Accounting and Finance Concepts

The assignment provided is a comprehensive document that covers various topics in accounting and finance. It includes questions related to general ledger, chart of accounts, journals, double-entry accounting, bank deposit slips, bank activity statements, cash budgets, and more. The assignment also requires students to analyze the situation of Iain Hew's company and French Travel Agency's revised budget, making recommendations for resource allocation based on cash availability. The document references various accounting and finance books, providing a useful resource for students preparing for exams or assignments.

RUNNING HEAD: FINANCE
Finance

Finance 2
Task 1
Question 1
Assets: According to the Australian Accounting Standards Board, assets are described as
future benefits held by the company as a result of past transactions (Aasb.gov.au.). Items like
cash, inventory, accounts receivables, land, building and equipment are come under the head
assets. On a balance sheet, assets are classified as current and non-current (Maheshwari,
Maheshwari & Maheswari, 2013).
Liabilities: As per AASB, the future sacrifices of the economic benefits made by the
companies to other entities as a result of past events is known as liabilities (Aasb.gov.au.).
These are basically known as financial obligations of the entity, which are to be paid within a
specific time period. Items included under this head are accounts payable, bank loan, bank
overdraft, bonds and interest payable, income tax liability and all other obligations of the
business. Just like assets, liabilities are also reported as current and non-current on the
balance sheet (Banerjee, 2010).
Question 2
Bank statement: It is a printed statement that contains the record of all the transactions done
by an account holder. It summarizes all the transactions that are made during the time from
the previous statement to the current one. These are critically reviewed by the consumers and
are kept for their financial records (Thomas, 2017).
The bank statement helps in identifying following discrepancies:
 When a check is been issued by a firm, it is recorded in the bank column of the cash
book on credit side. But the same will be not be debited in the firm’s account by the
bank. Reason being, the person to whom the check is been issued, has not presented it

Finance 3
in the bank. Due to this time lapse between issuing and presenting the check,
difference may occur in the balances of both the books (NCERT, n.d.).
 When a check is deposited in the bank by the firm, it is reported on the debit side of
the bank column in the cash book. But the same transaction will only be recorded by
the bank when the amount of check is realized. Once it is done, the bank will credit
firm’s account with the respective amount. This may again lead to the discrepancies in
the books (Warren, 2014).
 Sometimes the money is directly deposited in the bank account of the firm. The entity
will get to know about this transaction only when it received the statement from the
bank. As a result, the balance of cash book will be different from that of pass book
(NCERT, n.d.).
 The bank charges or fees and commissions on the different services, interest or
dividend received, expenses paid by the bank on behalf of firm, dishonour of check or
discounting of bill, all these transactions are recorded by the bank and the firm will
know about them after looking at the bank statement. The difference between the
balances of both the books can be identified through the statement (Warren, 2014).
Hence, it can be said that the statement issued by bank can assist in identifying the
discrepancies in the balances of both the books.
Question 3
GST stands for Goods and Services Tax is a value added tax imposed on the goods and
services which are sold for domestic consumption. It is added to the sale price of the product
and when the consumer purchase that product, he pay GST along with the price. The tax is
then collected by the seller and forwarded to the government (ATO. 2018).
Calculation for GST inclusive price:

Finance 4
In Australia, 10% GST is been charged on the supply of goods and services. In order to
calculate the price excusive GST, divide the price with 1.1 (ATO. 2018). For example:
Price including GST = $220
GST = 10%
Price without GST = [$220/ (1+10%)]
= $220/1.1 = $200
The amount of GST included = $220 - $200 = $20.
Calculation of GST exclusive price:
Price = $200
GST = 10%
Amount of GST = $200*10%
= $20
Total price including GST = $200 + $20 = $220.
Question 4
Accrual Accounting Cash Accounting
It takes into account, revenue when it is earned. It records the amount of revenue when
it is received.
Expenses are recorded when they are incurred. It reports about expenses, when they are
paid (Procházka, 2017).
It matches the revenue and expenses as and
when recognized.
It tracks the inflow and outflow of cash
in the business.
It provides a better picture of company’s profits
(Kelly, Barrow & Epstein, 2011).
It does not show the true profitability
position.
Question 5
(a) General Ledger: A set of accounts prepared by the company for keeping the record of
financial transactions made during the life of business (Barker, 2011).
(b) Chart of accounts: A financial tool used for providing a complete listing of all the
accounts in an accounting system.

Finance 5
(c) Journals: It is a record of all the transactions reported in an order by date (Barker,
2011).
(d) Double entry accounting: It is a type of accounting which follows the principle that
each and every transaction has equal effects on two different accounts (Tracy,
2016). It completes the equation:
Assets = Liabilities + equity.
Task 2
(3) Bank deposit slip

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(5) Bank Activity Statement

Finance 7
Task 4 A
(1) According to the cash budget prepared, Iain Hew can purchase the new office
furniture costing $65,000. The budget shows a balance of $111,000 at the end of
December which is sufficient for purchasing the furniture.
(2) If the balance at the end become negative, it means company has made more
payments than its receipts. To rectify this, company should timely collect its debtors,
so that cash availability can be maintained in the business. Along with this, it should
also increase its working capital and should provide discounts on the credit sales.
Moreover, reducing unnecessary expenses can also help in increasing the amount of
cash in the business.

Finance 8
(3) The company would inform and consult to the top management regarding the
decisions related to the available resources.
Task 4B
In the revised budget of French Travel Agency, the cash balance has been reduced as
compare to that of the previous budget. This reduction can affect the resource decision taken
by the top management as now the availability of the cash is less and it is necessary to
acquire and allocate the resources accordingly.

Finance 9
References
Banerjee, B.K. (2010). Financial Accounting: Concepts, Analyses, Methods and Uses. 1st ed.
New Delhi: PHI Learning Pvt Ltd.
Bank Reconciliation Statement. Ncert.nic.in. Retrieved 10 March 2018, from
http://ncert.nic.in/ncerts/l/keac105.pdf
Barker, R. (2011). Short Introduction to Accounting Dollar Edition. USA: Cambridge
University Press.
Definition and Recognition of the Elements of Financial Statements. Aasb.gov.au. Retrieved
10 March 2018, from http://www.aasb.gov.au/admin/file/content102/c3/SAC4_3-
95.pdf
Goods and services tax (GST). (2018). Ato.gov.au. Retrieved 10 March 2018, from
https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/Goods-and-
services-tax-(GST)/
Kelly, J., Barrow, P., & Epstein, L. (2011). Bookkeeping for Dummies. 2nd ed. England: John
Wiley & Sons.
Maheshwari, S. N., Maheshwari, S. K., & Maheswari, S. K. (2013). An Introduction to
Accountancy. 11th ed. New Delhi: Vikas Publishing House.
Procházka, D. (2017). New Trends in Finance and Accounting. Switzerland: Springer.
Thomas, P. (2017). How to Analyse Bank Financial Statements: A concise practical guide for
analyst and investors. Britain: Harriman House Ltd.
Tracy, J. A. (2016). Accounting for dummies. 4th ed. Hoboken: John Wiley & Sons.
Warren, C. (2014). Survey of accounting. 8th ed. USA: Nelson Education.