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BSBFIM601 - MANAGE FINANCES Class Activity 1 Part A. 1. What is the purpose of conservatism? The purpose of conservatism or prudence is to ensure revenue and assets are not overstated, and that liabilities and costs are not understated, to ensure responsible accounting practices. For example, increases in an asset's value should only be recognised when the asset is sold (or used) and not before. Decreases in asset's value (or an increase in a liability) should be recognised immediately. 2. Take time to explore the AASB's website at:, what are the two key accounting standards that are directly relevant to gathering revenue data for statutory recording and reporting? Corporations Law Australian Securities and Investments Commission (ASIC) 3. According to the AASB, what does a set of financial statements comprise? Financial statements provide information about an entity's: (a) assets; (b) liabilities; (c) equity; (d) income and expenses, including gains and losses; (e) contributions by and distributions to owners in their capacity as owners; and (f) cash flows. 4. Review the features of off-the-shelf business management and accounting software products. Imagine you are running a retail business, selling products via a bricks and mortar site and online. You need to manage inventory, point-of-sale and payroll, and would like a cloud-based system to work on financial planning and management at your warehouse, retail space and home on a variety of devices. Which product would you purchase? Why? I will purchase Xero. Xero has a price that is not too expensive and easy to use. In addition, Xero is a software that uses a cloud-based system that is needed by the company. Part B. 1. Calculate the revenue, gross profit and net profit margins for these products. Product COGS/unit Fixed costs /unit Selling price /unit Gross profit / unit Unit solds Revenue Gross profit margin Net profit margin Front pocket wallet $27.00 $16.00 $89.00 $62.00 40 $3,560.0 0 $2,480.00 $1,840.00 Compact smartphone wallet $29.00 $17.00 $99.00 $70.00 37 $3,663.0 0 $2,590.00 $1,961.00
2. What is the formula for calculating the contribution margin? Contribution margin = Sales - Variable cost 3. When calculating the contribution margin, why are only variable costs considered? Because variable costs are variable costs that directly affect sales, so they will greatly affect the contribution of margins. The focus is on variable costs as these are the costs that are likely to change within a period of time, such as the price of raw materials 4. In what three ways does horizontal analysis look at the change in each item of the financial statements? The change is absolute monetary value The percentage change from the value of the previous period Whether the change was favourable or unfavourable for the organization Part C. 1. Many government and accounting professional organisations have websites that provide information to help people without professional accountancy qualifications to manage their personal and business finances. Visit the following sites to explore the resources available to help you manage your organisation's finances: Australian Government, Business, 'Managing your finances'. ( topics/tax-finance-insurance/business-finances/pages/default.aspx) CPA Australia, 'Financial management of not-for-profit organisations', ( International Federation of Accountants, 'Public sector financial management transparency and accountability', ( Queensland Government, Business and industry portal, 'Managing cash flow', ( Queensland Government, Business and industry portal, 'Trend analysis for business improvement', ( 2. Explain the value of trend analysis to identify cash flow trends. Trends may be identified by plotting key ratios on a graph, giving a visual representation of changes happening over time from different financial periods - whether they be months, quarters or years. The cashflow ratio provides the information that helps managers to forecast their organisation'scashflow. Positive trends, for example, may lead to investment for growth as there is confidence in the organisation's ability to obtain and pay back loans. Part D. Explore the ATO's website, visiting the sections for business, non-profit organisations and superannuation. 1. What are the due dates for lodging and paying an organisation's business activity statement (BAS) online?
The due date for lodging and paying is displayed on owner of business activity statement (BAS). If the due date is on a weekend or public holiday, company have until the next business day to lodge and pay. 2. What are the due dates for an organisation'slodgement of their income tax return? Company returns are generally due by 28 February each year
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