Provide answer to all questions below

1. list three types of financial statement?

Income statement
The income statement is a statement that illustrates the profitability of the
company. It begins with the revenue line and after subtracting various expenses
arrives at net income. The income statement covers a specified period like quarter
or year.

Balance sheet
The balance sheet does not account for the entire period and rather is a snapshot of
the company at a specific point in time such as the end of the quarter or year. The
balance sheet shows the company’s resources (assets) and funding for those
resources (liabilities and stockholder’s equity). Assets must always equal the sum of
liabilities and equity.

Statement of Cash Flow

he statement of cash flows is a magnification of the cash account on the balance
sheet and accounts for the entire period reconciling the beginning of period to end
of period cash balance. It typically begins with net income and is then adjusted for
various non-cash expenses and non-cash income to arrive at cash from
operating. Cash from investing and financing are then added to cash flow from
operations to arrive at net change in cash for the year.”

2. What is the purpose of balance sheet?

The purpose of the balance sheet is to reveal the financial status of a business as
of a specific point in time. The statement shows what an entity owns (assets)
and how much it owes (liabilities), as well as the amount invested in the business
(equity). This information is more valuable when the balance sheets for several
consecutive periods are grouped together, so that trends in the different line
items can be viewed.There are several subsets of information that can be used
to gain an understanding of the short-term financial status of an organization.
When the current assets subtotal is compared to the current liabilities subtotal,
one can estimate whether a firm has access to sufficient funds in the short term
to pay off its short-term obligations.
3. Explain main steps in the budgeting process?

Are economic troubles causing you to consider your personal financial situation? You
may be worried about losing your job or how much debt you have. Avoid a potential
personal financial crisis; get back to basics with a budget you can stick to. Here’s
how to start

1) Set Realistic Goals

2) Identify Income and Expenses

3) Separate Needs from Wants

4) Design Your Budget

5) Put Your Plan into Action

6) Manage Seasonal Expenses

7) Looking Ahead
4. Explain the principle of cash accounting?

Cash accounting is an accounting method in which payment receipts are recorded

during the period they are received, and expenses are recorded in the period in
which they are actually paid. In other words, revenues and expenses are recorded
when cash is received and paid, respectively. Cash accounting is also called
cash-basis accounting.

Understanding Cash Accounting

Cash accounting is one of two forms of accounting. The other is accrual accounting,
where revenue and expenses are recorded when they are incurred. Small businesses
often use cash accounting because it is simpler and more straightforward and it
provides a clear picture of how much money the business actually has on hand.
Corporations, however, are required to use accrual accounting under Generally
Accepted Accounting Principles (GAAP).

KEY TAKEAWAYS
  Cash accounting is simple and straightforward. Transactions are recorded
only when money goes in or out of an account.
 Cash accounting doesn't work as well for larger companies or companies with
a large inventory because it can obscure the true financial position.
 The alternative to cash accounting is accrual accounting where transactions
are recorded when an order is made rather than paid.
5. List one advantage and disadvantage of cash accounting?
Advantages

 Simple: As a business, you have to choose one of the accounting methods. If

you choose this accounting, it’s the simplest because you will only record
transactions that are related to cash. Other transactions won’t be taken into
consideration.
 Maintenance is easy: Maintaining an accrual system of accounting is tough.
Compared to that maintenance of cash accounting is pretty easy. You will
record revenue when cash is received from customers and you will record
expenses when cash is paid to suppliers.
 Liquidity: Since it is all about only cash transactions, the potential investors
who would like to invest in the business doesn’t need to go through any
liquidity ratio. S/he can look at the accounting system, look at the cash inflow
and cash outflow and then find out for herself/himself the net cash flow of
the business.
 Single-entry accounting: This is single entry accounting. That means the
effect occurs only on one account. It makes things easier for the business and
the business also doesn’t need to follow the matching concept.

Disadvantages

 Not very accurate: Since it is only recorded cash transactions, It doesn’t

include all the transactions. As a result, we can’t say that cash accounting is
very accurate. Plus under this accounting revenue or expenses is recorded
when the company receives or pays cash, even in the different accounting
period.
 Not recognized by Companies Act: Few businesses follow this accounting,
but it is not a recognized method under the Companies Act. As a result, This
isn’t practiced by big companies.
 Chances of discrepancies: Since its only records cash transactions, the
business can be involved in unfair practices by hiding the revenue or inflating
the expenses.

6. Explain the principle of accrual accounting?

The accrual principle is the concept that you should record accounting
transactions in the period in which they actually occur, rather than the period in
 which the cash flows related to them occur. The accrual principle is a
fundamental requirement of all accounting frameworks, such as Generally
Accepted Accounting Principles and International Financial Reporting Standards.

Accrual principle are:

 Record revenue when you invoice the customer, rather than when the
customer pays you.
 Record an expense when you incur it, rather than when you pay for it.
 Record the estimated amount of bad debt when you invoice a customer,
rather than when it becomes apparent that the customer will not pay you.
 Record depreciation for a fixed asset over its useful life, rather than
charging it to expense in the period purchased.
 Record a commission in the period when the salesperson earns it, rather
than the period in which he or she is paid it.
 Record wages in the period earned, rather than in the period paid.

7. list one advantage and disadvantage of accrual accounting?

Advantages of Accrual Accounting

1. It provides an accurate picture of overall cash flow for the business. Many
business transactions occur over a period of several months and therefore
several accounting periods. Accrual accounting reflects that income and
expenses generated in one month can carry over into the next month or even
longer.
2. Investors prefer accrual accounting. A business that uses accrual accounting
is often looked at as more permanent and established than businesses that use
cash-basis accounting methods.
3. It's the preferred method for GAAP. The Generally Accepted Accounting
Principles set forth by the Financial Accounting Standards Board prefers accrual
accounting over cash-basis accounting because the financial statements for a
business that uses accrual accounting are deemed more accurate since the
transactions reflect when they actually took place instead of when money is
exchanged.
Disadvantages of Accrual Accounting
1. Small companies might lack the staff needed to manage this method. Larger
companies typically have staff – even an entire department – dedicated to
tracking and reporting transactions. For example, a hospital might have an
account receivables department to keep track of patient billings, and an account
payable department to track hospital expenses.
 2. Accrual basis accounting requires at least monthly reporting. In order to
remain accurate, accrual accounting needs frequent reports generated. These
are usually the monthly financial statements most business managers are
familiar with, such as the income statement and balance sheet. But accounts
receivable and accounts payable reports are often generated on a more
frequent basis.
3. Taxes. Although an advantage to using accrual accounting is that you can
report income when the sale is incurred instead of waiting until you have cash
on hand, this also means a business pays taxes on money it hasn't received.

8. What is the standard rate of GST?

The goods and services tax (GST) in Australia is a value added tax of 10% on most
goods and services sales, with some exemptions (such as for certain food, health
care and housing items) and concessions (including qualifying long term
accommodation which is taxed at an effective rate of 5.5%). GST is levied on most
transactions in the production process, but is in many cases refunded to all parties in
the chain of production other than the final consumer.
The tax was introduced by the Howard Government and commenced on 1 July 2000,
replacing the previous federal wholesale sales tax system and designed to phase out
a number of various State and Territory Government taxes, duties and levies such as
banking taxes and stamp duty.
An increase of the GST to 15% has been put forward, but is generally lacking in
bi-partisan support.

9. List two items that attracted by GST?

I. Court/Tribunal Services including District Court, High Court and Supreme

Court

Courts will not charge GST to pass judgement.

II. Duties performed by:

 The Members of Parliament, State Legislature, Panchayat, Municipalities and

other local authorities
 Any person who holds a post under the provisions of the Constitution
 Chairperson/Member/Director in a body established by the government or a
local body and who is not an employee of the same

10. What is the process by which a business would report GST to the Australian
Tax office?

GST reporting method:

The GST reporting method you use is based on your business's GST turnover and
other reporting requirements:

 If your GST turnover is less than $10 million

 you generally report GST using the default Simpler BAS reporting
method
 if your aggregated turnover is greater than $10 million, or you make
input taxed supplies as your main business or enterprise activity, you
have the option to use either Simpler BAS or the GST full reporting
method
 if you pay GST instalments quarterly and report annually, you may use
the GST instalment method.

 If your GST turnover is $10 million or more

 you report GST using the full reporting method.

The GST turnover figure we use to determine your GST reporting method is obtained
from your ATO records. It was previously advised by you (at GST registration or
subsequently).

Your GST reporting method will generally be rolled over at the end of each financial
year based on your GST turnover. You can contact us to change your GST reporting
method.

11.What is the penalty rate to be applied if a supplier does not provide an ABN?

If a business or organization supplies you with goods or services, it should quote its
Australian business number (ABN) to you. Most quote their ABN on their invoice,
and you need to keep this invoice in your business records. They can also quote their
ABN to you on another document as long as it relates to the supply they are making.

If they don't quote their ABN, you must withhold 47% from their payment you make
to them and send the withheld amount to us.

Your organization should not withhold if any of the following applies:

 The total payment to the supplier is $75 or less, excluding any goods and
services tax (GST).
 The supplier is an individual under 18 years old, is not your employee, and
the payments you make to that person do not exceed $350 per week.
  The supply is wholly input taxed under GST – this includes most financial
supplies, supplies of residential rent, residential premises and some precious
metals, and food supplies by school tuck shops and canteens that have
chosen to be input taxed – contact us if you are not sure whether a supply is
input taxed.

12.A non-profit organization needs to register for GST after it has a turnover of
more than how much?

If your not-for-profit (nfp) organization's turnover is $150,000 or more, you must

register for gst. You can choose to register even if your gst turnover is lower than
this.

Generally, organizations registered for gst will:

 Remit gst to the ato for their sales of goods and services
 Claim credits for the gst included in the price of goods and services bought in
carrying on its activities.

If your organization has a turnover of less than $150,000, it can choose to voluntarily
register for gst. This decision should be made based on the administrative needs of
your organization.

Generally, an organization that registers for gst must stay registered for at least
12 months, even if its gst turnover is less than $150,000.

13. What information must be included on a tax invoice for sale of $1000 or
more?

Tax invoices for sales of $1,000 or more need to show the buyer's identity or ABN.If
your tax invoices meet the requirements for sales of $1,000 or more, you can also
use them for sales of lesser amounts.
Tax invoice for a sale of more than $1,000

14. Under tax law how long must business keep their records for?
 Long to keep your records

Generally, you must keep your written evidence for five years from the date you
lodge your tax return.

There are some more specific situations. If you:

 have claimed a deduction for decline in value (formerly known as

depreciation) – keep records for the five years from the date of your last
claim for decline in value
 acquire or dispose of an asset – keep records for the five years after it is
certain that no capital gains tax (CGT) event can happen
 are in dispute with us – keep records for the later of

 five years from the date you lodge your tax return or
 five years from the date the dispute is finalized.
15. Who must have their financial report audited?
Certain types of entities must have their financial reports audited by a registered
company auditor.

A company (other than a small proprietary company), registered scheme (managed

investment scheme) or disclosing entity (a body that holds enhanced disclosure
securities) must have its annual financial report audited and obtain an auditor's
report.

However a proprietary company may be exempt from having its financial report
audited (see Regulatory Guide 115 and CO 98/1417 Audit Relief for Proprietary
Companies) or may otherwise be eligible for audit relief.
A disclosing entity must have its interim financial report reviewed and obtain a
registered company auditor's review report.

What is the purpose of audit and auditor’s report?

The purpose of an audit

The purpose of an audit is for an independent third party to examine the financial
statements of an entity. This examination is an objective evaluation of the statements,
which results in an audit opinion regarding whether the statements have been
presented fairly and in accordance with the applicable accounting framework (such as
GAAP or IFRS). This opinion greatly enhances the credibility of the financial statements
with users, such as lenders, creditors, and investors. Based on this opinion, users of
the financial statements are more likely to provide credit and funding to a business,
possibly resulting in a reduced cost of capital for the entity.

Purpose of Auditor’s Report

When financial statements are finalized, they usually must contain an evaluation –
an auditor's report - from a licensed accountant or auditor. This report provides an
overview of the evaluation of the validity and reliability of a company or
organization’s financial statements.

The goal of an auditor's report is to document reasonable assurance that a

company’s financial statements are free from error.

Along with balance sheets, profit & loss statements, and directors reports, auditor's
reports make up part of a company's statutory accounts.

17.List the key components of a financial report?

Top 4 Main Components of Financial Statements

Balance sheet
The balance sheet is a report that summarizes all of an entity's assets, liabilities, and
equity as of a given point in time. It is typically used by lenders, investors, and
creditors to estimate the liquidity of a business. The balance sheet is one of the
documents included in an entity's financial statements. Of the financial statements,
the balance sheet is stated as of the end of the reporting period, while the income
statement and statement of cash flows cover the entire reporting period.

Income statement
The income statement is a financial report that shows an entity's financial results over
a specific period of time. The time period covered is usually for a month, quarter, or
year, though it is possible that partial periods may also be used. This is the m ost
commonly-used of the financial statements, and is the most likely statement to be
distributed within a business for management review

Statement of cash flows

The statement of cash flows is one of the financial statements issued by a business,
and describes the cash flows into and out of the organization. Its particular focus is on
the types of activities that create and use cash, which are operations, investments,
and financing. Though the statement of cash flows is generally considered less critical
than the income statement and balance sheet, it can be used to discern trends in
business performance that are not readily apparent in the rest of the financial
statements. It is especially useful when there is a divergence between the amount of
profits reported and the amount of net cash flow generated by operations.

Statement of retained earnings

The statement of retained earnings reconciles changes in the retained earnings
account during a reporting period. The statement begins with the beginning
balance in the retained earnings account, and then adds or subtracts such items
as profits and dividend payments to arrive at the ending retained earnings
balance. The general calculation structure of the statement is:

Beginning retained earnings + Net income - Dividends = Ending retained earnings

The statement of retained earnings is most commonly presented as a separate

statement, but can also be appended to the bottom of another financial statement.

18. What is a profit and loss statement?

The profit and loss (P&L) statement is a financial statement that summarizes the
revenues, costs, and expenses incurred during a specified period, usually a fiscal
quarter or year. The P&L statement is synonymous with the income statement.
These records provide information about a company's ability or inability to generate
profit by increasing revenue, reducing costs, or both. Some refer to the P&L
statement as a statement of profit and loss, income statement, statement of
operations, statement of financial results or income, earnings statement or expense
statement.

P&L management refers to how a company handles its P&L statement through
revenue and cost management.

19. Is it compulsory to prepare a profit and loss statement?

Every company prepares a Profit and Loss Account/statement at the end of the year
generally, to get the visibility of the income, earning, expenses and loss incurred in a
specific range of period. It is important to prepare Profit and Loss statement because
this information helps an organization to take the right business decision like where
should we do the cost-cutting, from where can a business generate more profit and in
which part business is suffering the loss. In this article, we will see types of Profit and
Loss account and Profit and Loss account format.

Profit and Loss Account/Statement

 Types of Profit and Loss

 Gross profit/ Gross loss

 Net profit/ Net loss

We prepare Trading account to ascertain the Gross profit/ Gross loss. While we prepare
Profit and loss account to ascertain the Net profit/ Net loss.

20. List 5 ways to improve cash inflow and give examples?

Lease, Don’t Buy

Since leasing supplies, equipment, and real estate usually ends up being more
expensive than buying, doing so may seem counter intuitive to someone who is only
paying attention to the bottom line, or your income after expenses are paid off. But
unless your company is flush with cash, you’re going to want to maintain a cash
stream for day-to-day operations.

Offer Discounts on Loans

Everyone loves an incentive, and if you offer customers a discount if they pay their
bills ahead of time, you’re creating a win/win situation for both of you. Getting the
cash in early helps your cash flow, of course.

Conduct Customer Credit Checks

If a customer doesn't want to pay you in cash, then be sure to conduct a credit
check—especially before you sign them up. If the client has poor credit, you can
safely assume that you won’t be receiving payments on time.

As badly as you might want to make the sale, the late payments will hurt your
business’s cash flow. If you opt for a sale despite any questionable credit, be sure to
set it up with a high interest rate.

Form a Buying Cooperative

Think power in numbers, and find other like-minded companies willing to pool their
cash in order to haggle lower prices with suppliers, who usually give big discounts to
large firms who buy in bulk.

Improve Your Inventory

Take an inventory check. Those goods you buy that aren't moving at the same pace
as your other products? They tie up a lot of cash.

Task 2
Based on amount allocated to each marketing activity.Complete the budget template
provided given below?

Marketing Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May Total
Activity 16 16 16 16 16 16 16 17 17 17 17 -17

Redesign 5,00 5,000

Website 0

Incentive 200 20 200 200 200 200 200 200 200 200 200 200 2400
Scheme 0

Radio 83 83 83 83 83 83 83 83 83 83 83 83 1000
Advertiseme
nt

Social Media
communicati
on

Expo-2016 33 3300
00

Promotional 1000 500 1500

brochure

Sponsor Local 200 500 400 100 200 200 400 2000

Contingency 800
Amount

Total

4. Research the benefits of television advertising prior to the meeting.Make

notes to assist you at the meeting if required?
The advent of digital computer marketing models made it cheaper and easier for
businesses to target customers. It sometimes seems like television advertising is left
only for the big brands with large budgets. However, there are still many advantages
for a small business to produce commercials for television broadcast and capture its
market share.

Mass Marketing For Maximum Impact

Television commercials are seen and heard by anyone tuned into the television
channel at the time of airing. While many call this a shotgun approach, there is a
strong branding message that happens when you have a good commercial seen by
tens of thousands of people. You don't need to advertise on the national platform,
but instead keep to local markets where your products and services will benefit from
strong brand recognition.
Cable Targeting for Specific Demographics

Television has expanded, with cable markets that not only help target specific
demographics but also help reduce the cost of commercial advertising. A local
comic-book and gaming store might benefit from commercials on the Syfy network.
Those who watch this channel are likely to be the ideal customers for the store.
Some of the smaller networks have smaller audiences and thus are cheaper to
advertise on. Doing research about your target market and the types of television
shows they watch can help you cost effectively hit that group.
Fewer Small Businesses, More Airtime

Because everyone is advertising online, media outlets are desperate to sell more
commercial packages. If you pay attention to TV commercials, you will see the same
companies in the advertising rotation constantly. There are two reasons for this: The
first is to enhance branding by constant advertising. The second is because packages
are purchased to help sell more airtime for commercial buyers.

A smart business owner can research the stations and times he wants to advertise
and then contact advertising distributors to see what packages are available. This
means a business owner can gain a captive audience compared to competing against
the noise in digital formats.
Cross-Promote on Digital Platforms

There is a secondary benefit to commercial advertising. The production value of a

professional commercial is generally much higher than the commercial videos put
together for digital media. This means you can use your television commercial in
digital formats and likely stand out because the production value is higher than that
 of other online commercials. This increases the bang for your advertising buck – you
can use two very strong platforms for marketing and sales.

5. Explain each of the planned marketing activities included in the budget

prepared for the meeting?

A marketing plan is a detailed road map that outlines your marketing strategies,
tactics, costs and projected results over a period of time. Your marketing plan and
budget keeps your entire team focused on specific goals – it’s a critical resource for
your entire company.Writing a marketing plan is a time-consuming exercise, but
it forces you to think through your strategies and relevant tactics. A good
marketing plan typically includes

Set your annual goals

Design your plan to achieve the goals that you define:

 Quantitative (numeric) goals such as total revenue, profit, number of

customers, units sold, and breakdowns by product or channel as needed.

 Strategic goals — for example, you may want to expand into a new market
with a new distribution channel, or you may need to re position your brand to reflect
a change in your business.

Emphasize your positioning in the marketplace

 Your positioning strategy defines how you’ll differentiate your offering from
those of your competitors.

 Your brand strategy defines what you stand for and how you’ll communicate
with the market.

Outline any plans for your products & services

If you need to do anything to strengthen your product line and better support your
positioning, address those issues in your plan.

Develop your tactical sales plan

 The number of sales reps you’ll need and the markets they’ll target
 Whether you’ll need to develop new compensation plans, or hire and train
new personnel

 Top priority markets, industries or customer segments; if you have a list of

key prospects, include them

 Your plan for managing current customers

 Plans for launching any new distribution channels and driving revenue
through existing channels

Outline your major marketing campaigns

You don’t need to list every campaign — just outline your major promotional plans
for the year. You’ll need to set your budget too, so the more planning you do now,
the better. Your plans should include:

 The top three campaigns you’ll run to generate leads, nurture customers,
close, and/or market to existing customers

 The media you’ll use (for example, email, social, print, telemarketing, trade
shows, publicity, etc.)

 Tools, technologies or resources you’ll need – for example, a new website, an

email service provider, or a new piece of software

 Your estimated ROI and other financial goals

Develop a marketing budget

 Budgeting can be a difficult process. Many companies just estimate, or base

their budget on last year’s spend. An estimate is better than nothing, but if you’ve
defined your major campaigns and needs, you can develop better numbers.

 You also use ROI to determine the appropriate total budget for your
marketing efforts.

Revisit your marketing plan regularly

 The planning process itself is immensely valuable, but if you don’t review the
plan regularly, it’s easy to lose focus. Periodically revisit the plan, and measure your
progress.
 Task Assessment 4:
1. Analyse the information provided in the interim profit and loss account
including?

Calculation of net profit or loss for each Campus.

Calculating Variance

Melbourne

Budget Actual Variance

Sales 450,000 475,000 25,000(Favourable)

Electricity & Gas 1500 3000 1500(Adverse)

Internet 1000 1100 100(Adverse)

Office Supplies 700 1200 500(Adverse)

Rent 225,000 220,000 5000(Favourable)

Stationary 800 1300 500(Adverse)

Wage and salaries 115,000 117,000 2000(Adverse)

Superannuation 15,000 16,000 1000(Adverse)

Expanse

Travel and 2500 2700 200(Adverse)

accommodations

Work Cover 900 900

Insurance

Water 2000 2600 600(Adverse)

Profit 85,600 109,200 23600(Favourable)

Sydney

Budget Actual Variance

Income 350,000 410,000 60,000(Favourable)

Sales

Electricity and gas 1200 2800 1600(Adverse)

Internet 1100 1100

Office Supplies 650 1300 650(Adverse)

Rent 185,000 190,000 5000(Adverse)

Stationary 700 1250 550(Adverse)

Wages & Salaries 115,000 117,000 2,000(Adverse)

Superannuation 15,000 16,000 1000(Adverse)

Expanse

Travel & 21,00 23,00 200(Adverse)

Accommodation

Water 1,900 2,100 200(Adverse)

Work Cover 870 870

Insurance

Profit 26,480 75,580 49,100(Favourable)