Part 1
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 measure would you put in place to help control these costs in the future?
| Jolimont accountant firm |
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2008 |
2008 |
Total |
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$ |
$ |
$ |
| Cash flows from operating activities |
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| Collections from debtors |
210,000 |
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| Collections from cash sales |
160,000 |
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| Interest received |
2,300 |
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| Payments to creditors |
-121,000 |
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| Wages and salaries |
-16,000 |
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| Interest Payments |
-3,500 |
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| Other operating expenses paid |
-17,000 |
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| Income tax paid |
-21,000 |
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| Total cash flows from operating expenses |
193,800 |
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| Cash flows from investing activities |
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| Proceeds from sale of property |
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| Payment for motor vehicle |
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| Purchase of shares in Singh's Ltd |
-12,000 |
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| Total cash flows from investing activities |
-12000 |
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| Cash from financing activities |
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| Proceeds from call on shares |
7,000 |
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| Loan from Abbotsford Mortgage Co. |
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| Loan repayments |
-14,000 |
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| Dividends Paid |
-28,000 |
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| GST Collections |
12,400 |
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| GST Paid |
-13,800 |
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| ATO-GST Settlement |
-1,400 |
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| Total cash flows from financing activities |
-36,400 |
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| Net change in cash |
145,400 |
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| Opening bank balance |
559,220 |
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| Closing bank balance |
704,620 |
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Question 1. Explain if the source of cash sustainable, and list any outstanding variances you have noticed below: 3-4 variances required.
Question 2. Now in the space provided, list the corrective measures you would implement:
Corrective measure 1:
Corrective measure 2:
Corrective measure 3:
Corrective measure 4:
Question 3. The financial controller has decided to increase debt repayment time for debtors form 60 days to 120. This had lead to an increase in sales but what are the consequences? Where do we look for this information in our business records?
Part 2
Write down what processes and data you would analyse when looking at the following scenario 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.
An employee who has been paid too much annual leave
A large tax liability owed to the ATO:
An inflated budgeted expense account:
A sales representative's overpaid bonus:
A trial balance that does not balance:
Overstated bad debt allowance:
Understated accounts payable:
Evaluation grid
| Idea |
Suitability for target audience |
Technical feasibility |
Commercial potential |
Possible impacts |
Resources required |
Time constraints |
Explore further? Yes /No |
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1. What are the roles and responsibilities of an auditor?
2. What is an ageing summary?
3. List the process you would follow if you identified a cost variation
4. What is the difference between a favourable and unfavourable variance?
5. List the advantages of ensuring effective monitoring of financial processes?
6. List the steps you would follow to implement and monitor improvements or changes made to the financial management process.
7. List the communication strategies you would use to disseminate information about budgets/financial plans to team members.
8. List the advantages and disadvantages of the communication strategies identified in queston.