Manage Finances Within a Budget: SITXFIN003 Assessment Solution - Apex

This document presents a comprehensive solution to the SITXFIN003 Manage Finances Within a Budget assignment, completed by a student. It includes solutions to both Unit Assessments, covering knowledge and skills related to financial record-keeping, cash flow management, and budgeting. The solution encompasses various aspects of financial planning and analysis, such as different types of financial records, components of a Business Activity Statement (BAS), cash flow budgets, sales budgets, and the definition and scope of various budgets like wage, purchasing, events, and project budgets. The assignment also delves into key financial concepts like cash flow, occupancy rate, sales performance, variance, and expenditure. Furthermore, the document explores the purpose and benefits of a draft budget, the comparison of budget items with actual figures, and the components of an operating budget. It also provides an analysis of budget variances, and the use of budgets to motivate staff. The assessment includes tasks related to budget allocation, variance analysis, and the application of different budgeting approaches such as incremental budgeting, zero-based budgeting, activity-based costing, and minimum level budgeting, along with their advantages and disadvantages.

Running head: MANAGE FINANCES WITHIN A BUDGET
Manage finances within a budget
Name of the student
Name of the university
Student ID
Author note

1MANAGE FINANCES WITHIN A BUDGET
Table of Contents
Assessment 1..............................................................................................................................2
Question 1..............................................................................................................................2
Question 2..............................................................................................................................2
Question 3..............................................................................................................................3
Question 4..............................................................................................................................4
Question 5..............................................................................................................................4
Question 6..............................................................................................................................6
Question 7..............................................................................................................................6
Question 8..............................................................................................................................7
Question 9..............................................................................................................................7
Question 10............................................................................................................................7
Question 11............................................................................................................................8
Question 12............................................................................................................................8
Assessment 2..............................................................................................................................9
Part 1......................................................................................................................................9
Part 2......................................................................................................................................9
Part 3....................................................................................................................................10

2MANAGE FINANCES WITHIN A BUDGET
Appendix 2...............................................................................................................................15
Appendix 3...............................................................................................................................16
Appendix 4...............................................................................................................................17
Reference..................................................................................................................................19

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Assessment 1
Question 1
8 different types of financial records are –
 General account books.
 Cash book records
 Banking records
 Creditors’ records
 Debtors’ records
 Details of any contracts
 Tax invoices and other relevant tax records
 Stock records
Question 2
If the business is registered for GST it shall lodge a business activity statement
(BAS). Components of BAS are –
 Goods and services tax (GST)*
 Pay as you go (PAYG) income tax instalment*
 Pay as you go (PAYG) tax withheld.
 Fringe benefits tax (FBT) instalment.
 Luxury car tax (LCT)
 Wine equalisation tax (WET)

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 Fuel tax credit (Walpole and Salter 2014)
Question 3
Cash flow budgets  Determining Cash Inflows
 Determining Cash Outflows
 Overhead Expenses
 Variable Expenses
 Other Expenses
Capital expenditure
budget
 Create a financial blueprint for the company’s objectives.
To establish what the current capital investment needs are
in order to take the company to the next level.
 To examine existing cash flow statements to determine
your company’s current costs vs. revenue.
 To calculate the projected cost of capital expenditures
 Considering alternatives to purchasing
 Considering the different related items that will affect the
operating budget by the purchase of the capital
expenditure and the method of payment (Klychova,
Faskhutdinova and Sadrieva 2014)
Sales budget  Select a Period for Your Sales Budget. ...
 Collect Historical Sales Data for Your Company. ...
 Locate Sales and Industry Information. ...
 Compare Sales with Past Sales Periods. ...
 Research Current Market Trends.
 Create the Forecast

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 Compare Results With Your Forecast
Question 4
Definition and scope of each budget –
a. Wage budget – it is the money designated over a specific amount of time, with which
to wages are paid. It helps in taking decision on how much is to be paid to the
employees and its scope includes deciding on Social security payments pension
contributions, travel expenses, training and development costs, HR expenses, holiday
pay, sick pay and healthcare costs
b. Purchasing budget – A purchases budget contains the amount of inventory that a
company must purchase during each budget period. The amount stated in
the budget is the amount needed to ensure that there is sufficient inventory on hand to
meet customer orders for products (Zheng, Ma and Wang 2014)
c. Events budget – The event budget is a projection (forecast) of the income and
expenditure that the event will incur based on plans made and information gathered.
The preparation of a budget is an essential part of event management.
d. Project budget – A Project Budget is the total amount of authorized financial
resources allocated for the particular purpose(s) of the sponsored project for a specific
period of time. It is the primary financial document that constitutes the necessary
funds for implementing the project and producing the deliverables (Ogujiuba and
Ehigiamusoe 2014).
Question 5
Cash flow Cash flow is the net amount of cash and cash-equivalents being

6MANAGE FINANCES WITHIN A BUDGET
transferred into and out of a business. The general form of the cash
flow statement shows three categories, namely: cash flow from
operating activities, cash flows from investing activities & cash
flows from financing activities
Occupancy Rate Occupancy rate is the ratio of rented or used space to the total amount
of available space. Analysts use occupancy rates when discussing
senior housing, hospitals, bed-and-breakfasts, hotels, and rental units,
among other categories (Robinson 2016)
Sales Performance Sales performance is the measurement of sales activity against the
goals outlined in your sales plan. The simplest method of
tracking sales performance is to establish sales goals for your team
and for individual team members and then evaluate performance,
either monthly or quarterly
Variance in
income/expenditur
e
It is the difference (variance) between expected
(budgeted) expenses and actual expenses. The purpose is to ensure
that spending follows a plan, supports business objectives, stays
within preset limits, and does not exceed available funds
Expenditure Payment of cash or cash-equivalent for goods or services, or a charge
against available funds in settlement of an obligation as evidenced by
an invoice, receipt, voucher, or other such document. See also
revenue expenditure, capital expenditure (Mirgorodskaya et al. 2017).
Cover The term cover in the context of finance is used to refer to any

7MANAGE FINANCES WITHIN A BUDGET
number of actions that reduce an investor’s exposure.
Stock levels Stock level refers to the different levels of stock which are required
for an efficient and effective control of materials and to avoid over
and under-stocking of materials
Wastage Wastage is any substance which is discarded after primary use, or it is
worthless, defective and of no use (Klychova, Faskhutdinova and
Sadrieva 2014)
Question 6
Purpose and benefits of draft budget
The purpose of budgeting is to enable the actual business performance to be measured
against the forecast business performance i.e. is the business living up to our expectations.
Benefits are –
 greater ability to make continuous improvements and anticipate problems
 sound financial information on which to base decisions
 improved clarity and focus
 greater confidence in your decision-making (Robinson 2016)
Question 7

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Every revenue and expenses items of budget shall be compared with actual amount of
revenues and expenses.
Question 8
When preparing a budget it is important to include all relevant components
(operating, financial and capital expenditure budget), correct techniques for estimation and
provide supporting documentation shall be used.
Question 9
Main components of operating budget are –
 Sales Budget
 Production Budget
 Direct Materials Purchases Budget.
 Direct Labour Budget
 Overhead Budget
Question 10
Variance A budget variance is the difference between the budgeted or
baseline amount of expense or revenue, and the actual amount
Projected/Forecasted
Figure
Forecast states its actual expectations for results, usually in a
much more summarized format
Actual Figure actual figures reflect how much revenue an account has
actually generated or how much money an account has paid out

9MANAGE FINANCES WITHIN A BUDGET
in expenditures at a given point in time
Budgeted Figure Budget figure lays out the plan for what a business wants to
achieve
Question 11
Budgets can be used to motivate the staff to be more fiscally minded, to pay greater
attention to detail and to think before they act. Consistency is critical, however: If
the budget isn't your focus, it won't be the focus of your employees either. This can lead to
de-motivation or other problems. Further, identifying of variances that are greater than the
threshold for investigation to follow up on will motivate to meet the target in next budget
(Popovcic Avric, Mizdrakovic and Djenic 2014)
Question 12
For analysing and reviewing the budget –
 analysing the reasons for any shortfall - for example, lower sales volumes, flat
markets and underperforming products
 considering the reasons for a particularly high turnover - for example, whether your
targets were too low
 comparing the timing of income with the projections and checking that they fit
Example – In a hotel budgeted sales were $ 250,000 for the month of June 2019, however,
the actual sales were $ 220,000. Hence, the management shall follow above mentioned steps
to analyse while reviewing and updating the budget.

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Assessment 2
Part 1
Task 1
2019 Budget
Department Allocated Funds
Operations $ 24,12,025.00
Marketing $ 6,89,150.00
Finance $ 10,33,725.00
Human Resources $ 27,56,600.00
Total Expenditure $ 68,91,500.00
Task 2
2019 Budget
Department Allocated Funds
Operations $ 27,56,600.00
Marketing $ 5,51,320.00
Finance $ 4,82,405.00
Human Resources $ 30,93,454.98
Total $ 68,83,779.98
Part 2
Task 2
To: [e-mail]

11MANAGE FINANCES WITHIN A BUDGET
CC: [e-mail]
BCC: [e-mail]
Dear Mr. Barrington
This is regarding the budget assessment and the actual performance found for the
departments including operation, human resource, marketing and finance. I have find that
except finance department, for all the 3 others department there is positive or negative
deviation in the actual performances against the budget. For instance, operation department
required 8.67% more allocation as against the budget as along with the shortfall allocation
amounting to $ 137,830, operation department require allocation of $ 206,745 for business
growth. Marketing department require 9.09% lower requirements as against budget as they
require only 80% of the allocation only. Further, human resource department require 5.90%
more amount as against budget as due to requirement of additional staff, it will require
additional fund amounting to 3.5% of revenue. In this scenario, I can suggest that the
operation department shall prepare its budget after carrying out appropriate research so that
no shortfall takes place. Further, before taking up the growth objectives its expenses and
expected earning shall be compared. Moreover, as the major expense of human resource
department is wages, they can start performance basis pay instead of paying high wages to
everyone. Hence, I request you and all the departmental heads to look into the same and
provide their valuable feedback.
Yours sincerely,
Mr. Richard Clause, Accounting head
Part 3

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Task 1
Please refer to role play doc
Part 2
To: [e-mail]
Dear Mr. Barrington
This is regarding the explanation of new budgeting approaches including incremental
budgeting, zero based budgeting, activity based costing and minimum level budgeting along
with their advantages and disadvantages.
1. Incremental budgeting
An incremental budget is a budget prepared using a previous period's budget or actual
performance as a basis with incremental amounts added for the new budget period. The
allocation of resources is based upon allocations from the previous period. This approach is
not recommended as it fails to take into account changing circumstances. Moreover it
encourages "spending up to the budget" to ensure a reasonable allocation in the next period. It
leads to a "spend it or lose" mentality
Advantages –
 The budget is stable and change is gradual.
 Managers can operate their departments on a consistent basis.
 The system is relatively simple to operate and easy to understand.
 Conflicts should be avoided if departments can be seen to be treated similarly.
 Co-ordination between budgets is easier to achieve.
 The impact of change can be seen quickly

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Disadvantages -
 Assumes activities and methods of working will continue in the same way.
 No incentive for developing new ideas.
 No incentives to reduce costs.
 Encourages spending up to the budget so that the budget is maintained next year.
 The budget may become out of date and no longer relate to the level of activity or
type of work being carried out
2. Activity based costing
Activity-based costing (ABC) is a costing method that assigns overhead and indirect
costs to related products and services. This accounting method of costing recognizes the
relationship between costs, overhead activities, and manufactured products, assigning indirect
costs to products less arbitrarily than traditional costing methods. However, some indirect
costs, such as management and office staff salaries, are difficult to assign to a product
Advantages –
 Provides realistic costs of manufacturing for specific products
 Allocates manufacturing overhead more accurately to products and processes that use
the activity
 Identifies inefficient processes and target for improvements
 Determines product profit margins more precisely
 Discovers which processes have unnecessary and wasted costs
 Offers better understanding and justification of costs in manufacturing overhead
Disadvantages –
 Collection and preparation of data is time-consuming

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 Costs more to accumulate and analyze information
 Source data isn't always readily available from normal accounting reports
 Reports from ABC don't always conform to generally accepted accounting principles
and can't be used for external reporting
 Data produced by ABC may conflict with managerial performance standards
previously established from traditional costing methods
 May not be as useful for companies where overhead is small in proportion to total
operating costs
3. Minimum level budgeting
The minimum level approach is representative of these attempts to control the growth
of costs not responding to unit-level drivers. Using the minimum level approach, an
organization establishes a base amount for budget items and requires explanation or
justification for any budgeted amount above the minimum (base)
Advantages –
 It can be helpful depending on the type of market.
 It can help with reducing tax burden
 It can help with setting small business budgets.
Disadvantages –
 It can disrupt the economic system
 It does not offer growth opportunities
4. Zero based budgeting

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Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be
justified for each new period. The process of zero-based budgeting starts from a "zero base,"
and every function within an organization is analyzed for its needs and costs
Advantages –
 It is highly useful to non-profit or service organizations.
 Costs may be saved in inefficient operations.
 Since the resources are allocated on cost benefit terms, there is a better utilization of
resources.
 It forces the management executives at all levels for active participation in budgeting
process
Disadvantages –
 In the case of large-scale business organization, a number of decision packages are
prepared and it involves more expenses.
 It is a time consuming process.
 More paper work is involved in the preparation of ZBB.
 Managers can be threatened by zero based budgeting.
 The manager may develop fear and oppose new ideas and changes
Hope the above mentioned details will provide you a clear and concise idea regarding
different budgeting approaches.
Yours sincerely,
Mr. Richard Clause, Accounting head

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Appendix 2
Budget Review Form
Names of Department Representatives
Who Developed the Budget
Mr. John Edward
Mr. Andrew Johnson
Mr. Kell Martin
Mr. Simonds Brown
Date of Review: 1st September 2019
Budget Year in Review 2019
Have all the departments received satisfactory allocation of funds? If no, please explain.
No, operational department was short of budget and they require additional budget for the
year 2019. Further, human resource department required additional 3.5% of total revenue
as they need to hire more staffs.
Have there been any changes to the allocation of funds, from the previous year’s budget?
If yes, please explain the extent of the changes and why they were necessary.
Yes, operation department and human resource department require additional fund whereas
finance department and marketing department require less budget as compared to previous
year.
Does the budget allow for the desired profit margin of 30% of total revenue to be
achieved? If no, please explain
No, the emended budget does not allow for desired profit margin of 30% and the profit
reduced to 28.48%.
Reviewers Signature:

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Date:
Appendix 3
Annual Year-End Financial Performance Review Form
Name of Reviewer:
Date: 1st September 2019
Year in Review: 2019
What was the profit for the year in review? Please provide a short description and
justification.
Profit for the year amounted to $ 27,40,648.02 that is 28.48% of total revenues. Budgeted
profit of 30% could not be achieved as there is additional requirement of fund for operation
department and human resource department as compared to the amount originally allocated.
Was there any exceptional financial activity which has caused the year in review’s financial
performance to be different from previous years? If yes, please explain.
Yes, additional requirement of staffs will lead to additional wages those were not there in
previous year. Further, for the growth objective of the organisation it require additional
budget that was not there in previous year.
Were there any deviations greater than 5% in the year in review from the budget?
there were following deviations –
Budget 2019
Department Actual Budget
Deviatio
n
Operations
$
27,56,600.00 $ 25,36,702.00 8.67%
Marketing
$
5,51,320.00 $ 6,06,452.00 -9.09%
Finance
$
4,82,405.00 $ 4,82,405.00 0.00%

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Human resources
$
30,93,454.98 $ 32,87,246.00 -5.90%
Total expenses
$
68,83,779.98 $ 69,12,805.00 -0.42%
Hence, more than 5% deviation was for operation, marketing and human resource
department.
Has the year in review met it’s investor return requirements of $2,000,000? If not, please
explain.
total return to investors is amounting to $27,40,648.02 that is greater than $ 20,00,000
Signature of Reviewer:
Appendix 4
Finance Department – Internal Reporting Form
Name of Reviewer:
Date of Review: 01/01/2020 – 31/03/2020
Was the previous year budget and the approach adopted successful in managing the
financial resource allocation requirements for the NBH?
No, previous year’s allocation was not successful as the operation department informed
that they had a shortfall of $ 137,830 in the allocated budget. Further, marketing
department had requirement for 80% of the allocated budget
Are there any recommended changes to the budgeting approaches for the year ahead? If
so, please explain.
Along with the shortfall allocation amounting to $ 137,830, operation department require
to allocate $ 206,745 for business growth. Marketing department can be allocated 20%
lower than the previous budget as they require only 80%. As finance department
implemented new accounting processes and have purchased new cost saving software they

19MANAGE FINANCES WITHIN A BUDGET
will save $551,320 of their forecasted expenses and hence shall be allocated less budget of
$ 551,320 as compared to previous year. However, due to requirement of additional staff,
human resource department will require additional fund amounting to 3.5% of revenue.
How would the recommended changes impact upon the organisations departments?
The recommended changes will allocate highest amount to human resource department
followed by operations, marketing and finance. Whereas the allocation for operation and
human resources will increase, allocation for marketing and finance will reduce.
Has the recommendation been presented to the correct authority in the finance
department? If so, who was it presented to and how was it presented?
Yes, the recommendation was presented to CEO and chief financial officer and
requirement of individual department was presented to him.
Signature of Reviewer:

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Reference
Klychova, G.S., Faskhutdinova, М.S. and Sadrieva, E.R., 2014. Budget efficiency for cost
control purposes in management accounting system. Mediterranean journal of social
sciences, 5(24), p.79.
Mirgorodskaya, E.O., Andreeva, L.Y., Sugarova, I.V. and Sichev, R.A., 2017. Balanced
budget system: organizational and financial tools. European Research Studies, 20(3B), p.300.
Ogujiuba, K.K. and Ehigiamusoe, K., 2014. Capital budget implementation in Nigeria:
evidence from the 2012 capital budget. Contemporary Economics, 8(3), pp.293-314.
Popovcic Avric, S., Mizdrakovic, V. and Djenic, M., 2014, June. Budget Control and Fund
Accounting. In International Conference: XIV International Symposium-Symorg.
Robinson, M., 2016. Budget reform before and after the global financial crisis. OECD
Journal on Budgeting, 16(1), pp.29-63.
Walpole, M. and Salter, D., 2014. Regulation of tax agents in Australia. eJTR, 12, p.335.
Zheng, W., Ma, K. and Wang, X., 2014, February. Exploiting thermal energy storage to
reduce data center capital and operating expenses. In 2014 IEEE 20th International
Symposium on High Performance Computer Architecture (HPCA) (pp. 132-141). IEEE.