Financial Management: Sales Budget, GST Calculation, Budgeting Process, Cash Flow Budget, Essay, Record Keeping, And Regulations. (70 Characters)

1. Prepare a Sales budget for 'Health is care' Cafe situated in a Blacktown city hospital for 2016.

Health is care Cafe- Sales data for the year ended December 2015

Product	Unit Sales	Selling Price ( $)	Sales Revenue( $)
Coffee	345	300	1035
Tea	100	2.50	250
Hot chocolate	125	3.00	375
Cold drinks	100	2.00	200
Iced donuts	200	1.00	200
Cakes	300	2.00	600
Total	1170	2.27	2660

 

Analysis of the local market and a trend over the past two years was conducted. A demographic report has been produced and following information has been determined in setting the budget for 2016. It is estimated that the following would occur during that period:

i. Unit sales of coffee will increase by 10%

ii. Sales of tea will decline by 5% and

iii. Sales of iced donuts will increase by 120%

iv. The selling price of coffee needs to decrease to $2.50 to meet competitors pricing

v. Cakes prices need to fall to $1.80

2. a) What is GST and give an example showing GST calculation in your response.

b) John manufacturer’s goods. He bought goods for $120,000 and incurred expenses of $ 10,000. These manufactured goods were sold for $ 145,000.

GST rate is 10%. Calculate total selling price of goods (( including GST).

3. Discuss whether relevant personnel need to be involved in developing and monitoring of the budgets?

4. a) What is the importance of cash flow budget or report.

b) Cash flow projection 

The following is a budget prepared by Roger's Tree service for the 3 months ending 31 March.

	Jan	Feb	March	Total
Inflows	$	$	$	$
Fees received	42000	48000	36000	126000
Outflows
Wages	12000	12500	10000	34500
Office expenses	2000	2200	1800	6000
Equipment expenses	1200	2600	1600	5400
Motor vehicles expenses	4800	5200	4600	14600
Advertising	3200	3600	2800	9600
Other	2800	3600	3000	9400
Total expenses	26000	29700	23800	79500
Net inflow(outflow)	16000	18300	12200	46500

 

The following assumptions ( use the march figures) are used to prepare the budget:

• fees are expected to rise by 12%
• wage will rise by 2%
• all other expense will rise by 4%

You are required to prepare a budget for April.

5. Define the following terms and give the examples where needed:

i. Budgets

ii. Profit and loss statement

iii. Contingency planning in financial planning

iv. Liabilities

v. Balance sheets

6. a) Explain the process of financial management.

b) List the relevant legislations and regulations that finance managers must be considered while developing and managing budgets. Explain at least 2 regulations/legislations.

7. Explain the steps of developing and managing a budget.

8. What methods would you use to monitor and manage finances within the organisation?

9. List down all possible records/documents/systems that should be reviewed and evaluated in the financial management process

10. a) Explain the details and functioning of existing financial record keeping system in your organisation or conduct a research and detail one of the financial record keeping system used in the organisation

b) As per the requirements of The Australian Taxation Office, List down the financial records you must keep and for how long for audit purposes.

Sales Budget for Health is Care Cafe in Blacktown City Hospital for 2016

1. 

2016
Particulars	Units	Selling price ($)	Sales Revenue ($)
Coffee	379.5	2.5	948.75
Tea	95	2.5	237.5
hot chocolate	125	3	375
Cold drinks	100	2	200
Iced donuts	240	1	240
cakes	300	1.8	540
Total	1239.5	2.050221864	2541.25

2. a) The GST stands for Goods and Service tax. It applies on supply of goods and services in a comprehensive manner. The main objective of goods and service tax is to eliminate double taxation. GST will lead to beneficial impact to the GDP growth of the country. In other words, it will replace the existing multiple tax structures of central and state. The GST rate in Australia is 10%.

Comprehensive example is:

Suppose GST rate is 20%.

Particulars	Without GST ($)	With GST ($)
Manufacturer to wholesaler
Cost of Production	10000	10000
Add: Profit margin	2000	2000
manufacturer price	12000	12000
Add: Excise duty @ 12%	1440	0
Total value (a)	13440	12000
Add: VAT @12.5%	1680	0
Add: CGST @ 10%	0	1200
Add: SGST @ 10%	0	1200
Invoice value	15120	14400
wholesaler to retailer
COG to wholesaler (a)	13440	12000
Add: profit margin 10%	1344	1200
Total value (b)	14784	13200
Add: VAT @12.5%	1848	0
Add: CGST @ 10%	0	1320
Add: SGST @ 10%	0	1320
Invoice value	16632	15840
Retailer to customer
COG to retailer (b)	14784	13200
Add: profit margin 10%	1478.4	1320
Total value (c)	16262.4	14520
Add: VAT @12.5%	2032.8	0
Add: CGST @ 10%	0	1452
Add: SGST @ 10%	0	1452
Total price to final consumer	18295.2	17424
Cost saving to customer		871.2

b)

Calculation of Selling price including GST
Particulars	Amount ($)
Purchase Cost	$           120,000.00
Add: Expenses	$             10,000.00
Total Cost	$           130,000.00
Add: Profit margin	$             15,000.00
Selling Price (excluding GST)	$           145,000.00
Add: CGST @ 5%	$                7,250.00
Add: SGST @ 5%	$                7,250.00
Selling Price (including GST)	$           159,500.00

3. Yes, a relevant personnel needs to be involved in the monitoring and developing of budgets so that if any discrepancy is found it can be corrected by that relevant personnel. Further, at regular intervals actual income and expenses will be compared with the budgeted figures in order to know whether the actual is in tune with budgets and if not finding the reasons for such deviations.

4. a) Budgets are very important for smooth functioning of business because it allows planning future policies and targets. The cash flow budget is an estimation of cash inflows and outflows. The importance of cash flow budget are as follows:

• The cash flow budget is also important as it involves the quick review as regards the performance of the business.
• By preparing cash budget, a company can expect when a cash deficit might arise and how much the shortfall.  
• Preparation of cash flow budget highlights probable incomes and deficits for the budget period.
• Cash budget will determine the requirement of the company to meet future commitments and corrective actions can be taken if budgeted figures do not match with actual amounts.
• It will demonstrate the company’s financial performance to internal and external stakeholders.

b. Budget for April:

Budget for the month of April
Particulars	Amount ($)
Inflows
Fees received	40320
Outflows
Wages	10200
Office Expenses	1872
Equipment Expenses	1664
Motor vehicles expenses	4784
Advertising	2912
Other	3120
Total Expenses	24552
Net inflow/(outflow)	15768

5. i. Budget means the statement of the financial position of a company for a fixed period based on the anticipations of incomes and expenditures during that period.  Budgets is prepared in order to achieve the objectives and also for analyzing the performance of the company.

ii. Profit and Loss statement is a financial statement that includes revenues, expenses and costs produced by the company over a reporting period. Profit and loss statement is also known as income statement.

iii. A contingency is an unpredicted situation which affects the financial strength or market value of a company. It is a plan which is usually linked with negative event. Some examples of creating contingency plans are: security of assets, business continuity, restructuring etc.

iv. Liabilities are the company’s obligations that occur during the business operations. In other words, liabilities are the present obligations arising from past events that the company is indebted to other party.

v. Balance sheet is a statement of financial position which summarizes assets, liabilities and stockholder’s equity at a specified point of time.

6. a) A process by which expenditures incurred are recognized, accepted and paid is called as financial management process. Expenditures such as: material expense (like: water, consumables, stationary etc.), Equipment expense (like: building, furniture, computers, vehicles etc.), supervision expense (legal and accounting fees etc.). This process provides the system for supervising and controlling the actual financials against the budgeted.

b. The list of relevant legislations are as follows:

i. Financial Management Act: This act provides the framework and policies for managing the budgets.

ii. PGPA Act: This act requires to prepare budget estimations by the finance managers according to the directions issued by Finance Secretary.

7. There are 10 steps of managing and developing a budget:

What is GST and how to calculate it

i. Strategic plan is the first step in the budgeting process. This step explains about “how” the company uses its resources to achieve the mission.

ii. Second step is business goals of the company. This step will explain the steps to implement the previous step that is strategic plan.

iii. Projection of revenue is the 3^rd Projections are based on past performance as well as estimated income growth.

iv. Projecting a fixed cost is a 4^thstep in developing a budget because budget estimates the costs which remain unchanged. For example: utility costs, rent expenses, insurance costs etc.

v. Variable costs are those costs which changes with the change in level of production. These costs should be estimated and controlled.

vi. Goal expenses should also be estimated. For example, if the department of revenue has a goal of increasing revenue by 15% then the cost related with the revenue should also be included in the budget.

vii. Every company should aim the profit margin because it indicates the financial strength of the company.

viii. BOD or the owner should continuously grant the budget and also must observe the financial statement in order to observe the performance of the budget.

ix. 9^thstep is to review the budget in regular intervals in order to make correction or modification in the budget if required.

x. Last but not the least, budget variances should be assessed by the respective manager and queries should be raised about the causes of such variances.

Thus, good budgeting process develops the company and also improves the financial health of the company.

8. The methods for managing the finances are as follows:

i. Use the right procedures to observe actual expenses and to manage costs through approval processes, delegations, reporting etc.

ii. Choosing cost analysis methods in order to identify deviations in costs.

iii. Keep records of cost management plans.

iv. Accounting of payment summaries and also files and documents.

v. Monitor the decisions that vary with the budget and amend them in order to achieve the overall objectives.

9. Below are the documents:

• A cash book which records payments and receipts
• Bank statements
• Employment records
• Expense records such as documentation, salary details etc.
• Sales records
• Details of stock in hand
• Agreement details such as rent agreements, lease agreements etc.
• Details of creditors and debtors.

10. a) Existing financial record book keeping system in the organization is Electronic record keeping. It simplifies to capture financial information, produce meaningful reports and meet tax and legal requirements very easily. Electronic method of keeping books is very efficient because it requires very less storage capacity. Further it allows to regular back up of records and keeps them in a safe place in case of disasters.

b) The following financial records are required to keep for five years for audit purpose (Australian Government, 2017):

i. Record of income and sales transactions including invoices, receipt books and records of sales in cash.

ii. Recording of all business expenses including purchases in cash. These include receipts of cheque book, credit card receipts, tax payments records etc.

iii. Year end records such as list of creditors and debtors. These include stock sheets, capital gain records etc.

iv. Bank statements. These include deposit slips, credit card statements etc.

v. Rental agreements, lease agreements etc.

vi. Loan statements.

References

Australian Government, 2017, “Business records you need to keep”, viewed on 10 July 2017 from https://www.ato.gov.au/General/Other-languages/In-detail/Information-in-other-languages/Record-keeping-for-small-businesses/?page=2#Record_keeping_evaluation_tool.