You have been asked by the owner of a new consultancy called Voyager to prepare the master budget. The consultancy consists of the owner who charges out at $68 per hour and the junior staff who are charged out at $42 per hour. The owner has advised you that the following hours are forecast for each quarter.

The consultancy has a credit system of payments with 60% of payment received the quarter in which they are earned and the remaining 40% earned the following month. The opening accounts receivable is $13,200 incl GST. The GST is accounted for on an accrual basis.

Prepare a quarterly revenue receipts forecast and cash collections forecast for the next financial year.

Hours	September	December	March	June
Senior	250	230	230	230
Junior	210	220	210	220

Voyager Co Revenue Receipts Forecast 30-June
	Hours			Receivables
Quarter	Junior	Senior	Total	Junior @ $42/hr	Senior @ $68/hr	Total	GST	Total GST inc
September
December
March
June

Voyager Co Cash Collections Forecast 30-June
Quarter	Receivables	September	December	March	June
Opening
September
December
March
June
Closing

The owner will purchase a new vehicle in the September quarter for $27,500. In December they will purchase photocopiers for $5,500 and a computer system for $5,500 with an upgrade in March for a further $2,750. Each item is inclusive of GST. Prepare the Capital Expense Budget for the financial year.

Voyager Co. Capital Expenditure Budget 30 June
	September	December	March	June	Total GST
Car
Photocopier
Computer
Total (net GST)
GST

The information in the table is based on source documentation from the companys previous operations. GST Expenses are shown.

	September	December	March	June
Motor vehicle	1,300	1,495	300	450
Printing	200	50	200	50
Electricity	600	555	500	500
Rent	4,500	4,500	4,500	4,500

Depreciation is $700 per quarter and tax payable at 30% of net profit per quarter. Wages for the senior staff are $8,000 per quarter and junior $5,000.

Complete the expense budget, budgeted statement of financial performance; you will need to add the non GST items to the expense budget, and the cash flow budget which has an opening cash balance of $42,000. The opening GST liability is 2,000 and the opening PAYG tax instalment is 2,500.

Voyager Co. Expense Budget 30 June
	September	December	March	June
Cash Expenses
Motor vehicle
Printing
Electricity
Rent
Sub Total GST inclusive
GST
Net of GST
Wages Senior
Wages Junior
Subtotal Cash Items
Depreciation
Total

Voyager Co. Budget statement of financial performance 30 June
	September	December	March	June	Liability
Service revenue
Less Expenses
Subtotal
Income tax 30%
Net Profit

Voyager Co GST Budget 30 June
	September	December	March	June	Liability
GST Collected on Sales
GST Paid on Expenses
GST Paid on Capital Acquisitions
Net GST

Voyager Co. Budget statement of cash flows 30 June
	September	December	March	June
Opening Cash
Add Collections from revenues
Total cash available
Less estimated cash payments
Cash Payments in expense budget
Capital Expenditures
GST Payments*
Tax payments
Total
Closing cash balance

Use the cash budget to prepare a graph of quarterly revenue received, payments made and closing cash position. For example:

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Explain the graph by answering:

Which month has the highest payments, what causes this?

What advice would you give about the purchase of capital items?

Approximately what effect would not purchasing the capital items have?

Which month has the highest revenue received?

Describe the position of closing cash throughout the year. The owner realises that there will be significant expenses in this first year of operations. Identify in which quarter the milestone of revenues exceeding expenditures occurs. What effect does this have on cash?

What advice would you give about the paying of a $1,000 bonus to the junior staff in June promised in the September quarter based on the staffs performance and the financial performance of the business for the year?

(200220 words)

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Suppose that Voyager has non-current assets valued at $55,000 with accumulated depreciation at the beginning of the year of 20,000. Use the depreciation expense for the forecast year and other relevant items to complete the budgeted statement of financial position as at 30^th June. Assume no depreciation on new non-current assets and all equity is represented by retained profits.

Voyager Co. Budget statement of financial position As at 30 June
Cash at bank
Accounts Receivable
Total Current assets
Non-Current
Less depreciation
Car
Computer systems
Photocopier
Total Assets
Liabilities
GST
TAX
Total Liabilities
Net assets
Owners Equity
Retained Profits

What makes setting budget account assumptions time-consuming for Voyager and what must it consider? Discuss in 5080 words.

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2

Part 2

Describe in 150200 words how budget assumptions operate over time, what makes the best budget assumptions and what happens when they become invalid.

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Suppose several additional junior staff are employed in subsequent years after a new business is established. The owner notices a large increase in the motor vehicle expense account. What changes to assumptions or controls would you recommend? (80120 words)

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Explain in 5080 words how organisational goals determine the master budget.

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Briefly describe (3050 words) what quantitative and qualitative data are in regard to budgeting.

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What is the budget calendar? (5080 words)

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When researching information to complete the cash flow budget, what needs to be considered? (80100 words)

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Which management actions can affect the cash flow budget? (80100 words)

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How can decision-makers compare projects and what criteria might they use? (80100 words)

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What does the budget audit examine? (5080 words)

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What does the budget audit detect and how frequently should it occur? (5080 words)

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What corrective action does the budget audit consider? (100130 words)

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When working to complete budget reporting on time, how should accountants approach new project reporting in a manufacturing business? (80100 words)

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How should budget assumptions be dealt with to guard against unethical assumptions? (5080 words)

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Who is responsible for budget management? (3050 words)

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Who is responsible for oversight of the budget? (3050 words)

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In order to be effective, which type of executives should make up the majority of the audit committee members? (3050 words)