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UNIT ASSESSMENT PART 1

Q1

Financial probity is the process of ensuring full accountability when managing funds whether in transaction activities or financial advisory services. The requirements for financial probity include ethical acts and code of conduct according to APS values and code of conduct, financial records such as financial reports, cashbook records, banking records, registration certificates, contracts and agreements and reviews of entitlement for tax concession. Financial probity protects the organization from legal and financial risks. It also builds trust with industry through commercial engagement.

Q2.

Accounting Entity Concept is the identification of the activity to which accounting occurs and the connection between the entity and other external parties.

Reliability principle is an accounting method that only allows recording of transactions that have verifiable proof such as a receipt or invoices and characterized by faithful representation.

Going concern principle is a concept that assumes that a company will continue operating in the unforeseeable future without an intention to liquidate the business.

Full disclosure principle is a concept that requires a business to disclose all financial information to an accustomed reader required to interpret the financial information.

Q3.

Transaction recording is an accounting process that entails keeping records of transactions that occurs in a business. The documents for recoding transactions are the source documents such as journals.

Reconciliation Process involves the steps followed in the comparison of financial records against monthly statements to ensure that the money that leaves the account is the actual expenses amount.

Invoicing is a process of recording transactions including products, amount of product purchased and the costs. It specifies the terms of the transaction and payment mode.

Cash flow management is a process by which a business controls the inflows and outflows of a business by monitoring cash receipts and payments.

Q4.

Competition and consumer act 2010 an Australian administered act aiming at proving a fair business environment as well as a competitive surrounding. It covers the relationship between various stakeholders in the industry such as suppliers, wholesalers, retailers, and consumers. It provides protection to consumers and promotes trading activities between organizations.

Privacy Act 1988 was introduced to promote and protect the privacy of individuals involved in the business activities. It governs the way business management and handle the personal information of individuals such as the employees. The act adds credibility and viability to an organization as it makes consumers and employees trust the business with their information.

National Employment Standards under the Fair Work Act 2009 are the terms and conditions of employment that applies in the national workplace relations system. It addresses employee working hours, leaves, notice of termination and public holidays. It protects the rights of employees in an organization by stipulating the required practices in matter affecting employees.

World Trade Organization deals with creation of rules of trade between nations to ensure that trade flows smoothly and predictably. It functions under ten components including stimulating growth and employment, cut living costs, support peace and stability, support health and environment, reduce cost of trading internationally and settle disputes, reduce trade tensions and help countries develop.

Q5.

Goods and service tax is a value added levy on goods and services being transacted within a country. These are the goods for domestic consumption.

Company tax is a rate of income charged on companies for ongoing operations.

Pay as you go withholding is whereby employers withhold a art of their employees payments after paying salaries. The withheld amounts are then sent to the tax office. The system helps the payees fulfill their obligation of liabilities.

UNIT ASSESSMENT PART 2

Part 1

Task 1

Question a

The review shows that NR, NBH, and NCC made profits Q1 of $974,770, $250,000, and $221,660, respectively. However, NCC made a loss of $7,590 while NR and NBH making a profit of $784,030 and $223,50, respectively, in Q2. The group made a loss in two areas for Q3 for NBH and NCC recording $36,379 and $115,404 consecutively. NR profit improved in Q3 ($887,240) as compared to Q2, but Q1 remains an all-time high.

Question b

The impressive results in first because of the high occupancy rate for the three areas (NR-78%, NBH-68%, and NCC-20%). However, the three branches recorded a decrease in occupancy rate in Q2, which led to dropping in profit for NR (72%) and NBH (58%). NCC made a loss since its occupancy rate dropped 5%. NBH and NCC recorded a further drop in occupancy to 56% and 12%, respectively, for Q3 and thus a drastic increase in loss. However, NR recorded an increase in occupancy rate by 4% in Q3. It led to an improvement in its profitability as compared to Q2.

Question c

The revenue has consistently reduced for two areas (NCC and NBH) for the three quarters because of a reduction in occupancy rate. However, NR has recorded an inconsistent revenue trend, a drop in Q2, and an increase in Q3, with Q1 being the highest. On the other hand, the variable expenses recorded a consistent drop for all areas in the three quarters. However, the drop in revenue reduced group revenue despite a reduction in overall variable expenses for the three periods.

Question d

The Nara Group operates in the service industry and thus liable to Goods and Service Tax (GST). Therefore, the company is required to collect GST from consumers and send it to the Australian Taxation Office with a summary of business activity for GST liabilities and credit. Nara group will record tax liability of 10% for all its revenue.

Question e

To: executiveteam@naragroup.com.au

From: reviewer@gmail.com

Dear John Wayne,

I hope this email finds you and the Nara Group team in good health. I had a great time reviewing the company’s budget for three quarters of 2018. I have few areas for recommendation to ensure that the company achieves the targets for the financial year.

First, the company should increase its promotional and sponsorship activities during Q1 at initial dates to ensure that consumer awareness is achieved early. The promotion should remain active for the entire period regularly. However, the sponsorship should remain minimal and conducted at the end of each quarter to avoid an increase in expenses.

Thank you so much for the opportunity to provide my review input for your 2018 budget.

Kind regards,

M.K Taylor

Question f

Task 2

Question a

Revenue and Variable Cost

Fixed Cost

Question b

According to the sponsorship policy, Nara Group allows a maximum of $30,000 for sponsorship for each department. Therefore, NBH and NCC should spend $30,000 each for the sponsorship. Also, account $2,000 as a promotional material expense to increase the spending limit for the function.

Question c

Question d

Part 2

Task 1

To: managers@naragroup.com.auFrom: operationsmanager@NGC.com.au

—————————————————————————————————–

Dear Managers and Supervisors,

Hello management team, I hope you are well. In the past months, Nara groups have not achieved the budget created for Q1 to Q3. Based on the budget established for October to December 2018, it is my wish that the targets on the budget will be achieved. I, therefore, request your commitment in the various departments and groups you are heading. The management team should highly be involved in the operations of the employees in the workplace to achieve the set objective.

You are also required to report to the finance department upon completion of the budget period. This will help in assessing the performance and the achievement of the target set in the budget.

I have attached the Q4 budget file for your perusal and confirmation of your targets. Thank you.

Kind regards,

From: Operations Manager

Financial risks occur due to the misappropriation of funds and resources in the various Nara subsections. Therefore, to prevent the risks, the funds allocated to each department will be based on the budget, and no extra allocations will be made. Thus, the risk management strategy will guide the managers to prevent the misappropriation of funds. The Risk management strategy is as shown below:

Manager Frequency of Reporting To whom the manager will report Time to report Frequency of reviews Internal Control

General manager 4 times in quarterly Chief Executive Officer Before completion of transactions 4 times Cash breakdown for all activities of the group

Nara Resort Manager 3 times General manager After completion of transactions 3 times -Set spending limits for each group

-Policy for maximum cash at a time.

Mara Business Hotel Manager 3 times General Manager After completion of transactions 3 times Set spending limits for each group

Receipts for transactions made.

Nara Conference Centre 3 times General Manager After completion of transactions 3 times Set spending limits for each group.

Financial breakdown of funds

Nara Group

Profit and Loss Account

For the year Ended 311st December 2018

Revenues

Total Revenue 7,413,320.00

(less) Total Credit Sale4,413,300.00

Cash Revenue In-flow 3,000,020.00

Revenue from Debtors

Total Cash Receipt 4,640,500.00

Total Revenues7,640,520.00

Expenses

Variable Expenses 4,327,390.00

Fixed Expenses 1,233,749.00

Total Expenses 5,561,139.00

Profit 2,079,381.00

Accounts Receivables

Accounts receivable for October203,700

Accounts receivable for November93,000

Accounts receivable for December59,500

Outstanding Accounts Receivables 356,200

Contingency Cost

Revenue $3,503,500 $2,142,368 $1,638,000

(Less) Variable Expenses $ 2,250,650 $ 1,542,620 $ 791,450

(Less) Fixed Expenses $ 495,000 $ 417,500 $ 321,250

Contingency (2% of total revenue) $ 70,070 $ 42,847 $ 32,760

Total Profit $687,780 $139,400 $492,540

Audit Items Audit Notes

Does the operating cash revenue receive match the cash flow statement? No. the operating budget shows a 1,319,720 and the cashflow shows $1,168,207. Therefore, a discrepancy of $248,487.

Do the debtors cash receipts match the accounts receivable for October 2018? No. The debtors cash receipts show $1,613,000

with n accounts receivable of $1,530,000 Therefore, a discrepancy of $203,700

Do the debtors cash receipts match the accounts receivable for November 2018? No. The debtors cash receipts show $1,582,500

with n accounts receivable of $1471800 Therefore, a discrepancy of $93,000

Do the debtors cash receipts match the accounts receivable for December 2018? No. The debtors cash receipts show $1,445,000

with n accounts receivable of $1,411,500 Therefore, a discrepancy of $59500

Do the variable expenses paid match the operating budget? No. the Variable expenses is $4,584,720 while the operating budget is $2,639,440

Do the fixed expenses paid match the operating budget? Fixed expense is $1,233,750 while the operating budget is at $1,319,720. This shows a discrepancy of $85970

Auditor Signature: f) The actual profit for Q42018 is $2,079,381. The actual tax of the organization is $170391, while the budgeted was $ 135.172.

Task 2- Financial findings report

A financial review was conducted on the Nara group by (name) on 31st December 2018 for the fiscal period quarterly for October to December 2019. The analysis showed the following:

The variables with the highest discrepancies from the study are the fixed expenses and operating budget, which have a disparity of $85970. This means that the business is using more costs in its operations than the amount budgeted. Therefore, it is hard for the company to gain profits. Also, the debtor’s cash receipts are lower than the accounts receivables by $203700, showing that the business is giving more debts to customers. More obligations may make the company have more reserves for written off debts, which affects the financial flow. The third is the operating cash revenue, which is higher than the cash flow by $248,487. Therefore, the group’s financial target is not met.

The organization’s tax liability for the period was $ 511,174. The budgeted tax liability was $395,916. There is a difference of $115,258.

The financial management process is useful because it ensures better budget control and the development of more reliable financial controls that enable more savings, hence creating more profits. It also allows transparency of information, therefore, proper decision making.

To increase the financial viability of the organization, break-even point should be attained. This is to ensure that the expenses are equal to the income received by the organization. Also, the level of sales should increase through a reduction in the sales made on credit. The amount of debts is high therefore, should be reduced to increase the profits by decreasing the expenses. In addition, a system to track costs should be developed to enable the organization have information on the funds and resources of utilized.