Development of Budgets and Debtor Ageing Summary - Case Study Example

Name Course Lecturer Date Assessment 1 - Part A Part 1 a. Development of Budgets and debtor ageing summary Sales budget for 2015/16 by department by quarter Time Period Quarter 1 Quarter 2 Quarter 3 Quarter 4 2015/2016 Sales ($) 3,142,822 3,771,386 4,085,668 4,714,232 15,714,108 Profit Budget for 2015/16 by quarter Income Expense Quarter 1 Quarter 2 Quarter 3 Quarter 4 Construction Expense Discount given 100 100 100 100 Material 12000 12000 12000 12000 Labor 8500 8500 8500 8500 Subcontractors. 17500 17500 17500 17500 Misc. 200 200 200 200 Total Income/Construction 38,300 38,300 38,300 38,300 Less: COGS(Cost of Goods Sold) 3,000 3,000 3,000 3,000 Gross Profit 35,300 35,300 35,300 35,300 Fuel 250 Repair and Maintenance 100 100 350 100 Expense 100 100 100 100 Total Expenses 200 200 700 200 Net Profit 35,100 35,100 34,600 35,100 Cash Flow Budget of the GST per quarter Cash Flow Quarter 1 Quarter 2 Quarter 3 Quarter 4 Beginning cash balance 5,000 50000 Cash inflow 5000 50,000 Sale of Livestock products 10000 Sale of crop products 25000 Total Inflow 30,000 50,000 10,000 Cash Expenses Fertilizer 20000 Feed 10,000 Seed 10,000 Marketing 5,000 Processing 10,000 Capital Purchases 10,000 Debt Payments 10,000 Interest 5,000 Total Expenditures 20,000 30,000 25,000 5,000 Cash Inflow – Cash Expenditures 10,000 20,000 -25,000 5,000 Debtor Ageing Summary at the end of the each quarter Ledger Name Quarter 1 Quarter 2 Quarter 3 Quarter 4 Balance Alana 50 50 0 0 0 Kelly 405 385 20 0 0 Lisa 127.5 127 0 0 0 Mac 440 135 135 90 170 Maria 115.5 0 0 0 25 Rebecca 705 235 235 0 235 Risa 170 170 0 0 0 Social Services 540 120 70 0 350 Susan 35 35 0 0 0 Taft 135 135 0 0 0 Total 2,722.50 1,392.50 460 90 780 Part 2 b. Develop budget notes Identification of reasons for previous profits and losses The past losses and profits could be attributed to such issues as the money related company programming. Consequently, it can be said that the item used in this company was not prepared to offer enough examination of the costs and the made wage and this is what had led to poor evaluation of the fundamental administration and future advantages or profits. The creation of the customer base by the company has helped in devotion bargains in addition to new references of key customers. This had reduced the notification cost. The new programming system however is to be utilized in compensating for the time lost during the development of association. Consequently, CGS=16971237 – 7297632 = 963760 Effectiveness of Existing Financial Management Approaches In different countries, the capacities of cash related organization have been broken down for fiscal populism. These countries have mangled and insufficient budgetary frameworks as well as the breakdown of the current cash related organization. A central sensitivity toward entire nations is the way for fitting methodologies for important organization as well as for controlling aggregate variables that are money related. There is need for big financial organizations to supplant temporary crisis organization. All assumptions and basis used to form budgets The assumptions include Updating spending suppositions, reviewing bottlenecks, available subsidizing, obtaining income conjecture, step costing focuses, obtaining office spending plans, obtaining capital spending demands, updating the spending model, reviewing the financial plan, processing spending emphasis, issuing financial plan and loading the financial plan. Implementation and monitoring of budget expenditure As far as budget implementation is concerned, some of the major activities include revenue mobilization and generation, awarding of contract as stated or specified in the budget, releasing funds and physical monitoring of programs or project sites. As far as budget audit or evaluation is concerned, some of the major activities include determination of value for money, physical assessment, reduction or prevention of the impact of losses and frauds, determination of the violations or compliance of financial procedures and rules, receipt of summary of expenditure and revenue. Prompt questions 1. One of the statutory requirements for tax is that of levying general sales tax on all Houzir Ltd products. However, there is some leverage and leeway which came in form of overall accounting information or data that is required to be given. The accounting information in this case ensures that GST is collected in the earned input tax credits at that time period. The company also earns tax on the buying of stocks as well as the entity’s eventual assets. The proceeds and amounts collected need to be paid in such a way that the business activity assessment is complied with. The Australian Tax Office determines the schedule of the business activity. The other statutory requirement is that the accumulated overall net profit will be taxed each quarter by 30%. Finally, the other statutory requirement is that payroll tax will be approximately 4.75% of all salaries and wages. Some of the tax liabilities include luxury car tax, fringe benefits tax, income tax and GST payable. Luxury Car Tax Fringe Benefits Tax Income Tax GST Sum 20920 28000 839585.5 1663680 2552185 5230 7000 83419.13 306145.1 401794.2 5230 7000 202600.9 399965 614795.9 5230 7000 239691.8 439374.9 691296.7 5230 7000 313873.6 518194.8 844298.4 2. Current compliance requirements and liabilities Housiz Pvt Limited needs to consider a number of compliance standards. One of the most important requirements is that of the company ensuring that it has followed all the accounting standards that are relevant. At some instance however, the firm needs not to necessarily comply with all accounting standards. This relief or leverage is only given to the smaller enterprises. In this company, the reports were made keeping in mind the shareholder’s needs and requirements just the way section 293 of the 2001 corporate act describes. The other area where the company might not need to comply with all the accounting standards is when it is specified in advance that the information that is being given comply not with the accounting standards. The company prepares the reports for a member that is subject to the direction of 294A and because of this, the specifications define that the report needs not to comply with the standards. The company should treat all the liabilities and items under the corporate act of 2001.One of the software that will be used is the arrow business software (.Curristine 25). 3. Commercially Available Financial Management software One of the advantages of this software is that it gives the user a great experience due to its dynamic and standard menus, it has panels that are dock able and it can be seamlessly integrated to Microsoft office application. The other software are Quick books and MYOB. Both of these software have proven impressive at their duties. However, Apple Macs do not support Quick books. While MYOB can allow for multiplication inventory, the character of Quick books fades in this case. Another strength that MYOB has over Quick books is that it allows multiple or several entries at ago. Therefore, after considering all the disadvantages and advantages of each software, the software that can be recommended in this case for Houzit is MYOB. 4. Application of principles of accounting Matching principle: As far as this principle is concerned, the business that uses the principle can make accurate evaluation of its pin point profitability and financial performance for a particular time through the concealing of the difference in the timings of the accounting entry. This is the organizing tenet in accounting. It is a planning standard that helps an association to report a given expense in the same time allotment on its pay decree as the related wages. Without this planning principle, an organization may find itself reporting $6000 of expense when it is paid in January instead of reporting it in December when the commitment and expense are realized. Account groups: This constitutes the expenses, revenue, owners equity, liabilities and assets that are required for the statement of financial performance as well as financial position of the company. Apart from showing us the budgets, account groups also show us profit/loss. Time periods-Time periods are used for making sound financial and economic decision needed in a given time period. In today’s world, a timely decision is needed by businesses. Time periods are commonly quarterly, month to month or consistently. After setting up the term of each reporting period, the trades are recorded inside each period using the tenets of International Financial Reporting Standards or Generally Accepted Accounting Principles (.Curristine 25). 5. The implications of probity The repercussions or implications of probity during budget preparations are that it helps in ensuring that there is financial probity. This is because probity ensures that the company has demonstrated full accountabilities when it comes to the management of funds irrespective of whether the funds are related to transaction or are in form of an advice. The other important thing here is that all of probity is lawfully met when it comes to financial responsibility. 6. The critical dates and initiatives Some of the critical dates in the company’s next financial cycle include wages and salaries rise by $172500 in 2010/2011, an increase in advertisement budget by $70000 in 2010/2011 and the $100000 loan on 31 December. 7. The items for inclusion in the budgets for Houzit Pty Ltd. Some of the items that were recommended to be included in the budgets include office expenses, staff amenities, transportation and water bill. 8. New or modified internal controls One of the modified internal controls in this case that could help in improving Houzit Pty Ltd’s risk management is the need to follow regulations and rules especially those guiding the accounting activities in the company. The other modified internal control is the application and implementation of all the set procedures. In addition, it will be very important to note the time sheets as well as the operating hours (.Curristine 25). Work Cited Curristine, Teresa. "Performance information in the budget process." OECD Journal on Budgeting 5.2 (2006): 87-131. Read More