Assessment Task 1 Case Study and Role Play

Part A Case Study

Sales and Profit Budget

Particulars 2016/17 Qtr 1 Qtr 2 Qtr 3 Qtr 4

Revenue (%) - 20% 24% 26% 30%

Sales 16,971,237 3,394,247 4,073,097 4,412,522 5,091,371

– Cost of Goods Sold 9,673,605 1,934,721 2,321,665 2,515,137 2,902,081

Gross Profit 7,297,632 1,459,526 1,751,526 1,897,384 2,189,290

Gross Profit % 43% 43% 43% 43%

Expenses

– Accounting Fees 10,000 2,500 2,500 2,500 2,500

– Interest Expense 84,508 21,127 21,127 21,127 21,127

– Bank Charges 1,600 400 400 400 400

– Depreciation 170,000 42,500 42,500 42,500 42,500

– Insurance 13,390 3,348 3,348 3,348 3,348

– Store Supplies 3,749 750 900 975 1,125

– Advertising 350,000 200,000 50,000 50,000 50,000

– Cleaning 16,282 3,256 3,908 4,233 4,885

– Repairs & Maintenance 64,272 16,068 16,068 16,068 16,068

– Rent 2,640,508 660,127 660,127 660,127 660,127

– Telephone 14,997 2,999 3,599 3,899 4,499

– Electricity Expense 26,780 5,356 6,427 6,963 8,034

– Luxury Car Tax 12,000 12,000

– Fringe Benefits Tax 28,000 7,000 7,000 7,000 7,000

– Superannuation 187,020 37,404 44,885 48,625 56,106

GST Cash Flow Budget

Aged Debtors

Budget Notes
Reason for previous profits and losses
• There are tight control on the different direct expenses for example rental
• Consistent growth revenue in last four years
• Effective human resources that help in better controls over the expenses
• High profits margins in production and purchase process

Part B Role Play

1. Identify the current statutory requirements for tax compliance and list and
calculate the tax liabilities for Houzit Pty Ltd under taxation legislation.
The statutory requirements will include :
Goods and Service Tax - Add on 10% values on the product and service for GST and remit
the money quarterly to Australian Tax Office through business activity statement
Payroll Tax - state government once a wages and salaries that has been reached. A salary of
$1000000 and tax is 4.75% on the total wages and salaries.

Tax liabilities for Houzit include :

Goods and services tax liability ($583,785)
Income tax ($436,928)
PAYG withholding payable ($44,872)

2. Identify the current compliance requirements and liabilities for this organisation
under the Corporations Act 2001.

• Director act within the prescribed limits

• Director must keep written record of minutes
• Income tax to be paid annually
 • Fringe benefits tax instalment paid as quarterly activity statement
• PAYG withholding payable which money own to ATO from taxes withheld from employee
salary
• Public company must have financial statement
• Large company must have financial statements audited
• Keep sufficient financial records to explain reports and records must kept for 7 years

3. Review commercially available financial management software to select the most

suitable software for Houzit Pty Ltd.
The most suitable software for Houzit will be cloud based software with internet
connection. The online accounting help the company connected to data and
accountants. The software can integrate with whole ecosystem. In the cloud, it do not
required to install and run the application. There are some financial management
software such as :
XERO - small business accounting software that not available through cloud which will cost
more time and effort required.
MYOB Advanced is complete cloud-based ERP which provide powerful and end-to-end
business management.

4. Ensure you diagnose software options by comparing two commercially available

software titles against the capabilities of the existing technology for the
organisation and against the prioritised requirements and outline the reasons that
lead you to this recommendation.
Requiements MYOB XERO

Complete payroll system Yes Yes

Compliant with all legislative requirements Yes Yes
Provide analysis of revenue and expenditure Yes Yes
Record GST and complete BAS Yes Yes
Compatible to current computer system Yes Yes
Manage company accounts more efficiently No Yes

Base on the table above, I will recommend MYOB as it allows company to be able manage
on the distribution process with system wide stock management. MYOB will include the real-
time access lot, expiration dates to reduce waste, transaction codes, ability to monitor goos in
transport and others. MYOB will help in configure employees with different pay items that
include multiple wages types. The payroll administered will help in automate the workflows,
journals and payment effectively which help in multiple pat runs.

5. Explain how you can apply the following principles of accounting in developing
the budgets required for this task:

• matching principle
Refer to how this could be contribute to financial bids and estimates on it such as comment
on the timing and relationship of cost of goods to set on the prices in order to maintain
margins in revenue.
• account groups
Account groups will provide example and explain on why this ‘group’ will be used and
how it can be use in develop budget. The financial transaction will divided into 5 account
group which include asset, liability, equity, revenue and expenses.
• time periods.
at least three different accounting periods that might be used in company and explain the
important of timeframe for different reporting purpose.

6. Explain and discuss the implications of probity when preparing and revising
budgets.

Responsibility - Every company should be ethical when undertake their financial house
which reflect the understanding of company’s responsibility to stakeholders from employees
to community. The business budgeting decisions will involve the choices between
thoughtfully dealing with company policies.

Conflict of Interest - Ethical business budgeting will include the conflict of interest which
will cause to dishonest accounting and improper allocation of resources. The manager who in
charge in the budget development may skew the budgeting process to direct disproportionate
share of company’s purchasing revenue toward endeavour.
 7. List the critical dates and initiatives that will require or generate resources for
Houzit Pty Ltd in the next financial cycle.

• Increase advertising budget by $70,000 to secure greater market share which $200,000 is
planned for first quarter with balance apportioned equally
• New car cost $97,466 will planned for coming period to replace old vehicle
• Reduce expected gross profit rate by 1% through lower the product price
• Increase wages by $172,500 to provide commissions on sales

8. List the items you would recommend for inclusion in the budgets for Houzit Pty
Ltd.

• Training fees such as training costs, tuition, coaching class to help in seek for competitive
fund as training expenditure
• Travel such as airline costs, business related meals and others
• Consultations which company look for expert to obtain more ideas that required
consultation fees
• Benefits such as health care, pensions, payroll taxes and others
• Office supplies that estimate amount per person per year base on experiences
• Equipments such as computers, printers, tables, and others

9. List the new or modified internal controls that could improve risk management
for Houzit Pty Ltd including the maintenance of audit trails.

• Use online fee for duties paid out

• Authorisation of time sheet by department manager
• Keep numbered cash receipts book
• Proper coding of transactions
• Settlements between company books and third party bank statements are performed
 Particulars 2011/12 Qtr 1 Qtr 2 Qtr 3 Qtr 4

GST Collected 1,697,124 339,425 407,310 441,252 509,137

Less GST Paid 1,281,358 282,913 306,854 326,325 365,267

GST Payable 415,765 56,512 100,456 114,927 143,870

Particulars TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4

Sales 16,971,237 3,394,247 4,073,097 4,412,522 5,091,371

% Debtors Sales 20% 20% 20% 20%

Total Debtors 100% 678,849 814,619 882,504 1,018,274

Current 84% 570,234 684,280 741,304 855,350

30 Days 10% 67,885 81,462 88,250 101,827

60 Days 5% 33,942 40,731 44,125 50,914

90 Days 1% 6,788 8,146 8,825 10,183

Comment on effectiveness of existing financial manager

There are a lot of mistakes being found in the existing financial manager which include :
• Cash receipts do not record properly
• Inefficient cash and debtor reconciliation
• Unauthorised overtime amounts in time sheets
• Ineffective recording of customer discounts
• Invoice not effective link with purchase orders

Assumptions
• The previous sales performance will continue in next year
• Expenses will not increase more than 4% of economic inflation rate
• Ineffective financial management will not have significant effects on financial results
• No change on the legislative environment of Australia

Relevant notes implement and monitor budget expenditure

• Develop budget report to plan for the expenditure activity of full year and profiled for year
to date
• Establish actual expenditure to date and future expenditure commitments
• Remain the balance of annual budget
• Analyse and explanation on the positive and negative different when compare expenditure
and forecast out turn to budget