Manage Finances

This document provides study material on managing finances, including obligations under the Corporations Act, Australian accounting standards, tax law compliance, principles of accounting, and commercially available software for financial management.

Running head: MANAGE FINANCES
Manage finances
Name of the student
Name if the university
Author’s note

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Table of Contents
Research Questions....................................................................................................................2
Question 1..................................................................................................................................2
Question 2..................................................................................................................................2
Question 3..................................................................................................................................4
Question 4..................................................................................................................................5
Question 5..................................................................................................................................6
Question 6..................................................................................................................................6
Assessment 2- Stage One...........................................................................................................7
Part A.....................................................................................................................................7
Part B....................................................................................................................................10
Assessment 2............................................................................................................................16
Assessment 2 -Stage Two........................................................................................................16
Variance Report...................................................................................................................16
Debtors Analysis Report......................................................................................................16
Issues Which can be Identified............................................................................................17
Variance Analysis................................................................................................................17
Recommendations................................................................................................................18

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Research Questions
Question 1
List the obligations under the Corporations Act 2001 List at least six (6) obligations)
The six obligations of Corporation Act 2001 are as follows;
a. Preparation of financial report under section 295 of the Act
b. Preparation of director’s report under section 298 of the Act
c. Having the audit of financial reporting and obtaining the auditor’s report under
section 301, 307, 308 of the Act (Warren and Jones 2018).
d. Providing the financial report, directors report and auditors report to the related
members of the company under section 314 of the Act.
e. Lodging the financial report, directors report and auditors report with the ASIC
under section 319 of the Act.
f. Laying down the financial report, directors report and auditors report at the annual
general meeting under section 317 of the Act.
Question 2
Briefly explain the following Australian, international and local legislation and conventions
that are relevant to financial management in the organisation
(a) Australian Accounting Standards
The Australian Accounting Standards is regarded as the Australian government agency
which is accountable for development, issuing and maintaining the accounting standards
applicable under the Australian company law. It contributes to the global financial

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reporting standard and sets a standard in the Australian community globally.
(b) Australian Securities and Investments Commission
The Australian Securities and Investments Commission is an independent government
body which takes part in corporate regulator in Australia (Kimmel et al., 2016). The role of
the ASIC is to enforce and control the company along with their financial services laws for
safeguarding the consumers, investors and creditors. Apart from that they enforce and
make the law implacable for the Australian government.
(c) Privacy Acts and Principles
The Privacy Acts and Principles comprises of the thirteen Australian Privacy Principles
which are applicable to some of the private sector companies along with majority of
Australian and Norfolk Island Government Agencies. Together they are called as the APP
entities. The APP sets down the standards, rights as well as obligations for handling,
maintaining and rectifying the personal information as well. Apart from that their role is to
safeguard the personal information.
(d) International regulations (a brief overview)

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International regulations takes place at the international level that is regularly exercised by
the overseas organizations (Avi-Yonah 2014). The advantage of the international
regulations is that it permits the localities and the individuals by holding them responsible
for the impact of their acts on the localities.
Question 3
Research tax law compliance and outline statutory requirements related to each of the
following:
Tax Requirements
(a) Goods and Services Tax All the Australian business that are having the
turnover of greater than minimum threshold limit of
$75,000 per year are required to be registered under
the GST. However Business limiting below to that
standard might consider to register if they want to.
(b) Payroll tax If an individual bill is $75,000 then they are required
to obtain the registration for the payroll tax under the
NSW (Woellner et al., 2016).
(c) Income tax If an individual being an Australian resident is
eligible for taxation, then the first $18,200 of the
annual income is not held for tax. This is known as
tax-free threshold. A tax rate of 19c is applied for
each greater than $1 over $37,000 with the highest
rate of 45% for over $180,000.

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(d) Fringe benefit tax The statutory requirements for fringe benefit tax is to
lodge return during the FBT year from (1st April to
31st March). An individual is required to lodge return
and pay the FBT for the total amount that is owed to
them for the year ended 31st March by 21 May.
(e) PAYG withholding payable A taxpayer is required to register for the PAYG
withholding in order to withhold the tax from the
payments for the works and businesses. The PAYG
should be reported by 14th August (Barkoczy 2016).
(f) Company tax Business in Australia are required to lodge the
income tax return within 1st July to 30 June. The
company tax rates for the base rate entities is
27.5% while for the other entities the tax rate is
30%.
Question 4
Describe the “principles of accounting” and financial systems.
The principles of accounting are as follows;
a. Cost Principles
b. Principles of Full Disclosure
c. Matching Principles
d. Principles of Going Principles
e. Principles of Revenue Recognition

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Financial systems: Financial systems can be defined as the system which permits the
exchange of funds among the lenders, borrowers and investors (Bryce, Ali and Mather
2015). Financial systems are widely used nowadays in businesses for the purpose of taking
major financial decisions and also analyzing various financial information of the business.
Financial systems are the wider regional systems which encompasses all the financial
institutions, lenders and borrowers inside the international economy.
Question 5
Describe the requirements and implications of “financial probity”.
Financial probity can be defined as the accountability and transparency of funds in an
organization irrespective of only providing advice or transaction (Bosire 2016). It helps in
protecting the customer’s interest, shares and employees interest from the illegal behavior
that may damage the reputations of client and company as well (Kimmel et al., 2016).
The organization should maintain records within the period of seven years. However
changing of information may lead to lawful actions and breach of Corporation Act. It helps
in avoiding the conflict of interest or clash of ideas.
Question 6
Recommend commercially available software that is suitable for financial management.
The commercially available software which is suitable for the financial management are as
follows;
a. Logic Account
b. Busy Accounting Software

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c. Invest Plus
d. Profit Books
e. NEESA Enterprise Resource Planning
f. SAG Project Finance
Assessment 2- Stage One
Part A
Sales Budget
Profit Budget

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Cash Flow Budget
Debtors Analysis Budget

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(a) Previous year’s profits and losses
Identify the reasons for the previous year’s profits and losses.
The profits in the previous year’s income statement are mainly affected due to rise in the
costs of the business. The costs of the business shown is increasing steadily while in sales
there has been a marginal increase over the years.
b) Financial management approaches
Comment on the effectiveness of existing financial management approaches
The management of Habitation Pvt Ltd is shown to be using the budgeting system for the
purpose of making future plans and also make comparisons with previous year
performance. The current financial management practices which is applied by the business
is not efficient as the business has ineffective cash management structure and even the
asset management structure of the business. In addition to this reconciliation of debtor
balances are not done on monthly basis.
c) Budget assumptions
What assumptions did you make in creating the budgets?

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The major assumptions which are applied for the preparation of the budget is that all the
figures are based on the financial figures for the company taken from previous year. It is
also assumed that no massive changes take place in the market and there is a steady
demand for the products which is offered by the business (Chalmers et al. 2013). The sales
growth rate is assumed which is shown in the sales budget and it is also assumed that the
all the units which are produced by the management will be sold during the period.
d) Implementation and monitoring of budget
What relevant thoughts do you have regarding the implementation and monitoring of budget
expenditure?
The management of the company needs to take appropriate steps for maintaining and
lowering the costs of the business for which the management needs to formulate
appropriate plans for the same. The implementation and monitoring of budget expenses are
an important part of the control plan of the business and this ensures that proper
supervision is maintained by the business for the activities of the business. The managers
need to ensure that the plans which are included in the budget are carried out by different
departments and proper targets are being achieved as per the plan of the management.
Part B
1. Identify the current statutory requirements for tax compliance and list and calculate the tax
liabilities for Habitania Pty Ltd under taxation legislation.

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The management of Habitania Pty Ltd needs to follows the tax rules and regulations which are
established by Australian Tax Offices and adhere to the provisions of the same. The
management of Habitania Pty Ltd needs to follow income tax provisions, GST provisions and
other types of taxes which are applicable to the business.
The liabilities for Habitania which can be identified from the case study and budgets which is
provided for the business are:
GST liability for the business ($1,571,411 (collected) – 987,626 (paid) = $583,785)
Income tax $436, 928
Pay As You Go (PAYG) Withholding payable $44,872.
2. Identify the current compliance requirements and liabilities for this organisation under the
Corporations Act 20XX.
 The management of Habitania Pty Ltd needs to comply with the requirements of
section 111 AA and the division 2 and 3 in order to maintain with all rules and
regulations. In addition to this, the management of the company needs to follow all
relevant taxation and civil rules which are applicable to the business. There are
several other legislations and compliance requirements which the management of the
company need to consider and the same are listed below in details:
 The management of the company needs to file an annual return containing all
information regarding the core activities and regarding new projects with the
Australian Securities and Investment Commission.
 The management needs to maintain appropriate financial records to have proper
explanation regarding the records which is maintained by the business and the
records needs to be maintained for a period of 7 years.

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 The management of the company needs to follow rules and regulations which are set
by ASIC for proper internal management of the business.
 The directors need to effectively act and undertake its functions within its limits
 The director needs to follow all the functions of the business and ensure that overall
efficiency of the business.
 The management of the company needs to ensure that ASIC have knowledge
regarding the registered office and also have proper documents submitted to the
ASICs for the business.
 The use of company name and ACN on documents of the public, business premises,
cheques and ASIC lodged documents. This would ensure that every activity of the
business has a legal name associated with the same.
 It is also a requirement for large companies to submit the financial statements of the
business to ASIC so that the same can be regarded as a public document.
 The financial statement which is formulated by the management of the company
needs to be audited in order to ensure that proper records and financial information
are displayed for public knowledge.
3. Review commercially available financial management software to select the most suitable
software for Habitania 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.

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The management of Habitania Pty Ltd has an option of taking innovative way for
developing the structure of the business. The management can opt for one or more
management accounting tool so that the reporting framework of the business can be
improved.
4. Explain how you can apply the following principles of accounting in developing the
budgets required for this task:
(a) matching principle
(b) account groups
(c) time periods.
a. The matching principle states that every expense should match revenue of the business and
the budget is prepared considering the costs which the business will incurring to earn
appropriate revenues of the business. As per the concept of matching principle, all expenses
should be of equal amount to the revenue which is generated by the business.
b. The accounts groups are also considered to be crucial factors which is to be considered for
preparing budgets of the company. The accounts groups can improve the quality of financial
reporting framework. Account groups are important for ensuring that proper forecasting and
estimation of results are maintained by the business.
c. The time period for which the budget is prepared is also an important consideration which
is essential in the preparation of the budget. The budgets should be prepared on time and the

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target sets should be timely so that appropriate decisions can be taken.
5. Explain and discuss the implications of probity when preparing and revising budgets.
The principle of probity allows the management to prepare budgets which are generally
free from material misstatements. This is done so that the budgets represent accurate view
of the financial position of the business.
6. List the critical dates and initiatives that will require or generate resources for Habitania
Pty Ltd in the next financial cycle.
The critical dates which the management of Habitania Pty Ltd needs to consider are included
in the budgets which is prepared by the management of the company. Some of the critical
dates which can be identified for the business are listed below:
 The new car which is purchased for the chairmen is an expensive vehicle and thereby
would be attracting luxury taxes.
 The management of the company needs to reduce the principal on the loan amount by
$100,000 on 31 December.
 Complete a debtor analysis to ensure that there is a reduction of cash tied up which is
under debt obligation.
 The management needs to reduce the gross profit rate by 1%.
 The advertisement budget of the business needs to be enhanced to $ 70,000.
 The management of the company needs to increase the salaries and wages of the

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business by $172,500.
7. List the additional items you would recommend for inclusion in the budgets for Habitania
Pty Ltd.
There are certain other types of costs which can be included in the budget so that there is a
clarity regarding the other expenses of the business. One of the examples which is recently
seen in the current budget is the figure of store supplies which is shown along with cleaning
expenses and this expense can be shown separately by the management of the company.
8. List the new or modified internal controls that could improve risk management for
Habitania Pty Ltd including the maintenance of audit trails.
The management of Habitania Pty Ltd can improve the internal control of the business
by implementing a new structure and process and also by introducing new system
software which will be handling the accounting reporting of the business.
Some of the internal control which can be suggested to the management for minimizing
the risks of the business are listed below in details:
 The amount of discounts of the business needs to be recorded
appropriately by the management of the company.
 Regular reconciliation of the records relating to cash registers of the
business is necessary so that accuracy is maintained by the business.
 The employee need to have proper authorization regarding access to

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supplier’s invoices and timesheets.
 The management of the company needs to maintain the assets register of
the business appropriately.
 Effective communication lines need to be established which can support
the overall communications in the business.
 The duties of the business need to be segregated so that an efficient
operational structure can be established
 Clear job descriptions need to be provided to the management
 The management needs to maintain rosters records for the purpose of
ensuring that efficiency is maintained and fraud activities are minimized.
● Following Audit trail can be considered:
• List of directives – In order to assess the audit trails of the business, all cash
receipts needs to be maintained on pre-numbers forms, payments which is done by
cheques, proper voucher system is maintained for the business, data entry to identify
source and electronic.
• Paperwork – The management needs to ensure that the business needs to provide
evidence for any receipts of payments regarding the cash of the business.
• Secondary control – Receipts of cash which will needs to be properly managed
by the management such as cash register and ensure that the independent records of the
business are proper assessed by the business.
• Proper authority – The payments of the business needs to be properly authoriz3ed
by the management of the company so that no fraud or misappropriation of funds does
not take place.

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Assessment 2
Assessment 2 -Stage Two
Variance Report
Particulars Budget Actual Variance ($) Variance (%) F or U
Sales $3,959,060 $3,371,200 $587,860 14.85% U
Less: Cost Of Goods Sold $2,256,664 $1,955,296 $301,368 13.35% F
Gross Profit $1,702,396 $1,415,904 $286,492 16.83% U
Gross Profit % 43% 42% 1% U
Accounting Fees $2,500 $2,500 $0 0.00% F
Interest Expense $21,127 $28,150 -$7,023 -33.24% U
Bank Charges $400 $380 $20 5.00% F
Depreciation $42,500 $42,500 $0 0.00% F
Insurance $3,348 $3,348 -$1 -0.01% U
Store Supplies $937 $790 $147 15.72% F
Advertising $200,000 $150,000 $50,000 25.00% F
Cleaning $3,256 $3,325 -$69 -2.11% U
Repairs & Maintenance $16,068 $16,150 -$82 -0.51% U
Rent $660,127 $660,127 $0 0.00% F
Telephone $2,999 $3,100 -$101 -3.36% U
Electricity Expense $5,356 $5,245 $111 2.07% F
Luxury Car Tax $7,491 $12,000 -$4,509 -60.18% U
Fringe Benefits Tax $6,500 $7,000 -$500 -7.69% U
Superannuation $37,404 $37,404 $0 0.00% F
Wages & Salaries $415,600 $410,500 $5,100 1.23% F
Payroll Tax $19,741 $19,741 $0 0.00% F
Workers’ Compensation $8,312 $8,312 $0 0.00% F
Total Expenses $1,453,667 $1,410,572 $43,095 2.96% F
Net Profit (Before Tax) $248,729 $5,332 $243,397 97.86% U
Income Tax $74,619 $1,600 $73,019 97.86% F
Net Profit $174,110 $3,732 $170,378 97.86% U
Expenses
Habitania Pty Ltd
Variance Report - xxx Quarter ended mmm-yyyy
Debtors Analysis Report
Debtor Analysis
Particulars 2009/10 2010/11 2011/12
Trade Debtors $850,000 $975,000 $3,959,059
Sales $14,550,100 $15,714,108 $19,795,297
Debtor Days 21.3 22.6 73.0

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Issues Which can be Identified
The issues which can be pointed out while analyzing the budgets which is prepared by the
management are discussed below in point form:
 There is an overall hike in the unwanted cost in the current financial year due to
business operation, which is shown in the budget considering as a proportion of
increase in sales figure.
 The invoices, which are recording for discounting in the gross profit shown as net and
does not provide clear eyeshot.
 The cash register of the business is not fully maintained by the management of the
company and reconciliation for the same is also not done on a regular basis.
 The recording of debtor’s balance does not address correct view since the
reconciliation of debtor’s balance has not done in a steady basis.
Variance Analysis
Variances of a business is computed considering the difference in actual performance
of a business in comparison to budgeted estimate of the business. The figures work out in the
variance analysis shows a significant difference between the actual outcomes and the
estimated outcomes, which was forecast by the business in the budget. The following points
need to consider in the variance analysis –
 The management fails to attain the sales target against the budgeted amount.
 In the variance, analysis of expanses admits that expanses like interest paid
and luxury car tax has more than the budgeted figure.
 There is a difference of 97.86% in the net profit, which is unfavourable
towards the company’s objective.

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The overall analysis gives a conclusion that company need to make improvement in
the business structure and strategy to achieve the goal. The budget prepared should be more
accurate and refined as there is huge difference between the budgeted figure and actual
figure.
Recommendations
The following point can be recommended to the management of the company of
Habitania Pvt. Ltd. in order to ensure that the management of the company can bring about
certain improvements in the operational structure of the business.
 The company need to place more concern on the unwanted costs of the
business which hinders the profitability of the company and ensure that
appropriate steps are taken by the management of the company for managing
the costs of the business.
 The business need to adopt some new strategy to enhance the sales that
ultimately give good revenue and increase the profit. The enhancement of
sales of the business can significantly contribute to the profitability of the
business as shown in the budget presented above.
 In addition to that, company have to prepare a more effective budget on the
basis of effective estimation of all items which are included in the budget. The
expenses and revenue of the business are to be estimated considering the
assumptions and market situation which is considered for the budget.

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References and Bibliography
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Bus., 11, p.1.
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(IFMIS) on Financial Probity in The Public Sector in Kenya.
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adoption periods and the impact on audit committee effectiveness—Evidence from
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Higher Education AU.
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Warren, C. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.

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Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
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