BSBFIM501: Managing Budgets & Financial Plans - Assessment Q&A

This document provides answers to assessment questions for BSBFIM501 Manage Budgets and Financial Plans. It covers accrual accounting, single vs. double entry accounting, the five types of accounts underpinning double entry bookkeeping, and the components of financial reports such as Profit and Loss statements, Balance Sheets, and Cash Flow statements. The document also lists and explains five different financial records a company must keep, including sales/debtors records, cash records, subsidiary books, work in progress, and financial statements. Furthermore, it outlines key accounting principles like consistency, disclosure, materiality, and conservatism. The assessment also includes calculation methods for profitability ratios, double-entry accounting examples, budget creation steps, and relevant expenditure/revenue items for budgeting. Finally, the document discusses maintaining the integrity of electronic financial spreadsheets, cash flow impacts, taxation laws, and relevant legislation such as the Income Tax Assessment Act 1997 and the Taxation Administration Act 2005.

Assessment: BSBFIM501 Manage budgets and financial plans

Assessment: BSBFIM501 Manage budgets and financial plans
Assessment 4:
Questions
1
1. What is Accrual Accounting?
Accrual accounting is an accounting method which records the expenditure and revenue of an
organization at the time of incurring the transaction rather than the time when the cash is exchanged.
In other words it is a term which records for the revenue and expenses in absence of the cash in the
transaction.
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2. What is the difference between single and double entry accounting?
Single entry accounting is a normal form of accounting and bookkeeping in which every transaction of the
business transaction is recorded single time and it affects on a single account of the company whereas double
entry accounting is an advanced form of accounting and bookkeeping in which every transaction of the
business transaction is recorded double time and it affects on double account of the company. In case of
double entry accounting system, accrual reporting system is used whereas in single entry, cash basis is used.
.
3. List the 5 types of accounts which underpin double entry bookkeeping.

Assessment: BSBFIM501 Manage budgets and financial plans
Double entry accounting system explains that every financial transaction of the business affects
the two accounts. Double entry accounting is a system of record keeping in which every transaction
is recorded twice. list of few accounts of double entry system is as follows:
1. Liability account
2. Expenses account
3. equity account
4. assets account
5. revenue account
.
4. Describe what is included in each of the following reports:
Profit and
Loss
 Sales and total turnover
 Cost of goods sold
 Gross profit
 office and administrative expenses
 selling and distribution expenses
 Net profit
Balance Sheet
Assets
 Current assets
 Property, plant and equipment
 Investment
 Intangible assets
 Other assets
Liabilities:
 Owner’s equity
 Long term liabilities and
 Current liabilities

Assessment: BSBFIM501 Manage budgets and financial plans
Statement of
Changes in Equity
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Free cash flow
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5. List and explain 5 different financial records that a company must keep.

Assessment: BSBFIM501 Manage budgets and financial plans
1. Sales / debtors record
 Sales journal
 List of debtors
 debtors journal
 Cheque butts
2. Cash records
 Cash payment journal
 cash receipt journal
 petty cash book
 Bank deposit book
 Cheque butts
3. Subsidiary books
 Sales book
 purchase book
 Cash book
 Sales return book
 purchase return book
4. work in progress
 Creditors record
 stock listing
 customer files
5. financial statement
 Profit and loss a/c
 balance sheet
 cash flow statement
7 Describe the following accounting principles.

Assessment: BSBFIM501 Manage budgets and financial plans
Doctrine of
Consistency
This accounting method explains that once an accounting method is
adopted by the company than the company should follow it permanently.
The company could make the changed into the accounting method but
the effect should be disclosed by the company properly.
Doctrine of
Disclosure
This accounting principle explains that all the activities should be
disclosed in the financial statement of the company according to materiality
concept.
Company should disclose all the information according to the
accounting concepts and the principles.
Doctrine of
Materiality
This concept explains that if the amount of any activity is quite smaller
than it should not be disclosed in the financial statement as it misleads the
financial statement.
This concept is useful for the analysts, auditors and other parties of the
company to evaluate the financial position and the performance of the
company.
Doctrine of
Conservatism
Doctrine of conservatism briefs the recognition of liabilities and the
expenses of the company as soon as possible, if there is any uncertainty
regarding the outcome.
This concept explains that if there is any certainty about the loss
occurring than it should be added into the financial statements of the
company. It further explains that the gain must not be recorded on the basis
of gain certainty.
.
8 Outline the calculation method used to determine the following profitability returns ratios.
Operating return
on assets
Operating Return on
assets (ROA)=
Net income
Average total assets

Assessment: BSBFIM501 Manage budgets and financial plans
Return on
assets Net income / total assets
Return on total
capital Earnings before interest and taxes / total capital
.
9
Pedro's Pasta purchases a car for $8,800 using a loan from the bank suppler. Referring
to double entry accounting, what are the two effects of action? Show how you would record
the transaction in the ledger.
1
10 Describe the budget creation steps that are in most company budgeting procedures.
Step 1: Identify the information flow
Step 2: Decision about the measurements
Step 3: Collecting the historical data
Step 4: Making projections
Step 5: Evaluating the breakeven point
Particular Debit Credit
Pedro’s pasta A/c $8800
To Bank A/c $8800

Assessment: BSBFIM501 Manage budgets and financial plans
1
11
Outline 9 different expenditure and revenue items that are relevant to budgeting and
forecasting.
The list of the expenses and revenue which are related to budgeting process is as follows:
a. Rent
b. Postage
c. Taxes and supplies
d. office supplies
e. Utilities
f. Commission
g. Carriage on saleable goods
h. Legal expenses
i. Advertisement
1
12 What are the key purposes / objectives of forecasts?
 identify the future performance and position of the company
 Enhance the human comfort
 Evaluate and make better strategy
 Enhance the organizational performance such as customer satisfaction, revenues,
profits etc
 Serve the best services to customers
1
13
Describe the process you would use to maintain the integrity of electronic financial
spreadsheets.

Assessment: BSBFIM501 Manage budgets and financial plans
 Password protected sheets and the software
 complete roaster of users
 Strong encryption of data
 restrictions of cell phones
 Regular network maintenance
 cross referencing to prevent data loss
 scheduled archiving
 Backup of data
1
14 What is cash flow and how does it affect the operations of a business?
Cash flow refers to the money which moves out and in, in a business at a particular time. Cash
flows affect the business at huge level. It affects the sales, activities and the business of the
company. Sometimes, because of cash issues, company has to face various issues.
1
15 What is normally included in a cash flow forecast for forward periods?
Normally, tax expenses, purchase of inventory, sales amount, dividend paid amount etc are
calculated and forecasted into the cash flow statement of a company.
1
16 Provide a brief explanation of the following taxation laws.

Assessment: BSBFIM501 Manage budgets and financial plans
Wine equalisation
tax
This tax is a complicated one as the % of wine equalisation tax is huge
and it affects the larger number of transactions.
Luxury car tax
Luxury car tax is 33% on the deducted amount which is above the luxury
care threshold. It s GST inclusive tax. It is paid by the seller as well as the
buyer.
Fuel tax
The credits of fuel tax offer a credit for the fuel tax which includes the fuel
price used in:
Plant
Equipment
Machinery
Heavy vehicle
Amount of fuel tax differs according to the situation and the activity.
GST
Goods and service tax is and indirect tax which is levied on most of the
goods, services and other items of Australian market. The GST rate is 10%>.
All the businesses whose turnover is more than $ 75000 per year are required
to register for goods and survive tax.
1
17 Explain the difference between cash and accrual reporting for a business.
Accrual accounting is an accounting method which records the expenditure and revenue of an
organization at the time of incurring the transaction rather than the time when the cash is exchanged.
On the other hand, cash accounting only records the expenditure and revenue of an organization at
the time of receiving the cash amount.
1
18 What legislation covers Income Tax?

Assessment: BSBFIM501 Manage budgets and financial plans
Income tax is covered by Income tax assessment act, 136. Though, new act of 1997 has made
few changes into the income tax of the country.
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19
What sort of records should be kept according the Taxation Administration Act 2005?
How long these records must be kept for?
Taxation administration act explains that an organization is required to maintain all the financial
statement of the company of last 5 years. So that the performance and the position of the company
could be identified better.
2
21
List 5 possible prosecutable acts when lodging a tax return under the Taxation
Administration Act 2005.
1. Taxation administration act,, 1953
2. higher education act, 1988
3. Income tax act, 2005
4. tax assessment act, 1936
5. taxation administration act, 1953
2
22 What is the purpose of the Income Tax Assessment Act 1997?

Assessment: BSBFIM501 Manage budgets and financial plans
Income tax assessment year 1977 has been prepared to evaluate the taxation amount. The
main purpose of this assessment act is to make it simple for the people to identify the tax limited and
fill the IT return accordingly.