MANAGE FINANCES BSBFIM 601 CHIRADET THEPWONG 14497

ASSESSMENT 3 (online assessment) – Research and questioning

Assessment questions:

1. In your own words, describe responsibility accounting?

Responsibility accounting is a system that involves identifying responsibility centers and their
objectives, developing performance measurement schemes, and preparing and analyzing
performance reports of the responsibility centers. Responsibility accounting involves gathering
and reporting revenues and costs by areas of responsibility.
It provides a guide to the evaluation of performance. It helps to establish standards which are
used for comparison with actual results.
It promotes management by objectives and management by exception.

2. Detail 4 different types of budgets, and their purposes.

CAPITAL EXPENDITURE BUDGETS

Investments in property, buildings and major equipment are called capital expenditures. These are
typically substantial expenditures both in terms of magnitude and duration. The magnitude and
duration of these investments can justify the development of separate budgets for these
expenditures. Such capital expenditure budgets allow management to forecast future capital
requirements, to keep on top of important capital projects, and to ensure that adequate cash is
available to meet these expenditures as they become due

Cash Budgets
A cash budget projects all cash inflows and outflows for the next year. Cash budgets have four
distinct elements: cash disbursements, cash receipts, net change in cash and new financing.

EXPENSE BUDGETS
Found in all units within a firm and in not-for- profit and profit-making organizations alike.
Expense budgets list the primary activities undertaken by a unit to achieve its goals and allocate a
dollar amount to each. Managers give particular attention to those that remain relatively

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 unchanged regardless of volume. As production drops, the variable expenses tend to control
themselves because they fall with volume.

REVENUE BUDGETS

The revenue budget is a forecast because it is based on projecting future sales. Managers must
take into consideration their competitors, advertising budget, sales force effectiveness and other
relevant factors, and they must make an estimate of sales volume. Then, based on estimates of
demand at various prices, managers must select an appropriate sales price.

3. What information would you require to plan and prepare a budget for a new Business?
Detail where this information would come from.

The annual business plan and budget process is a key part of running a business successfully and
achieving a strategy. It provides a discipline for the management to thoroughly review progress
and to set objectives - and for the directors/holding company to commit to supporting the budget
and investment plans.

4. Describe what external factors should be taken into consideration when planning and
preparing a budget.

Social external influences: There are also many social factors that also can act as external
influences on the business budget. For example, a change in lifestyle patterns or in behavior can
affect the way that people decide to spend their money. In addition, a change in the population
can also have an external effect on the business budget. Many things can affect the change in
population in an area as well, such as the lowering or rising of the cost of living, etc.

Technological external influences: There also could be technological external influences which
could have an effect on the business budget. For example, breakthroughs in new technology could
all-of-the-sudden put the business on the backburner of your particular type of business. We will
have to compensate for the purchasing and implementation of new technology within our
business budget if our budget is closely tied with technology.

5. What are the financial reporting cycles relevant to your Industry?

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 They tell us how the business is doing. For example, we will look at the statement of cash flow to
see the company cash flow during the time period.

The audit process consists of five financial statement cycles to ensure that all of the financial
statement components are reviewed and tested. By keeping closely related account transactions
together, and separating those closely related accounts into cycles, auditors will be able to work
more effectively. This is called the cycle approach and is used to tie the way transactions are
recorded in the account registers and condensed in the ledger, trial balance, and financial
statements.
There are five cycles:
1. Sales and collection cycle
2. Payment and acquisition cycle
3. Payroll and personnel cycle
4. Inventory and warehousing cycle
5. Repayment and capital acquisition cycle

6. Describe 2 different capital investment evaluation techniques

Capital investment appraisal, also known as capital budgeting is primarily a planning process
which facilitates the determination of the concerned firm's investments, both long term and short
term. The components of the firm that come under this kind of capital investment appraisal
include property, equipment, R & D projects, advertising campaigns, new plants, new machinery
etc. Thus in simple words, capital investment appraisal is the budgeting of major capital and
investment to company expenditure. For example, capital investment appraisal in small
companies decides on future ventures into newer markets as well as expansion and inclusion of
new activities.

Techniques and methods for evaluating investments are used for assessing whether and how fast
the invested funds return. Investing is always in some way about investing funds (directly or
indirectly) and the aim is either a financial income, interest or some either positive effect, which
leads to the increased competitiveness, market position or to the future returns (investment into
educated people leads to the future success). Evaluation is simpler for direct financial investment
which leads into clearly measured outcome - the profit. In practice however we have kind of
investment where a direct financial result may not be clear at first sight or in the short term. For

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 example investments into educating people, into quality or security improvement are difficult to
assess.

For the financial evaluation there is a large number of investment evaluation techniques. They
can be distinguished into two groups - statistical methods and dynamic methods.

Static evaluation methods

They focus especially on monitoring of cash benefits or measuring of the initial expenditures.
They don’t include a risk factor and take the time into account only in a limited extent:

 Average Annual Return

 Average Payback Period
 Average Percentage Return
 Payback Period

Dynamic evaluation methods

They take into account the time and risk factor, the basis is discounting of input parameters.

 Net Present Value

 Internal Rate of Return
 Profitability Index
 Payback Period
 Accounting-Based Profitability Measures

7. What steps would you take to effectively implement the budget into a team Environment?
- Set up to meeting the team
- Explain for creating and maintain the budget.
- Track the company’s expenses
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8. What are INCOTERMS? Describe the following INCOTERMS codes.

 Departure (Group E) FCA – Free Carrier is a trade term designating the location the seller is to
deliver goods

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 Main Carriage Paid by Seller (Group C) CIF - Cost, Insurance and Freight Seller must pay the
costs and freight to bring the goods to the port of destination. However, risk is transferred to the
buyer once the goods have crossed the ship’s rail. Maritime transport only.
 Arrival (Group D) DAF – This term can be used when the goods are transported by rail and road.
The seller pays for transportation to the named place of delivery at the frontier. The buyer
arranges for customs clearance and pays for transportation from the frontier to his factory. The
passing of risk occurs at the frontier.

9. What is the trades practice Act?

Trades practice Act is a federal law that deals with almost all parts of the marketplace including
unfair market practices, product safety, price monitoring and industry codes of practice.

The Competition and Consumer Act 2010 (CCA)[1] is an Act of the Parliament of Australia.
Prior to 1 January 2011, it was known as the Trade Practices Act 1974 (TPA).[2] The Act is the
legislative vehicle for competition law in Australia, and seeks to promote competition, fair
trading as well as providing protection for consumers. It is administered by the Australian
Competition and Consumer Commission (ACCC) and also gives some rights for private action.
Schedule 2 of the CCA sets out the Australian Consumer Law (ACL). The Australian Federal
Court has the jurisdiction to determine private and public complaints made in regard to
contraventions of the Act.

10. What is the Warsaw Convention?

The Unification of certain rules relating to international carriage by air, commonly known as the
Warsaw Convention, is an international convention which regulates liability for international
carriage of persons, luggage, or goods performed by aircraft for reward.

11. What is the World Trade Organization?

The only global international organization dealing with the rules of trade between nations. At its
heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations
and ratified in their parliaments.

12. What are Bilateral and Regional Free Trade Agreements?

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 A bilateral trade agreement is one made between two contracting parties, and a regional trade
agreement is one made between two or more contracting parties that share some common
denomination known conceptually as “region.” The purpose of such agreements is to reinforce
trade relations between the members. In this age of globalization, the world trading order is based
on the World Trade Organization (WTO) Agreement

13. What is meant by financial probity?

Reports looking at a candidate's integrity, which cover a candidate's financial history, including;
registered debts (including bankruptcy), county court judgments.

Probity requires that a public authority conduct its procurement activities ethically, honestly and
fairly. Elements of a procurement culture that promotes and demonstrates high standards of
probity include the following:

 Expected behaviours are articulated and enforced.

 Officers involved are skilled, knowledgeable and experienced.

 Appropriate checks and balances are in place at various stages in the procurement
process.

 The concept of conflict of interest is well understood and strategies are in place
to identify and manage potential issues.

 Communication with suppliers is consistent and does not disadvantage or

advantage one supplier over others.

 Officers are not compromised in their ability to act, or to be seen to act,

impartially.

 Confidentiality of supplier information and evaluation processes is secure.

14. What records need to be kept for the ATO for a small business with an annual

Turnover of less than $2million (cash basis)

- Transaction
- Cash payment
- Cash receipt
- Bank reconciliation statement

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 Good record keeping is essential for anyone in business because it makes it easier to manage your
cash flow, meet your tax obligations and understand how your business is doing.

What the law requires

By law your records must:

 explain all transactions

 be in writing (electronic or paper)
 be in English or in a form that can be easily converted
 be kept for five years (some records may need to be kept longer).

If you don't keep the right tax records, you can incur penalties.

How to keep records

You can keep invoicing, payment and other business transaction records electronically or on
paper. The principles are the same for each, but keeping electronic records will make some tasks
easier.

With the right electronic record-keeping software you can:

 automatically tally amounts and provide ready-made reports

 produce invoices, summaries and reports for GST and income tax purposes
 keep up with the latest tax rates, tax laws and rulings
 report certain information to us online
 save on physical storage space
 back up records in case of flood, fire or theft.

15. Consider the following information:

As an accountant to a large production firm, John looks at a proposal to purchase a $900,000

stamping machine to increase output. He determines the following information:

 The new machine can do 100 more units per hour

 The 4 workers currently doing the stamping can be replaced

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  The units will be higher quality because they are more uniform

John calculates the selling price of the 100 units per hour multiplied by the number of production
hours per month, plus adding the 3% that aren’t rejected due to the increased quality of the
machine output vs. manual stamping. He adds the monthly wages of the workers that are no
longer required and in the end you have a healthy benefit calculated.

John then calculates the monthly cost of the machine by dividing the purchase price by 12 months
per year and divides that by 10 years the machine should last. The manufacturer’s specs state the
power consumption of the machine and John calculates the cost of that as well. He subtracts the
total cost figure from the total benefit figure and this shows a healthy benefit calculated.

1. Consider the above example of cost benefit analysis. Do you think John has done a good job in
calculating the benefit of the machine? Has he used the information at his disposal correctly?

John has made several errors. Firstly, by using the selling price of the units he has introduced
additional factors that will complicate the analysis, especially the profit margin. The activity
based value of the units should be ascertained and used in his calculations instead.

2. Consider the costs of the new machine. Has John factored in all associated costs? If not, what has
he left out?

John should have also checked out the amortization period – just because the machine may last 10
years doesn’t mean the company will keep it for 10 years

16. Calculate the Equivalent Annual Cost of the following 2 machine purchases to determine
which would be the better investment.

Machine 1:

 Investment Cost: $50,000

 Expected Lifespan: 3 years
 Annual Maintenance: $13,000

Machine 2:

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 Investment Cost: $150,000
 Expected Lifespan: 8 years
 Annual Maintenance: $7,500

Cost of Capital = 5%

EAC Machine 1 = 26,000

EAC Machine 2 = 26,700

Therefore it will be better to invest in Machine 1 since it has lower EAC.

17. Identify and compare a minimum of 3 commercially available financial management

software for its appropriateness within their current employer or projected business. You
need to consider their price, usability, feature and function, compatibility with other
program.

Software Name Xero AccountEdge Pro Bkper

Price $9/month $399 one time $6 /month
Usability Award-winning AccountEdge Pro is a Bkper is a simple
online accounting complete small bookkeeping solution
software designed for business accounting for G Suite that turns
small business owners and management your Google Sheets
and accountants. solution for your Mac into your accounting
Available on any or Windows office, system.
computer or mobile with everything you
device with an need to make sales
internet connection. and purchases, run
Business finances and payroll, track and
cashflow are updated build inventory, bill
in real time. Imports for time, and manage
transactions from contacts.
bank accounts. AccountEdge is all
Unlimited user logins. you need to run your

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 Integrates with over business easily and
600 3rd-party efficiently.
business applications.
Supports multiple
currencies. Data is
accessible through a
single ledger,
allowing accountants
and clients to
collaborate around
finances.
Feature and function Explore features like Traceability All
Profitability
invoicing, payroll, Activities are logged
New Profitability
reporting and more. and recorded, making
reports show the
Xero small business it really easy to keep
profitability of items,
accounting software track of changes on
customers and
has all you need to your books.
activities.
manage your numbers
effortlessly. Create Copy Security All your data
is stored on Google
Create a template
Cloud's secure servers
based on an existing
in secure locations,
sale or quote with the
accessed behind SSL
details from the
original by choosing and OAuth2

“Create Copy.” protocols.

Void Check

Void any kind of

check and mark it as
reconciled.
Transaction journals
and recaps will show
the transaction as
void. The memo field

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 is updated on each
transaction.

Compatibility with Run your business Secure your important Use Google Drive to
other program and from anywhere business information safely upload data
specialists Access your business The Company Data from your bank
finances anytime, Auditor helps you to account in 2 clicks
from any internet- make sure your and easily create time
connected device – business data is saving workflows
phone, tablet, or correct, protected, and with +500 apps you
computer. balanced. It backs up already use, from
and verifies your Paypal to Slack.
company file, lets you Develop with our
lock-down reconciled Google Apps Script
financial data, keeps library and integrate
an audit trail, and runs to all other Google
reviews to make sure and non-Google
your numbers are in services, with few
balance. lines of code.

- Price, should be reasonable and can make the company profit in short term.
- Feature future, the useful of the software and fits with the organization needs.
- Compatibility with other program, has to get along with other program that already exist
in the company.

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