Reference no: EM132247864

Assessment Task 1 - Prepare budgets

Performance objective

For this task you are required to respond to a range of prompt questions that examine your understanding of key legislative and financial management requirements for a case study organisation. This assessment also requires you to review available financial information and establish a budget for the organisation.

Assessment description
This assessment requires you to determine the requirements to undertake budgeting, financial forecasting and reporting requirements for an organisation. You will also need to review the case study provided and prepare a budget (in electronic spreadsheet format) and budget notes for distribution and implementation in the organisation.

Procedure
1. Read the case study.
2. Analyse the case study information and respond to the questions in the space provided.
3. Analyse the case study information (including business plan summary and previous financial data) and complete the following.
a. Develop a sales budget, profit budget, cash flow budget and debtor ageing summaryusing electronic spreadsheets (as separate worksheets) making sure each budget is divided into quarterly periods and that you use previous financial data to determine allocations for resources.
Ensure each budget you prepare complies with the organisational and policies and procedures as provided.
b. Develop budget notes which include:
i. identification of reasons for previous profits and losses
ii. your comment on the effectiveness of existing financial management approaches
iii. all assumptions and basis that have been made or used to form budgets
iv. any relevant notes regarding implementation and monitoring of budget expenditure.
4. Communicate information regarding the budget and answer a series of prompt questions in written or oral form as agreed with your assessor.

Assessment Specifications
You must submit this assessment after session 4.
You must provide:
– a completed annual budget in a single spread sheet with a separate sheet for each budget component
– budget notes and question answers in a written format.
Your assessor will be looking for:
– evidence that you understand the required legislative requirements
– evidence that you can identify suitable software for financial management
– evidence you have reviewed the case study information provided by submitting an appropriate budget with budget notes
– evidence that you have clearly communicated information regarding the budget and correctly responded to a series of questions.

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
Houzit 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 department 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
– To qualify the strategic plans for the next 3-5 years planning cycle:
? profit and CAPEX budget to be prepared.
Budget variances and schedules
– Key performance indicators that should be closely monitored and reported on include variances to:
? total sales
? gross profit (GP) %
? wages andsalaries 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.

Scenario
The CEO of Houzit Pty Ltd, Jim Schnieder 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 Jim 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, Jim asks you a series of questions (listed below, which you will complete written or orally as agreed with your assessor).

Prompt questions
Based on the information provided in the case study answer the following questions in the space provided below:

1. Identify the current statutory requirements for tax compliance and list and calculate the tax liabilities for Houzit Pty Ltd under taxation legislation.

2. Identify the current compliance requirements and liabilities for this organisation under the Corporations Act 2001.

3. Review commercially available financial management software to select the most suitable software for Houzit 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.

4. Explain how you can apply the following principles of accounting in developing the budgets required for this task:
a. matching principle
b. account groups
c. time periods.

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

6. List the critical dates and initiatives that will require or generate resources for Houzit Pty Ltd in the next financial cycle.

7. List the items you would recommend for inclusion in the budgets for Houzit Pty Ltd.

8. List the new or modified internal controls that could improve risk management for Houzit Pty Ltd including the maintenance of audit trails.

Assessment Task 2 - Monitor and review budget

Performance objective
This Assessment Task requires you to monitor the implementation of a budget and report on the variances, trends and performance of the established budget for a fictional business and provide recommendations for ongoing financial viability.
Assessment description
You will need to review the provided current case study information and compare it to the budget you established in Assessment Task 1.After evaluating these you will need to report on the following:
• significant issues
• variances from budget
• comparative performances
• recommendations for ongoing financial viability
• evaluation of financial management processes.

Procedure
1. Read the case study.
2. Develop a variance report based on the format and template provided by Houzit.
3. Complete a cash flow analysis on the average length of time it takes Houzit to collect funds from its debtors to determine the trend based on the financial reports in Assessment Task 1.
4. Examine the sales budget, profit budget, cash flowbudget and debtor ageing summary to identify the following:
a. Issues:
i. Identify, describe and prioritise significant issues that are evidenced in the provided case study information and describe reasons or causes of these issues. Include in this issues of financial probity that you have identified or considered when monitoring these budgets.
b. Variances:
i. Complete an actual-to-budget variance report, using the template provided in the case study.
ii. Identify variances by comparing actual results with the established budget, and provide reasons why these variances may have occurred.
c. Performance:
i. Compare financial performance of the organisation (according to financial information provided) to industry benchmarks for this organisation in line with the retail trade sector.
ii. Respond to the performance questions provided by the CEO, as provided by the board of Houzit,
iii. Determine a trend of the average debtor days and the impact to the cash flow of Houzit.
d. Recommendations:
i. Outline your recommendations for ongoing financial viability for the organisation, based on your assessment of the issues,reasons for variances and organisational performance you have identified (Steps 1-3).
ii. Include in this section your plans for a revised budget, effectively managing contingencies and issues that have been identified in feedback and monitoring of the budgets.
e. Evaluation:
i. Provide a summary review of the financial management processes in place for the organisation, in light of your assessment of the issues, reasons for variances and organisational performance you have identified.Include in this section any recommendations you have for modifying management processes.

Procedure
1. Read the case study.
2. Develop a variance report based on the format and template provided by Houzit.
3. Complete a cash flow analysis on the average length of time it takes Houzit to collect funds from its debtors to determine the trend based on the financial reports in Assessment Task 1.
4. Examine the sales budget, profit budget, cash flowbudget and debtor ageing summary to identify the following:
a. Issues:
i. Identify, describe and prioritise significant issues that are evidenced in the provided case study information and describe reasons or causes of these issues. Include in this issues of financial probity that you have identified or considered when monitoring these budgets.
b. Variances:
i. Complete an actual-to-budget variance report, using the template provided in the case study.
ii. Identify variances by comparing actual results with the established budget, and provide reasons why these variances may have occurred.
c. Performance:
i. Compare financial performance of the organisation (according to financial information provided) to industry benchmarks for this organisation in line with the retail trade sector.
ii. Respond to the performance questions provided by the CEO, as provided by the board of Houzit,
iii. Determine a trend of the average debtor days and the impact to the cash flow of Houzit.
d. Recommendations:
i. Outline your recommendations for ongoing financial viability for the organisation, based on your assessment of the issues,reasons for variances and organisational performance you have identified (Steps 1-3).
ii. Include in this section your plans for a revised budget, effectively managing contingencies and issues that have been identified in feedback and monitoring of the budgets.
e. Evaluation:
i. Provide a summary review of the financial management processes in place for the organisation, in light of your assessment of the issues, reasons for variances and organisational performance you have identified.Include in this section any recommendations you have for modifying management processes.

Assessment Specifications
You must submit this assessment after session 2.
You must provide:
• a complete actual-to-budget variance report
• a completed report detailing the issues, variances, performance, recommendations and evaluations identified from the financial information for Houzit Pty Ltd.
Your assessor will be looking for:
• Evidence that you reviewed the provided case study information to develop an evaluative report concerning the progress of the budget.

Attachment:- Assessment Tasks.rar