Nova Institute BSBFIM501: Budget and Financial Plans Assignment

This document presents a comprehensive solution to a BSBFIM501 Manage Budgets and Financial Plans assignment from the Nova Institute of Technology. The assignment covers a range of financial topics, including financial accounting principles, different types of budgets (operating, master, capital expenditure, and financial budgets), and the financial management process. It explores the differences between service, trading, and manufacturing organizations and delves into key budgeting elements, cash flow planning, and the impact of GST. Furthermore, it includes detailed explanations of financial statements, inventory, accounts receivable, accounts payable, and overheads, along with financial and non-financial performance indicators. The assignment also provides a sales and purchase budget for a furniture company, cash budget projections, and calculations of direct material and direct labor variances, offering insights into the factors influencing remedial actions in budgeting and performance analysis.

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BSBFIM501 Manage budgets and
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BSBFIM501 Manage budgets and
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BSBFIM501 Manage Budgets and financial Plans
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Instructions
 Do not remove staples from this book.
 You should attempt ALL questions.
 Electronic or other dictionaries are not permitted in the test.
 This booklet contains 10 pages.
 Maximum time provided to finish this booklet is 120 minutes including reading time.
 You must have a calculator to finish your tasks.
 To be filled by assessor:
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SECTION-I
1 (a) What is financial Accounting?
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BSBFIM501 Manage budgets and
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(b) List 5 Generally Accepted Accounting Principles (GAAP)
Financial accounting is regarded as accounting specialized branch that helps in keeping
track of all financial transactions of organization. It make use of standardized guidelines for
summarizing, recording and presenting financial report. Rules of financial accounting are
incorporated in Generally accepted accounting principles. The five generally accepted
accounting principles are as follows:
1) Assumptions of economic entity
2) Assumption of time period
3) Assumption of Unit assumption
4) Full Disclosure principle
5) Going concern principle
2 (a) What is a budget?
(b) Name and briefly explain different types of Budget?
(c) What is meant by Financial Management Process?
(d) Name 3 Key elements of Financial Management Process?
Budget is a quantitative tool that is used as design for choosing on activities that helps in
projecting sales, costs and income of an organization.
Different types of budget involves operating budget, master budget, capital expenditure
budget, operating budget and financial budget.
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BSBFIM501 Manage budgets and
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Process of financial management incorporates organizing, planning, controlling and
directing financial activities within an organization. Financial management process would help in
ensuring adequate and regular supply of funds to going concern. This involves utilization and
procurement of funds within organization along with optimally utilizing funds.
The three key elements of financial management process involves investment decisions,
dividend decisions and financial decisions.
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3 How do service, trading and manufacturing organizations differ? Provide examples for
each type of organization?
Tangibility of output is key difference between service, trade and manufacturing
organizations. Other factors of distinction involves production that are customer specific,
production for inventory, location for physical production, automated or labor intensive
operations. Business process of service organization involves providing service to customers at
particular point of time. Sales and procurements of trading concerns are main business of
trading organizations. Production, procurement and sales are major business process of
manufacturing organizations.
4 What are the key elements of Budgeting?
Some of key elements of budgeting are flexible expenses, fixed expenses, general savings
and unplanned expenses. Income and unplanned expenses are the key elements of budget.
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5 What is meant by cash flow plan? Explain why is it important?
Organizations make or prepare cash flow plans for forecasting inflow and outflow of cash
over a period of times and they form crucial part of business plan. It also means forecasting
short-term and long-term expenses that would arise from carrying out business activities against
projected cash flow. They are strategic documents prepared by companies for forecasting flow
of cash carried out by their operational activities. Companies are able to predict the needs to
borrow money and raise further capital. For success of any business, cash flow is considered to
be of paramount importance.
6) What is GST?
Goods and services are indirect tax that is not directly imposed on individual. Such tax is
levied at each stage of cycle of production and is levied on value added. This particular taxation
has become a global standard that ensures that structures and rate of indirect tax are common
that would enhance the ease of carrying out business. Application of this tax would make
business tax neutral regardless whether they carry out their business.
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7) What is a financial statement? What are the three main financial statements?
Financial statements are documents that form part of financial report of organizations
depicting cash flow and financial conditions. Ability of organization to generate cash and meet
their obligations is determined by information provided in financial statements. Looming
profitability issues within organizations can be tracker using financial statement. Financial
statements have three standard content that composed of balance sheet, statement of cash flow
and statement of profit and loss. Organization should adhere to major accounting standards
while preparing financial statements. Disclosures outlined in financial statements helps in
investigations of business transactions in detail.
8) Explain the terms
(a) Inventory b) Accounts receivable (Debtors) (c) Accounts payable (Creditors) (d) Overheads
Inventories are one the major category of assets and they comprise of raw material, finished
goods and work in progress that are ready to use and sale. Inventories are stock of goods that is
held for sale in ordinary business course.
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Accounts receivables is the payment or proceeds that company ought to receive from their
customers bought services and goods from organizations. On other hand, accounts payable are
amount that should be paid by companies to suppliers who has provided services and goods.
Overhead costs refer to expenses that are incurred in carrying out business operations. However,
this portion of costs is not related to their party expense, direct material and direct labor.
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9) List 5 financial and non financial performances Indicator?
Financial performance indicator are used to measure financial performance of organization
that helps in accomplishment of strategic objectives by monitoring progress. Developing
performance indicators is overall part of management that is related with achieving mission. Five
financial indicators are as follows: components of balance sheet and income statements, change
in growth of sales, categories of expenses, ratios and statement of profit and loss. On other hand,
non-financial indicator comprise of measures that is related with relationship with customer,
employees, operations, supply chain, cycle time and quality. Some of no financial indicators are
customer retention ratio, number of staffs, quality of products.
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10 What is remedial action in relation to budgets? Discuss, giving examples, the factors which
influence the identification of remedial action alternatives.
The remedial action in relation to budget is that there needs to be proper analysis of plant
utilization and inspect about their work in progress. It is required by management while
preparing budget to take input from different department heads so that information are properly
segregated so that budgets are efficiently prepared. Factors that are responsible for influencing
the identification of remedial action alternatives are whether budgets are prepared according to
qualifications and required criteria.
Plan of management in cash terms is feasible or not and impact of change in management
policies on budget preparation helps in identifying remedial action. This helps in taking
precautionary actions in reparation of budget.
SECTION-II
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1) Prepare a Sales and Purchase budget for the Action Furniture Company, which has three
divisions (1, 2 and 3) and sells three products (A, B and C). The following is the sales
forecast for January 2011
Product Division 1 Division 2 Division 3
A 800@60 1000@60 1200@ 60
B 1000@100 1200@100 3300@100
C 600@120 1600@120 3400@120
Additional information:
A B C
Desired ending inventory (31 January 2011) 1200 800 1900
Opening inventory (1 January 2011) 800 600 500
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