Financial Statement Analysis and Budgeting: A Comprehensive Report

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MANAGE BUDGETS AND FINANCIAL PLANS
1

Table of Contents
Assessment Task 1..................................................................................................................................... 3
Assessment Task 2..................................................................................................................................... 9
Assessment Task 3................................................................................................................................... 12
Assessment Task 4................................................................................................................................... 15
Assessment Task 5................................................................................................................................... 20
References:............................................................................................................................................... 22
2

Assessment Task 1
Question 1
Types of Financial Statements are:
 Balance Sheet
 Income statement
 Statement of Cash Flows
 Statement of changes in equity
Question 2
Balance sheet shows the financial position of the organization. It shows the details of the assets
present in the company and the liabilities it has to pay in the future. Also, it shows the amount of
capital invested by its owner into the company. Balance sheet is an important element for the
stakeholders of the company as it specifies and fulfills the information needs of the stakeholders
as stakeholders can review the balance sheet for the financial information needed by them.
Question 3
Following are the main steps in budgeting:
 Setting of an overall goal
 Identification of the income and expense for the particular period for which budget is
prepared
 Defining the cost into different categories (corporatefinanceinstitute, 2019).
 Designing the budgets on the basis of income and expense which fulfills the goal also
 Getting approval of the budget prepared from the higher authorities
 Executing the budgets
Question 4
The principle of cash accounting states that income and expense should be recognized in the
books of accounts only when they are incurred. Income is recorded when the same is received
by the company whereas expense is recognized when they are actually paid by the company.
3

Question 5
Advantages of Cash Accounting
It helps in deferring the tax as the expenses are recognized more quickly and on the other hand
revenue is recognized slowly. Also, cash accounting is an easy concept which can be
understood and adopted by the company.
Disadvantage of Cash Accounting
It does not show the liabilities incurred by the company but not yet paid thus not showing a clear
picture of the financial statements. Also, manipulation becomes easy as the cash received not
shown or overstatement of expense can be easily shown.
Question 6
The principle of accrual accounting states that the revenue and expenses of the company
should be recognized in the period when it is actually incurred irrespective of whether the
payment of the same has been done or not. The period of incurring of cash flows is irrelevant in
recognition of revenue or expense (Keythman, 2019).
Question 7
Advantages:
 The advantage of cash accounting is that the account statements can be prepared by
way of single entry system so the complex system does not need to be adopted
 The advantage of the accrual accounting system is that matching principle in accounting
system helps in proper and better business analysis and analysis of the financial
system. Also, it shows a better and true picture of the financial status of the company.
Disadvantages:
 The disadvantage of cash accounting system is that it does not comply with the GAAP
formalities and is a short term indicator of the business. It cannot be used for the long
term perspective. Also, the company cannot adopt this method if it is maintaining
inventory at the end of the year.
4

 The disadvantage of the accrual accounting system is that the financial statements
made by way of accrual accounting can be deceptive as mistakes can be easily hidden
by the top management. Also, it is difficult to switch to the accrual method if some other
method is followed.
Question 8
The standard rate of GST in Australia is 10% on most goods and services sales. However, there
are some exemptions and concessions provided to some goods and services which are
chargeable at a lower rate than 10%.
Question 9
Items that do not attract GST include (ato.gov, 2019):
 Basic Food items
 Education Courses, Study material and other related items in the field of education
 Medical & Health care services
 Religious & Charitable activities
 Exports and international transports
 Sales made by duty-free shops
 Eligible emission units
Question 10
GST can be reported to the Australian tax office in the following ways:
 Monthly Reporting- If the GST turnover of the company is $20 Million or more
 Quarterly Reporting- If the GST Turnover is less than $20 Million
 Annual Reporting- If voluntary registration is taken by the person and GST Turnover is
less than $75000
Depending on which bracket the company falls the company should report the GST along with
the required forms to the Australian Tax Office.
Question 11
The process of not withholding tax if the supplier does not provide their ABN:
5

 Payers should show sufficient records to prove the reason for not withholding.
 Payers should request the written statement from the supplier for not withholding tax if
the supply relates to :
o Private recreational hobby or pursuit
o Wholly Private or Domestic nature
 The statement should contain the reason for not withholding along with the supplier's
name & signature.
Question 12
Information on a tax invoice of sales includes:
 The identity of buyer or ABN
 Seller’s Identity
 Seller’s ABN
 Date of invoice
 Description of items
 GST amount and its bifurcation if required
Question 13
Businesses should keep their record for at least five years from the date of filing of the return.
For the company, the same period is extended to seven years (business.gov, 2019). Also, the
following cases should be considered:
 Claim for deduction for decline in value- Five years from the date of the last claim
 Acquisition or disposal of an asset- five years after the certainty of no capital gains tax
on the same.
 Matters which are in dispute- five years from the settlement of the dispute.
Question 14
A company must have its financial report audited however small proprietary company is
exempted from the same. Also registered scheme or disclosing entity should have its financial
records audited. Disclosing entity must also have its interim financial report audited.
Question 15
6

Purpose of the audit is to provide an opinion which is independent to the shareholders and other
stakeholders of the company about the true and fair view of the financial statements of the
company. The audit report is documented evidence of the audit conducted and the comment on
the truth and fairness of the financial statements.
Question 16
Key components of a financial report include:
 Balance Sheet
 Profit & Loss Statement
 Cash Flow Statement
 Statement of Changes in Equity
 Notes of Financial Statements
Question 17
Profit & loss statement is a statement consisting of details of revenue, costs, and expenses
incurred during the period for which such statement is being prepared which is usually for a
year, quarter or month. P&L statement helps in determining the profit and loss for the period
which is then transferred to the balance sheet of the organization. The main purpose of P&L
Statement is to calculate profit along with different margins like operating profit margin, net profit
margin etc.
Question 18
The budget can be defined as an estimation of an income or expenditure for a particular period
of time for which such budget is prepared. Budget is prepared to estimate future expense or
income which an organization would incur or earn.
Common types of budget include:
 Master Budget
 Expense Budget
 Finance Budget
Question 19
7

Process for developing and managing a budget includes:
 Identifying of Goals
 Review of current environment and documents
 Defining costs associated with the goals of the organization
 Creating the budget on the basis of costs recognition
 Implementing the budgets in the overall process
 Making changes as required in the budgets
Question 20
Ways to improve Cash Flows Example
Cost Cutting Identification of unnecessary expense and
eliminate such cost
Improve debtors Collection Collection from debtors should be improved and
time period for collection of cash from debtors
should be reduced
Delay in Payment of Creditors Deferment of payment made to creditors to have
enough cash with the organization
Delay of expansion plans The organization should delay the expansion plans
which require a huge amount of cash if not
necessary
8

Assessment Task 2
Part A- Role Play
2. MASTER MARKETING BUDGET (MONTHLY)
2017 - 2018 FY
Projected
expenses
Marketing
Activity
Jun
-17
Jul
-17
Au
g-
17
Se
p-
17
Oct
-17
No
v-
17
De
c-
17
Ja
n-
18
Fe
b-
18
Ma
r-
18
Ap
r-
18
Ma
y-
18
2017/
18
Total
Redesign of
Website
$
1,6
67
$
1,6
67
$
1,6
67
$
5,000
Design &
Implementation of
incentive scheme
$
218
$
218
$
218
$
218
$
218
$
218
$
218
$
218
$
218
$
218
$
218
$
2,400
Radio Advertising
Campaign
$
2,0
00
$
2,0
00
$
2,0
00
$
2,0
00
$
2,0
00
$
10,00
0
Stand at VCE
Careers Expo
2019
$
3,3
00
$
3,300
9

Development &
Publishing
Promotional
Brochure
$
1,5
00
$
1,500
Sponsorship in
Community
Organization
$
2,0
00
$
2,000
Contingency
amount
$
67
$
67
$
67
$
67
$
67
$
67
$
67
$
67
$
67
$
67
$
67
$
67
$
800
Total
$
67
$
285
$
285
$
285
$
1,7
85
$
5,2
52
$
285
$
3,9
52
$
4,2
85
$
3,9
52
$
2,2
85
$
2,2
85
$
25,00
0
Particulars 2017/18
Marketing Activities (25,000)
Projected Advertisement Expenditure (30,000)
Total (55,000)
MASTER MARKETING BUDGET (QUARTERLY)
10

2017 Projected Expenses
Marketing Program Q1 2017 Q2 2017 Q3 2017 Q4 2017 2017 Total
Paid Advertising $0 $0 $4,000 $6,000 $10,000
Content $0 $1,666 $1,667 $1,667 $5,000
Events $0 $3,300 0 0 $3,300
Public Relations $0 $0 $2,000 $0 $2,000
Branding & Creative $0 $1,500 $0 $0 $1,500
Product Marketing $0 $0 $0 $0 $0
Other $635 $855 $855 $855 $3,200
Total $635 $7,321 $8,522 $8,522 $25,000
3.
Research has been conducted regarding TV Advertising campaign and it has been observed
that television advertising campaign would cost $ 30000 and would have the following
advantages to the organization:
 Advertisement campaign would help reach the product information to the mass audience
thus helping an increase of sales of the product (Allbusiness, 2019).
 TV Advertisement is much more interactive as compared to newspaper or radio media
thus gathering the attention of people.
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4.
Role Play
MM- Hi
C- Hi
C- What all expenses have been included in the budget plan?
MM- Budget expenses have been planned and include the following:
 Website redesign for improvement in branding
 Incentive scheme for students
 Advertisement through a radio campaign
 Stand at a carrier expo
 Promotional brochure
 Improvement of local community profile by the sponsor for community organization
C- Have all the expenses necessary included in the budgets prepared?
MM- Yes all the necessary amount needed for marketing campaign has been included. Also,
contingency amount has been included for emergency needs for marketing which cannot be
avoided and has to be incurred.
C-Any other amount required to boost the marketing of the product
MM- Yes, the budget should be increased by taking up TV Advertising Campaign which would
cost about $ 30000 but would be of huge advantage to the organization sales as it would be
able to reach the mass audience and people would be able to gain knowledge of the same.
Also, TV Advertising Campaign is an interactive source which would help gain the attention of
the public. Thus it is recommended that the company should include advertisement campaign
budget in the amount and increase the budgeted amount.
C- Ok, will think and get back on the same.
MM- Thank You
12