Report on Financial Activity

Formative Assessments

Activity 1

Question 1
Why is it necessary for organisations to collect, index, file and maintain accurate financial
records? (30-50 words)

Financial information is used by management to monitor and control cash flow and productivity,
solve problems, plan for continuous improvement, implement quality control procedures and plan
future strategies including the preparation of achievable budgets or goals.

Question 2
Collect three pieces of financial data. Each piece of data must come from a different source.
Submit a copy of the data and your comments in response to these activities to your
trainer/assessor.

a. Summarise the data

b. Evaluate in 30-50 words the usefulness of the data to those who might be required
to provide a report on financial activity.

Financial information is used by management to monitor and control cash flow and
productivity, solve problems, plan for continuous improvement, implement quality control
procedures and plan future strategies including the preparation of achievable budgets or
goals. Financial data needs to be gathered and analysed in accordance with organisational
requirement.

c. Describe in 30-50 words how you could index the data to ensure it can be quickly
located and referred to later.

Some ABS data is free. More specific can be purchased. Further information about the ABS
can be found on the ABS website. There are a variety of organisations that provide financial
data. Organisations such as Thomson Reuters collect and store data from a variety of
sources including stock exchanges and brokers. This data can be purchased on an outright or
subscription basis.

Question 3
How can accurate coding help your organisation to ensure consistency and quality in
financial analysis? (50-80 words)

The data storage system used by your organisation will have an impact on the collection and storage
methods which are used. A small organisation which keeps financial data in a filing cabinet will have
different coding and filing requirements than a large organisation which keeps everything in
electronic form stored on an off-site server.
Activity 2

Question 1
Why might it be necessary to consolidate and/or convert financial data to allow it to be
analysed in accordance with organisational requirements? (50-80 words)

There might be occasions when you need to compile financial data in a specific way to allow
it to be analysed in accordance with your organisation’s requirements. By following the
correct procedure, it is more likely that the results of any analysis are consistent, accurate
and useful. Data from more than one source or time frame might need to be consolidated
and converted from one another.

Question 2
Explain how data might be consolidated or converted to allow it to be analysed. (30-50
words)

There are a variety of forms of moving averages. The simple moving average is easiest to
calculate and use. To calculate a simple moving average, add a series of numbers before
dividing by however many numbers there are. This will allow you to determine the mean or
average number.

Question 3
You have been asked to calculate the moving average of a series of numbers. You need to
include three days’ worth of data as part of the moving average.

Each for nine days you obtain this data:

a. The data for day 1 is 300

b. The data for day 2 is 300
c. The data for day 3 is 270
d. The data for day 4 is 720
e. The data for day 5 is 330
f. The data for day 6 is 240
g. The data for day 7 is 240
h. The data for day 8 is 210
i. The data for day 9 is 240

Prepare a table in which you set out the actual data you received and the moving average
(where applicable). Plot the actual data and moving average on a line graph.

Activity 3

Question 1
What is a balance sheet? (30-50 words)
A balance sheet is a statement of financial position. It shows an organisation’s assets, liabilities and
proprietorship at a particular point in time and shows how much the capital invested at the
beginning of the year has changed.

Question 2
Give three examples of assets.

- Building
- Stock
- Cash at bank

Question 3
Give three examples of liabilities.

- Loans
- Creditors
- Bank overdraft

Activity 4

Question 1
When should discrepancies be identified and dealt with? (80—100 words)

All discrepancies must be identified and dealt with when payments are received. There are many
reasons why discrepancies might occur between the invoiced amount and the payment received.
There could be a discount for prompt payment, there might have been a previous over or under
payment, or goods might have to be returned and the documentation has not been provided to you.
All of these issues should be handled at the allocation stage.

Question 2
What action should you take if a discrepancy occurs, but you do not know how to fix it? (30-
50 words)

You might contact the supplier to discuss the discrepancy. Be calm and polite. Have all the source
documents, invoices, delivery dockets etc available, so you can provide any details the supplier
needs. You might need a copy of the purchase order, cart note, receipt and payment details.

Activity 5

Question 1
Do online.
Question 2
If an invoice is for $109.89 including GST but the GST amount is not shown how much GST
was included?

Cost of goods/services including GST - $109.89

GST - $109.89/11 = $9.99

Question 3
If you intend to sell a product for $75.50 (before GST) how much GST should you collect?
What is the tax inclusive price for the product?

Costs of goods/services (Ex GST) - $75.50

GST - $75.50 x 10% = $7.55
Total Cost - $83.05

Activity 6

Question 1
What are expenses? (30-50 words)

An expense is the cost of an asset used by a company in its operations to produce revenues.
Common expenses include payments to suppliers, employee wages, factory leases, and equipment
depreciation.

Question 2
Identify five expenses you or someone you know incurs on a regular basis.

- Cost of goods sold

- Sales commission expense
- Delivery expense
- Rent expense
- Salaries expense

Question 3
What is the difference between cash and accrual-based accounting? (50-80 words)

Organisations which account on a cash basis record income from sales only when the money is
actually received. In small cash-based businesses this is often the method chosen.

Organisations which account on an accrual basis record transaction when there has been an
exchange of goods, services or work effort. The income is recorded in the books when the product or
service is delivered even if payment is not immediate. In organisations selling expensive products
such as computers and motor vehicles this is often the chosen method.

Activity 7

Question 1
Locate an example of each of these documents:

a. An invoice which is not a tax invoice

b. A tax invoice suitable for GST purposes
c. A receipt
d. An adjustment note or a credit note, or a cartage note or a purchase order

If you cannot locate any type of required document create your own sample version
containing all of the information which you would expect to find it.

Label each document and specify whether you consider each one to be typical of similar
documents within the same category. If not, explain in 30-50 words.

Question 2
From these options, which source document is the best evidence to show payment has been
made?

a. A bank statement
b. A message on a Post-It note recording that Joe from accounts paid the electricity
account on Thursday
c. An invoice makes as having been paid by the employee who says they arranged
payment
d. A cheque stub

Explain your answer in 30-50 words.

A bank statement – Bank statements can provide useful evidence of payments made. These
will be listed in monthly, quarterly and/or yearly statements sent to the organisation and/or
available online if this facility is offered.

Activity 8

Question 1
List five statutory requirements for the preparation of financial reports.

- Assets
- Liabilities
- Equity
- Revenues
- Expenses

Question 2
Prepare a detailed list of financial records that should be kept to comply with statutory
requirements.

- Financial statements:
o Profit and loss
 o Balance sheet
o Cash flow
o Depreciation schedules
o Taxation returns
- General ledger
- General journal
- Asset register
- Cash records:
o Cash receipts journal
o Cash deposit book
o Cash payments journal
o Cheque butts
o Petty cash book
- Bank records
o Bank statement
o Bank reconciliation
o Loan documents
- Sales records
o Sales journal
o Debtors ledger
o Debtors list (accounts receivable)
o Invoices and statements
o Delivery dockets
- Creditors records
o Invoices and statements
o Payment remittances
o Creditors ledger
o Unpaid invoices (accounts payable)
- Work in progress
o Job files
o Customer files
o Inventory
- Correspondence, annual returns, and ASIC forms
- Wages and superannuation records
- Registers
o Members
o Options
o Debenture holders
o Prescribed interest
- Minutes
o Directors meetings
o Members meetings
- Deeds
o Trust
o Debentures
o Contracts and agreements
o Inter-company transactions

Question 3
What is a conflict of interest? (25 words)

A conflict of interest occurs when an entity or individual becomes unreliable because of a clash
between personal interest and professional duties or responsibilities.

Question 4
What are your obligations in relation to confidentiality? (25 words)

The Tax Practitioner Board Code of Professional Conduct states ‘Unless you have a legal duty to do
so, you must not disclose any information relating to a client’s affairs to a third party without your
client’s permission.

Activity 9

Question 1
Describe the different uses of column charts and pie charts. (80-100 words)

Column charts shows the differences in individual value vertically. It can be used to show the
differences between values in different time periods or other data groupings. A three-dimensional
graph allows comparison on two dimensions. Examples include showing the total number of
placements each month for the past year or the number of placements related to each occupation
over the last month. This graph works best with fewer data series.

Pie charts shows the proportions of each segment of a whole. This graph only handles one data
series. An example is showing the proportion of employment funding available to each business
group in a particular year.

Question 2
Give three examples of data an organisation might chart for column charts and pie charts.

- Sales figures over a significant period

- Comparing shares
- Staff sales

Activity 10

Question 1
Your organisation has purchased a new photocopier at a cost of $17,000. The purchase was
made in July so there is no need to calculate depreciation for part of the first year. The
copier will be outdate and written off after five years at a book value of zero.

Use the diminishing value method and the prime cost method, detail the cost each year to
be allocated for reporting purposes and show the book value during each year.

Show results in a table with comparisons between the two methods.

Do online.

Question 2
From where could you obtain information to ensure that your organisation’s statements and
claims take full advantage of available benefits and allowances in accordance with statutory
requirements? (50-80 words)

Most organisations keep details of items subjected to depreciation in an assets register. The register
is likely to be in the form of a book, computer spreadsheet or card system.

The register should contain information including:

- Part number
- Description
- Serial number
- Place of purchase
- Date of purchase
- Amount of purchase
- Maintenance history
- Other comments

The asset register should contain the formula used for depreciation and the amount of monies to be
regarded as a cost in each financial year during the accountable life of the item.

Activity 11

Question 1
What is the ATO’s business portal used for? (50-80 words)

The ATO’s business portal can be used to:

- Prepare, lodge and revise activity statements

- View statements of account and find your payment reference number (PRN)
- View your Single Touch Payroll (STP) reports
- Request a refund or transfer funds between accounts
- Update your business registration details, including email addresses
- Register for goods and service tax (GST) and pay as you go (PAYG) withholding

Question 2
How can organisations submit statutory requirement reports to the ATO? (50-80 words)

You need to lodge an income tax return each year to report your business income and claim
deductions. You may also need to lodge other yearly reports or returns if you are registered for
other tax types. Most businesses also need to lodge business activity statements.
Question 3
What are the three major obligations for taxation reporting?

- Pay As You Go (PAYG) withholding

- Goods and Services Tax (GST)
- Company tax

Activity 12

Question 1
You work for an organisation which is financial difficulty.

After considering a variety of financial data you have decided to recommend that your
organisation:

a. Reduce expenses
b. Write-off thirty bad debts
c. Change profit expectations
d. Obtain finance to cover cash flow shortcomings

What information will you provide to those responsible for decision-making within your
organisation to support your recommendations? (100-120 words)

Forecasting for an adequate cash supply is of critical importance in the wellbeing of your
organisation and such planning is done in the form of a budget based on forecasts and best
estimates of sales/purchases/expenses.

In setting the cash flow forecast you should, as a first step, determine at what level of activity your
organisation is going to perform. Cash is the lifeblood of your organisation and to have sufficient
cash is essential for your business survival and to realise maximum profit achievement.

Profit does not necessarily mean that you have cash and if you are short of cash and unable to meet
your financial commitments, a paper profit is all that will be evident.

The cash flow forecast is the planning document required to ascertain your cash needs and to
manage your organisation in such a manner that you do not get into financial difficulties.

It is necessary to prepare an overall sales/purchase/expense budget (monthly) before completing

your cash flow forecast as this forecast is concerned with cash movements as they are expected to
happen, whereas your overall budgets do not record or always relate to cash flow.

There are four steps required in the preparation of the cash flow forecast:
- Sales budget
- Purchases budget
- Expense budget
- Capital expenditure budget

To work out cash flow, use the formula:

Sales – purchases – expenses – capital expenditure = cash flow

Question 2
Explain why evidence should be provided to support recommendations. (80-100 words)

Activity 13

Question 1
To whom might reports and/or recommendations, relating to improved effectiveness and
efficacy of functions and services be made? List six people that might require such
communication.

When making recommendations, ensure that they can be useful and are intended to
improve the effectiveness and efficacy of your organisation’s activities.

A range of stakeholders might require reports containing concise and relevant financial
information that will facilitate direction and control of organisation’s operations.
Stakeholders can include managers at different levels in the organisation, directors, boards,
stakeholders, investors, lending bodies and creditors.

Question 2
Recommendations should always be accompanied by relevant and concise supporting
information. In a short sentence, explain why.

Effective and efficient information sharing at all levels with the organisation is essential to enhance
the effectiveness and efficacy of functions and services.

Activity 14

Question 1
Do online.

Question 2
Describe 10 issues that you could identify in statements, financial reports and/or financial
data which would require further review.

Internal Controls – Those responsible for financial decision-making need to ensure that the
organisation utilises appropriate financial systems to ensure the finances of the organisation
are properly accounted for.

Debtor Control – Your organisation will have systems in place to control debtors – those
who owe money to the organisation. A computer program might be set up to trigger an
alarm if a customer’s account reaches $3,000. Once this occurs the customer can be asked
to pay the amount which is owed.
Proper Banking Procedures – You might identify that money which has been banked does
not always equal the amount which is specified in reports or statements. Your organisation
will have procedures in place with respect to banking. Money and credit card vouchers from
cash registers or cash drawers might be counted away from public view.

Petty Cash – You could identify problems with your organisation’s petty cash system after
viewing reports and statements. Although petty cash is made up of relatively small amounts
of cash an appropriate system must be implemented to track the amount which is spent.

Floats – Many organisations use floats. These are carried by employees to give change or are
used in cash registers or cash drawers. After reviewing statements and reports you might
determine that employees do not sign for their floats when beginning their shift. They might
not count the money to confirm they have received the correct amount.

Financial Control Systems – In addition to the financial systems which are in place in your
organisation you might be involved in implementing more general financial control systems.
These are systems which are designed to control spending and expenses within your
organisation beyond what is necessary to achieve the required standards of operation.

Losses – You might determine that a significant issue arises with respect to losses being
incurred by your organisation. If an organisation trading using a company structure does not
manage its cash flow and does not have the money to pay its debts but continues to operate
then it is trading insolvent. This means that the organisation is trading even though it does
not have the ability to pay its debts as and when they become due and payable.

Profitability – You might determine that your organisation is not meeting its profit goals.
This is a significant issue which needs to be addressed.

Statutory Obligations – Statements and reports you review might indicate that the
organisation is not complying with its statutory obligations. Certain companies are required
to generate written financial reports which are audited and accompanied with a declaration
that the reports are a true reflection of the financial state of the company.

Suppliers – Statements might indicate that there is a problem with suppliers. You might
become aware that raw materials from a particular supplier are resulting in excessive
returns. A supplier might not be able to supply the required quantity of goods within the
required time frame.

Activity 15
Question 1
Undertake your own research to locate an example of a blank form or report which must be
submitted to a government agency or department. Describe in 80-100 words the
information which you would need to allow you to complete the form or report in
accordance with requirements.

Question 2
Why is it important that financial statements and reports are clear and conform to
organisational and statutory requirements? (50-80 words)

Financial reports must provide all the financial data and information appropriate to the type
of report being prepared. The report will need to address the specific design requirements
of your organisation.

The report should be prepared in the required format, meeting organisational guidelines,
statutory obligations and within designated timelines. It should utilise language, format and
information which can be understood and used by the audience to whom it is addressed.

The content and format of the report will depend on the information to be included and the
business and industry of the organisation.

Question 3
Describe a type of report or statement which could be used to display this information
clearly:

a. Details of current and non-current assets and liabilities.

Balance Sheets – A balance sheet is a statement of an organisation’s financial position. It

provides information about an organisation’s assets, liabilities and ownership equity at a
particular point in time. It provides details of how much the capital invested at the
beginning of the year has changed.

b. Details of income and expenses categories and actual profit made during a specified
period.

Profit and Loss Statements – Profit and loss statements contain details of income and
expenses together with a determination of whether an organisation has made a profit or
loss in a specific period.

c. Details of cash which is expected to be available to the organisation and cash which
is outgoing.

Cash Flow Statements – A cash flow statement sets out when cash is expected to flow in and
out of the business. Depending on the audience and the use to which the statement will be
put it might be very detailed containing details of income and expense categories or contain
just a summary of inflows and outflows.