Assessment task 3: Prepare and monitor budgets
Instructions to Students
You are required to demonstrate your ability to complete a comparative balance sheet and gain an understanding of how to prepare budgets. You can do this in consultation with your assessor who will provide you with feedback. Once you have completed the tasks, discuss your answer with your assessor.
Activities: Prepre a balance sheet for the year ended 30 June 2009 for TML Ltd. Refer to the additional information provided to complete the balance sheet.
|TMH Ltd. Comparative Balance Sheets for years ending 30 June 2008 and 2009|
|Assets: $ $|
Cash 52,000 46,000
Accounts Receivable 134,000
Inventory 156,000 176,000
Total Current Assets: 356,000
Less Accumulated Depreciation (120,000) (105,000)
Total Land and Buildings 325,000
Total Assets: 681,000
Expense Payable 155,000 124,000
Accounts Payable 197,000
Total Current Liabilities 322,000 321,000
Long-Term Borrowings 139,000
Ordinary Share Capital 50,000 45,000
Retained Earnings 176,000
Total Owner’s Equity 221,000
- Profit for year ended 31 June 2009 was $94,000
- Cash received from customers totalled $330,000
- Cash paid for inventory totalled $170,000
- Cash paid for expenses totalled $20,000
- Dividends paid during the year were: $67,000
- During the year, accounts receivable decreased by $10,000
- Cost of new buildings acquired during the year $125,000
- You are now required to analyse the balance sheet utilising both vertical and horizontal analysis and ratio analysis. Document your answer in the space below.
- Once the above statements are completed, you are required to further analyse the company’s performance by comparing the above data with company goals as stated below and explain how the company goals have varied from the actual data.
|TMH Management had the following aims for 2009:
• To reduce liabilities by 5%
• To increase profits by 8%
• To increase sales by at least 5%
- Were these goals met?
- Were they exceeded?
- Did they fall short?
- Case Study
|You manage a small event management company. The business is growing steadily and you have decided to develop a budget to help plan for future growth.
Over the past year, sales have been increasing by 6% per quarter, with the most recent quarterly sales being $48,000. Your objective is to grow the gross profit by 8% per quart higher than this projection offers.
Expenses for the last quarter have been as follows:
· Staffing (two staff) = $18,600
· Telephone/Internet = $680
· Rent = $3,600
· Advertising = $1,250
· Equipment Hire = $8,400
· Event catering = $13,850
Without any major changes, you are projecting that sales will continue to increase by 6% per quarter, with equipment hire, event catering and telephone/internet expenses rising by 4%.
Instructions to students
You will be required to prepare a budget, finalise a budget, monitor and review the budget. This task must be undertaken individually and presented professionally to your assessor. The report must also be word processed and not hand written. You will have dedicated time given to you by your trainer and assessor to complete this task.
- Develop a report that includes the following information:
- What are your company’s objectives?
- What budgets will you need to prepare?
- What sources of information will you see to develop a budget?
- Conduct a SWOT analysis and explain what internal and external factors might impact on the budget?
- Explain how you will involve your colleagues in the budget planning process.
- Once you have developed the budget, you are required to monitor and review the budget. By the end of the first quarter you can see that your actual sales grew by only 4% and expenses were as follows:
- Staffing = $22,400
- Telephone/Internet = $580
- Rent = $3,600
- Advertising = $1,650
- Equipment hire = $9,800
- Event catering = $14,250
Prepare a profit and loss report for this quarter, including the budgeted, actual and variance amounts.
Produce a revised budget for the second, third and fourth quarters, with an explanation of what actions you will take to deal with the deviation to the budget