Reference no: EM132986555
BSBFIM501 Manage budgets and financial plans - Gen Institute
Assessment 1 - Written Questions
1 Explain the following accounting assumptions or principles in 50-60 words each.
• Entity assumption
• Monetary assumption
• Historical cost assumption
• Accounting period assumption
2 Name the five groups of accounts and identify if their accounting nature is a credit or debit.
3 Briefly describe the two functions of financial management. Respond in no more than 50 words.
4 Identify any three reasons why an organisation must establish an effective and efficient accounting system.
5 Briefly describe GST (in 10-20 words) and:
• Identify the legislation relevant to GST
• outline the eligibility of businesses to register for GST
• outline ATO reporting and tax payment requirements for business who use GST
6 Briefly outline the ATO's requirements of a company in relation to Company Tax.
7 Briefly describe Pay As You Go (PAYG) withholding, and outline the ATO's reporting and payment requirements of a company in relation to PAYG withholding. Respond in no more than 100 words in total.
8 Briefly explain the legal requirement of a business to maintain paper and electronic records. In your response you must include the compliance conditions relating to record retention and language.
9 Identify at least five basic types of records a business may need to maintain, and provide one example of each.
10 Identify three benefits or uses for maintaining accurate business records, apart from legal compliance.
11 Briefly describe (50-60 words each) the roles of the following standards applicable to a financial audit that could be conducted in an organisation.
• Australian Accounting Standards
• Australian Auditing Standards
12 What is the purpose of a financial audit? What specific items are auditors looking to detect? Respond in no more than 100 words.
13 How does a financial audit help an organisation? Briefly describe any three ways, in up to 100 words.
14 Briefly describe the following in about 80 words each.
• Incremental budgeting
• Zero-based budgeting
15 List any five principles of budgeting.
16
List any five principles of Cash Flow management.
17 List any five principles for preparing an efficient spreadsheet to plan finances.
18 Briefly describe three principles for GST in Australia. Respond in no more than 150 words in total.
19 Answer the following five questions about accounting records applicable to a business in no more than two or three sentences each:
a. What does a General ledger contain?
b. What are the two ledgers that are the subsidiary ledgers?
c. Name the two main financial statements of a business.
d. If a business records a profit or loss, what group of accounts are then increased or decreased by that value?
e. Briefly describe the principle of double entry accounting.
20 Briefly describe a profit and loss statement and the steps are involved in preparing a profit and loss statement. Your response must be no longer than 80 words.
Assessment 2 Project 1 - Plan and implement financial management approaches
Scenario
Endurance Fitness is a chain of functional fitness centres in and around Melbourne.
Read an overview of Endurance Fitness's operations and strategic goals in Appendix A: Endurance Fitness Business Plan Extract 2019.
Since March 2020, Endurance Fitness's operations have suffered greatly due to COVID-19 lockdowns enforced by the Victorian Government. The company has had to close, re-open, and once again close its gyms in response to the dynamic COVID-19 situation.
Overview of changes to operations in response to COVID-19
10th March 2020 - 30th June 2020
Gyms were not allowed to be open to public as part of COVID-19 lockdowns. Endurance Fitness began offering online classes so that members could work out with Endurance Fitness coaches from the comfort of their own homes.
Impact on income
In Q3 and Q4 of 2020, the company's income was significantly impacted by lockdowns.
• All memberships were suspended until 30th June 2020.
• A $50 per month virtual membership plan was offered to members, for 4 months. This worked out to as little as a quarter of the average membership fee.
•Approximately 47% of the company's 400 clients switched to the $50 virtual membership.
The remaining clients chose to remain on suspension until 1st July 2020, paying nothing.
•However, the company added an income stream through a program to rent out gym equipment such as weights, barbells, dumbbells, and rowers, to members, so that they can complete workouts from home.
Impact on operating expenses
In Q3 and Q4, expenses were affected as follows.
• Wages were significantly lower since the trainers, who were on part-time or casual rosters, did not have any shifts and only the three head coaches were conducting live video work outs for members.
• The Marketing Manager also took a 60% salary cut to work from home.
• Cleaning/ maintenance costs, consumables, retails stocks and merchandise related expenses were significantly lower as the gyms were closed.
• Bank fees were significantly waived as a COVID-19 response.
• The company incurred a further cost for video-conferencing software subscription, at
$279.90 per month. In Q3 the company incurred this cost for only the month of March. However, in Q4 the company incurred this cost in all months.
Endurance Fitness expects to re-open doors on 6th July 2020. At that time, the company plans to discontinue the $50 virtual membership, and resume charging clients usual membership rates.
This decision is based on communication from the Victorian Government that lockdowns will be lifted on 6th July. However, government communiqués stress that the situation is dynamic and the decision to lift lockdowns on 6th July is not absolute. The government will continue to monitor the COVID-19 situation and may change plans if required.
You are the Finance Manager of Endurance Fitness.
Based on the unexpected COVID-19 situation described in the scenario, you must formulate a contingency plan for FY2021, and revise the budget for FY 2021 (year ending 30th June 2021), to maximise the company's profits in 2021.
Before attempting this task, you must ensure you have read and understood the following:
• Business scenario highlighting COVID-19 response, given above
• Appendix A: Endurance Fitness Business Plan Extract 2019
• Appendix B: Endurance Fitness Financial Management Policy Extract (budget contingency planning)
Part A: Identify changes to financial plan and budget
You have decided to adjust the 2021 budget for 20% shortfall, based on the contingency planning guidelines in the Endurance Fitness Financial Management Policy Extract (Appendix B).
Research and answer the following questions:
1. What two contingency strategies can you implement to maximise profits in 2021?
2. Is the current 2021 budget accurate, achievable, and logical? Why is reducing the budget necessary?
3. Will income and expenses both reduce equally in the revised budget?
4. Identify three information sources you can use in developing your
Prepare your responses in a separate typed document attached to this assessment pack.
Part B: Role play - Negotiate and confirm changes to financial plan and budget
Conduct a meeting with your colleagues Vanessa Choi (Operations Manager) and Maria Lorenzo (Centre Manager - Airport West), and present your recommendations for changes to the financial plan and budget for 2021.
The aim of this meeting is to gain the team's agreement and support for the changes you are proposing.
During the meeting, you must:
• Discuss your recommendations for the 2021 financial contingency plan
• Make your recommendations for changes to the 2021 budget
• Negotiate the changes to be made by incorporating ideas from team members if they are able to provide suitable rationale for them
• Make detailed notes of changes as agreed by the team
• Summarise changes discussed and gain the team's agreement for implementing the changes
• Ensure that you use language that is suitably complex for an audience comprised of senior management
This is a role play. You must play the role of Arvin Krishnan, the Finance Manager. Your assessor will organise volunteers to play the roles of the other two managers. Alternately, your assessor will play one of the roles themselves.
Your assessor will observe, record and assess your performance using the Role Play Observation Checklist for this task.
Prior to the assessment, read the Role Play Observation Checklist to understand the skills and behaviours you are expected to demonstrate to satisfactorily complete this task.
Part C: Prepare contingency plan and revise budget
Based on the changes agreed with your team members, you must now prepare a contingency plan for FY2021.
1. Use the Financial Contingency Plan template in contingency plan for Endurance Fitness.
document the financial
In your plan, you must include the following:
• At least two risks you have identified
• At least three strategies to reduce risks and maximise profits that you have agreed with the team (including budget changes)
• At least three monitoring methods for strategy
• At least two changes to budgets agreed with team
• At least two resources required to implement contingency plan (such as human resources, technology, etc.)
• At least two methods of staff support required to implement contingency plan (such as access to specialist advice, peer support, etc.)
• At least five actions to implement contingency plan, and against each action, its priority, the person responsible for implementing it, and monitoring frequency
2. Using the template in
You must also add any line items necessary, based on contingency plan.
The Microsoft Excel template contains most of formulae you require for the budget calculation.
Part D: Role play - Present contingency plan and revised budget to team
Present your final contingency plan and revised budget to the team, to ensure that they understand:
• the budgetary constraints that will affect their job roles in 2021
• their roles and responsibilities in implementing the financial contingency plan
• the support you will offer them in implementing the plan
1. Prepare slides for a 10-minute to your team.
Your slides must cover the following elements of your contingency plan:
• Risks
• Strategies to maximise profits
• Monitoring methods
• Resources required
• Support you will provide the team in navigating this change
• Implementation Action Plan
• Revised budget, with an explanation of assumptions and changes Your
2. Make your presentation to your team. You will have no more than 10 minutes for the presentation.
This is a role play. You must play the role of Arvin Krishnan, the Finance Manager. Your assessor will organise your classmates to play the roles of the other managers. Your assessor will also organise a meeting space with project and computer for your presentation.
Prior to the assessment, read the Role Play Observation Checklist to understand the skills and behaviours you are expected to demonstrate to satisfactorily complete this task.
Ensure that in both your slides and your presentation, you use language that is suitably complex for an audience comprised of senior management
Assessment 3 - Project - Monitor and evaluate financial management approaches
Scenario
This is a continuation of the scenario in Assessment 2.
It is the end of Q1 of 2021, and the company has suffered more losses due to government lockdowns being extended.
The initial lockdown was extended until 12th July. Endurance Fitness resumed in-person classes on 13th July.
However, due to a surge in the number of new COVID-19 infections in Victoria, gyms were forced to shut their doors once again on 12th August.
It is expected that Endurance Fitness can commence in-person classes once again on 5th October.
Impact on income
In Q1 of 2021, the company's income was affected as follows:
• Total income was only 20% of the budget forecast in the contingency plan.
The company continued to market the virtual membership ($50 per month, month-month) and saw a promising market for it. The sales performance of virtual memberships in Q4, 2020 indicate that virtual memberships can be marketed more aggressively and will generate income.
The company continued the equipment rental program and generated higher income than the previous quarter. This suggests that the equipment rental program can remain a steady source of income for the company throughout the COVID-19 crisis.
• The company acquired the following corporate clients, who purchased virtual memberships
for their employees working from home:
Archer Tech - 15 memberships
JP Engineering - 10 memberships
Inpharma - 20 memberships
In Q1, expenses were affected as follows.
Trainers were rostered as per the contingency budget prepared in Assessment 2. However, they had to be compensated for their shifts being unexpectedly cancelled in August.
• The company continued their paid subscription to the video conferencing software, for virtual memberships.
• Bank fees were significantly waived as a COVID-19 response.
The company successfully negotiated a rent reduction of 15% for the next 6 months. They do not expect rent to be reduced any further.
Part A: Monitor budget and report on effectiveness of financial management systems
You are Arvin Krishnan, the Finance Manager of Endurance Fitness.
You are reviewing the budget at the end of the quarter, as per company policy. Analyse the following financial statements for Q1 of 2021:
• Appendix F: Endurance Fitness 2021 Q1 P&L Actual
• Appendix G: Endurance Fitness 2021 Q1 Cash Flow Statement
• Appendix H: Endurance Fitness 2021 Q1 Accounts Receivable Ageing Summary
• Appendix I: Endurance Fitness 2021 Q1 Balance Sheet
Then, prepare a formal report of the financial situation for the management team. In this report, you must cover the following:
1. Overview of issues
• Identify and prioritise at least two significant issues in the financial statements for Q1 and the remainder of the forecast budget for 2021.
2. Budget variances
• Calculate variance, and in the table format below, identify the income line items with the most significant variances (+ or -)
• Calculate variance, and in the table format below, identify the expense line items with the most significant variances
• discuss the impact of the variances on the company's financial position
• identify four areas of the budget that need to be reviewed with highest priority, and suggest how they should be modified for the next three quarters
3. Financial management processes
• analyse the effectiveness of existing financial management processes that were used to prepare the budget forecast for 2021 - i.e. what were two key inefficiencies in the financial management policy and process that you used?
• make recommendations for four improvements to the financial management policy and process in order to ensure:
effective forecasting during the COVID-19 situation
effective maximisation of profits during the COVID-19 situation
effective monitoring of finances and cost control for the COVID-19 situation
effective management of accounts receivable for the COVID-19 situation
Use the numbered sections above to create sub-headings for your report.
Part B - Modify financial contingency plan
Scenario
The recommendations you made in your report (in Assessment 3, Part A) have been accepted by the management team.
The team has also agreed to the following tactics to control costs and maximise profits:
• temporarily stop the following membership options/ income streams, from Q2 - Q4 2021:
o Full membership - 12 months
o Full membership - 6 months
o Full membership - 3 months
o Month to month - all classes
o 10 class pass
o Weekly drop in/ visitor
o Daily drop in/ visitor
o Personal training
o Retail sales
for Q2 - Q4, 2021, forecast income only from the following streams:
Month to month - 3 classes per week (in-person), reduced by 80% of previous forecast $50 Virtual month to month membership - increase forecast by 50% Equipment rental income - maintain forecast
cut all retail stock and merchandise related expenses, as well as training expenses all managers to take pay cuts monitor finances and COVID-19 situation weekly (with the exception of utilities which are to be monitored quarterly), to ensure timely contingency planning
Furthermore, the management has made an important decision to downsize operations by closing the Airport West facility.
The lease of the Airport West facility is renewed annually in October. However, it will now not renewed in be 2020.
All members at Airport West will continue to be offered virtual memberships.
All equipment at Airport West will be sold. It is estimated that, with depreciation, this will generate a cash injection of $70,000 to the business.
This change means that the budget will need the following changes:
reduce rent expenses by 40%
reduce payroll by 70%
reduce consumables and utilities expenses by 75%
maintain all other expenses as they are
Task
Based on the contingency measures agreed with the management team (as given in scenario above) as well as your understanding of the financial situation and unpredictable economic environment you must now modify and update the financial contingency plan you had initially prepared (in Assessment 2, Part C), to implement and monitor the changes you have agreed with the team.
1. Modify the Financial Contingency Plan you had prepared (using the template in Appendix
E) as follows, for Q2 - Q4, 2021:
maximise profits that you have agreed
update monitoring methods for strategy
update changes to budgets
identify two resources required to implement contingency plan (such as human resources, technology, etc.)
update methods of staff support required to implement contingency plan (such as access to specialist advice, peer support, etc.)
identify at revised contingency plan, and against each action, its priority, monitoring method, monitoring frequency, and the person responsible for implementing it
If no change is required to an element, you may leave it as you had originally written.
2. Using the template in Appendix D, adjust the 2021 budget quarterly breakdowns for Q2 - Q4 2021, based on the shortfall percentage you have agreed with the team (see scenario above).
You must also add or remove any line items necessary, based on your revised contingency plan.
The Microsoft Excel template contains most of formulae you require for the budget calculation.
Attachment:- Manage budgets and financial plans.rar