SITXFIN004 - Prepare and Monitor Budgets Assessment Workbook

This assessment workbook is designed to assess the student's understanding and application of the performance criteria, performance evidence and knowledge evidence for SITXFIN004 - Prepare and Monitor Budgets. It includes questions related to the role and nature of different types of budgets, data sources required for budget preparation, factors impacting budgets, cost volume profit analysis, and more. The final budget format must be in Ms Excel or similar other formats. Subject: SITXFIN004 - Prepare and Monitor Budgets. Course Code: SITXFIN004. Course Name: Prepare and Monitor Budgets. College/University: Not mentioned.

SITXFIN004 - Prepare and monitor budgets
Assessment Workbook
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 NYC – Not Yet Competent
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 Yes - Description of adjustment
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application of the performance criteria, performance evidence and knowledge evidence. If
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assessment tool. All questions must be answered in full. Your assessor may verbally challenge
your answer by asking you to clarify or further explain your answer. At the end of this
assessment task, your assessor will provide you with feedback on areas for continuous
professional development. Unless specified, answers should be approximately 100 word in
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Q # Questions
Satisfactory
√ = Yes
X = No
1. Briefly discus the role and nature of the following types of
budgets relevant to the tourism, travel and hospitality industry:
a. Cash budgets.
Cash budgets are an estimation of the cash that comes into and
goes out of your business. Its main purpose is to track whether the
business has a sustainable cash income to allow them to fulfill
regular operations, as well as determining whether the cash being
distributed around the organisation is going into the most
productive areas.
Creating a cash budget is a great method for determining where the
incoming cash is being spent, allowing for the opportunity to cut
unnecessary costs.
b. Cash flow budgets.
A cash flow budget is used to predict what cash your business will
have available for expenses over a nominated period, which is
usually 12 months.
The budget shows the expected income and expenditure of cash for
the business and can be used to predict the monthly bank balance.
This is important as it allows you to plan ahead for any month
where it is likely that the cash flow will be slow, meaning
expenditure will need to be carefully monitored.
c. Departmental budgets.
A departmental budget is a tool that can project the income and
expenses of a department within the organisation in order to
achieve its financial goals.
A departmental budget allows the organisation to analyse the costs
and expenses related to a department and whether the total
business income is sufficient to meet these expenses.
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d. Event budgets.
As you might suspect, an event budget is a budget that is set in
place for an event. This budget will need to cover all aspects of the
event, which means everything you will need for the event will need
to be covered.
This plan is useful for ensuring that everything that is needed for
the event is budgeted to show where the main costs will be. You
can adjust certain features to change the numbers around
depending on other factors, for example, if the venue is a great
location with beautiful views and scenery, then you may be able to
allocate less funds to decorations.
Ensure there is a buffer for any unexpected costs. Event
professionals will generally suggest around 10% of the total budget
should be allocated to unplanned expenses.
e. Project budgets.
A project budget is used to estimate and track the costs that a
project will require to operate and meet its goal
The project manager is responsible for drawing up the project
budget, which they must do with consideration of the fact that it
is difficult to know how much the project will cost
f. Purchasing budgets.
The purchasing budget is used to determine how much stock a
business must purchase to be able to supply the amount of stock
needed to meet customer orders during the budget period
It can be used to estimate the amount that will be spent on
products that will be resold by looking to past months and
following the trend. The purchase budget is commonly used in
businesses where they do not manufacture their own goods
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g. Sales budgets.
The sales budget is similar to, and often runs alongside, the
purchasing budget. It shows the expected sales that the business
will make over a period of time in a monetary value and an
estimated quantity of units sold.
The sales budget is also used to determine the monetary amount of
net sales that will happen during the nominated period.
It is important to ensure that the sales budget is as accurate as
possible in its forecasting, as the sales budget is used as a starting
point for many other budgets, such as a production or materials
budget
h. Wage budgets.
The wage budget is created to estimate the cost to the organisation
from paying employee wages. This budget is an important one to
create as it shows the amount of cash flow that is being placed into
wages, and compared to the income of the business, will determine
whether wage reductions, increases, or more or less staff is
required.
When creating the wage budget, you will need to take into account
employment conditions and award provisions for minimum wage
requirements for workers.
i. Whole of organisation budgets.
A whole of organisation budget is one where all of the operations
and departments’ income and expenditure are budgeted for in a
single plan. This is useful for creating a far simpler to run budget,
but it does come with the risk of not being able to easily pinpoint
any problems in particular areas.
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2. Identify at least 10 types of data and data sources that may be
required for budget preparation.
 Competitor research
 Customer or supplier research
 Declared commitments in areas of operation
 Financial information from suppliers
 Financial proposals from key stakeholders
 Income and expenditure
 Departmental, event or project budgets
 Grant funding guidelines or limitations
 Management policies and procedures
 Organizational budget preparation guidelines
3. What are 5 of the internal and external factors that have the
potential to impact on budgets?
 Growth or decline in economic conditions
 Human resource requirements
 New legislation regulation
 Organisational and management restructures
 Organisational objectives
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4. Who should you provide with opportunities to contribute to
budget planning process?
 Chefs
 Bar staff
 Business owner
 Hotel manager
 Tourism consultant
 Admin manager
5. What is a cost volume profit analysis?
Cost Volume Profit Analysis is a technique that generates
information that summarises various levels of profit or loss
associated with various levels of operations
Managers use this as a basis for planning and budgeting.
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6. What information may you need to analyse when drafting
budgets and estimating income and expenditure? Identify at
least four types of information required.
Analogous estimating
Parametric estimating
Three-point estimating
Bottom-up estimating
7. What is valid, reliable and relevant information?
Reliable information that allows you to make a decision, take an
action or reach a conclusion.
A valid document is a document you can rely and trust. There is
good evidence to show the document is correct in what you are
saying
Relevant information is data that can be applied to solve a problem.
This is a particular issue when determining the format and content
of an entity’s financial statements, since the proper layout and level
of detail of information can adjust the opinions of users regarding
the future direction of a business.
8. How can organisational objectives be reflected in a draft budget?
 Calculate the break-even point in both units and dollars.
Reference will need to be made to the total fixed and
variable costs and the selling price per unit.
 • Determine the x-axis scale by:
 Finding the maximum number of units to be graphed, or
 o doubling the number of break-even units. This will cause
the break- even point to appear approximately in the middle
of the graph.
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 • Determine the y-axis scale by:
 Finding the maximum value to be graphed by multiplying the
maximum number of units depicted on the x-axis by the unit
selling price.
 • Plot the break-even point on the graph by placing a mark
on the graph which corresponds to the break-even units
dollars on the y-axis and the break-even units on the x-axis.
9. What are the 5 factors that need to be involved when presenting
a budget for assessment and approval?
A budget is made to represent certain critical and important
information. A budget needs to include some critical aspects for
its assessment and approval. The five integral factors that has to
be present within a budget includes;
1. Clarity of information
2. Definition of critical points
3. Similarity of units across all figures or mentioning of
them
4. Presentation and depiction of KPI (key performance
indicator) scores
5. Purpose and aim of the budget
10. Why do you need to circulate a draft of the budget to colleagues
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and managers before finalisation?
A budget draft needs to be prepared and presented across to
colleagues and managers for their assessment and approval.
Assessment and approval prior to finalization is a critical step
that needs to be undertaken such that there are challenges faced
for applying them. Colleagues and managers can provide their
useful insights which can in turn allow the budget to become
more effective and efficient. Therefore, circulation of draft is
deemed to be essential such that each and every employee and
manager can represent their views regarding the budget and
provide useful insights related to them.
11. What are the 6 steps you can take to ensure that you are in a
good position to negotiate your budget submission and are
aligned with your organisational policies and procedures?
Budget submissions are an essential component of every
organization. Budget submissions needs to be aligned with
organizational policies and procedures, such that there is a good
position to negotiate budget with. The six steps which can
ensure that there is a good position to negotiate budget
submissions are;
1. Ensuring that the budget adheres to the organization’s
vision, mission and goal statement.
2. The budget needs to encompass all possible heads that
the organization deals with.
3. There needs to be adherence to organization’s policies
and procedures such that no items or aspects are present
which can present contrary rules.
4. Accountant or personnel responsible for preparing and
presenting the budget needs to be aware and well
equipped to comply with budgetary norms and rules. The
person should be well aware of all possible compliance
procedures and adhere to them while preparing of the
budget.
5. A budget represents a well-formatted documented
statement, hence clarity of information needs to present
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such that all relevant stakeholders can read it. Clarity of
information needs to be present for all relevant
stakeholders, such that they can easily comprehend the
same and thereafter approve it.
6. A budget for the purpose of getting approval need to
contain clear reasons for allocation into different
budgetary heads such that they are self-explanatory in
nature. Clarity of information represents necessary
grounds on which everyone can easily accept and no one
can reject the budget or such that minim um alterations
are needed for changing the budget.
12. Why might you need to agree on and incorporate modifications
into the budget?
A budget after its presentation might require certain changes to
be made. Incorporating modification into the budget is generally
made to include views and aspects of relevant stakeholders.
While some changes can be incorporated into others might have
to be rejected at the face off it. Incorporation of modification into
the budget primarily includes changes in budgetary heads,
creating additional provisions, inclusion of KPI scores and so on.
These changes made into the budget are primarily aimed at
improvising of the budget and information presented by it. On
the contrary other changes might be not possible to incorporate
as they might include other alterations to be made into
budgetary heads and so on.
13. What format must be the final budget is in?
The final budget format has to be in Ms Excel or similar other
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formats such that information can easily be retrieved from it. A
budgetary format needs to be a representation of various
resources, costs and other necessary heads for the organization.
The final budget must be easily readable in nature including
various heads that form organization’s critical costs and
processes. Moreover the final budget needs to be approved by all
departmental heads, managers and employees such that they are
able to easily apply and adhere to it.
14. What information needs to be included when informing
colleagues of final budget decisions and the applicant of the
budget in relevant work areas?
A budget includes various information and decision criteria’s.
There is varied information to be included when informing
colleagues regarding final budget decision. This information
includes date of commencement of the budget, budgetary heads,
units of the budget, application of the budget in relevant areas
and KPI scores monitoring standards and rules of the budget. All
these information presented when informing colleagues of final
budget decisions and applicant of the budget helps adhere and
understand various aspects of the budget. As a budget is
generally large and presents volumes of complex information it
often becomes difficult to search such information and abide by
them. An annexure where reference to the budget is included is
often handed along with the detailed in-depth budgetary views.
Such an annexure presents ease of handling information and
dealing with them.
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15. Why do you need to regularly review budgets?
Budget needs to be reviewed frequently to include latest figures
and aspects of the same. Budgets are reviewed and monitored
frequently and on timely basis to include increase in costs and
other detailed aspects such as additional resources and so on.
Any changes in the organization along with other regulatory
changes that are accommodated into the organization have to
form an integral part of the budget. In absence of regular update
and monitoring of the budget, its effectiveness might be lost out.
16. What do you need to incorporate when preparing accurate
financial reports?
Financial reports are formed and presented for almost all
organizations. Preparing accurate financial reports is essential as
it is furnished to major stakeholders of the organization such as
shareholders, investors, directors, employees and any other
internal or external stakeholders such as governmental agencies
or rating agencies. For preparation of accurate financial reports
care needs to be taken those standards and regulatory board
measures are followed in an accurate manner. Financial reports
needs to represent information in standardized units and
conform to standard format as prescribed by IFRS or in
accordance to the country’s specified board. It needs to be
represent information in a fair and true manner; moreover it
needs to furnish all relevant information as deemed to be
essential by shareholders. Last year’s leases losses and other
taxes or discounts that need to carry forward have to be taken
into consideration. All stages of financial reporting such as
trading account, profit and loss account, cash flow statement and
balance sheet needs to be prepared. A glossary of terms and
summary of information has to be presented.
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17. What is the difference between standard deviations and
significant deviations?
Standard deviation measures deviation from particular standard
as set by the organization. On the other hand, the term
significant deviation denotes a lot of deviation away from
standards that are set by the organization. Significant deviation
means that there is 95% chance that differences have occurred
due to discrimination.
18. What are 4 common reasons for deviations?
Deviation can be due to a number of reasons and can occur
primarily due to changes in raw materials, changes in labour
force, which operates without much induction or training,
changes in macroeconomic factors and due to changes in
currency system. Though there are various other reasons that
can be accounted for reasons of standard deviation, these factors
are considered to be critical and important in nature.
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19. What are 5 internal and/or external environment changes that
could occur when preparing and monitoring budgets?
While preparation of budget there needs to are provisions kept
to account for external along with internal environmental
changes. In preparation and monitoring of budgets internal
changes can be changes in needs of resource allocation, project
related changes and changes in units kept standard for the
organization. Changes in external environment can arise from
fluctuations in economic conditions, political conditions, legal
systems affecting budgetary preparations and technological
changes.
20. Why must you collect and record all relevant information?
Relevant information needs to be collected and recorded such
that there is conformance to them. Collecting information allows
preparing budgets and conforming to them. Moreover collecting
and recording information allows for conformation to meeting
standards as presented by the organization.
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21. What is a financial reporting cycle?
Financial reporting cycle is generally the annual cycle time or
financial year during which financial reports are presented. Each
financial year generally proceeds from 1st April and concludes on
31st March of every year. This financial reporting cycle is
generally followed for the purpose of purchase and presentation
of facts and figures by the organization.
22. Outline the steps required in the financial reporting procedure.
The process of Financial reporting follows a step by step
procedure. The procedure that is outlined for the purpose of
financial reporting includes collecting information, documenting
them, incorporating each and every information from different
ledgers into account heads such that final financial statements
can be prepared. Bank statements and cash in hand needs to be
accounted for such that reconciliation can be encompassed.
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23. What are 5 of the features and functions included in accounting
software programs used to prepare and monitor budgets?
Accounting software programs in order to prepare and monitor
budgets need to have features and functions. The five distinct
features and functions are;
1. Reporting and analysis
2. Graphics
3. Automation
4. Automatic updates
5. Customization
24. What are 3 estimation techniques used for making budget
estimates?
Estimation techniques that are used for the purpose of making
budget estimates are;
1. Analogous Estimating
2. Parametric Estimating
3. Three Point Estimating
25. How can you complete competitor research?
A competitor research can be conducted by the following steps;
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1. Identifying top ten competitors
2. analysing and comparing competitors
3. Analysing their core competency
Satisfactory (please circle) Yes No
Feedback to the Student:
16.02.2018 17

P # Projects
Satisfactory
√ = Yes
X = No
1. Budget Terminology.
Develop a reference sheet that would be suitable to have in a
workplace or to include in an induction package of at least 15
pieces of terminology relating to budgets and budgeting.
Internal and External Factors that Potentially Impact
Budgets.
Discuss how each of the following internal and external factors
might potentially impact on the development of budgets:
a. Growth or decline in economic conditions.
b. Human resource requirements.
c. New legislation or regulation.
d. Organisational and management restructures.
e. Organisational objectives.
f. Scope of the project.
g. Shift in market trends.
h. Significant price movement for certain
commodities or items.
i. Supplier availability and cost.
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2. Sources and Contents of Data Required for Budget
Preparation
Develop a resource that would be suitable to keep in the
workplace that explains the following information that is
generally required for budget preparation:
a. Competitor research.
b. Customer or supplier research.
c. Declared commitments in areas of operation.
d. Financial information from suppliers.
e. Financial proposals from key stakeholders.
f. Income and expenditure for previous time periods.
g. Departmental, event or project budgets.
h. Grant funding guidelines or limitations.
i. Management policies and procedures.
j. Organisational budget preparation guidelines.
k. Performance information from previous periods.
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3. The following task must be demonstrated in an operational
tourism, travel, hospitality or events business operation or
activity for which budgets are prepared. This can be an industry
workplace or a simulated industry environment, and will require
access to:
 Computers, printers and accounting software
packages
 Financial and operational data and reports used to
prepare budgets
 Others with whom you can discuss and negotiate draft
and final budget components with; these can be: those
in an industry workplace who are assisted by the
individual during the assessment process; or
individuals who participate in role plays or simulated
activities, set up for the purpose of assessment, in a
simulated industry environment operated within a
training organisation.
For this task you are to prepare a budget for a business that
meets the specific business’ needs, and monitor and review the
budget against its performance over its life cycle.
You will need to perform each of the following steps to prepare
the budget information:
1. Determine the scope and nature of budgets that are
required and confirm with relevant personnel.
2. Identify the data and data sources required for the budget
preparation.
3. Access and interpret the data required for the budget
preparation.
4. Identify and analyse any internal and external factors that
may potentially impact on the budget.
5. Consult with and provide opportunities for colleagues to
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contribute to budget planning process.
Complete the following steps to prepare and draft the budget
within the designated timelines:
6. Draft the budget based on your analysis of all available
information.
7. Estimate the income and expenditure of the business, and
support this estimate with valid, reliable and relevant
information.
8. Ensure to reflect the organisational objectives within the
draft budget.
9. Assess all relevant options and recommendations, and
present them in in a clear format.
10. Circulate the draft budget to all colleagues and managers
for input.
Perform each of the following steps to finalise the budget within
the designated timelines:
11. Follow organisational policies and procedures to
negotiate the budget with relevant personnel.
12. Agree on modifications with relevant personnel, and
incorporate them into the budget.
13. Complete the final budget in a clear format and within the
designated timelines.
14. Inform colleagues of the final budget decisions and their
applications within all relevant work areas, including
informing them of new or changed reporting and financial
management responsibilities.
Once you have developed your budget, you will need to complete
the following steps to monitor and review the budget against
performance over its life cycle:
15. Review the budget on a regular basis to assess the actual
performance against the estimated performance.
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16. Prepare accurate financial reports.
17. Incorporate all financial commitments into budget and
budget reports.
18. Investigate and take appropriate action on identified
significant deviations.
19. Analyse any changes in the internal and external
environment, and make any necessary adjustments.
20. Collect and record all relevant information to assist in
future budget preparation activities.
Once you have effectively prepared a budget for a business, and
monitored and reviewed the budget over its life cycle, you will
need to sit down with your assessor and discuss:
21. Any of the following types of budgets used throughout
your task, including how they were used:
a. Cash budgets
b. Cash flow budgets
c. Departmental budgets
d. Event budgets
e. Project budgets
f. Purchasing budgets
g. Sales budgets
h. Wage budgets
i. Whole of organisation budgets
22. Any budget terminology used throughout the task.
23. The role and nature of budgets used in your specific
industry and organisation.
24. Budget formats used in your specific industry and
organisation.
25. Budget performance in your specific industry and
organisation.
26. Financial reports used to assist with your budget for your
specific industry and organisation, including financial
reporting procedures and cycles.
27. The features and functions of any accounting software
used to prepare and monitor your budget.
28. How any of the following internal or external factors
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impacted on budget development:
a. Growth or decline in economic conditions.
b. Human resource requirements.
c. New legislation or regulation.
d. Organisational and management restructures.
e. Organisational objectives.
f. Scope of the project.
g. Shift in market trends.
h. Significant price movement for certain
commodities or items.
i. Supplier availability and cost.
29. The sources and contents of any of the following data
used for your budget preparation:
a. Competitor research.
b. Customer or supplier research.
c. Declared commitments in areas of operation.
d. Financial information from suppliers.
e. Financial proposals from key stakeholders.
f. Income and expenditure for previous time periods.
g. Departmental, event or project budgets.
h. Grant funding guidelines or limitations.
i. Management policies and procedures.
j. Organisational budget preparation guidelines.
k. Performance information from previous periods.
30. Techniques used for making your budget estimates.
31. The reasons for any deviations identified, and methods
used to respond to the deviations.
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Satisfactory (please circle) Yes No
Feedback to the Student:
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PA # Practical Assessment
Satisfactory
√ = Yes
X = No
1. Prepare a budget for a business that meets the specific business’
needs
2. Monitor and review the above budget against performance over
its life cycle
3. Demonstrate the below when preparing the above budget:
 consultation on components
 analysis of factors that impact on the budget
 completion of draft and final versions of budget within
designated timelines
Satisfactory (please circle) Yes No
Feedback to the Student:
16.02.2018 26

SSO # Supervisor Sign Off
Satisfactory
√ = Yes
X = No
1. Prepare a budget for a business that meets the specific business’
needs
2. Monitor and review the above budget against performance over
its life cycle
3. Demonstrate the below when preparing the above budget:
 consultation on components
 analysis of factors that impact on the budget
 completion of draft and final versions of budget within
designated timelines
Satisfactory (please circle) Yes No
Feedback to the Student:
16.02.2018 27