Manage Finances for SIT60316 - Advanced Diploma of Hospitality Management at Australian Ideal College

This assessment requires students to prepare a budget and budget notes for an organisation based on a case study provided. The case study is about Houzit Pty Ltd, a 15 store retail chain located in Brisbane. The assessment is for the unit BSBFIM601 Manage Finances, which is a part of the course SIT60316 - Advanced Diploma of Hospitality Management offered by Australian Ideal College. The assessment coversheet includes a student declaration and an assessor declaration.

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Assessment Submission Sheet
Course SIT60316 - Advanced Diploma of Hospitality Management
Unit BSBFIM601 Manage Finances
Assessor Name
Student Name
Student ID
Due Date
Please read and sign this assessment coversheet and submit it together with your assessment to
your Assessor by the due date.
Student Declaration
I declare that the work submitted is my own, and has not been copied or plagiarised from any person
or source.
I have read the Plagiarism Policy and Assessment Appeal and Reassessment Policy in the Student
Handbook and I understand all the rules and guidelines for undertaking assessments.
I understand that by typing my full name in the student field this is equivalent to a hand-written
signature.
I give permission for my assessment material to be used for continuous improvement purposes.
Student
Signature
Date
Submitted
Assessor Use Only
Assessment Items Result
Task 1 Case Study S NS
Task 2 Report S NS
Task 3 Report S NS
Final Result for this unit C NYC
Student Declaration: I declare that I have been
assessed in this unit, and I have been advised of
my result. I am also aware of my appeal rights.
Assessor Declaration: I declare that I have
conducted a fair, valid, reliable and flexible
assessment with this student, and I have
provided appropriate feedback.
Signature Signatur
e
Date
Assessor’s Final Comments
AIC-UP-BSBFIM601-V4.0 Page 1 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Task 1
Assessment Instructions
This is an individual assessment. This assessment requires you to determine the requirements to
undertake budgeting, financial forecasting and reporting requirements for an organisation. You will also
need to review the case study provided and prepare a budget (in electronic spreadsheet format) and
budget notes for distribution and implementation in the organisation.
Procedure
Read the case study.
Analyse the case study information (including business plan summary and previous financial data)
and complete the following.
Develop a sales budget, profit budget, cash flow budget and debtor ageing summary using
electronic spreadsheets (as separate worksheets) making sure each budget is divided into
quarterly periods and that you use previous financial data to determine allocations for
resources.
Ensure each budget you prepare complies with the organisational and policies and
procedures as provided.
Develop budget notes which include:
identification of reasons for previous profits and losses
your comment on the effectiveness of existing financial management approaches
all assumptions and basis that have been made or used to form budgets
any relevant notes regarding implementation and monitoring of budget expenditure.
To be deemed competent you will need to successfully demonstrate the following:
You must provide:
a completed annual budget in a single spread sheet with a separate sheet for each budget
component. You must print out all worksheets and submit to your trainer.
budget notes
evidence you have reviewed the case study information provided by submitting an appropriate
budget with budget notes
AIC-UP-BSBFIM601-V4.0 Page 2 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Task 1
b. Development of budget notes
Identifying the reasons for past profit & losses
On the basis of analysis performed between previous years and upcoming year trend in profits and
losses pertaining to Houzit Pty limited, it has been identified the trend of increasing trend of growth in
sales remains the same for the accounting year 2022 / 2023 despite the fact that the upcoming trading year
would be quite difficult as compared to previous years. The reason behind this increase in sales was the
reduction in prices to ensure similar growth in sales even in the difficult trading conditions. Also, the
advertisement budget has increased for the year 2022 / 2023 through which Houzit would be able to
secure greater market share even in the contracted market, thus accounted for higher expenses and
accordingly losses. Further, to ensure growth in the sales of Houzit, there are higher anticipated
expenditure in terms of wages and salaries in order to encourage better efforts from casual staff through
offering commissions for higher sales made by them. In addition to this, a new product has been added to
the existing product line that is, lighting fixture which is anticipated to have contribution of around 20%
of total sales which acts as an element due to which there are higher profits for Houzit in 2022 / 2023. At
last, the reason for which the profit are in the upcoming year's budget is due to the lower interest expenses
resulting from repayment of principal loan amount.
Therefore, all these reasons listed above contributed towards low profitability of Houzit in an attempt to
maintain the similar sales growth.
Along with this, there are losses attributed to the increase in expenses on account of inflation as
well as luxury car bought by CEO but there is an increasing trend in last many year's gross profit.
Commenting on the effectiveness of existing approaches of financial management
The current financial management approach is quite ineffective which can be explained
through the example that Houzit made unnecessary expense for the purchase of luxury car which is fuel
inefficient and have attracted luxury car tax which is not a profitable deal for Houzit and by avoiding this
expenditure they could save much towards higher profitability. Another, ineffective decision made by
management is that of the increment in advertisement budget which leads to higher expenditure but lower
profitability for the business (Mora and Triana, 2018). So, at this point it could be said that management
could resort to some other strategies in an attempt to maintain sales growth. At last, it could be said that
the decision to lower the prices is not effective in the scenario of increasing expenses as a result of rise in
inflation. Therefore, instead of raising price, the prices has been lowered which doesn't seems to be
effective approach of financial management team at Houzit.
Assumptions and basis made or used for creating budget
There are certain assumptions and basis that are used or made while preparing a budget for 2022 / 2023,
such as the following:
1. All the costs are increased to the extent of rise in inflation that is, 4% followed by their respective
behaviour in previous year.
2. On the basis of sales growth determined for the last three years, the budgeted sales has been increased
by the same proportion that is, 8%.
3. The balance of debtors at the ending of each quarter has been kept at 20% of the sales made during that
particular quarter.
4. It has been assumed that the expenses such as depreciation, bank charges and fringe benefit tax would
remains the same as it was in previous year.
Notes associated with the implementation & monitoring of budget expenditure
1. To ensure better monitoring of budgeted expenditure, all the time sheets needs to be approved &
AIC-UP-BSBFIM601-V4.0 Page 3 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
authorized (Ahrens, Ferry and Khalifa, 2018).
2. All the service invoices needs to be signed & linked with the respective purchase order.
3. Performance of reconciliation must be ensured between third party bank statements and company's
books.
4. Appropriate communication between department and employees at head office and shop floor to ensure
required lines of feedback and proposing a solution for the correction of errors along with making sure
that new strategy devised at top level has been communicated to them.
AIC-UP-BSBFIM601-V4.0 Page 4 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Case study
You have recently been appointed as the business manager of Houzit Pty Ltd having been a store
manager for the past three years. Houzit Pty Ltd is a 15 store retail chain located in Brisbane. Houzit is
the leading homewares retailer, catering to the growing need for furnishing new and renovated dwellings
in the greater Brisbane area.
The assortment on offer of bathroom fittings, bedroom fittings, mirrors and decorative items together with
the recently added lighting fixtures has positioned Houzit as a leader in homewares retailing in Australia.
Houzit has grown over the past five years from a single store to the current chain. Houzit prides itself on
superior after sales service which has been a key reason for the continued growth in sales and
corresponding profit increases. Today Houzit employs over 150 staff.
Houzit Pty Ltd is a proprietary limited company (ACN 34 765 234 02) registered with the Australian
Securities and Investment Commission. The registered address is with Houzit’s solicitors (Langs
Lawyers, 535 Queen Street, Brisbane, QLD 4000) and the principle place of business is 505 Boundary
Street Spring Hill Brisbane QLD 4000.
Computer software requirement
The current accounting information system has not adequately provided sufficient analysis of revenue
and expenditure and has made it difficult to make informed estimates of future profits. Estimates have
relied on the ‘gut feel’ of the experienced traders on the board and of the senior managers. The board
sees the need to apply more analysis to past results that they believe could be done with the introduction
of state-of-the-art computer software.
Houzit Pty Ltd wants to upgrade their existing accounting system which will manage the company
accounts more efficiently in the long run. They request that the new system you recommend to them to
be compliant with all legislative and statutory requirements for small to medium businesses.
None of Houzit’s products are GST free however the accounting information system records the GST
collected as well as the input tax credits earned on the purchases of stock and assets. These amounts
are reported and paid in accordance with the business activity statement (BAS) schedule determined by
the Australian Tax Office.
They have 100 fulltime and 50 part-time staff, but only 10 of the staff will have or need access to the
financial system. Some staff are paid on a salary sacrifice arrangement that attracts fringe benefits tax.
The staff with access to the financial system want software that is a single purchase with no ongoing
license fees, and a plan to keep using if for the next 3–5 years, while the organisation continues to grow.
They are anticipating that within five years they will have over 250 full-time staff, and at least 20 staff will
require access to the financial system by then.
The payroll system deducts withholding tax from the employees and remits this along with the firm’s pay
as you go (PAYG) instalment each quarter as reported on the firm’s business activity statement. Income
tax return for the company and its annual statement is completed by the firm’s accountant. Taxes and
fees due are paid by the due dates. Financial records are kept at Houzit’s principle place of business.
Houzit have just upgraded their computers and have five new desktop PCs which will be used by the
finance staff. They are current specification machines with i5 CPUs and 8Gb RAM each, and all have
Windows 10 Professional and Norton’s 360 installed with the professional version of Microsoft Office
Small Business as well. Other staff will use their machines at various times, so it is important that the
software requires a login to access data and that data stored by the software cannot be accessed in any
other way.
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Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Corporate details
Jim Schneider, the CEO, has asked you to prepare some financial budgets for the 2022/23 financial year
as a preliminary overview of the financial year ahead. He asked you to first prepare a 12 months budget
and then break it up over the four quarters. The areas he is particularly interested in seeing is:
Sales budget for 2022/23 by department by quarter.
Profit budget (including detailed expenses) for 2022/23 by quarter.
The cash flow result per quarter of the GST after adjusting the GST collected by the allowable
GST tax credits.
The anticipated aged debtors summary at the end of each quarter.
The CEO wants to be given all the budgets except for the aged debtors budget which the accountant
and accounts receivable clerk can monitor. The CEO produced a summary of the current business plan
that covered the budget year to highlight some of the key goals, objectives and strategies he would like
incorporated into the budget.
AIC-UP-BSBFIM601-V4.0 Page 6 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
AIC-UP-BSBFIM601-V4.0 Page 7 of 26
Business plan summary
The anticipation that the coming financial year would maintain the same sales growth as the
growth that took place between 2018/19 to 2021/22.
To budget for an increase in inflation to 4% per annum and that all costs subject to inflation
should incorporate this particular increase.
A new car costing $97,466 including GST has been planned for in the coming period to
replace the five year old vehicle currently used by the chairman. This fuel inefficient car will
attract a luxury car tax.
Sales breakup over the departments is anticipated to be bathroom fittings 30%, bedroom
fittings 25%, mirrors 15% and decorative items 10% together with the recently added
lighting fixtures 20%.
Profits are to be built on securing a growing customer base which will generate loyalty sales
and become the refer other customers to the organisation. The superior after-sales service
is the key strategy to achieve this.
Reduction on the principle of the loan by a payment of $100,000 on the 31 December 2022
from the profits generated by the business.
One objective in this plan is to manage the debtors more efficiently in the current period.
This will involve an analysis of the debtors to identify ways to reduce the amount of cash
tied up in outstanding debtors.
The expectation that 2022/23 would be a difficult trading year but that the budget net profit
should target the same result as achieved in the 2021/22. The strategy to achieve this in
the business plan included three key elements:
To reduce the expected gross profit rate by 1% on the 2021/22 result in the hope that lower
prices on the products would help maintain the sales growth even in difficult trading
conditions.
To increase the advertising budget by $70,000 over the 2021/22 results in the hope that
Houzit can secure a greater market share in a constricting market. $200,000 is planned for
the first quarter with the balance apportioned equally over the following three quarters.
To increase wages and salaries by $172,500 over the 2020/21 amounts in the hope that
allowing the existing high number of casual staff to earn commissions on sales that should
help to maintain Houzit’s sales growth.

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
After going through the business plan summary, the CEO gave you the previous year’s financial reports
and asked you to speak with the accountant Celina Patel to get some of the figures and detailed
expectations for the coming year.
You arrange a meeting with Celina Patel, Houzit’s accountant, and she gives you the following insight
into the historical expense relationships and the current statutory compliance liabilities.
Sales and profit budget information
Celina explained that the only budget she monitors on a day-to-day basis is the cash flow budget and the
store manager is primarily responsible for the sales budget.
These are the notes you take at the meeting:
The overall sales for 2022/23 target set by the business plan should be apportioned across the
quarters in the same % as was achieved in 2021/22.
This was:
Qtr 1 Qtr 2 Qtr 3 Qtr 4 2021/22
3,142,822 3,771,386 4,085,668 4,714,232 15,714,108
Cost of goods sold is the inverse of the gross profit rate determined by the business plan and is
determined by the quarterly sales budget.
Accounting fees have been negotiated for the year at a fixed amount of $10,000 to be paid in equal
amounts each quarter.
The interest charges on the bank loan are anticipated at a reduced amount of $84,508 due to an
agreed repayment of some of the loan principal. This is to be paid in equal amounts each quarter.
Bank charges are expected to be the same as 2012 and paid in equal amounts each quarter.
Celina has requested that a new expense (store supplies) be recognised in the new budget that was
previously included in with the cleaning expense amounts. Store supplies in the 2020/21 results
was $3,500 of the cleaning expense and $3,605 of the 2021/22 result. Cleaning expense will then
be lower but identify the real labour costs involved in the cleaning expense.
Depreciation is expected to be the same as 2022 and allocated in equal amounts each quarter.
Advertising is to be apportioned to each quarter based on the business plan.
The following expenses are expected to increase by the determined inflation rate in the business
plan summary:
Insurance – apportioned in equal amounts each quarter.
Store supplies – is calculated for to each quarter using the same % as determined by the sales for
each quarter.
Cleaning – is calculated for each quarter using the same % as determined by the sales for each
quarter.
Repairs and maintenance – apportioned in equal amounts each quarter.
Rent – apportioned in equal amounts each quarter.
Telephone – is calculated for to each quarter using the same % as determined by the sales for each
quarter.
Electricity – is calculated for to each quarter using the same % as determined by the sales for each
quarter.
Fringe benefits tax is expected to be the same as 2022 and paid in equal amounts each quarter.
Wages and salaries are calculated for each quarter using the same % as determined by the sales for
each quarter.
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Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
The statutory requirements are:
superannuation is 9% of wages and salaries for each quarter
payroll tax is 4.75% of wages and salaries for each quarter
workers compensation is 2% of wages and salaries for each quarter
company tax is 30% of net profit before tax for each quarter.
AIC-UP-BSBFIM601-V4.0 Page 9 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Houzit Pty Ltd
For 12 months ended
Profit & Loss Actuals 2018/19 2019/20 2020/21 2021/22
Revenue
Sales 12,474,336 13,472,315 14,550,100 15,714,108
– Cost Of Goods Sold 6,860,901 7,409,773 8,002,555 8,799,900
Gross Profit 5,613,465 6,062,542 6,547,545 6,914,208
Expenses
– Accounting Fees 5,500 6,500 8,500 9,000
– Interest Expense 45,000 65,000 96,508 90,508
– Bank Charges 1,200 1,300 1,580 1,600
– Depreciation 170,000 170,000 170,000 170,000
– Insurance 12,500 12,500 12,500 12,875
– Store Supplies - - - -
– Advertising 50,000 100,000 280,000 280,000
– Cleaning 12,560 15,652 18,700 19,261
– Repairs & Maintenance 40,250 52,600 60,000 61,800
– Rent 2,465,000 2,465,000 2,465,000 2,538,950
– Telephone 9,862 12,523 14,000 14,420
– Electricity Expense 22,500 23,658 25,000 25,750
– Luxury Car Tax - - 12,400 -
– Fringe Benefits Tax 26,000 26,000 26,000 28,000
– Superannuation 148,500 160,737 166,500 171,495
– Wages & Salaries 1,649,998 1,785,965 1,850,000 1,905,500
– Payroll Tax 78,375 84,833 87,875 90,511
– Workers’ Compensation 33,000 35,719 37,000 38,110
Total Expenses 4,770,245 5,017,987 5,331,563 5,457,780
Net Profit (Before Tax) 843,220 1,044,554 1,215,982 1,456,428
Income Tax 252,966 313,366 364,795 436,928
Net Profit 590,254 731,188 851,188 1,019,499
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Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Houzit Pty Ltd
Statement of Financial Position
As at 30 June 2020/21 2021/22
Assets
Current Assets
– Cash On Hand 50,000 55,000
– Cheque Account 144,842 160,314
– Deposits Paid 950,000 950,000
– Trade Debtors 850,000 975,000
– Merchandise Inventory 1,530,000 1,430,000
Total Current Assets
Fixed Assets
– Motor Vehicles At Cost 500,000 500,000
– Motor Vehicles Accum Dep ( 100,000 ) ( 125,000 )
– Furniture & Fixtures At Cost 1,950,000 2,250,000
– Furniture & Fixtures Accum Dep ( 650,000 ) ( 770,000 )
– Office Equip At Cost 400,000 400,000
– Office Equip Accum Dep ( 90,000 ) ( 115,000 )
Total Fixed Assets 2,010,000 2,140,000
Total Assets 5,534,842 5,710,314
Liabilities
Current Liabilities
– MasterCard 17,800 14,860
– Trade Creditors 780,000 679,000
– GST Collected 1,455,010 1,571,411
– GST Paid ( 943,125 ) ( 987,626 )
– Superannuation Payable 100,000 120,000
– Luxury Car Tax Payable 20,920 -
– income Tax Payable 364,795 436,928
– PAYG Withholding Payable 65,000 44,872
Total Current Liabilities 1,860,400 1,879,445
Long-Term Liabilities - -
– Bank Loans 1,608,459 1,508,459
Total Liabilities 3,468,859 3,387,904
Equity
– Owner/Shareholder’s Equity 500,000 500,000
– Retained Earnings 850,000 1,565,982
– Dividends Paid ( 500,000 ) ( 1,200,000 )
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Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
– Current Year Earnings 1,215,982 1,456,428
Total Equity 2,065,982 2,322,410
Internal auditor
Carl Kerns is one of the directors of the board. Carl said that as a board member they are given the profit
and cash flow budgets. He was appointed by the board to conduct an internal audit of operations to look
for weaknesses in the internal control system. His report uncovered the following processes that he
believed needed to be strengthened.
While the overall customer base is increasing from year to year, there may be internal control issues
relating to how these new customers are secured.
Some discounts that were being given to customers were recorded as a net amount on the invoices
and gave no indication of the discount from standard prices.
Some cash registers in the stores were not reconciling the cash in drawer with the register printout.
Not all timesheet overtime amounts were being authorised by the line manager.
Service invoices for some items of equipment were not signed or linked to a purchase order. There
was no check that the work had actually been carried out.
Not all assets in the stores had unique codes fixed to the asset.
There were minimal feedback lines of communication from the shop floor to head office, particularly
when an error in the budgeting report process was recognised.
Debtor reconciliations were not done monthly and sometimes not at all.
In busy times the cashiers that operated the registers were also asked to do their own reconciliations
and banking. Sometimes the cash was held in the store for a day or two.
Job roles were not clearly defined so that responsibilities and liability can be identified.
There was little rostering of duties and cash receipts were not pre-numbered.
Of particular concern to Carl was the directive given by the board to ensure that audit trails were created
and maintained. These included:
Signing the timesheets for employees under the authority of a department manager.
Maintenance of a numbered cash receipts book.
Using sequenced cheques as a systematic way of evidencing all monies paid out.
Ensuring proper coding of evidenced transactions against appropriate general ledger account and
cost centre.
Ensuring reconciliations between company books and third party bank statements are performed.
GST cash flow budget
Statutory requirements for GST is 10% of the recorded amounts in sales. The only capital purchase
planned for the year is the luxury car for the chairman. Those expense payments on which 10% GST
was paid include the following:
Cost of goods sold:
accounting fees
insurance
store supplies
advertising
cleaning
AIC-UP-BSBFIM601-V4.0 Page 12 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
repairs and maintenance
rent
telephone
electricity expense.
The GST amount payable each quarter is the difference between the GST collected from sales and the
GST paid – format as per policy and procedures.
CASH FLOW ANALYSIS –
GST 2022/23 Qtr 1 Qtr 2 Qtr 3 Qtr 4
GST Collected x,xxx x,xxx x,xxx x,xxx x,xxx
Less GST Paid x,xxx x,xxx x,xxx x,xxx x,xxx
GST Payable Calculation Calculation Calculation Calculation Calculation
Debtors ageing budget
The historical records show that the debtors balance at the end of each quarter is usually about 20% of
the quarter’s sales. At any time in the debtors balances 1% of the total debtors is overdue 90 days and
over, 5% is 60 days overdue, 10% is 30 days overdue and the balance of the total debtors is current.
The aged debtors’ budgets are only distributed to the accountant and the accounts receivable clerk.
Houzit Budgeting Policy and Procedures
Budget development process
The standard process for developing budgets will follow the following steps:
Establish the budget objective.
Gather prior period data.
Discuss prior period information and anticipated changes in the budget period with stakeholders.
Research relevant external information.
Incorporate identified trends to determine assumptions and parameters.
Prepare budgets in standard formats.
Submit budgets for approval.
Budget objectives
Houzit prepares budgets to meet various company objectives. Budgets are prepared:
for a specific expansion of the business activities:
business case to be prepared covering a cost-benefit analysis, market research report and summary
profit and investment expectations
to outline a specific debt reduction initiative:
company-wide summary of profit expectations, planned debt and equity funding arrangements,
CAPEX plans summarised
annually to cover the next financial year:
for the 12 month period from the beginning to the end of the financial year
budget to include four quarter milestones in line with seasonal trends identified from prior year data
AIC-UP-BSBFIM601-V4.0 Page 13 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
initial preparation includes a preliminary overview of the financial year ahead
sales budget for next year to be prepared by department by quarter
profit budget (including detailed expenses) for the next year to be prepared by quarter
cash flow effect of the GST payable per quarter to be prepared (scheduled compliance payment
date is the 21st day after the end of the quarter)
To satisfy the statutory requirements relating to the current and short-term solvency of the company:
three monthly rolling forecast of cash flows to be prepared
To qualify the strategic plans for the next 3–5 years planning cycle:
profit and CAPEX budget to be prepared.
Budget variances and schedules
Key performance indicators that should be closely monitored and reported on include variances
to:
total sales
gross profit (GP) %
wages and salaries as a % of total sales
total expenses as a % of total sales
net profit in dollars
net profit as a percentage.
Budget variances will be reported using the standard format provided in this policy and
procedures document.
Budget variances must be completed within five working days of quarter end.
Actual results for the month will be provided by the accounting information system.
An analysis of the variance between the actual and the budget must include $ and % variance.
Report with explanations and recommendations to be complete within seven working days of
quarter end and be given to the CEO.
Analysis and investigation of variances will include the following priority:
Establish the primary causes for variances to key performance indicators of total sales, gross
profit % and net profit $.
Establish reasons for those individual items in the variance report that represent the greatest $
variance.
Establish reasons for those individual items in the variance report that represent the greatest %
variance.
Schedules relating to compliance due dates must be prepared and monitored by the accountant.
Managers supplying information to the accountant regarding the compliance schedule must
submit it at least five working days prior to the due date deadline.
Standard formats
The following formats will be used when preparing Houzit budgets and variance reports.
Sales and profit budgets
PROFIT BUDGET 2021/22 Qtr 1 Qtr 2 Qtr 3 Qtr 4
Revenue - % % % %
AIC-UP-BSBFIM601-V4.0 Page 14 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Sales x,xxx x,xxx x,xxx x,xxx x,xxx
– Cost of Goods Sold x,xxx x,xxx x,xxx x,xxx x,xxx
Gross Profit Calculation Calculation Calculation Calculation Calculation
Gross Profit % Calculation Calculation Calculation Calculation Calculation
Expenses
– Accounting Fees x,xxx x,xxx x,xxx x,xxx x,xxx
– Interest Expense x,xxx x,xxx x,xxx x,xxx x,xxx
– Bank Charges x,xxx x,xxx x,xxx x,xxx x,xxx
– Depreciation x,xxx x,xxx x,xxx x,xxx x,xxx
– Insurance x,xxx x,xxx x,xxx x,xxx x,xxx
– Store Supplies x,xxx x,xxx x,xxx x,xxx x,xxx
– Advertising x,xxx x,xxx x,xxx x,xxx x,xxx
– Cleaning x,xxx x,xxx x,xxx x,xxx x,xxx
– Repairs & Maintenance x,xxx x,xxx x,xxx x,xxx x,xxx
– Rent x,xxx x,xxx x,xxx x,xxx x,xxx
– Telephone x,xxx x,xxx x,xxx x,xxx x,xxx
– Electricity Expense x,xxx x,xxx x,xxx x,xxx x,xxx
– Luxury Car Tax x,xxx x,xxx x,xxx x,xxx x,xxx
– Fringe Benefits Tax x,xxx x,xxx x,xxx x,xxx x,xxx
– Superannuation x,xxx x,xxx x,xxx x,xxx x,xxx
– Wages & Salaries x,xxx x,xxx x,xxx x,xxx x,xxx
– Payroll Tax x,xxx x,xxx x,xxx x,xxx x,xxx
– Workers’
Compensation
x,xxx x,xxx x,xxx x,xxx x,xxx
Total Expenses Calculation Calculation Calculation Calculation Calculation
Net Profit (Before Tax) Calculation Calculation Calculation Calculation Calculation
Income Tax Calculation Calculation Calculation Calculation Calculation
Net Profit Calculation Calculation Calculation Calculation Calculation
AIC-UP-BSBFIM601-V4.0 Page 15 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
GST Cash flow budget
CASH FLOW ANALYSIS –
GST 2021/22 Qtr 1 Qtr 2 Qtr 3 Qtr 4
GST Collected x,xxx x,xxx x,xxx x,xxx x,xxx
Less GST Paid x,xxx x,xxx x,xxx x,xxx x,xxx
GST Payable Calculation Calculation Calculation Calculation Calculation
Aged debtors
AGED DEBTORS
BUDGET
TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4
Sales x,xxx x,xxx x,xxx x,xxx x,xxx
% Debtors Sales % % % %
Total Debtors % Calculation Calculation Calculation Calculation
Current % Calculation Calculation Calculation Calculation
30 Days % Calculation Calculation Calculation Calculation
60 Days % Calculation Calculation Calculation Calculation
90 Days % Calculation Calculation Calculation Calculation
AIC-UP-BSBFIM601-V4.0 Page 16 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Task 2
Assessment Instructions
This is an individual assessment. This task requires candidates to respond to a range of questions that
examine their understanding of key requirements of financial management and legislation and
Communicate information regarding the budget. You must answer all of the questions below, and include
examples where appropriate. Please ensure that you have answered each question with an appropriate
level of detail. If you need help understanding any questions, ask your assessor to explain.
To be deemed competent you will need to successfully demonstrate the following:
You must complete and successfully answer all questions.
Scenario
The CEO of Houzit Pty Ltd, Jim Schnieder explained that he prefers to discuss the budgets with all
senior managers prior to their distribution in order to ensure a corporate view of the strategic plans. He
then meets with each group separately to answer questions and concerns about their particular area.
Eventually the budgets will be printed in hard copy and bound as well distributed as an electronic
spreadsheet.
Upon completion of the budgets you meet with Jim to provide an overview of the information contained
within the budgets, the budget notes and recommendations regarding the internal controls to prepare
him for the meetings with the senior managers. To clarify his understanding of the information, Jim asks
you a series of questions.
Procedure
Based on the information provided in the Assessment Task 1, answer the following questions in the
space provided below:
Identify the current statutory requirements for tax compliance and list and calculate the tax liabilities for
Houzit Pty Ltd under taxation legislation.
Houzit Pty limited is required to complied with all the regulatory requirements made compulsory by
government in an attempt to ensure no intervention of government in their day to day matters. The tax
liability of Houzit can be calculated on the basis of various tax law applicable to it. The various statutory
requirements currently applicable to Houzit with reference to its tax compliance are requirements to pay
GST, PAYG, lodging BAS (Business Activity Statements) and to report timely their incomes and
expenses associated with the particular financial year to the tax body of the land (Bashtannyk and et.al.,
2021). Also, the financial statements of Houzit must be prepared with reference to applicable standards
such as AASB and the calculation of tax must be done by taking into consideration the net income of
Houzit for the particular year after deducting all the expenses associated with the same financial year. It is
to be noted that Houzit is not using the industrial benchmark for determining its wage rate which they
must revise.
Calculation of tax liabilities for Houzit
Tax payable on net income before tax for the year 2022 / 2023
Net income before tax = $4825567
Tax rate applicable on Houzit = 30%
Income tax = 4825567 * 30% = $1447670
Payroll tax is payable @4.75% of wages & salaries
Wages & salaries = $2078000
Payroll tax = 2078000 * 4.75% = $98705
Luxury car tax = $12000
fringe benefit tax = $28000
GST payable = $415765
Superannuation = 9% of wages & salaries = 187020
Total tax liability of Houzit = $2189160
AIC-UP-BSBFIM601-V4.0 Page 17 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Identify the current compliance requirements and liabilities for this organisation under the Corporations
Act 2001.
As per the Corporation Act of 2001, the following compliance requirements and liabilities must be
fulfilled by Houzit:
- This compliance tool such as AASB and ASIC required Houzit to appoint auditor on regular basis in
order to audit the accounting and financial record of the company along with its financial statements, so
that discrepancies & deficiencies can be identified to be corrected in required manner (Smith, Park and
Liu, 2019).
- Must maintain a record of financial information for up to 7 years by establishing a policy for record-
keeping.
- All the directors, place of business and head office must be registered with the registrar of the company.
- Lodgement of returns & statements must be done with ASIC to indicate the activities of the company.
- Directors of the company is required to act in ethical manner and ensure that decisions made by them
are in good faith.
- Any changes made regarding the maintenance of record must be notified to ASIC.
Review commercially available financial management software to select the most suitable software for
Houzit Pty Ltd.
Ensure you diagnose software options by comparing two commercially available software titles
against the capabilities of the existing technology for the organisation and against the prioritised
requirements, and outline the reasons that lead you to this recommendation.
Financial management software are useful in recording transaction in timely & accurate manner. The
various such software are as follows:
MYOB: It is an accounting system meant for entry – level bookkeeping system for a single user and is
considered to be highly suitable for micro businesses. The availability of integrated modules allows for
easy recording and maintenance of business transaction (Bashtannyk and et.al., 2021). The system
software always remains up to date with reference to ATO and accordingly, fast & easier updates of tax
can be facilitated.
XERO: It is another online accounting software for the businesses to record and maintain their daily
business record (Sparkes and et.al., 2019). It is helpful in identifying real time cash flows of the business
along with the provision of various additional features such as bank reconciliation, quotes and invoicing
and maintenance of inventory record.
XERO facilitates higher integrations that is, over 400 with that of third party software & apps
which leads to improvement in the capabilities of business that is most suitable for them. However,
MYOB is restricted accounting software due to its heavy reliance on installation of software on user's
computer. Also, it is compatible with Windows only.
The current accounting information system is not adequate in terms of providing sufficient
analysis expenditures & revenue which is creating difficulty in estimating future profitability in informed
manner as currently it is done on the basis of gut feeling of experienced senior managers.
On the basis of above review of financial management software, XERO is most suitable to cater to
the needs of Houzit as it is a small sized business and meant for offering strong accounting and
forecasting features, facilitates report preparation and integrations.
Explain how you can apply the following principles of accounting in developing the budgets required for
this task:
matching principle
account groups
AIC-UP-BSBFIM601-V4.0 Page 18 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
time periods.
a. Matching principle: This principle is used in budgeting while recognising the expenses in the same
year when its associated revenue has been recognised.
b. Account groups: This principle allows for classifying the transaction within their respective account
groups such as assets, liabilities, equity, expenses and revenues.
c. Time periods: This principle allows for selecting a frequency within which the company will prepare
reports that is, quarterly in case of Houzit. So that differentiation and comparison can be established
between results of various time periods (Zhang and Sussman, 2018).
.
Explain and discuss the implications of probity when preparing and revising budgets.
Probity can be explained with reference to financial information which entails that the information
should be real and have supporting evidences, so that the true nature of transaction could not be disguised.
Therefore, financial information must be presented by confirming required honesty and integrity while
preparing and revising budgets.
For the purpose of preparing & revising budgets, adoption of innovative approaches and required
internal expertise must be ensured to carry out forecasting & estimations (Vammalle and et.al., 2018).
Also, the concept of probity should be applied in the process of budgeting in a decent & sensible
way along with ensuring that it should not be utilized personal advantages and must be kept confidential.
Accordingly, it is necessary to ensure that budgeting must be done by avoiding conflict of interest
between management and organizational goals.
List the critical dates and initiatives that will require or generate resources for Houzit Pty Ltd in the next financial cycle.
List of critical dates and initiatives for Houzit in the next financial cycle
Due date of superannuation - 28th January, 28th April, 28th July and 28th October
Principal loan repayment amounted to $100000 - 31st December 2023
Payroll tax is due to be payable by 21st of July each year.
GST to be payable after 21 days from the end of the quarter
Company income tax returns due data is 31st October.
Initiatives for generating resources
Lowering prices to secure similar sales growth.
Increase in advertisement budget to obtain greater market share.
Increase in wages & salaries to offer commissions on sales made by casual staff.
List the items you would recommend for inclusion in the budgets for Houzit Pty Ltd.
Following items should be included in the budget:
Pension as a expenditure incurred towards providing benefits to employees.
Healthcare facilities provided to staff & employees.
Travel expenses associated with ensuring professional engagement and flexible movement of employees
& management for business purpose.
Training expenses incurred for making employee suitable & efficient for the job should be recognized as
an administrative expense (Mora and Triana, 2018).
List the new or modified internal controls that could improve risk management for Houzit Pty Ltd including the
maintenance of audit trails.
Conduction of internal audits
Cash controlling system through new financial management software
AIC-UP-BSBFIM601-V4.0 Page 19 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Delegating responsibilities pertaining to getting time sheets signed and approved (Atmadja and et.al.,
2021).
All transaction must be accompanied by supporting documents such as invoices, bank reconciliation,
cheques and cash receipts.
Budget monitoring on regular basis.
Maintenance of audit trails.
After completing above questions please prepare a plan for communicating the budget to all relevant
parties using the following format.
Communication Plan
Stakeholder When How Responsible person
Investors Within the
duration of 1
month after the
preparation of
budget.
Through budget reports
and budgeted financial
statements (Ahrens,
Ferry and Khalifa,
2018).
Senior Financial
executives
Employees Within every
week in the
process of
budgeting.
Through memos and
circulars
Financial department
head
CFO After the
completion of
budget.
In the meeting Management accountant
Board of directors Within the process
of budgeting to
get suggestions on
various aspects
and after the
completion of
budget.
In the meeting Management accountant
AIC-UP-BSBFIM601-V4.0 Page 20 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Task 3
Assessment Instructions
This is an individual assessment. You will need to review the provided current case study information
and compare it to the budget you established in Assessment Task 1.
After evaluating these you will need to report on the following:
significant issues
variances from budget
comparative performances
recommendations for ongoing financial viability
evaluation of financial management processes.
To be deemed competent you will need to successfully demonstrate the following:
You must provide:
a complete actual-to-budget variance report
a completed report detailing the issues, variances, performance, recommendations and evaluations
identified from the financial information for Houzit Pty Ltd.
Evidence that you reviewed the provided case study information to develop an evaluative report
concerning the progress of the budget.
a. Issue identification, their reasons and priorities
Economic recession: The impact of this issue on retail sector leads to reduction in sales growth in the
upcoming quarter. The reason behind this issue is slower growth of investment along with increasing
interest rates.
Price discounts: Houzit has given price discounts in order to maintain sales growth which leads to
reduction in gross profit.
Bank loan at variable interest rate: Houzit has secured its loan on variable interest rate and banks are
raising interest rates due to increased international pressure on upward side (Smith, Park and Liu, 2019).
Financial probity – performance review through budget values. It is due to the reason of efficiency in
reporting review of performance which is depicting better picture of the business.
Financial probity – profit sharing through bonus scheme which is an indicator of company's performance
because when there are higher profits, there would be greater payouts from the company.
b. Reasons of variances
There are lower sales as compared to budgeted figures due to economic recession.
Unfavourable gross profit as prices are lowered
Higher interest expenses as banks are increasing interest rates and Houzit has taken loan on variable
interest rates.
Also, various expenses are showing unfavourable due to rise in inflation (Bashtannyk, and et.al., 2021).
c. Performance
The overall performance is favourable for Houzit as their net profit is higher than that of previous
year which indicates financial viability of Houzit, however their sales performance and accordingly, gross
profit performance is not so well due to economic downturn and lower prices respectively. Accordingly,
maintenance of gross profit margins in the period of predicted downturn could be impossible. Also, they
are paying wages & salaries at 12.2% of sales as against industry benchmark which is paying at 11% of
sales. Further, their net profit could be much better due to the saving in advertising costs. At last, it could
be seen through the debtor ageing ratio which indicates that debtors are paying quite late than their
indicated time which may lowers the company's cash flows.
AIC-UP-BSBFIM601-V4.0 Page 21 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
d. Recommendation
Recommendations and plans for revised budget are:
Houzit should review and modify its discounted price policy in order to obtain desired gross profit
margins.
Houzit should concentrate on reducing their outstanding loan amount to protect itself from rising interest
rates. Also, the restructuring of loan should be done by including fixed interest rates in place of variable
interest rates (Sparkes and et.al., 2019).
Maintain wages & salaries around industrial benchmark which would be helpful for Houzit in reducing
expenses and improving viability.
Revised budget would be prepared by taking into account all cost centres.
Reporting and monitoring of revised budget will be done frequently that is, on monthly basis.
e. Evaluation
From the analysis of financial management process in place within Houzit, it is recommended that
the management should concentrate on the adoption of proper policies towards pricing and strategies to
enhance overall profitability. So that, the set targets for sales could be attained and discount could be
offered to the company's customers optimally. Also, the expenditure done towards advertisement requires
further controlling to ensure that the derived benefits are higher than the cost incurred on it. At last, it is
recommended that wages and salaries should be reduced to the level of industrial benchmark.
.
Procedure
Read the case study.
Develop a variance report based on the format and template provided by Houzit.
Complete a cash flow analysis on the average length of time it takes Houzit to collect funds from its
debtors to determine the trend based on the financial reports in Assessment Task 1.
Examine the sales budget, profit budget, cash flow budget and debtor ageing summary to identify
the following:
Issues:
Identify, describe and prioritise significant issues that are evidenced in the provided case study
information and describe reasons or causes of these issues. Include in this issues of financial probity
that you have identified or considered when monitoring these budgets.
Variances:
Complete an actual-to-budget variance report, using the template provided in the case study.
Identify variances by comparing actual results with the established budget, and provide reasons why
these variances may have occurred.
Performance:
Compare financial performance of the organisation (according to financial information provided) to
industry benchmarks for this organisation in line with the retail trade sector.
Respond to the performance questions provided by the CEO, as provided by the board of Houzit,
Determine a trend of the average debtor days and the impact to the cash flow of Houzit.
Recommendations:
Outline your recommendations for ongoing financial viability for the organisation, based on your
assessment of the issues, reasons for variances and organisational performance you have identified
(Steps 1–3).
Include in this section your plans for a revised budget, effectively managing contingencies and issues
that have been identified in feedback and monitoring of the budgets.
AIC-UP-BSBFIM601-V4.0 Page 22 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Evaluation:
Provide a summary review of the financial management processes in place for the organisation, in light
of your assessment of the issues, reasons for variances and organisational performance you have
identified. Include in this section any recommendations you have for modifying management processes.
Case study
Soon after the end of the first quarter, Jim Schneider the CEO of Houzit, asked you to follow up with
Celina Patel, Houzit’s accountant, to see how the actual results compared with the budget you had
prepared three months ago. You explained that you had a meeting with Celina that afternoon to get the
results and that you would report back as soon as you had done some analysis.
The key questions that the board was most interested to have answered from the budgets and the
variance reports were:
‘To what extent do the reports support the view of the board that Houzit is financially viable?’
‘Will we be able to maintain our gross profit margins in the predicted downturn?’
Jim and you both agreed that it had been a tough quarter with the economy still in recession and the
impact this was having on the retail sector. Banks are raising interest rates in line with the increased
upward international pressure and Houzit has a significant part of their loan funds on a variable interest
rate which changes directly with market conditions. Jim was pleased that the sales seem to be holding
up reasonably well as first quarter results are generally impacted by factors relating to public and school
holidays but he was concerned about the discounts that had to be given to generate these sales.
‘That’s going to hurt us at some point’ Jim said. ‘Just a pity we could not get into some national
magazines this quarter to promote the store offers. I’m sure that would have helped us exceed
the budgets you set. I guess we will just have to spend that advertising money in the next
quarter’ Jim said. ‘I still think we are running our wages and salaries a bit high. The industry
benchmark for wages and salaries is close to 11% of sales’
Jim went on to explain, ‘One of our contingency plans in a slowing economy is to reduce our
exposure to debt by applying our profits to the repayment of the long term debt. This will help
reduce the interest burden on the business and take some pressure off the diminishing profits.
It would also be of interest to determine the impact that our debtors has on the cash flow of the
business from 2021/22.’
You are a beneficiary of the company’s profit bonus scheme that is based on the profitability of the
company’s financial reports which you are required to prepare. You also prepare the departmental
reports that form the basis of the performance review of the managers. You are the manager of the
finance/administration and prepare this department’s report as well.
You met that afternoon with Celina and she provided you with the following report on the actual results
for the quarter ended 30 September 2022.
Houzit Pty Ltd
Actual Results Qtr 1
Revenue
Sales 3,371,200
– Cost Of Goods Sold 1,955,296
Gross Profit 1,415,904
Gross Profit % 42%
Expenses
– Accounting Fees 2,500
AIC-UP-BSBFIM601-V4.0 Page 23 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
– Interest Expense 28,150
– Bank Charges 380
– Depreciation 42,500
– Insurance 3,348
– Store Supplies 790
– Advertising 150,000
– Cleaning 3,325
– Repairs & Maintenance 16,150
– Rent 660,127
– Telephone 3,100
– Electricity Expense 5,245
– Luxury Car Tax 12,000
– Fringe Benefits Tax 7,000
– Superannuation 37,404
– Wages & Salaries 410,500
– Payroll Tax 19,741
– Workers’ Compensation 8,312
Total Expenses 1,410,572
Net Profit (before tax) 5,333
Income Tax 1,600
Net Profit 3,733
GST cash flow – Actual
Cash flow analysis –
GST
Qtr 1
GST Collected 337,120
Less GST Paid 279,988
GST Payable 57,132
Aged debtors – Actual
AGED DEBTORS
BUDGET Qtr 1
Sales 3,371,200
% Debtors Sales 22%
Total Debtors 741,664
Current 585,915
30 days 111,250
60 days 37,083
90 days 7,417
Total Debtors 741,664
Budget variance report template
According to the organisational policy and procedures, the following format is to be used when preparing
a budget variance report.
Houzit Pty Ltd
AIC-UP-BSBFIM601-V4.0 Page 24 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Variance to Budget
xxx Quarter ended mmm-yyyy
Actual Results
Budget-
Qx Actual-Qx
$
Variance
%
Variance
F or
U
Sales x,xxx x,xxx x,xxx x% F or U
– Cost Of Goods Sold x,xxx x,xxx x,xxx x% F or U
Gross Profit Calculation Calculation Calculation x% F or U
Gross Profit % % % % x% F or U
Expenses
– Accounting Fees x,xxx x,xxx x,xxx x% F or U
– Interest Expense x,xxx x,xxx x,xxx x% F or U
– Bank Charges x,xxx x,xxx x,xxx x% F or U
– Depreciation x,xxx x,xxx x,xxx x% F or U
– Insurance x,xxx x,xxx x,xxx x% F or U
– Store Supplies x,xxx x,xxx x,xxx x% F or U
– Advertising x,xxx x,xxx x,xxx x% F or U
– Cleaning x,xxx x,xxx x,xxx x% F or U
– Repairs &
Maintenance
x,xxx x,xxx x,xxx x% F or U
– Rent x,xxx x,xxx x,xxx x% F or U
– Telephone x,xxx x,xxx x,xxx x% F or U
– Electricity Expense x,xxx x,xxx x,xxx x% F or U
– Luxury Car Tax x,xxx x,xxx x,xxx x% F or U
– Fringe Benefits Tax x,xxx x,xxx x,xxx x% F or U
– Superannuation x,xxx x,xxx x,xxx x% F or U
– Wages & Salaries x,xxx x,xxx x,xxx x% F or U
– Payroll Tax x,xxx x,xxx x,xxx x% F or U
– Workers’
Compensation
x,xxx x,xxx x,xxx x% F or U
Total Expenses Calculation Calculation x,xxx x% F or U
Net Profit (Before Tax) Calculation Calculation x,xxx x% F or U
Income Tax Calculation Calculation x,xxx x% F or U
Net Profit Calculation Calculation x,xxx x% F or U
Note: F = Favourable, U = Unfavourable
Debtor ageing ratio template
2020/21 2021/22 2022/23
AIC-UP-BSBFIM601-V4.0 Page 25 of 26

Australian Ideal College
Registered as Australian Ideal College Pty Ltd
RTO No.: 91679 | CRICOS Provider Code: 03053G
Sydney Campus: Level 7 & 8, 75 King Street, Sydney NSW 2000 Australia
Adelaide Campus: Level 3, 21-23 Rundle Mall, Adelaide SA 5000 Australia
Hobart Campus: GRD Floor, 116 Murray Street, Hobart TAS 7000 Australia
T: [phone] (Sydney) | [phone] (Adelaide) | [phone] (Hobart)
E: [e-mail] | W: www.aic.edu.auEducating for Excellence
Trade Debtors
Sales
Debtor Days
Anticipate that the trade debtors for the 2022/23 financial period maintain the same growth as that which
took place between 2020/21 to 2021/22.
AIC-UP-BSBFIM601-V4.0 Page 26 of 26