29,611
Task 1
Part1
SALES and
PROFIT
BUDGET
2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
Revenue 100% 20% 24% 26% 30%
Sales $16,971,236 $3,394,248 $4,073,097 $4,412,521 $5,091,370
– Cost of Goods
Sold $9,673,604 $1,934,721 $2,321,665 $2,515,137 $2,902,081
Gross Profit $7,297,632 $1,459,527 $1,751,432 $1,897,384 $2,189,289
Gross Profit % 43% 43% 43% 43% 43%
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 $170,000 $42,500 $42,500 $42,500 $42,500
– Insurance $13,390 $3,348 $3,348 $3,348 $3,348
– Store Supplies $3,749 $937 $937 $937 $937
– Advertising $350,000 $200,000 $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 $2,640,508 $660,127 $660,127 $660,127 $660,127
– 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 $12,000 $12,000 $0 $0 $0
– Fringe Benefits
Tax $28,000 $7,000 $7,000 $7,000 $7,000
– Superannuation $187,020 $37,404 $44,885 $48,625 $56,106
– Wages & Salaries $2,078,000 $415,600 $498,720 $540,280 $623,400
– Payroll Tax $98,705 $19,741 $23,689 $25,663 $29,611
3MANAGE FINANCE
– Workers’
Compensation $41,560 $8,312 $9,974 $10,806 $12,468
Total Expenses $5,841,371 $1,458,676 $1,395,209 $1,444,476 $1,543,010
Net Profit (Before
Tax) $1,456,261 $851 $356,222 $452,908 $646,280
Income Tax $436,878 $255 $106,867 $135,872 $193,884
Net Profit $1,019,383 $596 $249,356 $317,036 $452,396
CASH FLOW
ANALYSIS – GST 2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
GST Collected $1,697,124 $339,425 $407,310 $441,252 $509,137
Less GST Paid $1,281,358 $256,272 $307,526 $333,153 $12,480
GST Payable $415,765 $83,153 $99,784 $108,099 $496,657
AGED
DEBTORS
BUDGET
TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4
Sales 16971236 3394247.63 4073096.73 4412521.274 5091370.368
% Debtors
Sales 20% 20% 20% 20%
Total Debtors 100% $678,849 $814,619 $882,504 $1,018,274
Current 84.00% $570,233 $684,280 $741,303 $855,350
30 Days 10% $67,885 $81,462 $88,250 $101,827
60 Days 5% $33,942 $40,731 $44,125 $50,914
90 Days 1% $6,788 $8,146 $8,825 $10,183
– Workers’
Compensation $41,560 $8,312 $9,974 $10,806 $12,468
Total Expenses $5,841,371 $1,458,676 $1,395,209 $1,444,476 $1,543,010
Net Profit (Before
Tax) $1,456,261 $851 $356,222 $452,908 $646,280
Income Tax $436,878 $255 $106,867 $135,872 $193,884
Net Profit $1,019,383 $596 $249,356 $317,036 $452,396
CASH FLOW
ANALYSIS – GST 2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
GST Collected $1,697,124 $339,425 $407,310 $441,252 $509,137
Less GST Paid $1,281,358 $256,272 $307,526 $333,153 $12,480
GST Payable $415,765 $83,153 $99,784 $108,099 $496,657
AGED
DEBTORS
BUDGET
TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4
Sales 16971236 3394247.63 4073096.73 4412521.274 5091370.368
% Debtors
Sales 20% 20% 20% 20%
Total Debtors 100% $678,849 $814,619 $882,504 $1,018,274
Current 84.00% $570,233 $684,280 $741,303 $855,350
30 Days 10% $67,885 $81,462 $88,250 $101,827
60 Days 5% $33,942 $40,731 $44,125 $50,914
90 Days 1% $6,788 $8,146 $8,825 $10,183
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4MANAGE FINANCE
Budget notes:
I. Identification of reasons for previous profit or loss
The budget of Houzit Pty Ltd is prepared for the year 2011-12. For the preparation of the
budget last four years financial statement are analysed. By analysing the financial statement of
the previous yearthe explanation for the profit or loss of the previous is obtained. The net profit
of the company is in the uptrend as the income statement is reflecting such. Due to stable sales
growth rate of 8% the net profit is increased. As the increase in expenditure is less that the
increase in Gross profit margin, the increase in the expenditure has not affected the company so
it has contributed to the profits for the year.
It can be said that the constant growth of sales by 8% and the increased rate of gross
profits is contributing to the operating profits because of the growth in gross profit is higher than
the increased in expenditure.
II. The comment on effectiveness of the existing financial management approach
Effective an efficient management of the business operation are the prime objective of
every organisation. This can be achieved by financial management. The senior level of the
management perform as an expert function. Large portion of the funds are blocked outside the
organization observed by the current financial management. The main objective of developing
the business plan is to manage the debtors effectively in the context of the business plan
summary. the upcoming year is expected to rough for the company as analysed by the economic
experts. In order to make the financial management more effective the company should
Budget notes:
I. Identification of reasons for previous profit or loss
The budget of Houzit Pty Ltd is prepared for the year 2011-12. For the preparation of the
budget last four years financial statement are analysed. By analysing the financial statement of
the previous yearthe explanation for the profit or loss of the previous is obtained. The net profit
of the company is in the uptrend as the income statement is reflecting such. Due to stable sales
growth rate of 8% the net profit is increased. As the increase in expenditure is less that the
increase in Gross profit margin, the increase in the expenditure has not affected the company so
it has contributed to the profits for the year.
It can be said that the constant growth of sales by 8% and the increased rate of gross
profits is contributing to the operating profits because of the growth in gross profit is higher than
the increased in expenditure.
II. The comment on effectiveness of the existing financial management approach
Effective an efficient management of the business operation are the prime objective of
every organisation. This can be achieved by financial management. The senior level of the
management perform as an expert function. Large portion of the funds are blocked outside the
organization observed by the current financial management. The main objective of developing
the business plan is to manage the debtors effectively in the context of the business plan
summary. the upcoming year is expected to rough for the company as analysed by the economic
experts. In order to make the financial management more effective the company should
5MANAGE FINANCE
efficiently manage the debtors in the effected period and evaluation to smoothen the cash
collection and reducing the working capital requirements. Based on the current analysis it can be
said that the financial managers must view and manage the debtors more effectively.
III. Assumptions made for preparing the budget
For the future periodan estimate financial performance of the company is prepared which
is called budget. After considering the necessary assumptions the estimates are made. The
assumption are as discussed here under.
It is assumed that the company is able to earn similar growth rate will be maintained in
the future;
It Is assumed that the inflation rate for expenditures to be 4%;
It is assumed that the business will be able to preserve the sales growth rate by
providing increased after sales service;
The gross profit rate of the company is reduced by 1% with the assumption that it will
help the company to maintain the same growth rate;
It is assumed that expenditures that will be incurred consistently in different quarters;
It is assumed that certain expenditure will be incurred in accordance with the sales of
each quarter.
IV. Monitoringand implementation of budget expenditures
It is the crucial step that determines the effectiveness of the budget process are
implementation and monitoring procedures. The distribution of the budgets are held for
different cost centres in an efficient manner. To condemn any discrepancies with the
efficiently manage the debtors in the effected period and evaluation to smoothen the cash
collection and reducing the working capital requirements. Based on the current analysis it can be
said that the financial managers must view and manage the debtors more effectively.
III. Assumptions made for preparing the budget
For the future periodan estimate financial performance of the company is prepared which
is called budget. After considering the necessary assumptions the estimates are made. The
assumption are as discussed here under.
It is assumed that the company is able to earn similar growth rate will be maintained in
the future;
It Is assumed that the inflation rate for expenditures to be 4%;
It is assumed that the business will be able to preserve the sales growth rate by
providing increased after sales service;
The gross profit rate of the company is reduced by 1% with the assumption that it will
help the company to maintain the same growth rate;
It is assumed that expenditures that will be incurred consistently in different quarters;
It is assumed that certain expenditure will be incurred in accordance with the sales of
each quarter.
IV. Monitoringand implementation of budget expenditures
It is the crucial step that determines the effectiveness of the budget process are
implementation and monitoring procedures. The distribution of the budgets are held for
different cost centres in an efficient manner. To condemn any discrepancies with the
6MANAGE FINANCE
budgeted expenditures the actual expenditure should be tracked consistently, as this will
help in the assertion of the management to control the cost.so that the management is able to
make remedial action to stop the over budgeting.
Question 1
Goods and service tax is a broad-based tax which is taxable on the consumption goods, items or
services in Australia. The GST tax rate is 10% on most goods in the country. GST credits can be
claimed on reporting and paying the GST on a regular basis.
Payroll Tax is implemented upon the wages or salary paid to a worker or an employee. The
wages or salary is only deductable when it exceeds the particular amount. It is a self assessed,
general purpose tax which is collected by the taxation department of the state and the territory.
Fringe Benefits Tax is payable by the employers. This tax signifies the benefits that are being
paid to the employees. This tax includes all the expenses which is not included in the salary but
still being enjoyed by the employee. This tax is separate to income tax.
PAYG withholding is the total amount of payment which the employer pays to its employees or
workers. This is done in order to show the liability of the payees at the year ending.
The Corporation Act 2001 is a legislation made and amended for the commonwealth of
Australia. This act implements and regulates the companies and entities like sole trader or
partnership structured business of Australia. This act is the base model of the Australian
Corporations Law.
budgeted expenditures the actual expenditure should be tracked consistently, as this will
help in the assertion of the management to control the cost.so that the management is able to
make remedial action to stop the over budgeting.
Question 1
Goods and service tax is a broad-based tax which is taxable on the consumption goods, items or
services in Australia. The GST tax rate is 10% on most goods in the country. GST credits can be
claimed on reporting and paying the GST on a regular basis.
Payroll Tax is implemented upon the wages or salary paid to a worker or an employee. The
wages or salary is only deductable when it exceeds the particular amount. It is a self assessed,
general purpose tax which is collected by the taxation department of the state and the territory.
Fringe Benefits Tax is payable by the employers. This tax signifies the benefits that are being
paid to the employees. This tax includes all the expenses which is not included in the salary but
still being enjoyed by the employee. This tax is separate to income tax.
PAYG withholding is the total amount of payment which the employer pays to its employees or
workers. This is done in order to show the liability of the payees at the year ending.
The Corporation Act 2001 is a legislation made and amended for the commonwealth of
Australia. This act implements and regulates the companies and entities like sole trader or
partnership structured business of Australia. This act is the base model of the Australian
Corporations Law.
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7MANAGE FINANCE
Question 2
Among the financial software available in Australia, MYOB and QuickBooks are two of
the best software widely used by the small and big entities of the country. The simple user
interface and the cheap price make this accounting software more attracting to the users. The
additional security and the updated accounting information make the accounting job easy to
analyze.
Principles of Accounting is based upon the guideline of GAAP or the Generally
Accepted Accounting Principles. It is used as a standard method of accounting and is acceptable
by various countries. This particular principle contains ten sub principles which should be
maintained in order to implementation of the principle. These are: economic entity assumption,
monetary unit assumption, time period assumption, cost principle, full disclosure principle, going
concern principle, matching principle, revenue recognition principle, materiality and
conservatism.
Probity means to maintain proper honesty, integrity and priority while stating the
financial status of any company. It is expected that the accounting team will show the mentioned
perspective while preparing the financial statements of any company. So the budget making
process should follow the all the requirements stated in probity which means the current financial
state of the company should be analysed, the issues of the companies regarding its operation
should be found and the upcoming actions regarding the operation of the company should be
stated in an elaborate way.
Question 2
Among the financial software available in Australia, MYOB and QuickBooks are two of
the best software widely used by the small and big entities of the country. The simple user
interface and the cheap price make this accounting software more attracting to the users. The
additional security and the updated accounting information make the accounting job easy to
analyze.
Principles of Accounting is based upon the guideline of GAAP or the Generally
Accepted Accounting Principles. It is used as a standard method of accounting and is acceptable
by various countries. This particular principle contains ten sub principles which should be
maintained in order to implementation of the principle. These are: economic entity assumption,
monetary unit assumption, time period assumption, cost principle, full disclosure principle, going
concern principle, matching principle, revenue recognition principle, materiality and
conservatism.
Probity means to maintain proper honesty, integrity and priority while stating the
financial status of any company. It is expected that the accounting team will show the mentioned
perspective while preparing the financial statements of any company. So the budget making
process should follow the all the requirements stated in probity which means the current financial
state of the company should be analysed, the issues of the companies regarding its operation
should be found and the upcoming actions regarding the operation of the company should be
stated in an elaborate way.
8MANAGE FINANCE
.
Part 2
Answer 1
According to the Income Tax Assessment Act 1997, the company is bound to pay taxes
based on the various provision stated on this legislation. The calculation of payable taxes needs
to be done in an elaborate way to avoid any other additional penalties. The company has to pay
income tax whenever it purchases any new assets. The payable income tax is calculated upon the
30% of the company’s profit. The GST is payable by the company upon the payments that are
made to the suppliers (Renz, 2016). The amount of income tax for the company works as an
indicator of incomes and the deductions of the company. The final calculation of payable income
tax for the company is being prepared after producing several other reports like GST, annual
returns and others.
Answer 2
If the company has to register any new assets or property in the business, it has to follow
the rules and regulations which is stated in the Corporation Act 2001. According to the act, the
company must obtain a resident director in order to register any new assets. The permanent
address of the office of the organisation should also be enlisted in the registration form. Other
requirements for registering new assets of the company under the Corporation Act is to provide
the records of the financial statements of the company and the recent changes that has been
occurred in the management team of the company which is not yet recorded in the financial
.
Part 2
Answer 1
According to the Income Tax Assessment Act 1997, the company is bound to pay taxes
based on the various provision stated on this legislation. The calculation of payable taxes needs
to be done in an elaborate way to avoid any other additional penalties. The company has to pay
income tax whenever it purchases any new assets. The payable income tax is calculated upon the
30% of the company’s profit. The GST is payable by the company upon the payments that are
made to the suppliers (Renz, 2016). The amount of income tax for the company works as an
indicator of incomes and the deductions of the company. The final calculation of payable income
tax for the company is being prepared after producing several other reports like GST, annual
returns and others.
Answer 2
If the company has to register any new assets or property in the business, it has to follow
the rules and regulations which is stated in the Corporation Act 2001. According to the act, the
company must obtain a resident director in order to register any new assets. The permanent
address of the office of the organisation should also be enlisted in the registration form. Other
requirements for registering new assets of the company under the Corporation Act is to provide
the records of the financial statements of the company and the recent changes that has been
occurred in the management team of the company which is not yet recorded in the financial
9MANAGE FINANCE
statement. The company should report all this necessary data to the higher authority in order to
get a valid registration on their assets.
Answer 3
In Australia, several software is being used by several companies to maintain the
accounting and finance of the company. These software are selected regarding the demands of
the company and the usability and simplicity of the applications. The price of the software can
also be a major factor for many companies. Among the accounting software that are available in
the market, MYOB and Quick Book are two of the most popular accounting software that are
widely used by the companies in Australia for accounting purpose. Both of these software cost
low in price and the usability and simplicity of these are up to the market standard. The security
and encryption level of Quick Book can be related with the security structure of a bank. But
MYOB can also offer the critical data analysis out of the financial condition of the firm which
helps the company to find any issue regarding its business and fix it as soon as possible. The
software also works perfectly both in online and offline mode. Both of these softwares can
provide regular updates for the recent development taxes as both of them are complied with
ATO.
Answer 4
The matching principle is used to match the expenses and the revenue regarding it after a
certain interval of time. The guideline of this principle is widely used to monitor the expenses of
the company and whether is the expenses has been surpassed the revenue gained from it or not. It
is very important to follow the matching principle as it can be very helpful at the time of
statement. The company should report all this necessary data to the higher authority in order to
get a valid registration on their assets.
Answer 3
In Australia, several software is being used by several companies to maintain the
accounting and finance of the company. These software are selected regarding the demands of
the company and the usability and simplicity of the applications. The price of the software can
also be a major factor for many companies. Among the accounting software that are available in
the market, MYOB and Quick Book are two of the most popular accounting software that are
widely used by the companies in Australia for accounting purpose. Both of these software cost
low in price and the usability and simplicity of these are up to the market standard. The security
and encryption level of Quick Book can be related with the security structure of a bank. But
MYOB can also offer the critical data analysis out of the financial condition of the firm which
helps the company to find any issue regarding its business and fix it as soon as possible. The
software also works perfectly both in online and offline mode. Both of these softwares can
provide regular updates for the recent development taxes as both of them are complied with
ATO.
Answer 4
The matching principle is used to match the expenses and the revenue regarding it after a
certain interval of time. The guideline of this principle is widely used to monitor the expenses of
the company and whether is the expenses has been surpassed the revenue gained from it or not. It
is very important to follow the matching principle as it can be very helpful at the time of
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10MANAGE FINANCE
preparing budget for forecasting the upcoming expenses. To simplify the procedure of making
budget, certain accounting groups are being created and organised in a particular sequence so
that the data revealed in the statement can be utilised properly and the usefulness of the budget
can be increased. To help to figure out the actual financial condition of any company and to help
making the final budget, several other short term budgets can also be created.
Answer 5
The term probity means to prepare the budget with proper honesty, integrity and priority.
For preparing a budget of any company, the management team should be totally devoted with the
work as the budget will work as a reference for the upcoming operations of the company. So the
budget making process should follow the all the requirements stated in probity which means the
current financial state of the company should be analysed, the issues of the companies regarding
its operation should be found and the upcoming actions regarding the operation of the company
should be stated in an elaborate way (Obaidullah, 2017). Thus the probity ensures that the budget
is made with a dignified manner and attention that it deserves. Following proper probity means
to lessen the chances of making any error or intentional mistakes or to exaggerate or surpass any
important financial data of the company. This also ensures that the analysis of the current
financial condition and forecasting the upcoming operating is done correctly and sincerely.
Answer 6
According to the budget of Houzit Pvt Ltd, the company should reduce the rate of gross
profit but 1% in order to keep up the growth in a steady way. The company should also increase
the advertisement budget by 70% to gain more markets and clients for getting more profits in the
upcoming year. The amount of salary and wages distributed to the employees and workers
should also be increased to maintain the satisfaction and the motivation of the employees in the
preparing budget for forecasting the upcoming expenses. To simplify the procedure of making
budget, certain accounting groups are being created and organised in a particular sequence so
that the data revealed in the statement can be utilised properly and the usefulness of the budget
can be increased. To help to figure out the actual financial condition of any company and to help
making the final budget, several other short term budgets can also be created.
Answer 5
The term probity means to prepare the budget with proper honesty, integrity and priority.
For preparing a budget of any company, the management team should be totally devoted with the
work as the budget will work as a reference for the upcoming operations of the company. So the
budget making process should follow the all the requirements stated in probity which means the
current financial state of the company should be analysed, the issues of the companies regarding
its operation should be found and the upcoming actions regarding the operation of the company
should be stated in an elaborate way (Obaidullah, 2017). Thus the probity ensures that the budget
is made with a dignified manner and attention that it deserves. Following proper probity means
to lessen the chances of making any error or intentional mistakes or to exaggerate or surpass any
important financial data of the company. This also ensures that the analysis of the current
financial condition and forecasting the upcoming operating is done correctly and sincerely.
Answer 6
According to the budget of Houzit Pvt Ltd, the company should reduce the rate of gross
profit but 1% in order to keep up the growth in a steady way. The company should also increase
the advertisement budget by 70% to gain more markets and clients for getting more profits in the
upcoming year. The amount of salary and wages distributed to the employees and workers
should also be increased to maintain the satisfaction and the motivation of the employees in the
11MANAGE FINANCE
work so that the production of the company can also be improved. The incentives of the
employees can also be increased in order to motivate them to increases their production level.
Answer 7
Apart from the items that are listed in the budget, there are few other recommendation which can
be considered for the budget for further improvements. These recommendations are also useful
in case of any financial emergency faced by the company and to manage its expenses in
accordance with the needs of the company. A company should always maintain its financial
viability to its operation to make stable growth. The additional recommendations are:-
The loans should be paid in time to reduce the amount of extra interest charges paid by
the company.
The distribution system of wages of the company should be improved and more
systematic in order to avoid any dishonesty in terms of payment made by the senior
employees.
The discounts given by the company should be reduced for the long term interests.
Answer 8
The risk management of any company is very important in order to compensate any
unexpected loss regarding the operations of the company. Every business operation involves
some kind of risks. Thus it is very important to establish a risk management team and short out
some plans regarding managing the risks that can evolve during the operations of the company.
Some of the suggestions regarding the risk management of Houzit Pvt Ltd are:-
The customer base of the company should be secured in order to keep a track to the
demand and probable growth in the user base of the company.
work so that the production of the company can also be improved. The incentives of the
employees can also be increased in order to motivate them to increases their production level.
Answer 7
Apart from the items that are listed in the budget, there are few other recommendation which can
be considered for the budget for further improvements. These recommendations are also useful
in case of any financial emergency faced by the company and to manage its expenses in
accordance with the needs of the company. A company should always maintain its financial
viability to its operation to make stable growth. The additional recommendations are:-
The loans should be paid in time to reduce the amount of extra interest charges paid by
the company.
The distribution system of wages of the company should be improved and more
systematic in order to avoid any dishonesty in terms of payment made by the senior
employees.
The discounts given by the company should be reduced for the long term interests.
Answer 8
The risk management of any company is very important in order to compensate any
unexpected loss regarding the operations of the company. Every business operation involves
some kind of risks. Thus it is very important to establish a risk management team and short out
some plans regarding managing the risks that can evolve during the operations of the company.
Some of the suggestions regarding the risk management of Houzit Pvt Ltd are:-
The customer base of the company should be secured in order to keep a track to the
demand and probable growth in the user base of the company.
12MANAGE FINANCE
The discounts which are given to the clients should be registered in the invoice bill so
that the total rebate given can be monitored.
The cash balance should also be verified along with the registered cash.
The total amount of overtime done by employees and workers should always be
authorized by the service manager.
The workers should always be paid when the work is completely done and thus the
invoice for the wage and salary should always be signed by them in order to avoid the
unnecessary expenditure.
The assets of the company should be indicated with a unique code in order to monitor
over the assets.
It is important to track who are currently working at the company and who had left to
track the clarity of the wages system.
The debtors’ balance should be updated every month.
The reconciliation of the cash balance should be done by individuals so that the report
cannot be biased.
Task 2
Houzit Pty Ltd
Variance to Budget
1 Quarter ended September-2017
Actual Results Budget-Qx Actual-Qx $ %
Variance F or U
Variance
Sales $3,394,247.63 $3,371,200.00 -$23,047.63 -1% U
– Cost Of
Goods Sold $1,934,721.05 $1,955,296.00 -$20,574.95 -1% U
Gross Profit $1,459,526.59 $1,415,904.00 -$43,622.59 -3% U
Gross Profit % 43% 42% -1% -2% U
Expenses
The discounts which are given to the clients should be registered in the invoice bill so
that the total rebate given can be monitored.
The cash balance should also be verified along with the registered cash.
The total amount of overtime done by employees and workers should always be
authorized by the service manager.
The workers should always be paid when the work is completely done and thus the
invoice for the wage and salary should always be signed by them in order to avoid the
unnecessary expenditure.
The assets of the company should be indicated with a unique code in order to monitor
over the assets.
It is important to track who are currently working at the company and who had left to
track the clarity of the wages system.
The debtors’ balance should be updated every month.
The reconciliation of the cash balance should be done by individuals so that the report
cannot be biased.
Task 2
Houzit Pty Ltd
Variance to Budget
1 Quarter ended September-2017
Actual Results Budget-Qx Actual-Qx $ %
Variance F or U
Variance
Sales $3,394,247.63 $3,371,200.00 -$23,047.63 -1% U
– Cost Of
Goods Sold $1,934,721.05 $1,955,296.00 -$20,574.95 -1% U
Gross Profit $1,459,526.59 $1,415,904.00 -$43,622.59 -3% U
Gross Profit % 43% 42% -1% -2% U
Expenses
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13MANAGE FINANCE
– Accounting
Fees $2,500.00 $2,500.00 $0.00 0% F
– Interest
Expense $21,127.00 $28,150.00 -$7,023.00 -33% U
– Bank
Charges $400.00 $380.00 $20.00 5% F
– Depreciation $42,500.00 $42,500.00 $0.00 0% F
– Insurance $3,347.50 $3,348.00 -$0.50 0% F
– Store
Supplies $937.25 $790.00 $147.25 16% U
– Advertising $200,000.00 $150,000.00 $50,000.00 25% F
– Cleaning $3,256.45 $3,325.00 -$68.55 -2% U
– Repairs &
Maintenance $16,068.00 $16,150.00 -$82.00 -1% U
– Rent $660,127.00 $660,127.00 $0.00 0% F
– Telephone $2,999.36 $3,100.00 -$100.64 -3% U
– Electricity
Expense $5,356.00 $5,245.00 $111.00 2% F
– Luxury Car
Tax $12,000.00 $12,000.00 $0.00 0% U
– Fringe
Benefits Tax $7,000.00 $7,000.00 $0.00 0% F
–
Superannuation $37,404.00 $37,404.00 $0.00 0% F
– Wages &
Salaries $415,600.05 $410,500.00 $5,100.05 1% F
– Payroll Tax $19,741.00 $19,741.00 $0.00 0% F
– Workers’
Compensation $8,312.00 $8,312.00 $0.00 0% F
Total
Expenses $1,458,675.62 $1,410,572.00 $48,103.62 3% F
Net Profit
(Before Tax) $850.97 $5,333.00 $4,482.03 527% U
Income Tax $255.29 $1,600.00 -$1,344.71 -527% F
Net Profit $595.68 $3,733.00 $3,137.32 527% U
Particulars 2015/16 2016/17 2017/16
Trade Debtors 850,000 975,000 1018274
– Accounting
Fees $2,500.00 $2,500.00 $0.00 0% F
– Interest
Expense $21,127.00 $28,150.00 -$7,023.00 -33% U
– Bank
Charges $400.00 $380.00 $20.00 5% F
– Depreciation $42,500.00 $42,500.00 $0.00 0% F
– Insurance $3,347.50 $3,348.00 -$0.50 0% F
– Store
Supplies $937.25 $790.00 $147.25 16% U
– Advertising $200,000.00 $150,000.00 $50,000.00 25% F
– Cleaning $3,256.45 $3,325.00 -$68.55 -2% U
– Repairs &
Maintenance $16,068.00 $16,150.00 -$82.00 -1% U
– Rent $660,127.00 $660,127.00 $0.00 0% F
– Telephone $2,999.36 $3,100.00 -$100.64 -3% U
– Electricity
Expense $5,356.00 $5,245.00 $111.00 2% F
– Luxury Car
Tax $12,000.00 $12,000.00 $0.00 0% U
– Fringe
Benefits Tax $7,000.00 $7,000.00 $0.00 0% F
–
Superannuation $37,404.00 $37,404.00 $0.00 0% F
– Wages &
Salaries $415,600.05 $410,500.00 $5,100.05 1% F
– Payroll Tax $19,741.00 $19,741.00 $0.00 0% F
– Workers’
Compensation $8,312.00 $8,312.00 $0.00 0% F
Total
Expenses $1,458,675.62 $1,410,572.00 $48,103.62 3% F
Net Profit
(Before Tax) $850.97 $5,333.00 $4,482.03 527% U
Income Tax $255.29 $1,600.00 -$1,344.71 -527% F
Net Profit $595.68 $3,733.00 $3,137.32 527% U
Particulars 2015/16 2016/17 2017/16
Trade Debtors 850,000 975,000 1018274
14MANAGE FINANCE
Sales 14,550,100 15,714,108 16971236
Debtor Days 21 23 22
Budget Variance
The terms budget variance is denotes the differences between the forecasted budget
results with the actual financial report of the company. If the profits of the organisation or the
operational targets of the company cannot meet the expected amount as stated in the budget, the
amount can be figured out from this variance report. From the analysis of the variance report of
the company, it can be seen that the actual gross profit was 3% less than the amount stated in the
budget report (Kang& Mason, 2016). But the expenses stated in the budget report were 3%
higher than the actual expenses stated in the financial report of the company. The variance in
these two reports can be caused by various reasons, such as:-
If the total expanses increase and the total sales decrease in the actual report than the
budget report then a variance can be observed in the net profit.
As the amount of sales cannot be controlled by the company, the management should
have considered the probable ups and downs of the concurrent economy in order to avoid
the variance.
There are other variances that differed from the budget report to the actual report. The
gross profit declined by 1%.
The cost of goods sold increased by 2%.
The internet expenses increased by 33%.
Sales 14,550,100 15,714,108 16971236
Debtor Days 21 23 22
Budget Variance
The terms budget variance is denotes the differences between the forecasted budget
results with the actual financial report of the company. If the profits of the organisation or the
operational targets of the company cannot meet the expected amount as stated in the budget, the
amount can be figured out from this variance report. From the analysis of the variance report of
the company, it can be seen that the actual gross profit was 3% less than the amount stated in the
budget report (Kang& Mason, 2016). But the expenses stated in the budget report were 3%
higher than the actual expenses stated in the financial report of the company. The variance in
these two reports can be caused by various reasons, such as:-
If the total expanses increase and the total sales decrease in the actual report than the
budget report then a variance can be observed in the net profit.
As the amount of sales cannot be controlled by the company, the management should
have considered the probable ups and downs of the concurrent economy in order to avoid
the variance.
There are other variances that differed from the budget report to the actual report. The
gross profit declined by 1%.
The cost of goods sold increased by 2%.
The internet expenses increased by 33%.
15MANAGE FINANCE
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Reference
Kang, D., & Mason, A. (Eds.). (2016). Macroprudential Regulation of International Finance:
Managing Capital Flows and Exchange Rates. Edward Elgar Publishing.
Obaidullah, M. (2017). Managing Climate Change: The Role of Islamic Finance (No. 2017-1).
The Islamic Research and Teaching Institute (IRTI).
Renz, D. O. (2016). The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Reference
Kang, D., & Mason, A. (Eds.). (2016). Macroprudential Regulation of International Finance:
Managing Capital Flows and Exchange Rates. Edward Elgar Publishing.
Obaidullah, M. (2017). Managing Climate Change: The Role of Islamic Finance (No. 2017-1).
The Islamic Research and Teaching Institute (IRTI).
Renz, D. O. (2016). The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
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