Assessment 1 Task 1

Management of Staples Pty Ltd have been provided you with the following information for the period 1 April ? 31 July 2016 in order to prepare a budgeted Income Statement and Cash Budget.

Following a meeting with management and the business owners the following budget milestones have been established.

Accounts Balances 1 April	$	$
Cash at Bank	6,000
Inventories	21,800
Accounts Receivable (net)	12,000
Prepaid Rent	1,000
Furniture & Equipment	27,000
Accumulated Depreciation ? Furniture & Equipment		4,600
Plant & Machinery	54,000
Accumulated Depreciation ? Plant & Machinery		22,400
Accounts Payable		7,000
Accrued Wages		1,200
Bank Loan		48,000
Share Capital		30,000
Retained Earnings		8,600
Totals	$121,800	$121,800

Budgeted Sales:

April 25,000

May 27,000

June 20,000

July 23,500

Cash Sales account for 50% of sales. Credit sales are collected 40% in the month of sale and 60% in the following month.

Purchases are expected to be made at the rate of 55% of expected sales for each month and are purchased on credit. The company requires the monthly ending inventory balance to be $20,000 plus 25% of the next month?s purchases.

Creditors are paid 20% in the month of purchase and 80% in the next month.

Dividends are paid by the business at the rate of $4,000 per quarter.

Rent on premises is $3,000 per quarter, paid on the last day of the first month of each quarter.

Wages are normally paid as incurred and this will occur in the quarter ended 30 June. In the quarter ended 31 March, pay day fell on 25th March so 6 days wages were outstanding at 31 March and are yet to be paid. Wages are normally incurred at the rate of $5,000 per month.

The following are paid as incurred: electricity $400 per month, interest on loan $180 per month and cleaning contractor $200 per month. The loan principal is paid at the rate of $2,000 per quarter.

Depreciation is charged at 10% per annum on the cost of the furniture and equipment and 15% per annum on the cost of the plant and machinery.

New machinery will be purchased for cash on 30th June for $10,000

Requirements:

In an Excel spreadsheet templates provided you are required to:

Create the schedules required to create: a. A Budgeted Income Statement

b. A Cash Budget

Determine where the business is sensitive to changes in input data and develop appropriate KPI?s.

Produce a Word document as a budget report and in that document include:

A brief explanation for the KPI?s chosen (item B above) including an explanation of how negotiations would be conducted with stakeholders on agreeing to the use of these KPIs as their performance measurement criteria.

Task 2

In a word document answer the following the following budgeting theory questions.

Explain what is meant by the term budget, and explain the key principles of budgetary control

You are employed by a white goods distributor and have been asked to prepare a list of controllable and uncontrollable factors that might affect the sales of refrigerators in the coming year. Supply a list for the next management meeting.

APPENDIX EXTRACT ? POLICIES & PROCEDURES

Procedure for Financial Administration and Budgeting

Policy

Staples Pty Ltd has implemented this policy to ensure that financial administration is completed in accordance with legal, ethical and accounting requirements.

Processing of financial transactions

All Employees must ensure financial transactions are recorded accurately and timely.

Confidentiality

Employees should perform their duties with honesty and integrity.

Financial Reporting

Financial statements should be prepared in accordance with the Australian Accounting Standards AASB101.

Accrual basis

All transactions should be prepared on an accruals basis and are based on historical costs.

GST

Staples Pty Ltd. is registered for GST and therefore must account for GST in all applicable transactions and on Financial Statements.

Budgets

The budget process will include consultation and communication with managers from all departments.

Forecasting techniques will include internal/controllable factors and external /uncontrollable factors.

Budgets will be monitored weekly to identify all Key Performance Indicators. Budget control will compare accurate results with budgeted figures.

Errors and Omissions

All errors and omissions detected in financial reports must be referred to the company accountant or immediate supervisor before any corrections are attempted.

Feb Mar Sales Revenue COGS & Purchases Budget Open Inventory Plus: Purchases 55% Desired Closing Inventory 25% = Cost of Goods Sold 20,000 21,800 April May June Jul Other Expenses April May June Quarter Total Rent Wages Electricity Interest on Loan Cleaning Depreciation: Furniture & Equipment 10% 225 225 225 675 Plant & Machinery 15% 675 675 675 2,025 Budgeted Income Statement April Revenue Less: Cost of goods sold Gross Profit Less: Other Expenses = Net Profit May June Cash Receipts Schedule Days in Receivables April 50% of Sales are cash Sales Revenue Mar Accounts Receivable April Sales May Sales June Sales Totals Cash Receipts 12,000 May June July Cash Payments Schedule April May June Purchases March A/c Payable 7,000 April Purchases May Purchaes June Purchases Total Staggered Cash Payments Other Cash Payments: Rent Wages Electricity Interest on Loan Loan (principal) repayment 2,000 Cleaning Dividends New Machinery Total Cash Payments 4,000 10,000 July Cash Budget March Opening Balance Cash at Bank Cash Receipts Cash Payments Closing Balance Cash at Bank 6,000 April May June