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BSB Fim 601: Student Name: College Name
BSB Fim 601: Student Name: College Name
Submitted by:
Date:
College Name:
Budget Notes
i. Profits and losses in the previous years manifests a steady increase as sales were also
constantly increasing throughout the years with the efforts and excellence done by the
entire team both in operations and administration.
ii. Houzit Pty Ltd manages its finances effectively as it properly monitor and control its
actual expenses in line with the budget.
iii. Assumptions for the budget creation includes:
o The anticipation that the coming financial year would maintain the same sales growth
as the growth that took place between 2007/08 to 2010/11.
o The overall sales for 2011/12 target set by the business plan should be apportioned
across the quarters in the same % as was achieved in 2010/11.
This was:
o Reduce the expected gross profit rate by 1% on the 2010/11 result in the hope that
lower prices on the products would help maintain the sales growth even in difficult
trading conditions.
o Cost of goods sold is the inverse of the gross profit rate determined by the business plan
and is determined by the quarterly sales budget.
o Fringe benefits tax is expected to be the same as 2011 and paid in equal amounts each
quarter.
o company tax is 30% of net profit before tax for each quarter.
o One objective in this plan is to manage the debtors more efficiently in the current
period. This will involve an analysis of the debtors to identify ways to reduce the amount
of cash tied up in outstanding debtors.
Questions
1. Identify the current statutory requirements for tax compliance and list and calculate the tax
liabilities for Houzit Pty Ltd under taxation legislation.
Houzit Pty Ltd has the following tax compliance:
Income Tax – computed at 30% of Net Profit before Tax
Gross Sales Tax – remitted at 10% of Sales net of Cost and Expenses or even asset
acquisitions subject also to the same tax rate
Luxury Car Tax – computed as Purchase Price inclusive of Gross Sales Tax in excess
of the said threshold at $57,466 divided by 110% to remove GST times 33% tax
rate.
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.
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b. Account Groups – helps a detailed description for each cost and follow an accounting
structure for presentation.
c. Time Periods – classifies cost based on occurrence, that helps develop budget to be more
specific as to which time of the year must it occur.
5. Explain and discuss the implications of probity when preparing and revising budgets.
Budgets are indicators to manage our finances properly, that heeds the attention when not
meet so as to identify reasons for the variances. A financial control tool to forecast the
future expenditures and sales of the company based on wise assumptions.
6. List the critical dates and initiatives that will require or generate resources for Houzit Pty Ltd in the
next financial cycle.
Date after purchase of luxury car
Date after payment of loan
7. List the items you would recommend for inclusion in the budgets for Houzit Pty Ltd.
Water Utility Expense
Meal Expense
Transportation Expense
8. List the new or modified internal controls that could improve risk management for Houzit Pty Ltd
including the maintenance of audit trails.
Variance Report
Houzit Pty Ltd
Variance to Budget
1st Quarter ended Mar-2012
$
Actual Results Budget-Q1 Actual-Q1 % Variance F or U
Variance
Sales 3,394,247.76 3,371,200.00 -23,047.76 -1% U
– Cost Of Goods Sold 1,934,721.12 1,955,296.00 -20,574.88 -1% U
Gross Profit 1,459,526.64 1,415,904.00 -43,622.64 -3% U
Gross Profit % 43% 42% -1% -2% U
Expenses
– Accounting Fees 10,000.00 2,500.00 7,500.00 75% F
– Interest Expense 21,127.00 28,150.00 -7,023.00 -33% U
– Bank Charges 400.00 380.00 20.00 5% F
– Depreciation 42,500.00 42,500.00 0.00 0% U
– Insurance 3,347.50 3,348.00 -0.50 0% U
– Store Supplies 749.84 790.00 -40.16 -5% U
– Advertising 200,000.00 150,000.00 50,000.00 25% F
– Cleaning 3,256.45 3,325.00 -68.55 -2% U
– Repairs & Maintenance 16,068.00 16,150.00 -82.00 -1% U
– Rent 660,127.00 660,127.00 0.00 0% U
– Telephone 2,999.36 3,100.00 -100.64 -3% U
– Electricity Expense 5,356.00 5,245.00 111.00 2% F
– Luxury Car Tax 12,000.00 12,000.00 0.00 0% U
– Fringe Benefits Tax 7,000.00 7,000.00 0.00 0% U
– Superannuation 37,404.00 37,404.00 0.00 0% F
– Wages & Salaries 415,600.05 410,500.00 5,100.05 1% F
– Payroll Tax 19,741.00 19,741.00 0.00 0% F
– Workers’ Compensation 8,312.00 8,312.00 0.00 0% F
Total Expenses 1,465,988.21 1,410,572.00 55,416.21 4% F
Net Profit (Before Tax) -6,461.57 5,332.00 11,793.57 183% F
Income Tax 0.00 1,600.00 -1,600.00 -160000% U
Net Profit -6,461.57 3,732.00 10,193.57 158% F
Evaluation
Houzit Pty Ltd is a 15-store retail chain located in Brisbane, and is the leading homewares retailer,
catering the growing needs for furnishing new and renovated dwellings in the area. The assortment on
offer of bathroom fittings, bedroom fittings, mirrors and decorative items together with the recently
added lighting fixtures has positioned Houzit as a leader in homewares retailing in Australia.
The current accounting information system has not adequately provided sufficient analysis of revenue
and expenditure and has made it difficult to make informed estimates of future profits. Thus, they want
to upgrade their existing accounting system which will manage the company accounts more efficiently
in the long run.
With the anticipation to improve the system, the manager was task to prepare an annual budget and
will be broken down over four quarters. It was forecasted that sales growth remains the same, an
increase in inflation to 4%, purchase of new car for the Chairman, reduction of principal loan, increase
in advertising and wages. A detail of last year’s actual sales and expenses were provided by the
accountant to identify other items up for budget.
Houzit develop a standard process for preparing the budget by (1) establishing the 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, and lastly (7) submit budgets for
approval. But after preparation, it must be identified the variances of actual cost versus the budget
made, so as to investigate any variances arising such comparison.
Soon after the first quarter ended, actual results came and a comparison report to such with the budget
will be presented. It was then identified that an external factor affected the outcome in which banks
are raising interest rates in line with the increased upward international pressure and Houzit has a
significant part of their loan funds on a variable interest rate which changes directly with market
conditions. But behind it, the sales are reasonably holding up and expected to grow in the next couple
of quarter.