BSBFIM601 Assessment 1 (1)

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BSBFIM601 Assessment 1 (1)

BSBFIM601 Manage finances

Assessment task 1

Topic 1 – Plan for financial management

Question 1

a. Explain in one paragraph what is the purpose of conservatism?

The conservatism principle is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received. Thus, when given a choice between several outcomes where the probabilities of occurrence are equally likely, you should recognize that transaction resulting in the lower amount of profit, or at least the deferral of a profit. Similarly, if a choice of outcomes with similar probabilities of occurrence will impact the value of an asset, recognize the transaction resulting in a lower recorded asset valuation.

b. Take time to explore the AASB’s website at www.aasb.gov.au and the two key accounting that are directly relevant to gathering revenue data for statutory recording and reporting, please explain in a paragraph?

  • Cash Accounting
  • Cash accounting is the simpler of the two methods. In fact, most people practice cash accounting in their daily lives, because it’s how they balance their checkbook. In cash accounting, all that really matters is the actual flow of money. 

  • Accrual Accounting
  • In accrual accounting, what matters is not when money changes hands, but rather when money is earned. In the previous example, you would book the revenue for the carpet-cleaning job as soon as you earned the money — when you actually cleaned the carpets.

    c. According to the AASB, what does a set of financial statements comprise?

    A complete set of financial statements includes:

  • a statement of financial position (balance sheet) at the end of the period
  •  

  • a statement of profit or loss and other comprehensive income for the period (presented as a single statement, or by presenting the profit or loss section in a separate statement of profit or loss, immediately followed by a statement presenting comprehensive income beginning with profit or loss)
  •  

  • a statement of changes in equity for the period
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  • a statement of cash flows for the period
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  • notes, comprising a summary of significant accounting policies and other explanatory notes
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  • comparative information prescribed by the standard.
  • d. Review the features of off-the-shelf business management and accounting software products.

  • Basic bookkeeping – for example sales and purchase ledgers, nominal ledger and invoicing.
  • VAT calculations – your accounts system should be able to keep track of VAT and calculate your VAT payment at the end of each VAT period.
  • Payroll processing

    BSBFIM601 Assessment 1 (1)
    Last updated: Jan 2022

    Page 1

  • x"> – if you have employees, consider a payroll function that calculates PAYE (Pay As You Earn) and National Insurance contributions weekly or monthly.

  • Automatisation of management reports – you may need to prepare internal management reports periodically, and a system that gives regular management accounts will help improve business efficiency.
  • Invoicing – any accounts package needs to be able to produce invoices, but you will probably want to be able to customise them and you may want to send them by email.
  • Credit control – an accounts package can help by highlighting where customers have exceeded their limits and provide statements to chase them.
  • Compatibility with other computer systems – including accounts system used by your accountant, as well as stock control systems, an e-commerce website or customer relationship management systems.
  • Industry accreditation – from an independent industry body such as the Business Application Software Developers Association .
  • Question 2

    a.Calculate the revenue, gross profit and net profit margins for these products.

    b. What is the formula for calculating the contribution margin?

    c. When calculating the contribution margin, why are only variable costs considered?

    When you make a product or deliver a service and deduct the variable cost of delivering that product, the leftover revenue is the contribution margin. Contribution margin shows you the aggregate amount of revenue available after variable costs to cover fixed expenses and provide profit to the company

    d. In what three ways does horizontal analysis look at the change in each item of the financial statements?

    Horizontal analysis allows investors and analysts to determine how a company has grown over time. Additionally, analysts and investors could use horizontal analysis to compare a company’s growth rates in relation to its competitors and industry. Horizontal analysis can be used on any item in a company’s financials from revenues to earnings per share (EPS) and is useful when comparing the performance of various companies.

    Question 3

    1. What are the due dates for lodging and paying an organization’s business activity statement (BAS) online?

    2. What are the due dates for an organization’s lodgment of their income tax return?

    Question 4

    1. What three budgets and budgeted statements should an organization’s matter budget include to ensure effective decision-making and…

    ...

    BSBFIM601 Assessment 1 (1)
    Last updated: Jan 2022

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