FNSACC313: Report on Financial Calculations and Performance Analysis

This report provides a comprehensive overview of financial calculations, covering Goods and Services Tax (GST), simple and compound interest, basic loan calculations, and straight-line depreciation. It details the formulas, methods, and practical applications of these concepts, including examples and calculations for each. The report also addresses computational errors in financial calculations, identifying types of errors and the necessary equipment and software used for performing calculations, such as Ready Ratios and Microsoft Excel. A portfolio assessment section further illustrates the practical application of these concepts with specific examples. The report concludes with short answer questions exploring input data types and calculations.

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Report on financial performance calculations
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Part 1: Report on key the topics
A). Goods and Services Tax
The goods and services tax refers to a value-added tax that is imposed or charged on
domestic consumer goods and services (Kagan, 2019). The final consumer of the product or
service is the final bearer of such a tax imposed on the goods. The wholesaler or retailer simply
acts as the middle man or agent between the tax authorities and the consumer. The seller gets this
type of tax from the consumer and then returns it to the authorities. GST can be calculated in
about three methods. These include the normal, quick and the simplified methods (Perry,2017).
This goods and services tax is an indirect tax that is added to the product price. Therefore, a
consumer buying a commodity from a seller pays the actual price plus the GST amount. For
instance in Australia consumer goods and services attract a 10% GST. This means that every
commodity attracts a 10% charge that is paid by the consumer.
b). simple interest
Simple interest refers to an additional fee or charges that an individual or debtor pays to
the creditor on a given principal loan amount. This type of amount or fee is paid on a
predetermined arrangement depending on the type of agreement. It can be paid on an annual,
semi-annual, quarterly or monthly basis. This simple is obtained by multiplying the coupon rate
on the loan by the total time of maturity. Therefore simple interest = P*r*n where: p is the;
principal loan amount, r is the coupon rate charged on the loan and n is the period (Pritchard,
2019). Simple interest rate can be calculated using the rate function in MS excel software. The
function is stated as follows: RATE = (nper, pmt, pv, [type],). This requires on to input data

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relating to loan period, monthly payment required, the present value. Future value in this
technique is an optional data input and it is mostly regarded as (0).
c) Compound interest
Unlike the simple interest, compound interest is a type of interest is charged on the
principal amount of a loan and it is inclusive of all other periodic interests. The compound
interest is, therefore, a sum of all simple interests charged on the loan. Additionally, this type of
interest can as well be called the "interest on interest". The growth rate of compound interest is
dependent upon the number of compounds that a loan attracts. The more the compounding
periods, the higher the compound interest that is paid. This interest is calculated by the formula
given as total future principal and future interest payment minus the present principal value. In
other words, compound interest = future value –present value= [p (1+r) ^n] – p,where p is the
principal value, r = interest rate, n = number of compounding periods(Kagan, 2019).
Alternatively, compound interest can be calculated as follows:
A = P (1+ r
n ¿ ¿ntwhere: A = future loan amount, and t = time taken
d). basic loan calculations
A basic loan is that type of loan that attracts a relatively low-interest rate. This loan is
usually cheaper especially for people intending to purchase homes. This loan comes with limited
features and it is estimated to be at around 0.7% less than the standard variable loans in Australia

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(Sweeney, 2018). The major feature with basic loans is that the lenders have the liberty to either
lower or increase the interest rates. However, this is not done on a weekly or daily routine. The
causes for changes may, however, be due to the need to attract borrowers or because the costs are
reduced. The basic loans are calculated by the following formula stated as: M = P [r ¿ ¿].
Where: m = monthly payment, p = principal amount, r = interest rate, and n = total
repayments for the loan. However, it is important to note that the interest rate reflected by the
banks is an annual rate and this should, therefore, be further divided by 12 (Whitten, 2019). The
basic calculations are made using an amortization form of calculation. Therefore, a loan
amortizations schedule is drafted to reflect the monthly payments and interest payments till
maturity. This schedule is used as way of writing down the loan up to (0) at maturity.
e). Straight-line depreciation
Straight-line depreciation is a method of ascertaining the deprecation of depreciable value
of fixed assets over their useful life. Under this system, the assets' carrying amount or purchase
price is used as the base upon which the carrying amount is determined. This method is one of
the easiest methods and thereby, making it one of the most used methods of calculating the net
book value or carrying amount of an asset. When using this method of depreciation, the
historical value of an asset is periodically written down at an estimated rate until when it is fully
depreciated. Therefore, the formula for depreciating fixed assets is given by:
Depreciation expense = purchasingcost −scrapvalue
usefullife .

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According to the formula, purchasing cost is the price that was paid for the asset at the
time of buying, scrap value is the amount that can be obtained if it is disposed of, and useful is
the period the asset will be used (Mathhew, 2015). The other methods of depreciating assets
include the reducing balance, declining balance methods. For intangible assets such as goodwill
of assets, amortization of net amounts can be used as the method.
2. Identifying computational errors in performing financial calculations
Errors resulting from financial computations are very unpredictable and these occur on a
routine basis. However, coming up with an effective and reliable control mechanism to identify
these errors is a vital requirement. These errors are classified to include the disclosed and not
disclosed errors. Financial errors include the errors of omission, commission, errors of principle,
and transition errors among others. Transposition errors, for example, are those errors that occur
when adjacent financial computation figures are inter-changed when making records of financial
data. These errors are evenly are divisible by nine. Therefore, there is presence of an error of
transposition if the difference between the actual and recorded figures of entry is divisible by 9.
For instance, if figure 36 was recorded instead of 63, the difference between these figures is 27.
However, when 27 is divided by 9, the result is 3. Therefore, such an outcome provides room for
the possibility of an error of transposition. Disclosed errors of financial computations are
effectively-identified through cross-checking the trial balance figures. If the balances do not
balance then there is a possibility of financial computational errors. Such errors include errors of
commission, errors of principle among others. Such errors of financial computations are solved
by creating temporary suspense to rectify the problem in financial data.

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Equipment and software needed for conducting financial calculations and their
features
Among the different software and equipment used for making financial calculations
includes the ready ratios software. Ready ratios is a web-based software that is built to analyze
company financial position. This software was built based on financial analysis. The computer
does all the analysis and the individual does not need to carry out the computations. This
software is a highly usable web - interface, operates with multiple-choice conditional texts
among other features (Ready Ratios, 2019).
Microsoft excel is similarly another financial software that is used for performing various
financial computations. It is used to make analyses, data visualizations with the use of rows and
columns. The features of Microsoft excel include PMT and IPMT functions; CHOOSE
functions, data validation, DB functions among other features.
The other financial equipment includes software such as Quicken. This financial software
s one of the most established financial software. The major features here include excel exporting,
payment of bills, tracking asset value among other features. For instance, the excel export feature
allows the user to alter and transfer data to MS excel. Here, the user can then be in a position to
make additional changes on financial information as the user wishes.
Part 2: Portfolio assessment
The goods service tax
To calculate GST, the paper will focus on the 10% rate that is charged in Australia. As
stated in the previous elements of the paper, this is an indirect tax and the consumer is the final

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bearer of such a tax. For purposes of carrying out the practical part, a calculation is provided
below. The following formula will be used GST value = (original product price* GST
%).Therefore, the net commodity price will be the original price of the commodity plus GST
value.
If the price of product cost AUD 2000 and that GST in Australia is charged at 10%, then
the price payable by the consumer would be determined as follows:
GST amount = AUD (2000*0.1)/100 = AUD 200. Therefore, the net price = AUD
(2000+200) =AUD 2200.
Calculating simple interest
From the provide formula above, simple interest = p*r*n. therefore if a borrower
obtained a loan of $50000, at an annual monthly rate of 8%, for two years, then the maturity
value of the loan is calculated as follows.
Total simple interest payable after two years = $(50,000*0.08*2) = $8,000
From the above formula, the borrower would pay back a net amount of $58,000 at the
end of the two-year loan period.
Compound interest
For compound interest, the formula to be used is as follows: A = P (1 + r
n)^nt. take for
example an individual obtained a loan of $10,000 and was charged an interest of 5% which is
compounded semi-annually. It s also given that the loan is to last for three years. The loan

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amount repayable in, such a case will be equal to $10,000 (1+ 0.05
3 )^6*3. Such a computation
would give a net result of $13,000 at the end of the three years.
Basic loan calculations
Given the formula M = p*r (1+r) ^n/ 1-(1+r) ^n. if an individual obtained a home loan of
$500,000 at an ongoing rate of 5.5% annually, for 25 years. The minimum monthly payment
form such an amount would be $ 921,131. The weekly Payments would be $707, 98. The total
loan amount would, therefore, accumulate to about $ 920,377.the values would be generated by
the above formula. It is however notable that the interest rate provided is an annual interest rate
and should, therefore, be divided by 12.
The resources and equipment required for the calculations
From the outlook provide, resources such the bank lending interest rates are some of the
necessary resources needed. Microsoft Excel packages such as the loan amortizations are as well
very necessary equipment for the calculations.
Methods for the calculations
For the basic loans, Microsoft Excel packages such as the loan amortization formulas are
very necessary for the calculations. The simple interests on loans can be directed calculated with
the use of calculators. Furthermore, future tables to determine both the future values on loans
together with the monthly payments are very necessary as well. Consumer goods and
commodities that attract GST can be assessed with mathematical formulas; this may, however,
depend on the type of price. If the price is GST inclusive, then there is no need to calculate the
GST net price. However, where GST is exclusive, then it is required to calculate the price.

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Part 3: Short answer questions
1. Types of input data
The types of data necessary for the calculations include the interest rates, the period especially
for the basic loans, simple interest, and compound interest among others. The other type of data
includes cash flow data. Te cash flow data specifically applies to the monthly interest payments
on the loans.
2. The five examples of calculations
The examples of calculations that one may require in determining the outcomes include the
following; Income tax: This is the tax that is attached on every income earnings of an individual.
This tax is charged on salaries and wages of employees annually and it is paid to the federal
government. In Australia, the Australian Taxation Authority is responsible for collecting this tax
on behalf of the government.
Compound interest: This is calculated on the investment value that is to say principal together
with interest at the point of payment. For example, in case one invests a given amount of money
in a fixed deposit account of a bank, the original money deposited say the principal will go on
increasing since interest rate will be added on it monthly or annually. The interest rate is
calculated together with the investment increased and it is considered to be compounding. The
person who invests is paid an amount more than the initial amount basing on the accumulations
of the investment.

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Simple interest: Under this type of calculation, the investment gets an equal amount of
interest every time according to the initial investment or ‘original amount' of the principal and
the interest rate charged on it. This method of calculation is suitable for hire purchase and other
loans that are not secured say in goods like refrigerators and washing machines.
Basic loan calculations: when calculating the basic loans, calculations relating the future loan
repayments are necessary. This is due to the fact that an individual or borrower has to get a clear
understanding of the loan amount repayable. The future value is therefore the total amount
payable at maturity. It takes into consideration the interest charged, the loan period, and the
present value (principal loan amount).
Depreciation calculations: are other calculations that have to be made. These include calculating
the accumulated depreciation of an asset, determining the net book value (nbv) or carrying
amount. Depending on the company policy depreciation rate of an asset is used in calculating the
useful life of an asset.
3. Types of resources that might be used to perform effective calculations
For this paper, the authority tax Acts can be used as a resource especially for the GST
calculations
The other resources may include the financial institutions' web pages on interest rates
offered
The financial standards and guidelines on preparing financial data
Financial data calculators and other online software

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4. Programs for creating spreadsheets
Google sheets
Open office calculator
iwork numbers
5. Equipment used to perform calculations
Cash flow calculator
Chequebook balancer
Financial ratios
Financial tables
6. Mathematical techniques
Post-tax returns formula.
Liquidity ratios
Purchasing power models
Net present value models
Annual rate models
Rule of 72: This is used to determine the time value of money
Compound annual growth rates

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Loan equated monthly instalments models
7. What is needed to check the results of the calculations?
The guiding principles and standards: These are the generally accepted and recognised
standards that one must follow when preparing calculations. Therefore if an individual is
checking for accuracy and reliability, these guidelines must be applied.
8. How to correct routine errors
Routine errors of financial calculations can be corrected by undertaking extensive
arithmetic checks and inspections. This involves taking actions such as recalculating the
outcomes more than once, making reviews among others.
Routine financial errors can be corrected by using automated and computerised financial
systems. This computerised software greatly minimises the problems associated with human
error in making financial calculations.
9. Benefits of recording results by standards
Industry standards are those guidelines and policies that must be followed when
preparing financial data. They, therefore, act as guiding principles of the industry. Some of the
benefits associated with industry standards include having standard and uniform results and
computations. This promotes comparability assessment of any firm within an industry.
The other benefit is that they encourage and preserve the quality of result and outcomes.
This as well facilitates decision making for all the stakeholders involved in an industry. Industry
standards also act regulative measures in the industry. This means that authorities use the