Investigate and discuss the importance of review and evaluation of financial performance planning monitoring.
Assessment description
This assessment requires candidates to answer the questions to demonstrate their knowledge and skills in regards to the effectiveness of financial management processes.
Procedure
1. Read the budgeted figures and complete the table.
2. Look for any outstanding variances and list possible reasons and preventive measures you would take.
3. Look at different scenarios and at the processes involved.
4. Complete an evaluation grid looking at improvements to processes.
5. Complete the short answer questions.
Specifications
• relevant skills are identified
• a demonstrated understanding of specific and transferable skills
• specific development opportunities are suggested.
Case study
Below are the 2008 budgeted cash flow figures from the Jolimont accountancy firm, as was the example in the workbook. Can you use the figures from the income statement below, to complete the actual figures for Jolimont accountancy firm for 2008? Look at where the cash for the company has come from and explain if this is a sustainable cash resource for the business. List any outstanding variances for the business and possibilities for the variances. What corrective measures would you put in place to help control these costs in the future?
The below table requires full completion. In the first part new actuals need to be calculated based on your recommendations of decreasing expenses.
The first 2008 column is the actuals and the second column is the predicted budget, the third is the variance that you calculate act-bud = variance
JOLIMONT ACCOUNTANCY FIRM
| |
2008($) |
|
Cash flows from operating activities
|
|
|
Collections from debtors
|
210,000
|
|
Collections from cash sales
|
160,000
|
|
Interest received
|
2,300
|
|
Payments to creditors
|
-121,000
|
|
Wages and salaries
|
-16,000
|
|
Interest Payments
|
-3,500
|
|
Other operating expenses paid
|
-17,000
|
|
Income tax paid
|
-21,000
|
|
Total cash flows from operating expenses
|
193,800
|
|
Cash flows from investing activities
|
|
|
Proceeds from sale of property
|
|
|
Payment for motor vehicle
|
|
|
Purchase of shares in Singh's Ltd
|
-12,000
|
|
Total cash flows from investing activities
|
-12000
|
|
Cash from financing activities
|
|
|
Proceeds from call on shares
|
7,000
|
|
Loan from Abbotsford Mortgage Co.
|
|
|
Loan repayments
|
-14,000
|
|
Dividends Paid
|
-28,000
|
|
GST Collections
|
12,400
|
|
GST Paid
|
-13,800
|
|
ATO-GST Settlement
|
-1,400
|
|
Total cash flows from financing activities
|
-36,400
|
|
Net change in cash
|
145,400
|
|
Opening bank balance
|
559,220
|
|
Closing bank balance
|
704,620
|
|
Account
|
Debit
|
Credit
|
|
Cash flows from operating activity
|
|
|
|
Collections form debtors
|
180,000
|
|
|
Collections from cash sales
|
170,000
|
|
|
Interest received
|
2,300
|
|
|
Payments to creditors
|
|
139,000
|
|
Wages and salaries
|
|
21,000
|
|
Interest expense
|
|
10,900
|
|
Other operating expenses paid
|
|
48,120
|
|
Income tax paid
|
|
39,984
|
|
Total cash flow from operating activity
|
93,296
|
|
|
Cash flow from investing
|
|
18,000
|
|
Purchase of shares in Singh's Ltd
|
|
|
|
Total cash flow from investing activity
|
|
|
|
Cash flows from financing
|
21,000
|
|
|
Proceeds from call on shares
|
180,000
|
|
|
Loan from Abbotsford Mortgage Co.
|
|
23,000
|
|
Loan repayments
|
|
41,000
|
|
Dividends paid
|
16,000
|
|
|
GST collected
|
|
14,000
|
|
GST paid
|
|
2,000
|
|
ATO GST settlement (refund)
|
137,000
|
|
|
Total cash flow from financing activities
|
212,296
|
|
|
Net change in cash flows
|
559,220
|
|
|
Opening bank balance
|
771,516
|
|
|
Closing bank balance
|
|
|
1. Explain if the source of cash sustainable, and list any outstanding variances you have noticed below:3-4 variances required.
2. No win the space provided, list the corrective measures you would implement and why:
Write down what processes and data you would analyse when looking at the following scenarios and write down any improvements you could include to ensure that the problem would be less likely to occur in the future. Using these improvements, complete the evaluation grid below.
1. An employee who has been paid too much annual leave:
2. A large tax liability owed to the ATO:
3. An inflated budgeted expense account:
4. A sales representative's overpaid bonus:
5. A large bank overdraft:
6. A trial balance that does not balance:
7. Overstated bad debts allowance:
8. Understated accounts payable: