Managing Budgets and Financial Plans Online Tutoring
Task 1
Assessment Instructions
This is an individual assessment. You are required to demonstrate the ability to plan financial management approaches. In response to the scenario provided, you are required to answer a series of questions. You must answer all of the questions below, and include examples where appropriate. Please ensure that you have answered each question with an appropriate level of detail. If you need help understanding any questions, ask your assessor to explain.
To be deemed competent you will need to successfully demonstrate the following:
- You must complete and successfully answer all questions.
Question 1
Read the case study, then complete the questions that follow.
Case study
Hasan works for a company that manufactures shower screens. He is the cost centre manager for the production area. For the four products they manufacture, sales at the end of February are in the table below.
| Product | Unit | Value ($) |
| Basic | 150 | 37,500 (250 per unit) |
| Standard plus | 250 | 125,000 (500 per unit) |
| Deluxe | 200 | 150,000 (750 per unit) |
| Super deluxe | 100 | 100,000 (1000 per unit) |
The above production is standard from month to month and the costs involved are below.
| Product | Labour per unit (hours) | Material cost per unit ($) | Overhead contribution per unit ($) |
| Basic | 2.0 | 100 | 10 |
| Standard plus | 3.0 | 250 | 20 |
| Deluxe | 4.0 | 480 | 34 |
| Super deluxe | 5.0 | 600 | 43 |
Labour is costed at $50 per hour and includes contributions to leave entitlements and superannuation. Material costs are fixed with a supply contract for the standard quantities required each month.
Hasan is advised that the company has just won an extra special order for the supply of shower screens for a refit of a hotel, and the products are required by the end of March. The quantities and agreed per unit price are below.
| Product | Required Unit | Price agreed per unit ($) |
| Basic | 30 | 275 |
| Standard plus | 50 | 550 |
| Deluxe | 10 | 750 |
| Super deluxe | 5 | 900 |
Production for March will now be the usual monthly production as per February above, plus the new contract commitment.
- Explain in your own words the role of a budget and its relationship with the strategic objectives of an organisation.
| Budget is the plan or objective set by the managers of the oragnisation and it is used internally. The purpose of budget is look how much resources have to be use or how much cash have to spend in business unit or how much units have to be sold and there are various purposes. The strategic goals set by the managers have to be implemented by actions or execution. So during that execution budgeting help them to monitor activities so we can say budgeting is one of the process of strategic planning. |
- Prepare a sales budget for March using the table provided below.
| Units | Price per unit | Value | |
| Usual monthly production | |||
| Basic | 150 | 250 | 37500 |
| Standard plus | 250 | 500 | 125000 |
| Deluxe | 200 | 750 | 150000 |
| Super deluxe | 100 | 1000 | 100000 |
| Total monthly production | 700 | 589.286 | 412500 |
| Special order | |||
| Basic | 30 | 275 | 8250 |
| Standard plus | 50 | 550 | 27500 |
| Deluxe | 10 | 750 | 7500 |
| Super deluxe | 5 | 900 | 4500 |
| Total special order | 95 | 502.632 | 47750 |
| Total March | |||
| Type of screen | Units | ||
| Basic | 180 | 254.167 | 45750 |
| Standard plus | 300 | 508.333 | 152500 |
| Deluxe | 210 | 750 | 157500 |
| Super deluxe | 105 | 995.238 | 104500 |
| Total units | 795 | 578.931 | 460250 |
- Determine the total labour required for a standard month’s production and for the additional production in March. You are advised that the total labour availability is 2,400 hours based on normal working hours. Since the existing labour force is nearly fully utilised, are there any issues for Hasan? If so, what options would you investigate and what would you recommend, given that overtime is costed at $75 per hour?
| The total labour hours required for March are 2625 in which 225 are overtime. Now hasan have to pay additional amount above normal wage rate to its labour in order to get work done. There might be an issue of availability of labour force so Hasan might have to hire more labour force which would be costly but production can be done withon normal working hours or the standard production normal hours might be reduced. Hasan have to do cost and benefit anlaysis whether to pay $75 overtime to its existing labaour force or to hire new labour force which would able to prodeuce units under normal production hours. The overtime payment is (225*$75=$16875). If cost of hiring new labour is less than 16875 so Hasan should look for this option this rather than paying overtime as there might be chances 2400 normal production would ne reduced to labour efficiency. |
(d) What other issues Hasan face? List at least three. For each issue, suggest a contingency plan that you would expect to be in place.
| The issues Hasan might face:
1)Due to more production of units there might be production inefficiency which would increase average total cost. Hasan have to look for those options from which it can achieve economies of scale like hiring new labour force where standard production hours would be reduce or he recieves material purchasing discount. 2)There might be increase in overheads like increase in utilities cost due to more production hours. The contingent plan to reduce this overheads would be efficient use of appliances which runs on electricity or gas etc. By switching them off when it is not needed or shutting down some processes in which work is not done. 3)Quick wear and tear of the machines or equipments used for production. So hasan have to hire an expert which would do maintenance of these of these machines or equipments and it will increase their life span. |
(e) Describe the checks that are performed to ensure a budget can be achieved.
| The checks which Hasan can perform are:
1)Business or production goals should be realistic so that true values should be potrayed in budgets. Like economic and competition factors has to be considered to ensure realistic budget. 2)Collection of every possible data related production or sales which include all costs and prices. 3)Monitoring of all activities during production in the month so that budget which is planned would probably become actual at the end of the month. |
Question 2
Read the case study, and complete the questions that follow.
Case study
Hugo is the manager of a medium-sized retailing operation and is concerned about the collection of monies for goods sold. He has a current policy for collecting monies from credit customers and all goods are sold on credit. He has actual sales data for the first six months of the financial year and projected sales figures for the six months to credit customers. He wishes to consider the impact of adjusting the policy and has two proposals in mind. The policies are below:
| Timing of payment | Payment under current policy | Projected payment under policy option 1 | Projected payment under policy option 2 |
| 1st month after sale | 60% of monies collected | 80% | 90% |
| 2nd month after sale | 25% of monies collected | 12% | 5% |
| 3rd month after sale | 14% of monies collected | 7% | 3% |
| 4th month after sale |
His sales figures are as follows.
| Sales figures | |||
| Actual for first six months | Predicted for next six months | ||
| July | $100,000 | January | $120,000 |
| August | $115,000 | February | $125,000 |
| September | $115,000 | March | $125,000 |
| October | $100,000 | April | $120,000 |
| November | $120,000 | May | $120,000 |
| December | $140,000 | June | $110,000 |
There is one additional question Hugo wants answered: is there any advantage from a cashflow perspective of offering a two percent discount if accounts are settled in the first month? His view is that most of his customers would pay in the first month and the remaining would pay in the next month, and no bad debts would need to be written off.
(a) Describe a budget development coordination and approval process.
| There are the steps in which the budget is developed, managed and approved by the senoir management. So following are the steps:
1)Strategic planning: It is where the organisation plans in order to achieve its vsion and mission. So there should be written startegic plans in which organisation would ensure how to utilize its resources and implement things according to the plans set. Further in every processes business goals or tactics are set and then budget is prepared. 2)Future Projections: It is where future revenues, production and administration costs are projected according to the target ratios business set. 3)Approval and review of the budget: In this process the board committee or senior management approve the budget and then they review budget on monthly or weekly basis so that they monitor the activities in order to make sure that they are going according to the plan set. |
(b) For what reasons might you adjust the format or methods of communication about budgets to employees?
| The reasons for which the format or methods of communication about budget is adjusted to employees are:
1)Employees could able to understand the budget so that they would work according to the plans set out by upper management. 2)Communication method matter a lot whenever employer try to see every important information is communicated well to employees. The feedback might be taken from employees regarding the budget so that upper management is convinced that employees have been communicated effectively. The feedback from employees is an example of adjusting method of commuincation. 3)After monitoring performances for months or weeks employers might have thought to adjust the format or communication methods about budget to employees as they might not be satisfied with the performances. |
(c) Analyse the optional policies and make a recommendation to Hugo as to which policy he should consider as the better option. Include in your response a projected cashflow spreadsheet for each of the proposals.
| Hugo should consider optional policy 1 because in the end he have write off 1% bad debts while in option 2 2% bad debts have to write off. Moreover hugo is considering 2% cash discount for first month payment so option 1 would have less discount allow expense that that of option 2. Projected cash flows are provided:
Option 1 also genetrates more Cash flows than Option 2 because Option 1 receives 99% of sales payment while in Option 2 98% is received. |
(d) Provide feedback on Hugo’s additional question.
| In order to get early payments from credit customers so cash discount is an effective policy. Moreover, it will also be more effective for first months as most of the payment, which Hugo is receiving from credit customers, is in the first month. However, it is not guaranteed that there will no bad debts and allowing cash discount to credit customers is treated as expense in accounting book. The question is which is better 2% cash discount for first month or 1% bad debts? So Hugo need to consider this. |
Task 2
Assessment Instructions
This is an individual assessment. You are required to demonstrate the ability to monitor and control finances. In response to the scenario provided, you will create a simple spreadsheet budget to capture monitoring information. Using information provided to you by your assessor, you will then use the budget spreadsheet to produce a report on expenditure in accordance with organisational policies and procedures. You will also modify a contingency plan.
If you need help understanding any questions, ask your assessor to explain.
Procedure
- Read through the scenario provided and Part A and B.
- Design and develop a spreadsheet to capture budgeted and actual figures to produce a variance report.
- Access actual budget figures from relevant managers and accounting systems (assessor).
- Monitor and record actual figures.
- Produce a variance report as per organisational requirements.
- Consider the scenario information and contingency plan provided and analyse the variance report.
- Modify the contingency and implementation plans provided in the scenario to improve effectiveness.
- Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.
To be deemed competent you will need to successfully demonstrate the following:
You must provide:
- a budget spreadsheet
- a budget variation report
- a modified contingency plan and modified implementation plan.
Appendix 1 – Big Red Bicycle Pty Ltd scenario
Big Red Bicycle is a bicycle manufacturer based in Bendigo Victoria. The company produces bicycles which it sells to retailers in the domestic Australian market.
The senior management structure of the company appears below.
| Person | Position |
| Michelle Yeo | CEO |
| Tom Copeland | Managing Director |
| John Black | CFO |
| Stuart LaRoux | Operations General Manager |
| Pat Roberts | Senior Accountant |
| Sam Gellar | Sales General Manager |
| Charles Pierce | Production Manager |
| Holly Burke | HR Manager |
According to company strategic plans, the company aims to achieve a net profit before tax of $1,000,000. The chief risks to this goal are:
- poor sales due to economic downturn
- increases in expenses such as wage expenses.
In addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product.
Role
You are the Senior Accountant at Big Red Bicycle. A major component of your role is setting budgets and monitoring budgetary performance for the organisation.
Part A
The Managing Director, Tom Copeland has asked you to implement a process to monitor expenditure and income. He has asked you to prepare a spreadsheet to capture and compare actual income and expenditure to budgeted figures. Your spreadsheet must contain columns for each of the four quarters of the financial year. You are required to gather data from the relevant managers (your assessor) to complete a budget variation report.
The report should conform to organizational requirements in policies and procedures
and contain:
- columns to show actual account values
- absolute variation
- percentage variation.
Part B
It has come to the attention of the managing director, Tom Copeland, that due to the current economic climate, sales volume may be 20% below target this financial year. Tom is worried that this may severely impact profit projections. The company can accept as much as a 10% variance in profit projections; however, more than this could severely affect the company’s ability to pay obligations and invest. Reliable data to determine whether the risk has eventuated should be available by midway through the second quarter (Q2), when sales data for the company’s product are in.
Consider the contingency plan and the implementation plan for the contingency below. You have already implemented a portion of the contingency plan, namely the monitoring of budget performance in the variation report you have prepared. You should now analyse the report to determine the effectiveness of the contingency plan and its implementation.
You have received the following feedback from team members:
- full-time workers and sales people resentful of time wasting and distracting contract employees
- overtime not used but employees resentful of suggestion it might not be approved if needed
- training suited the needs of many sales team members but was not relevant to about half
- sales team members were happy with the incentives program and tried hard to make sales in the third quarter (Q3); however they were also resentful at the threatening tone of emails and soon lost enthusiasm
- effect of one-day training wearing off
- 50 percent of direct wages costs are attributable to short-term contract employees whose contracts have expired and who are no longer needed
- employees concerned about lack of attention paid to wastage: water; electricity: paper; raw materials
- employees feel left out of budgetary decision-making in general.
The managing director would like you to submit a revised contingency plan and contingency plan implementation to bring income and expenses under more effective control.
Contingency plan for Part B
Contingency implementation plan for Part B
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Contingency plan for Part B
| Contingency Plan
Company name: Big Red Bicycle Pty Ltd Person developing the plan: Name : Tom Copeland Position: Managing Director |
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| Risk identified: Profit for FY more than 10% less than budgeted | ||
| Strategies/activities to minimise the risk | By when | By whom |
| Produce quarterly variation reports to identify income/ expenditure and profit shortfalls over 10%. | Q2 | PR |
| Implement sales training/coaching. | Q2 | PR |
| Implement incentives program. | Q2 | PR |
| Reduce overtime. | Q2 | PR |
Contingency implementation plan for Part B
| Risk identified: Profit for FY more than 10% less than budgeted | ||
| Activity | Monitoring activity and date | Person/s |
| Monitor variance. | Completion of report: Q2. | PR |
| Analysis of report to identify issues. | Management report: Q2. | PR |
| Email to warn employees of risk to jobs. | Monitoring of variation report results: Q4. | PR |
| Email to announce rise of commission from 2% to 2.5%. | Monitoring of variation report results: Q3. | PR |
| Email to inform employees that overtime will no longer be approved. | Monitoring of variation report results: Q3. | PR |
| Email to inform employees of mandatory sales skills training: set program. | Monitoring of variation report results: Q3. | PR |
| Mandatory training conducted. | Monitoring of variation report results: Q3. | PR |
Appendix 2 – Budgeting and finance policy
Budget preparations
The business plan will set the key parameters for all financial budgeting.
Variations to the business plan must be approved by the CEO and senior management strategic committee.
Prior period results are to be analyzed to identify the profit level of cost centers, identify correlations between financial statistics and to set key performance indicators and benchmarks for future budgets.
The budget planning committee will meet prior to budgets being developed and agree on budget parameters. The committee will consist of all department managers plus the CEO and finance manager.
- A CAPEX budget will be developed from the approved business plan.
- A detailed sales budget must be completed before completing the profit budget for the year.
- A cash-flow budget covering the first three months will be prepared after the profit budget is completed.
- A master budget including profit projections will be completed from which cost centre allocations will be made.
- Budget notes that contain all the assumptions used in the budgets should accompany the master budget or be made available on a separate document. Where possible, the notes should justify the basis on which the estimates were made.
- Overheads (non-direct expenses) will be apportioned across the cost centres Exceptions need to be negotiated with relevant authorities.
- All expenses and income will be spread equally throughout the year unless otherwise required by business needs or business environment.
- The financial cycle for budgeting purposes will be yearly ending 30 June.
Reporting requirements
Software applications to be used in reporting.
- environment – Windows
- accounting Information System – BRB will use MYOB AccountRight plus
- data analysis – BRB will use Microsoft Excel 2007.
Actual results will be produced monthly by the MYOB accounting system. Actual variances to budget will be performed by Excel with a report prepared for senior management for significant variances.
Financial delegations
- Each manager is responsible for achieving the revenue budgets agreed to in the budget committee.
- Each manager is responsible to approve, by signing the necessary paperwork, all expenditures that fall within their area of responsibility.
- Expenditures must be within the budget guidelines for the individual departments.
Format for budgets and reports
All budgets must include the following details:
- name of the person who prepared it
- cost centre (if applicable)
- name of the budget/report, i.e. sales, expenses, CAPEX, cash flow, budget variation report
- period of the budget.
Task 3
Assessment Instructions
This is an individual assessment. You are required to demonstrate the ability to review and evaluate financial management processes. Using the scenario information supplied, you will respond to a number of scenario tasks. You will collect and analyse financial data and make recommendations to improve existing processes. You will also create a plan to implement and monitor solutions.
If you need help understanding any questions, ask your assessor to explain.
Procedure
- Consider the four scenario activities below along with the scenario background information and financial information contained in the appendices of this assessment task.
- Provide written responses to the following four scenario activities.
- Submit a document containing your responses to your assessor as per the specifications outlined below. Ensure you keep a copy of all work submitted for your records.
To be deemed competent you will need to successfully demonstrate the following:
You must provide responses to the four scenario activities provided in this assessment task
Scenario background information
Big Red Bicycle is a bicycle manufacturer based in Bendigo, Victoria. The company produces bicycles which it sells to retailers in the domestic Australian market.
The senior management structure of the company appears below:
| Person | Position |
| Michelle Yeo | CEO |
| Tom Copeland | Managing Director |
| John Black | CFO |
| Stuart LaRoux | Operations General Manager |
| Pat Roberts | Senior Accountant |
| Sam Gellar | Sales General Manager |
| Charles Pierce | Production Manager |
| Holly Burke | HR Manager |
According to company strategic plans, the company had aimed to achieve a net profit before tax of $1,000,000. Actual figures showed the company fell about $175,000 short of goals.
After successful labour cost cutting measures and improved sales team performance, the company aims to generate a net profit before tax of $1,200,000 from Australian operations alone.
This year, in addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product.
The board of directors of Big Red Bicycles feels that more cash will be needed to make investments to achieve strategic aims. One chief risk to plans is bad debt and poor cash flow due to large and unsustainable trade debtors balances quarter by quarter.
Note: Strategic plans dictate that Big Red Bicycles must reduce its debt levels and so additional financing to increase cash flow is not an option.
Statement of Financial Performance
| Big Red Bicycle | ||
| Statement of Financial Performance | ||
| For the year ended 30 June 2015 | ||
| REVENUE | ||
| Sales | 2,900,000 | |
| Less direct wages and Commissions | 272,500 | |
| Opening stock | 100,000 | |
| Purchases | 300,000 | |
| Closing stock | 20,000 | |
| Less cost of goods sold | 380,000 | |
| Gross Profit | 2,247,500 | |
| EXPENSES | ||
| General & Administrative Expenses | ||
| Travel | 22,000 | |
| Legal fees | 4,500 | |
| Bank charges | 700 | |
| Office supplies | 4,000 | |
| Postage & printing | 500 | |
| Dues & subscriptions | 600 | |
| Telephone | 11,200 | |
| Repairs & maintenance | 45,000 | |
| Payroll tax | 25,000 | |
| Marketing Expenses | ||
| Advertising | 208,000 | |
| Employment Expenses | ||
| Superannuation | 45,000 | |
| Wages & salaries | 500,000 | |
| Staff amenities | 23,000 | |
| Occupancy Costs | ||
| Electricity | 38,000 | |
| Insurance | 100000 | |
| Rates | 100,000 | |
| Rent | 200,000 | |
| Water | 35,000 | |
| Waste Removal | 60,000 | |
| TOTAL EXPENSES | 1,422,500 | |
| NET PROFIT (BEFORE INTEREST & TAX) | 825,000 | |
| Income Tax Expense | 206,250 | |
| NET PROFIT AFTER TAX | 618,750 | |
Ageing Debtors budget
| Big Red Bicycle | |||||
| AGED DEBTORS BUDGET 2015/16 | TOTAL | Qtr 1 | Qtr 2 | Qtr 3 | Qtr 4 |
| Sales | 2,900,000 | 600,000 | 900,000 | 800,000 | 600,000 |
| % Debtors Sales | 50% | 50% | 50% | 50% | |
| Total Debtors | 100% | 300,000 | 450,000 | 400,000 | 300,000 |
| Current | 65% | 195,000 | 292,500 | 260,000 | 195,000 |
| 30 Days | 20% | 60,000 | 90,000 | 80,000 | 60,000 |
| 60 Days | 12% | 36,000 | 54,000 | 48,000 | 36,000 |
| 90 Days | 3% | 9,000 | 13,500 | 12,000 | 9,000 |
Role
You are the Senior Accountant. As part of your role, you will need to complete the following four activities.
Activity 1
As you are aware, one risk to the strategic plans of Big Red Bicycle (BRB) is bad debt and poor cash flow due to large trade debtors balances. Consider the following:
- according to its policies, Big Red Bicycles offers 30 day terms to debtors
- currently, BRB does not train sales staff on credit terms
- there is currently no enforcement of credit terms
- warehousing of stock is expensive at current leased premises
- many bicycles need to be thrown out if parts rust; this problem exacerbates the problem of waste expense.
You have the following information from the Statement of Financial Position and current ledger accounts in the electronic accounting system (MYOB AccountRight).
| Account | $ |
| Trade debtors | 362,500 |
| Trade creditors | 80,000 |
| Opening stock | 100,000 |
| Closing stock | 300,000 |
| Purchases | 1,000,000 |
Complete the following.
| 1. Review the Statement of Financial Performance in the appendices to calculate:
1. The average debtor days ______________ 2. The average creditor days _____________ 3. The average stock turnover ____________ 4. Show calculations and results on your response document for this assessment task. |
| 2. Consider the existing BRB ageing debtor’s budget. On your response document, make two written recommendations for improvement to existing financial management processes to improve cash flow. To support your recommendations, refer to data sources, organisational needs, and analytical techniques, for example:
1. statement of financial performance 2. ledger accounts 3. scenario information 4. ageing debtors budget 5. ratios. 3. On your response document, list three sources of information of use to complete this activity. |
| Question 1
1) (362500/2900000) *365= 46 days 2) (80000/1000000) *365 = 29 days 3) (380000/((100000+300000)/2)) =(380000/200000) = 1.9 times Question 2 Recommendation: 1) BRB need to tighter cash collection policy from its credit customers because according to its policy BRB offers 30 days time but the average debtors collection days is 46 which is beyond 30 days. Futhermore, credit terms should be enforced immediately along with the training of sales teams regarding credit terms. 2)BRB is paying its creditor or suppliers in 30 days which is 15 days earlier than it is receiving a cash from its debtors. So BRB need to reduce gap between average creditor and debtors days to avoid liquidity issues by negotiating with creditors. 3)BRB is selling its bicycles twice a year accoridng to average stock turnover. BRB has the problem with the wastage of the bicycles so it need to control this issue. Moreover, it need to reduce its storage cost of inventory by implementing better inventory management techniques like Just in Time. Question 3 Three list of sources of information are: 1) Statement of financial performance 2) Ledger Accounts 3) Ageing Debtor budget |
Activity 2
In addition to its Australian business, Big Red Bicycles is considering manufacturing a new range of cheaper bicycles in Indonesia. The following information is available:
- the Indonesian plant has capacity to manufacture 8000 units
- Big Red Bicycle’s strategic goal is to generate a pretax profit of $1,000,000 for the next financial year for Indonesian operations
- clients will pay a maximum of $500 per bicycle
- possibility exists for move to Indian plant with capacity for 10,000 units
- market for bicycles is growing rapidly and BRB will be able to sell everything produced
- limited ability to renegotiate costs with suppliers
- pricing and cost information is as follows.
| Bicycle price per unit | $500 (ex GST) |
| Current variable costs per unit | $250 |
| Fixed costs | $1,280,000 |
Complete the following.
| 1. On your response document, work out:
1. how many units at current variable cost would need to be produced to achieve profit target (show calculations) 2. what the variable costs per unit would need to be to achieve profit target at current manufacturing capacity (show calculations). 2. On your response document, make one written recommendation based on your analysis. To support your recommendation ensure you refer to the organisational needs or situation, and any analytical techniques used. You may also suggest possible actions for BRB to take depending on possible future scenarios. 3. On your response document, list three sources of information of possible use to complete this activity. |
| Question 1
1) $500x – ($250x + 1,280,000) = 1,000,000 $250x – 1,280,000 = 1,000,000 $250x = 2,280,000 X= 2,280,000/250 X= 9120 units 2) $500*8000 – (8000x + 1,280,000) = 1,000,000 $4,000,000 – 8000x – 1,280,000 = 1,000,000 2,720,000 – 8000x = 1,000,000 8000x = 1,720,000 X= 1,720,000/8000 X= $215 Question 2 The units which BRB required to sell at current variable cost is 9120 in order to achive its target profit of $1000,000. However this units are 1120 units above the maximum capacity. So BRB need to increase its ability to renegotiate with the supplier so that it would get materials at minimum costs which help BRB to reduce its variable cost per unit at $215 where it can able to achieve target profit of $1000,000 at 8000 units. Other recommendation of BRB is to increase the price of its bicycle as its demand is already created in Indonesia. Question 3 The sources of information required for this activity are: 1)Income statement 2)Balance sheet 3)Cash Flow Statement
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Activity 3
Soon you will need to prepare a business activity statement (BAS) for the first quarter on 2016/17.
Complete the following.
| 1. State how many years you will need to keep GST records in order to satisfy ATO requirements.
2. Complete the GST budget on the following page to anticipate GST liability. |
| July | August | September | |
| Budgeted cash receipts incurring GST: | |||
| Cash sales | 20,000 | 10,000 | 10,000 |
| Cash revenue (besides sales) | 0 | 0 | 0 |
| Cash receipts from sale of assets (not stock) | 0 | 0 | 0 |
| Total receipts for GST | 20,000 | 10,000 | 10,000 |
| Budgeted non-cash receipts incurring GST: | |||
| Debtors sales | 180,000 | 230,000 | 150,000 |
| Total non-cash receipts: | 180,000 | 230,000 | 150,000 |
| Total budgeted receipts incurring GST | 200,000 | 240,000 | 160,000 |
| Budgeted cash payments incurring GST | |||
| Cash purchases of stock | 0 | 0 | 0 |
| Cash expenses | 4,300 | 5,200 | 5,250 |
| Total cash receipts incurring GST | 4,300 | 5,200 | 5,250 |
| Budgeted credit payments incurring GST | |||
| Credit purchases of stock incurring GST | 25,000 | 30,000 | 25,000 |
| Credit purchases of assets (besides stock) | 4,300 | 5,200 | 5,250 |
| Total cash payments incurring GST | 29,300 | 35,200 | 30,250 |
| Total budgeted cash payments incurring GST | 33,600 | 40,400 | 35,500 |
| GST cash budget calculations | |||
| 1. Cash receipts | |||
| 2. Cash payments | |||
| 3. GST liability |
| Question 1
Ans. 5 years Question 2 GST is 10% a)Cash receipts July: 200,000 *10% = 20000 August: 240,000*10% = 24000 September: 160,000*10%= 16000 b)Cash payments July: 33600*10% = 3360 August: 40400*10%= 4040 September: 35500*10%= 3550 c)GST liabilty July: 20000 – 3360 = 16640 August: 24000 – 4040 = 19960 September: 16000 – 3550 = 12450 |
Activity 4
Choose one of the recommendations from Activity 1 or 2 and develop an action plan to implement and monitor the recommendation. Ensure you include appropriate activities, monitoring, timelines and accountabilities.
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