FNSACC501 Accounting Essay: Financial and Business Performance

This accounting essay addresses key aspects of financial performance and accounting principles. The essay begins by defining work-related deductions and allowances under the Income Assessment Act, providing examples of claimable and non-claimable deductions. It then explores the General Interest Charge (GIC) and its role in tax compliance. The essay further examines areas that can cause tax issues, such as large tax deductions and the importance of consulting tax professionals. Forecasting techniques like percentages of sales and cash budgets are discussed, along with the role of the Australian Securities and Investments Commission (ASIC) and the Australian Consumer Law in protecting consumers. Additional topics covered include the Australian Competition and Consumer Commission (ACCC), the definition of financial products and services, and the components of financial statements, including balance sheets, income statements, and cash flow statements. The essay also addresses fair presentation, compliance requirements, and the key data needed for a Cash Flow Statement. Budgetary control, types of financial institutions in Australia, and financial risks like liquidity and interest rate risk are also explored. Finally, the essay touches on company policies for protecting client rights.

Running Head: Accounting Essay 1
Accounting Essay
Name
Institution
Date

Accounting Essay 2
Task 1
Question 1
Work-related deduction under the Income Assessment Act is defined as a loss that is incurred by
a business whilst producing salaries or wages of its employees. A number of companies claim
the work related deduction for their client provided that they were not reimburse after spending
the money by themselves, they have evidence to assert the claim and as well the deductions must
be in relation to the income earned. Therefore, work-related deductions can only be claimed
when a client incurred them during the process of gaining assessable incomes. Most importantly,
the assessable incomes gained by the clients should not be domestic, private or capital in nature.
Salaries and wages, rent on business property and utilities are the three examples of deductions
that can be claimed by a business. Also, laundry (less than or equal to $150), travel expenses that
are catered for by travel allowance and small expenses (less than $10 each and with a total less
than $200) are examples of deductions that cannot be claimed by a business (ato.gov.au, 2019).
Question 2
Work-related allowance under the Income Assessment Act refers to an expense that is deducted
from gross income so as to minimize the amount of income that is subjected to income taxes.
They are paid by an individual so as to earn income. However, a certain criteria can be met by an
individual so as to reduce the taxable income by the magnitude of his expenses. As a result, work
related allowance under Income Assessment Act leaves an individual with an income obtained
after an income tax. Expenses that an individual incurs whilst earning a taxable income,
depreciation on equipment being used and superannuation deductions that are paid to a
compliant superannuation funds are examples of work related allowances (cpdlive.com, 2012).

Accounting Essay 3
Question 3
General interest charge was introduced by the Australian government in 1999 as a successor to a
multiple of interest penalties and charges and is always considered as a tax deductible.
Arrangement under GIC is that payments for penalties are advanced when they are overdue. For
example, it is always calculated on a daily basis and divided on the 365 days in a year whereby
the figure attained is applied to every day outstanding balance of taxpayer. As a result, it is used
as a tool for encouraging taxpayers to make timely repayments of their tax debts to Australian
tax authority. Property taxes and inheritance tax are two types of taxes for which the General
Interest Charge can be levied (ato.gov.au, 2019).
Question 4
A large number of tax deductions and not consulting tax professionals are the two examples of
areas that can cause significant tax issues for business. A large number of tax deductions
increases prospects of tax avoidance among businesses especially on finances that are utilized to
meet operational expenses like capital expenditures, client gifts and business travels. As a result,
owners of businesses should be sensitive to overstating deductions. On the contrary, incidences
of not consulting tax professionals have been attributed to paramount use of tax preparation
softwares among business owners whilst preparing their tax returns. Although the above
software makes the process is time saving, tax professionals would help the business owners to
comprehend to all details in the prevailing tax laws so as to avoid unexpected legal penalties
(Henderson, 2019).
Question 5

Accounting Essay 4
Percentages of sales and cash budgets are two examples of forecasting techniques that can be
used in finance. Both percentages of sales and cash budgets are focused on determining the
current financial position of an entity so as to predict its future financial strength and position.
However, percentage of sales is used to express a number of items from the balance sheet such as
current assets, net fixed assets and current liabilities as percentage of an entity's sales. While cash
budgets is used to indicate the capital cash inflows, revenue sources and any speculated surplus
or deficit in cash during the forecasted period of an entity (Businesswritingservices.org, 2011).
Question 6
In regards to government regulations, Australian Securities and Investments plays a role of
enforcing and regulating financial service and company laws so as to safeguard Australian
creditors, investors and consumers. In this case, the body acts in the best interests of all users of
financial information in Australian as far as consistence and compliance to government
regulations like policies on accounting standards are concerned (Malhotra and Ray, 2016).
Question 7
The following are the key areas in which the Australian Consumer Law offers protection to
consumers
i. Redress alternatives for consumers, enforcement powers and penalties
ii. Simplified nationwide laws for lay-by mutual understandings
iii. Provision of nationwide product safety laws
iv. Implementation of a nationwide law that guarantees rights of consumers when purchasing
services

Accounting Essay 5
v. Implementation of nationwide unfair contract term regulations that takes into
consideration the small entity and consumer contracts
Question 8
Australian Competition and Consumer Commission have a primary responsibility of enforcing
the 2010 Competition and Consumer Act amongst Australian business entities. In this case, it
offers a range of more legislation promotes fair trading, competition and regulates the business
environment for the wellbeing of Australians (Malhotra and Ray, 2016).
Question 9
A financial product is defined under the Corporations Act 2001 as a facility that is utilized by an
individual to make non cash payments, manage financial risks and make financial investments.
The above roles are executed without any prior consideration given to the initial motives of
attaining the financial product. In this case, a particular facility is still considered to be a
financial product even when the individual who acquired it did not have intentions of managing
financial risks. Financial product is listed under section 763A of the Corporations Act 2001
(Wipo.int, 2017).
Question 10
Financial service as set out in the Corporations Act 2001 are defined as tools through which
uniform disclosure regime and licensing have been implemented to shape financial practices of
entities. In this case, an individual operating a financial services venture is required to have an
Australian financial services license unless exempted by Australian Securities and Investments

Accounting Essay 6
Commission. Financial service is listed under section 761C of the Corporations Act 2001
(Wipo.int, 2017).
Question 11
Balance sheet and income statement are part of financial information that is included in the
General Purpose Financial Reports. A balance sheet is a statement of capital, liabilities and assets
that are held by an entity at a given point of time. It gives details about balance of income carried
forward by an entity as well as expenditures that are to be incurred over the forthcoming periods.
On the other hand, an income statement is a tool used to show an entity's expenses and revenues
during a specific period of time. In other words, income statement shows how revenues can be
changed into either net profit or net income. As a result, balance sheets and income statements
are used in general purpose reports that are availed to lenders and investors so as to aid their
decision making processes as far as devotion of resources to an entity are concerned. The above
information differs from that offered in special purpose reports in a way that information in
special purpose reports like tax reporting is only limited to a group of financial information users
like small and medium enterprises (Quinns.com.au, 2018).
Question 12
A balance sheet, income statement, statement of changes in equity and cash flow statement are
the key components of a financial report. A balance sheet is a statement of capital, liabilities and
assets that are held by an entity at a given point of time. It gives details about balance of income
carried forward by an entity as well as expenditures that are to be incurred over the forthcoming
periods. Additionally, an income statement is a tool used to show an entity's expenses and
revenues during a specific period of time. In other words, income statement shows how revenues

Accounting Essay 7
can be changed into either net profit or net income. Also, statement of changes in equity gives a
detailed explanation of changes in accumulated reserves and share capital over the reporting
periods of an entity. Furthermore, cash flow statement shows how shifts in income and balance
sheet accounts impacts cash and as well analysis is broken down to financing, operating and
investment activities (Malhotra and Ray, 2016).
Question 13
Fair presentation is described as depicting financial statements in a manner that is free from
misstatements in the financial position and performance of an organization is faithfully
represented. Fair presentation is a prerequisite for financial reporting in Australia whereby
financial statements should fairly indicate the financial performance, position as well as cash
flows of an organization. Additionally, compliance requirements with AAS are rules that entities
should follow whilst preparing financial statements. They include; organization should engage in
internal auditing and recording keeping so as to present reliable and accurate financial statements
(Pete, 2019).
Question 14
Monthly billings and operating expenses are the vital company data that is needed to complete a
Cash Flow Statement. In addition, net incomes for a given periods, non cash expenses, changes
in all current assets as well as changes in liabilities are the vital information that a cash flow
statement provides. The above mentioned information is essential in delivering detailed analysis
of financial, operating and investment activities of an entity (Peavler, 2018).
Question 15

Accounting Essay 8
Budgetary control is an instrument that depicts the degree of effectiveness that manage make use
of budgets to control and monitor operations plus costs in a specified period of accounting. In the
due course, managers are in position to make actual comparisons of results and performance
adjustments so as to meet the performance and financial objectives with an entity's budget.
Formulation of a plan that coordinates all undertakings of an entity, recording actual
performances, comparisons between actual and planned performance, calculating disparities in
performance and analyzing the causes and feasible actions undertake to address the disparities
are the five key principles of budgetary control (Pal, 2019).
Question 16
Banks, Building societies, Credit Unions and Reserve Bank of Australia are the four main types
of institutions that operate within the Australian financial services industry. Banks are regulated
by Australian Prudential Regulation Authority (APRA) consists of 86 subsidiaries that offer a
variety of financial services in form of insurance and financial management services to all
sectors of Australian economy. In addition, Building societies are also regulated by APRA
consists of 3 subsidiaries that offer deposit, payment and housing loan services to their members.
Also, Credit Unions are also regulated by APRA consist of 47 subsidiaries that offer deposit,
payment and housing loan services to their members. Furthermore, Reserve Bank of Australia is
a government institution that plays a role of regulating banking and non banking financial
institutions and provides necessary information about the financial institutions (Rba.gov.au,
2018).
Question 17

Accounting Essay 9
Liquidity risk is categorized as a financial risk that emerges when an entity that had urgent cash
needs possesses a valuable asset that cannot be sold off due to absence of potential buyers in the
market. The above risk is facilitated by dependence of an entity on a market that is exposed to
losses in liquidity. However, liquidity risks can be managed by making timely payments of
account receivables by an entity (Amihud and Pedersen, 2013).
Question 18
Interest rate risk refers to the possibility of a deduction in the value of assets arising from
unanticipated decrements or increments in interest rates. Bonds are the most fixed assets that are
associated with interest rate risks. Interest rate risks are managed through swaps whereby a
mutual understanding is made between counterparts during exchange of sets of long term cash
flows (Norris, 2018).
Question 19
Zero tolerance to discrimination, protection of privacy of individual clients, responsibilities and
rights should be executed together and equality in rights for all clients are four examples of
company policies that could be used to protect rights of clients. Zero tolerance to discrimination
could involve setting rules and actions that safeguard every client from any kind of
discrimination at workplace may be due to gender, race or ethnicity. Also, a company could
stipulate legal actions like fines as a way of protecting privacy of individual clients at workplace.
I order to protect rights of clients; a company should ensure that responsibilities and rights
whereby all assigned responsibilities are completed to meet the interests of clients. Furthermore,
a company could as well create an environment that facilitates equal access and sharing of
thoughts as a way of promoting equality in rights among the clients (Sielearning.tafensw.edu.au,

Accounting Essay 10
2018). The above policies could help to protect rights of clients as well as making them to
understand their responsibilities.
Task 2
Question 1
Basing on the email, I confirm that the proposed business venture by Mary has the following
objectives;
i. To reap significant returns on their investments in manufacturing and selling high quality
educational children toys within Australia. Just like any other business, Mary would be
willing to earn significant returns from her investments in manufacturing and selling the
children toys wholesale to retailers (Johan and Gabriel, 2013).
ii. To enhance the degree of educations quality in Australia through using their educational
toys for demonstration purposes by educators. Mary could be having a view that the
current level of education is education could be enhanced through manufacturing and
selling children toys to facilitate the demonstration purposes of educators (Natalie, 2013).
iii. To outcompete the existing rivals in the industry through producing and selling their high
quality toys. In this case, Mary is focused on better quality of children toys as a way of
sustaining the survival and competitive advantage capability of her venture. Such an
approach will help her business to attract and retain all potential clients with the proposed
high quality of children toys and thus enhanced survival and competitiveness (Katila and
Piezunka, 2012).
As part of the legal requirements, Mary will need to attain a license from the Australia's
manufacturing authority to fully register her company as OZ Quality Toys. This will ensure that

Accounting Essay 11
the business is legally recognized by the authority which could as well help to attract potential
investors. In regards to financial requirements, Mary should ensure that her finances are
significant to set up and maintain the business operations for long periods of time to prevent
incidences of collapse. In this case, socio-economic status of the potential clients will need to be
evaluated to help find out whether clients will be able to meet the proposed prices for the
children toys (Katila and Piezunka, 2012). Also, the above assessment will help to determine the
most appropriate price for her children toys so that clients can be attracted and maintain.
Question 2
In regards to business structure, her venture will involve manufacturing, distributing and
selling of the children toys. Manufacturing will basically involve identifying feasible factor
inputs like raw materials, equipment and manpower. The above structure will ensure that
strategic plans are made to kick start the venture. However, ineffective execution of the strategic
plans may lead to wastage of resources (Matt, 2015). Additionally, distribution structure will
involve identifying outlets like wholesalers or retailers through which produced children toys
will be delivered to potential clients. The above structure holds a merit of easing delivery of
children toys to potential clients. However, a shortage in the supply of the products may affect
the whole distribution chain especially in times of high demand. Furthermore, selling structure
will involve considering points that the products will be sold off to clients (Griffith, 2014). The
above structure holds a merit of enhancing product sales as selling points may be diversified to
client locations.
In regards to sources of funding, small mortgage on their house, personal saving and
acquisition of a loan from a financial institution are the feasible alternatives to meet the required

Accounting Essay 12
startup capital of $50,000. Small mortgage on their house, personal savings and loan acquisition
hold a merit of raising more funds to meet the financial needs of the entity because it holds a
significant financial value. However, the above sources of funding could have financial
constraints on the venture in form of loan repayments and reductions on their quantity of the
fixed costs that are held by the client in the short run (David, 2010). In order to achieve the
proposed business structure, the client will need strategic planning approach so that the available
resources can be assessed and evaluated to determine if they can be able to sustain the business
for longer periods of time. In case of shortages in resources, then sources of funding should be
diversified through borrowing from friends.
Question 3
Executive summary
Manufacturing and selling children toys is a great business idea that can result into desirable
returns on investment in the short and long run. The above is attributed to the fact that the
available low quality children toys have not been effective in enhancing children education. As
such, focusing on quality children toys will help the proposed business to realize significant sales
and profits due to wide market base. However, there is need to strategically plan for all the
process of starting the business so as to sustain its survival and competitiveness.
Introduction
The purpose of this business report is to describe the feasibility of Mary's proposed business idea
by assessing the findings, making conclusions as well as recommendations on what steps should
be undertaken to start up the business. Mary's business idea to manufacture children toys is a
feasible venture that can be flourishing provided an effective strategic plan can be utilized by the