ACCOUNTING

Business plan summary

1. The anticipation that the coming financial year would maintain the same

sales growth as the growth that took place between 2011/12 to 2014/15.

2. To budget for an increase in inflation to 3.75% per annum and that all costs

subject to inflation should incorporate this particular increase.

3. A new car costing $97,664 including GST has been planned for in the coming

period to replace the five year old vehicle currently used by the chairman.

This fuel inefficient car will attract a luxury car tax.

4. Sales breakup over the departments is anticipated to be hamburgers 30%,

cold drinks 25%, sweets 15% and hot drinks 10%, together with the recently

added salad bar 20%.

5. Profits are to be built on securing a growing customer base which will

generate loyalty sales with established customers referring new customers to

the business. The superior sales service is the key strategy to achieve this.

6. Reduction on the principle of the loan by a payment of $110,000 on the 31

December 2015 from the profits generated by the business.

7. One objective in this plan is to manage the debtors more efficiently in the

current period. This will involve an analysis of the debtors to identify ways to

reduce the amount of cash tied up in outstanding debtors.

8. The expectation is that 2015/16 will be a difficult trading year, but that the

budget net profit should target the same result as achieved in 2014/15.

The strategy to achieve this in the business plan included three key

elements:

a. To reduce the expected gross profit rate by 1% on the 2014/15 result

in the hope that lower prices on the products would help maintain the

sales growth even in difficult trading conditions.

b. To increase the advertising budget by $77,250 over the 2014/15

results, in the hope that Big Bob’s Burgers can secure a greater market

share in a constricting market. $200,000 is planned for the first

quarter with the balance apportioned equally over the following three

quarters.

c. To increase wages and salaries by $180,000 over the 2014/15

amounts, in the hope that allowing the existing high number of casual

staff to earn commissions on sales that should help to maintain Big

Bob’s Burgers’ sales growth.

Assessment Task 2 BSBFIM601A Manage Finances

Attribution to © 2011 Innovation and Business Assessment Task 2 – BSBFIM601A Hospitality Sem 1, 2016

Industry Skills Council Ltd 1st edition version: 2 Author: Paul Coulter

Last Updated: 20 April 2016 Page 6 of 18

After going through the business plan summary, the CEO gave you the previous year’s

financial reports and asked you to speak with the accountant Cecilia Petalto get some of

the figures and detailed expectations for the coming year.

You arrange a meeting with Cecilia Petal, Big Bob’s Burgers’ accountant, and she gives

you the following insight into the historical expense relationships and the current statutory

compliance liabilities.

Sales and Profit budget information

Cecilia explained that the only budget she monitors on a day-to-day basis is the cash flow

budget and the store managers are primarily responsible for the sales budget.

These are the notes you take at the meeting:

● The overall sales for 2015/16 target set by the business plan should be

apportioned across the quarters in the same % as was achieved in 2014/15.

This was:

Qtr 1 Qtr 2 Qtr 3 Qtr 4 2014/15

3,142,822 3,771,386 4,085,668 4,714,232 15,714,108

● Cost of goods sold is the inverse of the gross profit rate determined by the business

plan and is determined by the quarterly sales budget.

● Accounting fees have been negotiated for the year at a fixed amount of $10,000 to

be paid in equal amounts each quarter.

● The interest charges on the bank loan are anticipated at a reduced amount of

$85,408 due to an agreed repayment of some of the loan principal. This is to be

paid in equal amounts each quarter.

● Bank charges are expected to be the same as 2015 and paid in equal amounts

each quarter.

● Cecilia has requested that a new expense (store supplies) be recognised in the new

budget that was previously included in with the cleaning expense amounts. Store

supplies in the 2013/14 results was $3,500 of the cleaning expense and $3,605

of the 2014/15 result. Cleaning expense will then be lower but will identify the real

labour costs involved in the cleaning expense.

● Depreciation is expected to be the same as 2014/15 and allocated in equal

amounts each quarter.

● Advertising is to be apportioned to each quarter based on the business plan.

● The following expenses are expected to increase by the determined inflation rate in

the business plan summary:

○ Insurance – apportioned in equal amounts each quarter.

○ Store supplies – is calculated for each quarter using the same % as

determined by the sales for each quarter.

○ Cleaning – is calculated for each quarter using the same % as determined by

the sales for each quarter.

Assessment Task 2 BSBFIM601A Manage Finances

Attribution to © 2011 Innovation and Business Assessment Task 2 – BSBFIM601A Hospitality Sem 1, 2016

Industry Skills Council Ltd 1st edition version: 2 Author: Paul Coulter

Last Updated: 20 April 2016 Page 7 of 18

○ Repairs and maintenance – apportioned in equal amounts each quarter.

○ Rent – apportioned in equal amounts each quarter.

○ Telephone – is calculated for to each quarter using the same % as

determined by the sales for each quarter.

○ Electricity – is calculated for to each quarter using the same % as determined

by the sales for each quarter.

● Fringe benefits tax is expected to be the same as 2014/15 and paid in equal

amounts each quarter.

● Luxury Car Tax is paid as one payment in the 1st Quarter.

● Wages and salaries are calculated for each quarter using the same % as

determined by the sales for each quarter.

● The statutory requirements are:

○ superannuation is 9.5% of wages and salaries for each quarter

○ payroll tax is 4.85% of wages and salaries for each quarter over the threshold

of $137,499 per quarter.

○ workers compensation is 2% of wages and salaries for each quarter

○ company tax is 30% of net profit before tax for each quarter.

Assessment Task 2 BSBFIM601A Manage Finances

Attribution to © 2011 Innovation and Business Assessment Task 2 – BSBFIM601A Hospitality Sem 1, 2016

Industry Skills Council Ltd 1st edition version: 2 Author: Paul Coulter

Last Updated: 20 April 2016 Page 8 of 18

Big Bob’s Burgers Pty Ltd

For 12 months ended

Profit & Loss Actuals 2011/12 2012/13 2013/14 2014/15

Revenue

Sales 12,474,336 13,472,315 14,550,100 15,714,108

– Cost Of Goods Sold 6,860,901 7,409,773 8,002,555 8,799,900

Gross Profit 5,613,465 6,062,542 6,547,545 6,914,208

Expenses

– Accounting Fees 5,500 6,500 8,500 9,000

– Interest Expense 45,000 65,000 96,508 90,508

– Bank Charges 1,200 1,300 1,580 1,600

– Depreciation 170,000 170,000 170,000 170,000

– Insurance 12,500 12,500 12,500 12,875

– Store Supplies – – – –

– Advertising 50,000 100,000 280,000 280,000

– Cleaning 12,560 15,652 18,700 19,261

– Repairs & Maintenance 40,250 52,600 60,000 61,800

– Rent 2,465,000 2,465,000 2,465,000 2,538,950

– Telephone/Internet 9,862 12,523 14,000 14,420

– Electricity Expense 22,500 23,658 25,000 25,750

– Luxury Car Tax – – 12,400 –

– Fringe Benefits Tax 26,000 26,000 26,000 28,000

– Superannuation * 148,500 160,737 166,500 171,495

– Wages & Salaries 1,649,998 1,785,965 1,850,000 1,905,500

– Payroll Tax * 78,375 84,833 87,875 90,511

– Workers’ Compensation 33,000 35,719 37,000 38,110

Total Expenses 4,770,245 5,017,987 5,331,563 5,457,780

Net Profit (Before Tax) 843,220 1,044,554 1,215,982 1,456,428

Income Tax 252,966 313,366 364,795 436,928

Net Profit 590,254 731,188 851,188 1,019,499

*Deemed as being correct

Assessment Task 2 BSBFIM601A Manage Finances

Attribution to © 2011 Innovation and Business Assessment Task 2 – BSBFIM601A Hospitality Sem 1, 2016

Industry Skills Council Ltd 1st edition version: 2 Author: Paul Coulter

Last Updated: 20 April 2016 Page 9 of 18

Big Bob’s Burgers Pty Ltd

Statement of Financial Position

As at 30 June 2013/14 2014/15

Assets

Current Assets

– Cash On Hand 50,000 55,000

– Cheque Account 144,842 160,314

– Deposits Paid 950,000 950,000

– Trade Debtors 850,000 975,000

– Merchandise Inventory 1,530,000 1,430,000

Total Current Assets

Fixed Assets

– Motor Vehicles At Cost 500,000 500,000

– Motor Vehicles Accumulated Depreciation ( 100,000 ) ( 125,000 )

– Furniture & Fixtures At Cost 1,950,000 2,250,000

– Furniture & Fixtures Accumulated Depreciation ( 650,000 ) ( 770,000 )

– Office Equip At Cost 400,000 400,000

– Office Equip Accumulated Depreciation ( 90,000 ) ( 115,000 )

Total Fixed Assets 2,010,000 2,140,000

Total Assets 5,534,842 5,710,314

Liabilities

Current Liabilities

– MasterCard 17,800 14,860

– Trade Creditors 780,000 679,000

– GST Collected 1,455,010 1,571,411

– GST Paid ( 943,125 ) ( 987,626 )

– Superannuation Payable 100,000 120,000

– Luxury Car Tax Payable 20,920 –

– Income Tax Payable 364,795 436,928

– PAYG Withholding Payable 65,000 44,872

Total Current Liabilities 1,860,400 1,879,445

Long-Term Liabilities – –

– Bank Loans 1,608,459 1,508,459

Total Liabilities 3,468,859 3,387,904

Equity

– Owner/Shareholder’s Equity 500,000 500,000

– Retained Earnings 850,000 1,565,982

– Dividends Paid ( 500,000 ) ( 1,200,000 )

– Current Year Earnings 1,215,982 1,456,428

Total Equity 2,065,982 2,322,410

Assessment Task 2 BSBFIM601A Manage Finances

Attribution to © 2011 Innovation and Business Assessment Task 2 – BSBFIM601A Hospitality Sem 1, 2016

Industry Skills Council Ltd 1st edition version: 2 Author: Paul Coulter

Last Updated: 20 April 2016 Page 10 of 18

GST cash flow budget information

Statutory requirements for GST is 10% of the recorded amounts in sales. The only capital

purchase planned for the year is the luxury car for the chairman. Those expense

payments on which 10% GST was paid include the following:

● cost of goods sold

● accounting fees

● insurance

● store supplies

● advertising

● cleaning

● repairs and maintenance

● rent

● telephone/internet

● electricity expense.

The GST amount payable each quarter is the difference between the GST collected from

sales and the GST paid – format as per policy and procedures.

CASH FLOW ANALYSIS – GST 2015/16 Qtr 1 Qtr 2 Qtr 3 Qtr 4

GST Collected x,xxx x,xxx x,xxx x,xxx x,xxx

Less GST Paid x,xxx x,xxx x,xxx x,xxx x,xxx

GST Payable Calculation Calculation Calculation Calculation Calculation

Debtors ageing budget information

The historical records show that the debtors balance at the end of each quarter is usually

about 20% of the quarter’s sales. At any time in the debtors balances: 1% of the total

debtors is overdue 90 days and over, 5% is 60 days overdue, 10% is 30 days overdue

and the balance of the total debtors is current. The aged debtors’ budgets are only

distributed to the accountant and the accounts receivable clerk.

Assessment Task 2 BSBFIM601A Manage Finances

Attribution to © 2011 Innovation and Business Assessment Task 2 – BSBFIM601A Hospitality Sem 1, 2016

Industry Skills Council Ltd 1st edition version: 2 Author: Paul Coulter

Last Updated: 20 April 2016 Page 11 of 18

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