SITXFIN002 Interpret financial information

Assessment 1

1. The average of all spending made by a person, family, or business in a month is called
average monthly spending. Anyone worried about saving, expanding, overspending, or
improving spending habits can benefit from knowing average monthly costs. There are a few
simple methods for calculating typical monthly spending. Locating all bank statements and
expenditure records for the previous year may be the most complete technique to compute
typical monthly expenses.

2. In the financial world, the phrase "cover" refers to a variety of acts that decrease an
investor's risk. The term cover differs from coverage, which in the financial realm refers to
insurance coverage as well as financial measures that assess a company's margin of safety in
servicing its debt and generating dividend payments. Cover could also be used in isolation to
refer to the act of safeguarding a portfolio's total worth, such as giving protection over
market volatility.

3. The Wastage Report allows to keep track of how much ingredient waste the company
generates. When report an ingredient waste in the Wastage Report, the amount wasted is
removed from the inventory stock level of that ingredient. Wastage can occur in both raw
inventory items and finished products.

4. Gross refers to the whole or full amount of something, whereas net refers to what remains
after certain deductions have been made. For instance, a company's net income is the profit
after all expenses, overheads, taxes, and interest payments have been removed from the
gross profit. In the same way, gross weight refers to the overall weight of the items including
their packaging, whereas net weight solely refers to the weight of the goods.

5. For tax reasons, the financial year is a 12-month term used by the government and
enterprises. Businesses must close their books and file a tax return (statement of expenses
and revenue for the financial year) at the end of the financial year, which the Australian Tax
Office (ATO) will use to assess the amount of tax owing by your company. The Australian
financial year begins on July 1st. In Australia, the financial year ends on June 30.

6. You've probably discovered that owning a business necessitates learning a slew of new
acronyms, one of which is a BAS. This is a monthly or quarterly Business Activity
Statement that allows you to report on Goods and Services Tax (GST), Pay as You Go
(PAYG) instalments, PAYG withholding tax, and any other tax responsibilities you may
have as a business. This is dependent on the industry. Small and medium businesses are
usually only required to file BAS once a quarter (4 times a year).

7. QuickBooks Online, Xero

8. Invoicing & Syncing your bank and credit cards

Accounts Payables & Receivables
 SITXFIN002 Interpret financial information

Customers' online payments are collected

Preparation of basic financial statements such as profit and loss statements, balance sheets,
and cash flow statements
Accountants and tax experts have user access.

9. Financial statements provide information about a company's performance to its owners.

Understanding how to read a financial statement is critical for any business owner.
Otherwise, the owner would have no way of knowing whether the company is making sound
financial decisions. Analyzing your company's financial accounts allows you to engage with
and ask questions of financial analysts and lenders with confidence. Knowing how to
evaluate your financials can also help you run your business more efficiently by pointing out
areas where you might need to make changes. Every action you do as a business owner is
influenced by money.

10. Ledgers:
An accounting ledger is a bookkeeping account or record that stores balance-sheet and
income-statement transactions. Cash, accounts receivable, investments, inventories, accounts
payable, accrued expenses, and client deposits are all examples of accounting ledger journal
entries.

Subsidiary ledgers: A subsidiary ledger is a collection of accounts with comparable balances

that add up to the total balance of a general ledger account. A control account or master
account is a general ledger account that summarizes the account balances of a subsidiary
ledger.

Journals: A journal is a thorough account that records all of a company's financial activities
and is used for future account reconciliation and information transfer to other official
accounting records, such as the general ledger. In a double-entry bookkeeping approach, a
journal records the date of a transaction, which accounts were affected, and the sums. A
journal is a complete record of all a company's transactions
Transactions: A journal is a thorough account that records all of a company's financial
activities and is used for future account reconciliation and information transfer to other
official accounting records, such as the general ledger. In a double-entry bookkeeping
approach, a journal records the date of a transaction, which accounts were affected, and the
sums. A journal is a complete record of all a company's transactions

Receipts: Receipts are important for a variety of reasons in addition to proving ownership.
Many retailers, for example, require a customer to show a receipt in order to exchange or
return items, while others require a receipt generally issued within a certain timeframe for
product warranty purposes. Receipts are also useful for tax purposes, as the IRS needs proof
of certain expenses.
The term "disbursement" refers to the act of disbursing funds. Money placed into a business'
operational budget, the delivery of a loan amount to a borrower, or the payment of a
 SITXFIN002 Interpret financial information

dividend to shareholders are all examples of disbursement. A disbursement is money paid by

an intermediary on behalf of a client, such as a lawyer's payment to a third party.

Invoices: A time-stamped commercial document that itemizes and records a transaction

between a buyer and a seller is known as an invoice. If products or services were acquired
on credit, the invoice normally spells out the conditions of the agreement and lists the
various payment options. A paper receipt, a bill of sale, a debit note, a sales invoice, or an
online electronic record are all examples of invoices.
Accounts payable: Accounts payable is a general ledger account that indicates a company's
commitment to pay back a short-term debt to creditors or suppliers. Another typical meaning
of "AP" is the business department or division in charge of making payments to suppliers
and other creditors on behalf of the company.
Debtors. A debtor is a person or company who owes money. The debtor is referred to as a
borrower if the debt is in the form of a loan from a financial institution, and as an issuer if
the debt is in the form of securities such as bonds. A debtor is legally defined as someone
who files a voluntary petition to declare bankruptcy. Individuals or businesses who owe
money to banks or other people are referred to as debtors
Creditors: A creditor is a person or an institution that extends credit by allowing another
entity to borrow money with the intention of repaying it later. A creditor is a firm or
individual who offers goods or services to a company or individual but does not demand
immediate payment because the client owes the company money for services already
delivered.

11. Assets:
A resource with economic worth that an individual, corporation, or country possesses or
controls with the hope of future gain is referred to as an asset. Assets are bought or
developed to raise a company's value or benefit its operations, and they are reported on the
balance sheet.
Liabilities: A liability is a debt that a person or company owes to another party, usually in
the form of money. Liabilities are resolved over time by exchanging economic benefits such
as money, products, or services
Equity: Equity, also known as shareholders' equity (or owners' equity in the case of privately
held corporations), is the amount of money that would be returned to a company's
shareholders if all of the company's assets were liquidated and all of the debt was paid off in
the event of a liquidation. It is the amount of a firm's revenues less any obligations due by
the company that were not transferred with the sale in the case of an acquisition.
Cost of sales: The direct costs associated with the manufacturing of goods/services provided
to your consumers are represented by cost of sales, often known as cost of goods sold
(COGS). Selling, general, and administrative (SG&A) expenses are excluded from the cost
of sales calculation, as are interest charges. In a nutshell, cost of sales is a critical financial
performance statistic since it measures your capacity to make and sell goods and services at
a reasonable price.
Income: Income is money earned by a person or a business in exchange for labour, the
provision of a product or service, or the investment of capital. A pension, a government
 SITXFIN002 Interpret financial information

payment, or a gift can all contribute to a person's income. Income might be taxable, tax-free,
or tax-reduced according to a government tax agency. For the most part, income is the
money we spend to cover our daily expenses.

12. Double entry, a essential concept underlying present-day bookkeeping and accounting, states
that every financial transaction has equal and opposite effects in at least two different
accounts. It is used to satisfy the accounting equation: Assets=Liabilities + Equity
With a double entry system, credits are offset by debits in a general ledger or T-account.

13. The most significant distinction between accrual and cash basis accounting is the timing of
revenue and expense recognition. The cash approach recognizes revenue and expenses more
quickly, whereas the accrual method focuses on future revenue and expenses. The cash
method's main virtue is its simplicity: it merely accounts for cash paid or received. The cash
approach also makes it easy to track a company's cash flow.

14. Revenue (sales/turnover)

Gross profit (revenue minus COGS)
Expenses

15. A balance sheet is a financial statement that shows the assets, liabilities, and shareholder
equity of a corporation at a certain point in time. Balance sheets serve as the foundation for
calculating investor returns and assessing a company's financial structure. In a nutshell, a
balance sheet is a financial statement that shows what a company owns and owes, as well as
how much money shareholders have invested.

16. The bank reconciliation process involves comparing the internal and bank records for a bank
account, and adjusting the internal records as necessary to bring the two into alignment. This
is done to ensure that an organization’s recorded cash balance is accurate. The bank
reconciliation process is usually accomplished with the bank reconciliation module in an
accounting software package.

17. These are cheques that an entity has issued to a client or a third party but have not been
submitted to the bank by the reconciliation date. The payment is recorded in the entity's cash
book as soon as the cheque is issued to the person, but the transaction is recorded by the
bank when it gets the cheque. As a result, the payment is recorded at a different time.
Because the bank would not have recorded the un-presented cheques, the balance on the
bank statement would be higher than the cash book balance, which is why in the bank
reconciliation, the amount of outstanding cheques is added to the cash book balance.

18. The costs of a company's variable costs are those that are linked to the number of goods or
services it produces. Variable expenses rise and fall in tandem with a company's output
volume. Variable expenses will rise as production volume increases. The variable expenses,
on the other hand, will decrease when the volume decreases. For example, is pointless
because their product outputs are not comparable. As a result, comparing the variable costs
of two businesses in the same industry, such as two automobile manufacturers, is preferable.
 SITXFIN002 Interpret financial information

Fixed costs, unlike variable costs, do not change with the volume of output. Whether or not
goods or services are produced, fixed expenses remain constant. As a result, a business
cannot avoid fixed costs. The most common examples of fixed costs include lease and rent
payments, utilities, insurance, certain salaries, and interest payments.
The costs of a company's variable costs are those that are linked to the number of goods or
services it produces. Variable expenses rise and fall in tandem with a company's output
volume. Variable expenses will rise as production volume increases. The variable expenses,
on the other hand, will decrease when the volume decreases. In general, different industries
have different levels of variable costs. As a result, comparing the variable costs of a car
manufacturer and an appliance manufacturer, for example, is pointless because their product
outputs are not comparable. As a result, comparing the variable costs of two businesses in
the same industry, such as two automobile manufacturers, is preferable.
In general, different industries have different levels of variable costs. As a result, comparing
the variable costs of a car manufacturer and an appliance manufacturer, for example, is
pointless because their product outputs are not comparable. As a result, comparing the
variable costs of two businesses in the same industry, such as two automobile manufacturers,
is preferable.

19. You must issue tax invoices to your customers, collect GST, and transmit it to us with your
business activity statement if you are a GST-registered business (BAS). There are a couple
things you can do to make this more manageable:
To create tax invoices and automatically generate reports of your GST liabilities and credits
at BAS time, use company accounting software. Use the cash accounting option to better
align your GST liabilities with your business cash flow. Put the GST you collect in a
separate bank account.

20. $165

21. $200

22. Balance Sheet

Income Statement
Cash Flow Statement
Annual Report
Gross Profit Margin
Net profit margin
Working capital
Current ratio

23. Comparing to the rate of decreasing the income by 5% the interest expense has been
decreased by a higher rate while increasing the number of covers by 5%.Sometimes other
expenditures will also be decreased affecting the profit before tax.

Task 1
 SITXFIN002 Interpret financial information

1. C

2. The Merchant Account Summary Report provides the total number of transactions and
total amounts processed for each Gateway Account associated with your Merchant
Accounts and for each type of credit card within each Gateway Account.
Use the Merchant Account Summary Report to show:
 The total number of transactions for each Gateway Account
 The total number of transactions for each type of credit card within each Gateway
Account
 The total amounts processed for each Gateway Account
 The total amounts processed for each type of credit card within each Gateway Account
 The total gift amount processed for each type of credit card within each Gateway
Account
 The total purchase amount processed for each type of credit card within each Gateway
Account
The average transaction amount for each credit card within each Gateway Account

3. An EFTPOS terminal (also referred to as an EFTPOS machine) is an electronic device

that assists in the transfer of funds from a customer’s bank account to a merchant
(business) bank account. To pay at an EFTPOS terminal your customers must acquire an
EFTPOS card, Debit Card or a Credit Card.

4. Match the deposits in the business records with those in the bank statement. Compare the
amount of each deposit recorded in the debit side of the bank column of the cashbook
with credit side of the bank statement and credit side of the bank column with the debit
side of the bank statement. Mark the items appearing in both the records.
Adjust the balance on the bank statements to the corrected balance. For doing this, you
must add deposits in transit, deduct outstanding checks and add/deduct bank errors.
Deposits in transit are amounts that are received and recorded by the business but are not
yet recorded by the bank. They must be added to the bank statement.
The next step is to adjust the cash balance in the business account.
Adjust the cash balances in the business account by adding interest or deducting monthly
charges and overdraft fees. To do this, businesses need to take into account the bank
charges, NSF checks and errors in accounting.
Bank charges are service charges and fees deducted for the bank’s processing of the
business’ checking account activity. This can include monthly charges or charges from
overdrawing your account.
After adjusting the balances as per the bank and as per the books, the adjusted amounts
should be the same. If they are still not equal, you will have to repeat the process of
reconciliation again.
Once the balances are equal, businesses need to prepare journal entries for the
adjustments to the balance per books.

Task 2
 SITXFIN002 Interpret financial information

1. Total - 150000
Total sales including GST - 132000
GST fees sales - 18000
Total expenses - 105000
Expenses including GST - 100000
Capital purchases - 10000
GST fee expenses - 5000
GST payable on sales - 3181

2. Please refer the chart below

Item Description Price Quantity GST Total

Per

Window Frame $150 50 $15 $8250

$40

Deadlocks 10 $4 $440

TOTAL

$8690

Task 3

a. Please refer the chart below

 SITXFIN002 Interpret financial information

Income Statement for the month ended 30th June

2016
Sales 80000 80000

Less cost of Sales 20000

Gross Profit
60000
Less Labour 19000
After Labour Profit
41000
Less operating expenses
Gas 1500
Water 900
Interest expenses 800
Maintenance 2500
Cleaning 1500
Fuel 900
Vehicle repairs 300
Electricity 1900
Miscellaneous 500
Advertising 1800 1
2600
Profit before Tax
28400

Calculate gross profit = sales – cost of sales = 60000

Calculate after labour profit= gross profit – labour cost = 41000
Calculate profit before tax = after labour profit – operating expense = 28400

b. Total current assets - is the aggregate amount of all cash, receivables, prepaid expenses,
and inventory on an organization's balance sheet. These assets are classified as current
assets if there is an expectation that they will be converted into cash within one year.
Total current asset- 28500

Total noncurrent assets - Noncurrent assets are a company's long-term investments for
which the full value will not be realized within the accounting year. Examples of
noncurrent assets include investments, intellectual property, real estate, and equipment.
Noncurrent assets appear on a company's balance sheet.
Total noncurrent assets – 234000

Total assets - Total assets refers to the total amount of assets owned by a person or entity.
Assets are items of economic value, which are expended over time to yield a benefit for
the owner. If the owner is a business, these assets are usually recorded in the accounting
records and appear in the balance sheet of the business.
Total assets - 262500
 SITXFIN002 Interpret financial information

Total current liabilities - Total Current Liabilities are the claims to the company's assets
that are due within one year or the cycle of operations.
Total current liabilities – 33000

Total noncurrent liabilities - Noncurrent liabilities, also known as long-term liabilities,

are obligations listed on the balance sheet not due for more than a year. Various ratios
using noncurrent liabilities are used to assess a company's leverage, such as debt-to-assets
and debt-to-capital.
Total noncurrent liabilities - 229500

Total liabilities - Total liabilities are the combined debts that an individual or company
owes. They are generally broken down into three categories: short-term, long-term, and
other liabilities. On the balance sheet, total liabilities plus equity must equal total assets.
Total liabilities - 262500

Task 4

a) Costs of goods sold

Formulae: COGS %=cost of goods sold / sales x 100
23.3%

b) Labor cost percentage

Formulae: Labour Cost Percentage = Labour / Sales x 100
28%

c) Prime Cost
Formulae: Prime Cost = COGS + Total Labour Cost
38500

d)Gross profit margin

Formulae: Gross Profit = Total Revenue – COGS
Gross Profit Margin = (Gross Profit / Total Revenue) x 100
76.6%

e) Net profit margin.

Formulae: Net Profit Margin = (Gross Sales – Operating Expense) / Gross Sales
0.792
 SITXFIN002 Interpret financial information

Part B

1. To calculate your average customer, spend, multiply your customer’s annual average spend
per purchase by the annual purchase frequency. ACS is more useful because it is personalized,
you can group customers according to personas to learn more about buying habits making it
easier to retarget similar types of customer.  It also makes it easier for retailers to see WHERE
customers spend and ultimately see opportunities for upselling or for price increases. There
are two ways to increase ACS, either through price increase or by upselling or cross-selling. 
The reason why ACS is invaluable as a metric is that it provides the means to compare
customers purchases with previous ones and generate product recommendations on these
purchases.
What are the benefits of average customer spend?
Improved customer satisfaction. More repeat customers. Increased venue profits. Improved
staff engagement and satisfaction.

2. stock purchased = 17500

Operating expenses = 15600

Labor cost is an important value that finance and accounting professionals calculate to
determine the direct and indirect price that a company pays for labor. The direct cost of
labor includes the cost of wages and benefits for employees who are directly involved in
producing the product or service commodity.

The COGS is an important metric on the financial statements as it is subtracted from a

company's revenues to determine its gross profit. Businesses thus try to keep their COGS
low so that net profits will be higher.

Occupancy cost. This is rent along with electricity, water, cable, phone, internet, and
property insurance.
Food cost.
Liquor cost.
Labor cost.
Inventory variance and shrinkage.
Kitchen equipment cost.
POS system cost.
Marketing and advertising cost.

3.

a. Sales = 75000
b. gross income = 20900
 SITXFIN002 Interpret financial information

c. Sales figures can also tell you about your customer buying patterns.
Understanding how much they spent and how often they purchased it really
important information. And it can give you an insight into the mind of your
customer. The key number to check is the average value of each transaction.
d. Gross profit assesses a company's ability to earn a profit while simultaneously
managing its production and labor costs. As a result, it is an important metric in
determining why a company's profits are increasing or decreasing by looking at
sales, production costs, labor costs, and productivity.

4. Accounts receivable is the amount of money owed to a company by customers for goods
or services that have already been provided. Investors can get a better idea of a company's
overall financial soundness and liquidity by looking at its accounts receivable. The
accounts receivable-to-sales ratio aids investors in determining how much of a company's
sales have yet to be paid for. Businesses with accounts receivable owing by a diverse
customer base may be less vulnerable than those with accounts receivable owed by
consumers concentrated in a single industry.

Accounts receivable measures the money that customers owe to a business for goods or
services already provided. The accounts receivable-to-sales ratio helps investors analyze
the degree to which a business's sales have not yet been paid for.

5. Sales growth percentage y2=7.5%

Sales growth percentageY3= 9.4%
Sales growth depicts an increase in sales over time; this is significant because, as an
investor, you want to know whether demand for a company's products or services will
continue to rise in the future. However, it's vital to distinguish between organic and
acquisitive sales growth.
The rate of growth varies depending on the industry and the size of the organization. For
large-cap companies, sales growth of 5-10% is regarded well, whereas sales growth of
over 10% is more possible for mid-cap and small-cap organizations.

6. Please refer the chart below.

Item Jul August
y
Budget Actual Variance Budget Actual Variance
Sales Revenue 230,000 225,000 5000 230,000 228,000 2000

Food Costs 85,000 87,000 (2000) 85,000 86,000 (1000)

Beverage Costs 14,000 15,000 (1000) 15,000 15,000 0

Labour Costs 77,000 82,000 (5000) 78,000 82,000 (4000)

Fixed Costs 35,000 35,000 0 35,000 35,000 0
 SITXFIN002 Interpret financial information

Total Costs 211000 219000 (8000) 213000 218000 5000

Profit 19000 6000 (13000) 17000 10000(7000)

As a result of the variance, net income may be below what management originally
expected. If the variances are considered material, they will be investigated to determine
the cause. Then, management will be tasked to see if it can remedy the situation.