Financial Management and Compliance Report: [Company Name], [Year]

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Manage Finances
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Table of Contents
Task 1.......................................................................................................................................................... 3
Answer 1...................................................................................................................................................... 3
Answer 2...................................................................................................................................................... 3
Answer 3...................................................................................................................................................... 4
Answer 4...................................................................................................................................................... 5
Answer 5...................................................................................................................................................... 5
Answer 6...................................................................................................................................................... 6
Answer 7...................................................................................................................................................... 6
Answer 8...................................................................................................................................................... 7
Answer 9...................................................................................................................................................... 7
Answer 10.................................................................................................................................................... 7
Answer 11.................................................................................................................................................... 7
Answer 12.................................................................................................................................................... 7
Task 2.......................................................................................................................................................... 9
Part A....................................................................................................................................................... 9
Part B..................................................................................................................................................... 12
Task 4........................................................................................................................................................ 19
References................................................................................................................................................ 21
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Task 1
Answer 1
 The taxation obligations for a business in Australia entails of different rate of taxes for
resident and non- resident companies. According to the Australian Tax Office (ATO), a
resident company is obliged to pay a tax rate of 30% (Ellison, 2019).
 Goods and services tax also needs to be paid by companies. The Australian Tax Office
registers the entities which need to pay goods and services tax. The broad tax rate for
goods and services tax is 10% for major products.
 All the employees aged between 18-75 years of age, working as casual labor, permanent
labor, part time or full time, working under a written or oral contract is eligible for
superannuation (Harrison, 2018).
 The employees who receive wages of $ 450(before tax), every month is eligible for
superannuation by their employer. If the employer or business fails to fulfill their
superannuation obligations, they are liable to face penalties (Ingles & Stewart, 2017).
Answer 2
a)
If the business has a turnover of $ 75,000 or more, annually then it is liable to register for GST.
If a non -profit firm has an annual turnover of $ 150,000 or more, and then it has to register
under GST. The taxi travel firms, whether one owns a taxi or drives it on a rental basis, has to
mandatorily be registered under GST by the Australian Tax Office.
b)
One can claim a tax invoice on GST when a firm makes the taxable sale of $ 82.5 (inclusive of
GST). The GST registered purchaser needs GST invoice in order to claim the GST credit
available to them.
c)
 The intention that the document is supposed to be an invoice
 The identity of the seller
 Australian business number (ABN) of the seller
 The date of issue of invoice
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 The invoice must entail of the description of products sold such as the price and the quantity
of each product sold
 The GST amount payable on the sale
 The GST amount taxable on each product must either be shown separately for each
product or the entire GST taxable must be shown in the invoice (Ellison, 2019)
 The buyer’s Australian Business Number (ABN)
d)
The accounting method used for GST when turnover is less than $ 2 million can either use a
cash method or a non-cash method of accounting. In the cash method of accounting GST is
paid when the cash is actually received or paid for the sales and purchases made. If the firm
chooses to go for the non-cash method then it would pay GST as and when the sales and
purchases are made, irrespective of the fact whether cash is received or not.
Answer 3
According to the Australian Tax Office, a company is a legal entity run by its shareholders and
directors and it has high set up and administration cost. The reporting requirements of a
company are also various. Companies are regulated by the Australian securities and
investment commission (ASIC).
 A Tax File Number or TFN is a basic requirement to be fulfilled by all companies and must
be used while filing income tax returns.
 All the companies require ABN or Australian Business Number.
 A company having a per year turnover of $ 75000 or above must register itself for GST.
 The directors or owners of the business are not allowed to take out the capital of the
company. They are only eligible for profits and wages.
 An annual tax return is compulsory to be filed each year.
 The workers of the company must be paid super guarantee contribution.
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Answer 4
a)
Pay as you go refers to the role of employer wherein they help their employees to meet their tax
obligations at the end of the year. This is done by collecting amounts from employees as and
when the payment is made to them. The pay as you go can be done by a company for its
workers/ employees, for contractors and for those businesses that do not require an Australian
Business Number.
Pay as you go installments refer to the system wherein the Australian businesses keep paying
their expected tax liability in the form of regular payments. This is done by creating an online
account with the Australian Tax Office. Generally, pay as you go installment system applies to
the firms whose annual turnover or gross business is $ 4000 or more (subject to some other
clauses).
b)
 First of all the company needs to register itself for pay as you go withholding under the
Australian Tax Office.
 The amounts must be withheld out of the employee’s wages.
 The activity statements and must be lodged with the Australian Tax Office.
 The payment summary must be provided by the company until the 14th of July to all the
employees.
 The Australian taxation office must be provided with an annual tax return and payment
summary by 14th of August.
Answer 5
Cash accounting refers to that system of accounting in which the transactions are recorded as
and when the cash is received or paid against an income or an expense.
Advantages Disadvantages
It keeps a proper track of business cash inflow
and cash outflow.
It does not tell how much money the business
owes to others and what amount of money the
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other dealers owe to the business.
It is very appropriate for the small scale
businesses which do not deal in a large
volume of transactions.
It is not suitable for large scale businesses.
Answer 6
Accrual accounting refers to that system wherein the transactions are recorded in the books of
accounts as and when they occur, irrespective of the cash received or paid.
Advantages Disadvantages
It is suitable for businesses that do not pay or
receive payments on an immediate basis i. e
the ones that do credit sales and purchases a
lot.
This is comprehensive and complex as
compared to cash accounting.
It provides a true and fair picture of business
transactions.
It is difficult to maintain and requires efficient
accounting staff.
Answer 7
 Financial accounting refers to the process of collection & recording of financial information in
order to take appropriate financial decisions.
 Management accounting refers to the process of collecting, analyzing, interpreting and
communicating financial, non-financial and economic information to help the top
management in taking effective and timely decisions (Vitez, 2019).
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 Accounting standards refer to those guidelines and framework of financial reporting which
help a firm to record and present their financial documents in a better way. These are
developed by the Australian Accounting Standards Board.
 Financial accounting system refers to the separate department which keeps a track of
financial transactions of a company. This helps to record, interpret and analyze the financial
transactions in a better way and aids in the formulation of financial reports.
Answer 8
The large organizations that fall under Incorporated Associations Act and large charities with an
annual turnover of more than $ 1 million need to be audited mandatorily.
Small proprietary firms, firms registered under investments scheme and disclosing entities need
not get their audit done.
Answer 9
The purpose of annual audit and the audit report is to provide an independent opinion that
whether the books of accounts and other financial statements represent a true and fair and
transparent position of a business or not (Clements, 2019).
Answer 10
Financial probity for a company can be defined as evidence of ethical behavior that the
company has carried out and recorded its financial transactions with complete honesty and
integrity.
The principles of probity and ethics are honesty and integrity, transparency, relevance, moral
behavior, good intent, and value creation.
Answer 11
 Incorrect recording of financial transactions
 Missing expenses or incomes to show increased profits
 The omission of financial information in financial statements
 Tempering of financial statements and not presenting a true and fair financial position.
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Answer 12
GAAP is the generally accepted accounting principles adopted by the organizations to present
their financial position in a way which could be understood by the stakeholders. It is a rule-
based system (Bank, 2019).
IFRS is International Financial Reporting Standards which are developed to give a more
uniformed approach to all the companies around the world in the manner their financial
statements are prepared and presented. This is a principle-based approach (Mohr, 2019).
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Task 2
Part A
Introduction
In this report the profit and loss statement, cash flow statement has been studied to find the
weak areas of the business. Also, the possible reasons for these weaknesses are identified and
suggestions are given.
1.
According to the research undertaken of the profit and loss statement of both the years as well
the cash flow statements of both the years, the firm has not generated a loss. The income
always exceeded the expenses. However, there is a discrepancy in the budgeted income and
budgeted loss of the firm. The budgeted income is more as compared to the actual one. Also,
the budgeted expenses are less than the actual losses. In addition, the software that is being
used by the company is also one of the best. Although, it would require additional charges in
order to get updated every year.
2.
The purpose of this report is to analyze the profit and loss statement of the year 2017-2018.
This undertakes the reasons for a performance of each section of profit and loss statement. The
reasons for losses are also analyzed in this report.
 The total net income/gross profit of the firm is $ 1,335,600 whereas the net profit was $
683,523 for the year 2017-2018. The reason for this net profit is good revenue from
consulting fees, workshops and publications and executive search service. Additionally, the
expenses from accounting fees, marketing, advertising, insurance, lease etc. were limited.
One of the important reasons for such a good profit amount is an extensive marketing
approach undertaken by the firm and the good quality of workshops carried out each year.
 An overall analysis of the profit and loss statement states that the firm's financial position is
really good. All the expenses such as a lease, computer software, advertising etc. are way
too less than the revenue generated by the firm 2017-2018.
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 The economic conditions and business trends both are in favor of the management
consultancy firm. This is the reason for a good amount of profit in 2017-2018. Also, the firm's
decision to use computer software has helped it to achieve its desired business objective
more efficiently.
 As per the firm’s business plan, it aims to achieve at least 10% of profit each year which has
been fulfilled in the year 2017-2018.
 As per the cash flow statement, the budgeted expenses are less than actual expenses. This
might be a problem for the firm if the expenses keep on growing more and more and exceed
the budget. The firm needs to undertake cost control and cost reduction. as the budgeted
income is less than actual and the budgeted expenses are also less than actual, it leads to
negative variances.
3.
Sales & Profit Budget 2018-2019
Particulars Amount ($)
Revenue
Consulting Fees 1,293,170
E-Book Sales 10,000
Workshops 38,000
Publications 2,000
Conference Collection 75,000
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Executive Search Service 132,000
Gross Profit/Net Sales 1,550,70
Less: Expenses
– Accounting Fees 7,164
– Advertising & Marketing 5,513
– Computer Software 4,830
– Insurance 7,875
– Lease/Loan Payment 1,575
– Motor Vehicle Expense 2,625
– Office Cleaning 5,775
– Office Supplies 2,205
– Rent & Rates 45,150
– Repairs & Maintenance 1,260
– Salaries/wages (including
PAYG)
529,200
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– Superannuation 63,000
– Telephone 3,570
– Utilities 2,520
– Travel and
Accommodation(For
Workshops)
25,200
– Contract writer (e-book) 10,500
– E-book 10,000
– Desktop publishing 3,000
–Marketing (e-book) 1,200
–Conference venue and
catering
5,000
–Speaker fees and travel 10,000
–Marketing (conference
only)
5,000
–Conference bags 1,000
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