ACCOUNTING

Internal auditor

Roger Everard is one of the directors of the Board. Roger said that as a board member

they are given the profit and cash flow budgets. He was appointed by the Board to

conduct an internal audit of operations to look for weaknesses in the internal control

system. His report uncovered the following processes which he believed needed to be

strengthened.

● Some discounts that were being given to customers were recorded as a net amount

on the invoices and gave no indication of the discount from standard prices.

● Some cash registers in the stores were not reconciling the cash in drawer with the

register printout.

● While the overall customer base is increasing from year to year, there may be

internal control issues relating to how these new customers are secured.

● Not all timesheet overtime amounts were being authorised by the line manager.

● Service invoices for some items of equipment were not signed or linked to a

purchase order. There was no check that the work had actually been carried out.

● Not all assets in the stores had unique codes fixed to the asset.

● There was minimal feedback lines of communication from the shop floor to head

office, particularly when an error in the budgeting report process was recognised.

● Debtor reconciliations were not done monthly and sometimes not at all.

● In busy times the cashiers that operated the registers were also asked to do their

own reconciliations and banking. Sometimes the cash was held in the store for a

day or two.

● Job roles were not clearly defined so that responsibilities and liability can be

identified.

● There was little rostering of duties and cash receipts were not pre-numbered.

Of particular concern to Roger was the directive given by the Board to ensure that audit

trails were created and maintained. These included:

● Ensuring proper coding of evidenced transactions against appropriate general

ledger account and cost centre.

● Ensuring reconciliations between company books and third party bank statements

are performed.

● Signing the timesheets for employees under the authority of a department

manager.

● Maintenance of a numbered cash receipts book.

● Using sequenced cheques as a systematic way of evidencing all monies paid out.

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 12 of 18

Big Bob’s Burgers’ Budgeting Policy and Procedures

Budget development process

The standard process for developing budgets will follow the following steps:

1. Establish the budget objective.

2. Gather prior period data.

3. Discuss prior period information and anticipated changes in the budget period with

stakeholders.

4. Research relevant external information.

5. Incorporate identified trends to determine assumptions and parameters.

6. Prepare budgets in standard formats.

7. Submit budgets for approval.

Budget objectives

Big Bob’s Burgers prepares budgets to meet various company objectives. Budgets are

prepared:

● for a specific expansion of the business activities:

○ business case to be prepared covering a cost-benefit analysis, market

research report and summary profit and investment expectations

● to outline a specific debt reduction initiative:

○ company-wide summary of profit expectations, planned debt and equity

funding arrangements, CAPEX plans summarised

● annually to cover the next financial year:

○ for the 12 month period from the beginning to the end of the financial year

○ budget to include four quarter milestones in line with seasonal trends

identified from prior year data

○ initial preparation includes a preliminary overview of the financial year ahead

○ sales budget for next year to be prepared by categories by quarter

○ profit budget (including detailed expenses) for the next year to be prepared

by quarter

○ cash flow effect of the GST payable per quarter to be prepared (scheduled

compliance payment date is the 21st day after the end of the quarter)

● to satisfy the statutory requirements relating to the current and short-term solvency

of the company:

○ three monthly rolling forecast of cash flows to be prepared

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 13 of 18

Budget variances and schedules

● Key performance indicators that should be closely monitored and reported on

include variances to:

○ total sales

○ gross profit (GP) %

○ wages and salaries as a % of total sales

○ total expenses as a % of total sales

○ net profit in dollars

○ net profit as a percentage.

● Budget variances will be reported using the standard format provided in this policy

and procedures document.

● Budget variances must be completed within five working days of quarter end.

● Actual results for the month will be provided by the accounting information system.

● An analysis of the variance between the actual and the budget must include $ and

% variance.

● Report with explanations and recommendations to be complete within seven

working days of quarter end and be given to the CEO.

● Analysis and investigation of variances will include the following priority:

1. Establish the primary causes for variances to key performance indicators of

total sales, gross profit % and net profit $.

2. Establish reasons for those individual items in the variance report that

represent the greatest $ variance.

3. Establish reasons for those individual items in the variance report that

represent the greatest % variance.

● Schedules relating to compliance due dates must be prepared and monitored by

the accountant. Managers supplying information to the accountant regarding the

compliance schedule must submit it at least five working days prior to the due date

deadline.

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 14 of 18

Part A – Budgets

Complete the required budgets using the organisational budget templates below

as a guide. These must be completed in Excel. After completion of all the budgets,

complete the theory questions that follow the provided scenario.

 Each budget on a separate worksheet

 All budgets in one work book, named to include student name & number

 Be submitted electronically

 Also handed in printed, together with written reports – professionally presented.

Standard formats

The following formats will be used when preparing Big Bob’s Burgers’s budgets and

variance reports.

Sales budget

SALES 2015/16 Qtr 1 Qtr 2 Qtr 3 Qtr 4

BUDGET Total Budget 20% 24% 26% 30%

Total Sales

Hamburgers 30%

Cold soft drinks 25%

Sweets 15%

Hot drinks 10%

Salads (bar) 20%

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 15 of 18

Profit budget

PROFIT BUDGET 2015/16 Qtr 1 Qtr 2 Qtr 3 Qtr 4

Revenue – % % % %

Sales x,xxx x,xxx x,xxx x,xxx x,xxx

– Cost of Goods Sold x,xxx x,xxx x,xxx x,xxx x,xxx

Gross Profit Calculation Calculation Calculation Calculation Calculation

Gross Profit % Calculation Calculation Calculation Calculation Calculation

Expenses

– Accounting Fees x,xxx x,xxx x,xxx x,xxx x,xxx

– Interest Expense x,xxx x,xxx x,xxx x,xxx x,xxx

– Bank Charges x,xxx x,xxx x,xxx x,xxx x,xxx

– Depreciation x,xxx x,xxx x,xxx x,xxx x,xxx

– Insurance x,xxx x,xxx x,xxx x,xxx x,xxx

– Store Supplies x,xxx x,xxx x,xxx x,xxx x,xxx

– Advertising x,xxx x,xxx x,xxx x,xxx x,xxx

– Cleaning x,xxx x,xxx x,xxx x,xxx x,xxx

– Repairs & Maintenance x,xxx x,xxx x,xxx x,xxx x,xxx

– Rent x,xxx x,xxx x,xxx x,xxx x,xxx

– Telephone x,xxx x,xxx x,xxx x,xxx x,xxx

– Electricity Expense x,xxx x,xxx x,xxx x,xxx x,xxx

– Luxury Car Tax x,xxx x,xxx x,xxx x,xxx x,xxx

– Fringe Benefits Tax x,xxx x,xxx x,xxx x,xxx x,xxx

– Superannuation x,xxx x,xxx x,xxx x,xxx x,xxx

– Wages & Salaries x,xxx x,xxx x,xxx x,xxx x,xxx

– Payroll Tax x,xxx x,xxx x,xxx x,xxx x,xxx

– Workers’ Compensation x,xxx x,xxx x,xxx x,xxx x,xxx

Total Expenses Calculation Calculation Calculation Calculation Calculation

Net Profit (Before Tax) Calculation Calculation Calculation Calculation Calculation

Income Tax Calculation Calculation Calculation Calculation Calculation

Net Profit Calculation Calculation Calculation Calculation Calculation

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 16 of 18

GST Cash flow budget

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

Aged debtors budget

AGED DEBTORS BUDGET TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4

Sales x,xxx x,xxx x,xxx x,xxx x,xxx

% Debtors Sales % % % %

Total Debtors % Calculation Calculation Calculation Calculation

Current % Calculation Calculation Calculation Calculation

30 Days % Calculation Calculation Calculation Calculation

60 Days % Calculation Calculation Calculation Calculation

90 Days % Calculation Calculation Calculation Calculation

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 17 of 18

Part B – Budget notes and further information

Read the scenario below and using all the information to date,

complete the prompt questions, using dot points, but in appropriate

report format.

Scenario

The CEO of Big Bob’s Burgers Pty Ltd, James Wolstencroft explained that he prefers to

discuss the budgets with all senior managers prior to their distribution in order to ensure

a corporate view of the strategic plans. He then meets with each group separately to

answer questions and concerns about their particular area. Eventually the budgets will be

printed in hard copy and bound as well distributed as an electronic spreadsheet.

Upon completion of the budgets you meet with James to provide an overview of the

information contained within the budgets, the budget notes and recommendations

regarding the internal controls to prepare him for the meetings with the senior managers.

To clarify his understanding of the information, James asks you a series of questions

listed below which you will complete written answers to.

Prompt questions

Based on the information provided throughout the case study, answer the following

questions.

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

suitable software for Big Bob’s Burgers Pty Ltd.

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. Use dot points.

2. Identify the current statutory requirements for tax compliance; then list and calculate

the current tax liabilities for Big Bob’s Burgers Pty Ltd under taxation legislation as at

30 June 2015.. Use dot points

3. Identify the current compliance requirements for Big Bob’s Burgers Pty Ltd under the

Corporations Act 2001. Use dot points.

4. Explain – in your own words – how you could apply the following principles of

accounting in developing the budgets required for this task:

a. Accounting or time periods

b. matching principle

c. account groups

5. List the critical dates and initiatives that will require or generate resources for Big

Bob’s Burgers Pty Ltd in the next financial cycle. Use dot points.

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 18 of 18

6. List the new item you would recommend for inclusion in the budgets for Big Bob’s

Burgers Pty Ltd. Use dot points.

7. List the new or modified internal controls that could improve risk management for Big

Bob’s Burgers Pty Ltd including the maintenance of audit trails. Use dot points.

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

Use dot points.

9. Summarise provided information to complete budget notes. Refer to analysis Question

3 (b). Making sure any notes are relevant to your budgets, include information about:

 Past information on profit and losses that you have used to generate budgets

 Any assumptions, and on what basis they have been made or used, to form

your budgets

 Any relevant notes about implementation and monitoring of budget

expenditure.

 Any comments about the effectiveness of current financial management

approaches.

(Use dot point or numbered format for the budget notes in Q9)

(Note: While dot point format is used for ease of presentation, well-informed answers –

expressed in your own words as appropriate – are still expected.)

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