PERFORM FINANCIAL

CALCULATIONS
BY: NIGUSSIE B.
Learning outcomes:
• Obtain data and resources for financial calculations
• Select appropriate methods and carry out financial calculations
• Check calculations and record outcomes
 TOPIC 1 – OBTAIN DATA AND RESOURCES FOR FINANCIAL
CALCULATIONS

Welcome to the unit- Perform financial calculations.

• This unit describes the skills and knowledge required to use a range of routine
calculation methods and techniques when performing routine financial
calculations and checking calculation outcomes.
• It applies to individuals who use literacy and numeracy skills to perform routine
computational tasks as part of their operational job role.
 OBTAIN INPUT DATA AND VERIFY AS REQUIRED FOR WORKPLACE CALCULATIONS AND
DETERMINE REQUIRED OUTCOMES OF CALCULATIONS AND CONFIRM FROM TASK
SPECIFICATIONS

• APPLY MATHEMATICAL TECHNIQUES AND METHODS OF CALCULATION

• In your role, it is important that you are able to apply mathematical techniques and methods of calculation,
including to calculations of:
• Goods and services tax (GST)
• Simple interest
• Compound interest
• Basic loan calculations
• Performing financial calculations is underpinned by data.
• Data is defined as a group of facts and statistics from which conclusions may be drawn together for
reference or calculation.
• Data verification is a procedure where data is checked for inconsistencies and accuracy.
• Some benefits that are signifying how high-quality data can improve businesses:
• Reduce cost / increased revenue
• Improved customer experience
• Proficient operations
• Regardless of the industry, data verification procedures add value.
• When you have high-quality data, it allows greater confidence in critical systems and reduces the
time spent reconciling data.
• Data verification is proposed to provide certain well-defined guarantees for accuracy, and
consistency for various kinds of user input applications or automated systems.
• Data validation rules may be developed, defined and implemented, for example:
• As a part of a requirements-gathering phase in a software engineering or developing a software
description
• As part of an operations modelling phase in business process modelling
• Deployment contexts
• As part of a user-interface
• In your role, you may be required to complete a variety of different types of
calculations.
• Common workplace calculations include:
• Primary loan calculations
• Compound interest
• Credit interest
• Goods and Services Tax (GST) calculations
• Inflation effects
• Mark-up and break even
• Simple interest
• Straight-line depreciation
• Primary loan calculations: Several loans can be secured by the same
collateral if it has an appropriate worth to cover the balance of each
loan.
• Lenders and real estate professionals refer to the first loan that you
record on a particular piece of collateral as the primary loan.
• Compound interest: Compound interest is the theory of adding
accumulated interest back on to the principal sum so that interest can
be earned on top of interest from that moment.
• Our compound interest calculators allow you to compound interest on
either a daily, monthly, quarterly, half-yearly or an annual basis.
• The line graph below demonstrates the compounding effect of varying rates on an initial
investment of $1000 with a 20% annual interest rate.

• Annual Compound Interest Formula:

• V = P(1+r/n)^nt
• Credit interest: Credit is when a contractual agreement is made, in which a borrower
receives something of value (money) and agrees to repay the lender, generally with
interest, within a set time frame in the future.
• Interest is the fee that is charged by the lender to a borrower for the use of
borrowed money, typically expressed as an annual percentage of the principal.
• Goods and services tax: Goods and services tax (GST) is a broad-based tax of 10%
on most goods, services, and other items sold or consumed in Australia.
• Business, companies and other organisations that are registered for GST will:
Their goods and services will include GST in the price they charge
Claim the GST included in the price of products and services they buy for their
business
• Inflation effects: Inflation is described as a constant increase in the general level of
prices for goods and services.
• As inflation rises, every dollar you have will buy a smaller percentage of products or
services. 
• When there is inflation, the dollar value does not stay constant.
• Mark-up and break-even: The mark-up is the amount of money above the cost of
purchase or manufacture you sell your goods for to the public or other businesses.
• This is how mark-up is calculated:
 Mark-up percentage value = (Sales less Cost of Goods Sold / Cost of Goods Sold) x 100
 Mark-up percentage value = (Gross Profit/Cost of Goods Sold) x 100
• Simple interest: Simple interest is a quick process of calculating the interest charge on
a loan.
• If you multiply the interest rate, by the principal, by the number or periods, you can
calculate the simple interest.
•  Simple interest = P x I x N
• Straight line depreciation: The most common method of matching a plant asset's cost
to the accounting periods in which it is in service is likely to be straight line
depreciation.
• The following formulas are used to calculate straight-line depreciation:

 Depreciation per annum = (cost – residual value) / useful life

 Depreciation per annum = (cost – residual value) x rate of depreciation
Where:
• Cost is the initial acquisition or construction costs related to the asset as
well as any subsequent capital expenditure.
• The estimated proceeds expected from the disposal of an asset at the end
of its useful life is a residual value or also known as its scrap value.
• The period that the asset is expected to be used starting from the date it
is available for use up to the date of its disposal or termination of use is
classified as estimated useful life.
• The percentage of useful life that is consumed in a single accounting
period is the rate of depreciation.
ACQUIRE RESOURCES AND EQUIPMENT NEEDED TO PERFORM
CALCULATIONS EFFECTIVELY AND USE SIMPLE SPREADSHEETS WHERE
NECESSARY TO PERFORM REPEATED CALCULATIONS
• EFFECTIVELY USE OFFICE EQUIPMENT AND SOFTWARE TO ENTER DATA AND
COMPLETE CALCULATIONS
• Even though our brains are remarkably resourceful, it is hard to calculate large numbers in our
heads.
• This is because we can only store a certain amount of figures.
• Specific equipment and resources are required that are relevant to the task at hand to perform
calculations efficiently.
• The different resources and equipment that might be used include:
• Hand-held calculators
• Computers
• Financial services software
• Spreadsheets
• When calculating small amounts, you might do that in your
head or quickly work out quantities on paper.
• The handheld calculator is a small, portable electronic device
used to perform both basic operations of arithmetic and
complex mathematical operations
• Calculators vary from cheap, giveaway, credit-card-sized
models to sturdy desktop models with built-in printers.
• Calculators are everywhere and often included as part of other
equipment.
• Some calculators have on, and off buttons, others go off after a certain
time.
• If your calculator has the percentage button (%), you can use this to find
the result of a calculation as a percentage.
• It’s important to clear your current calculation by pressing "C."
• Press M to save a number to the calculator's memory.
• Using the memory function of the calculator helps you to preserve
subtotals as you work through your calculations.
• There could be several subtotals in your calculations of the amount of
the goods, adding the tax, gift wrapping or special packaging and
shipping costs.
• Sometimes there will be deductions.
• After the subtotal of goods ordered there may be a discount, gift card
or code used to reduce the price.
• In addition to hand-held calculators, you might also use computers and
financial services software to complete calculations.
• A computer is capable of receiving information in a particular form,
and performing a structure of operations in agreement with a
predetermined but variable set of procedural instructions (program).
• Financial software is typically described to help individuals or
corporations manage all accounting needs, finances and business
ledgers.
• Financial software is divided into two categories:
• Financial management (money management) 
• Tax software
• Spreadsheets are a file, often referred to as a worksheet.
• An example of how a spreadsheet can be used is to create an overview of your bank balance.
• A fundamental example of what a Microsoft Excel spreadsheet looks like as well as all the major portions of a
spreadsheet are highlighted below:
• Today, Microsoft Excel is the most popular and widely used spreadsheet program, but there are
also many alternatives.
• Below is a list of spreadsheet programs that can be used to create a spreadsheet.
• Google Docs Online and collaborative spreadsheet
• iWork Numbers - Apple Office Suite
• Lotus 1-2-3
• Open Office - Calc
• Lotus Symphony Spreadsheets
• Microsoft Excel
• VisiCalc
• Some of the things mentioned above could be completed in a word processor, however, when it
comes to numbers, spreadsheets have an enormous benefit over word processors.
 TOPIC 2 - SELECT APPROPRIATE METHODS
AND CARRY OUT FINANCIAL CALCULATIONS
• Identify and obtain equipment required to perform calculations, including hand-held
calculators
• KEY FEATURES OF EQUIPMENT AND SOFTWARE REQUIRED TO CONDUCT
ROUTINE FINANCIAL CALCULATIONS
• A simple handheld calculator is a tool to make simple math calculations.
• Press the buttons, the numbers appear on the display, press "=" to show the result, press "C" to
delete, etc.
• The calculator supports the following operations:
• Addition (key '+')
• Subtraction (key '-')
• Multiplication (key 'X')
• Division (key '/')
• It has one memory that can be used for storing values
temporarily
• A simple calculator can be used to calculate percentages even
though it might not have a '%' key.
• Multiply the number by the percentage fraction.
• If your calculator does not have a percent key and you want
to add a percentage to a number multiply that number by
1 plus the percentage fraction.
 Operation English Equivalent
+ plus, or addition
- minus or subtraction, Note: there are DIFFERENT keys to make a
positive number into a negative number, perhaps marked (-) or
NEG known as "negation."
• Most calculators today have the * times, or multiply by
/ over, divided by, division by
following operations, which you ^ raised to the power
need to know how to use yx y raised to the power x
Sqrt or  square root
ex "Exponentiate this," raise e to the power x
LN Natural Logarithm, take the log of
SIN Sine Function
SIN-1 Inverse Sine Function, arcsine, or "the angle whose sine is."
COS Cosine Function
COS-1 Inverse Cosine Function, arccosine, or "the angle whose cosine
is."
TAN Tangent Function
TAN-1 Inverse Tangent Function, arctangent, or "the angle whose
tangent is."
() Parentheses, "Do this first."
Store (STO) Put a number in memory for later use
Recall Get the number from memory for immediate use
SELECT METHOD SUITABLE FOR REQUIRED CALCULATIONS AND
PERFORM FINANCIAL CALCULATIONS TO COMPLETE WORK
REQUIREMENTS USING TECHNIQUES SUITED TO SELECTED METHOD

• INDUSTRY-STANDARD TECHNIQUES AND METHODS TO

PERFORM ROUTINE CALCULATIONS
• When performing calculations to complete different work requirements, there
is a range of techniques that can be used
Appropriate techniques include:
• Multiplication • Percentages
• Division • Fractions
• Addition • Decimals
• Subtraction • Straight-line graphs
 MULTIPLICATION
• The process of multiplying a number by another number is called multiplication.
• Multiplication is often referred to as ‘times’ (or repeated addition)
• The symbol used for multiplication is '×'

• For example, 7 × 2 = 14
• This is read as seven times two is equal to fourteen or simply, seven times two is fourteen.
• To multiply a large number with another number, we write the numbers vertically and generally
multiply the larger number with the smaller number.
DIVISION
• Division is the action of separating something into parts or the process of being separated
• It is breaking a number up into an equal number of parts
• Example:  20 divided by 4 = ? 
• If you take 20 things and put them into four equal-sized groups, there will be 5 things in each group
• The answer is 5
ADDITION
• The process of calculating the total of two or more numbers or amounts is addition (often signified by the plus
symbol "+")
• The addition of two whole numbers is the total amount of those quantities combined
• The addition is finding the total, or sum, by combining two or more numbers
• Example: 8 + 3 = 11 is an addition
SUBTRACTION
• Subtraction is a mathematical operation of removing objects from a collection.
• It is signified by the minus sign (−)
• For example, there are 5 balls, remove 2 balls, only 3 balls are left
• Therefore, 5 − 2 = 3
• Subtraction can also signify combining other physical and abstract quantities using different kinds of objects
including negative numbers, fractions, irrational numbers, vectors, decimals, functions, and matrices.
• In mathematics, subtraction means taking something away from a group or number of things.
PERCENTAGES
• A percentage, in mathematics, is a number or ratio expressed as a fraction of 100
• It is often denoted using the percent sign, "%", or the abbreviations "pct.", "pct“ – a percentage is a dimensionless
number (pure number)
• Percent is an abbreviation for the Latin ‘per centum’, meaning for each 100
• 100%, then, means 100 for each 100, which is all
• 100% of 12 is 12
• 50% is another way of saying half because 50% means 50 for each 100, which is half –
50% of 12 is 6
FRACTIONS
• Fractions are for counting PART of something
• A fraction is a part of a whole
• When you slice pizza, you will have fractions:

/21 1
/4 3
/8
(One-Half) (One-Quarter) (Three-Eighths)
DECIMALS
• A decimal is any number in our base-ten number system
• Specifically, we will be using numbers that have one or more digits to the right of the decimal point in this unit of
lessons
• The decimal point is used to separate the one's place from the tenths place in decimals
• (It is also used to separate dollars from cents in money)
• As we move to the right of the decimal point, each number place is divided by 10
 STRAIGHT-LINE GRAPHS

• The equation of a straight line is usually:

y = mx + b
What does it stand for?
• y = how far up
• x = how far along
• m = Slope or Gradient (how steep the line
is)
• b = the Y Intercept (where the line crosses
the Y axis)

Slope (or Gradient) Y-Intercept
 TOPIC 3 - CHECK CALCULATIONS AND
RECORD OUTCOMES
• CHECK FOR ACCURACY OF COMPUTATIONAL RESULTS AND CORRECT ERRORS WHERE REQUIRED,
INCLUDING TYPICAL COMPUTATIONAL ERRORS AND WAYS TO CHECK FOR THEM
• Checking results is imperative to ensure calculations are accurate and meet required outcomes.
• Common computational errors may include:
• Input/transcription errors
• Wrong spreadsheet function or formula used
• Wrong computational sign
• Incorrect order of operations
• Loss of constants
• Incorrect positioning of decimal points and brackets in equations
• Input / transcription errors: A transcription error is a type of data entry error that is
commonly made by human operators or by optical character recognition (OCR)
programs.
• Human transcription errors are usually the result of typographical mistakes caused
by striking the wrong key on a keyboard, or by striking two or more wrong keys
because of finger misalignment with respect to the keyboard
• Electronic transcription errors are the result of attempts to scan printed matter that
has been compromised, or that is rendered in an unusual font
• Some transcription errors can be identified using spell checking programs
• Wrong spreadsheet function or formula used: To calculate new values, analyse data, and much more you use
formulas.
• However, formulas also have a downside: If you make even a small mistake when typing a formula, it can give
an incorrect result.
• A spreadsheet might not always tell you if the formula is wrong or inaccurate
• These tips should provide you with the some of the tools to identify many common errors, even if they won't
help you solve every problem you encounter.
• Check the references
• Look for mix-ups
• Break it up into several smaller formulas
• Check the arguments
• Estimate
• Walk through the order of operations
• Wrong computational sign: Computation is a calculation involving
numbers or quantities.
• Act, process, or method of computing and calculation.
•  Incorrect order of operations: "Operations" relates to addition,
subtraction, multiply, divide, etc.
• It is helpful to remember that if it isn't a number, it is most likely an
operation.
• Loss of constants: A constant, in Algebra, is a number on its own, or sometimes a letter (a, b or c) to stand for a
fixed number.
• A fixed value.

• A constant is a real number that is “significantly interesting in some way”.

• Incorrect positioning of decimal points and brackets in equations: The positioning of numbers, decimal points and
brackets in equations is vital for correct calculation.

• Our decimal system lets us write numbers as large or as small as we want, using the decimal point.
• Digits can be placed to the left or right of a decimal point, to show values greater than one or less than one.
 RECORD CALCULATION RESULTS ACCORDING TO ORGANISATIONAL
REQUIREMENTS AND STORE OR ELECTRONICALLY FILE
CALCULATION WORKSHEETS FOR FUTURE USE ACCORDING TO
ORGANISATIONAL POLICY AND PROCEDURES
• All companies and businesses keep financial records and calculations to ensure they recognise how
their processes are performing, auditing and tax purposes.
• Some companies, need to keep these records for the purposes of preparing and lodging financial
reports with the Australian Securities & Investments Commission (ASIC).
• Financial reports prepared by the Corporations Act generally must comply with the accounting
standards.
• Although initially, it may seem that this time would be better spent on running your business, by doing
your bookkeeping:
• You'll minimise costs
• Have more control
• Get a greater understanding of your operations and financial information
• Bookkeeping: Recording the routine financial transactions within appropriate
account categories is bookkeeping.
• A bookkeeper accumulates all of the information that requires being recorded into
the system.
• The bookkeeping system provides the numbers for the accounting system.
• Accounting: Accounting is analysing, measuring, classifying, and connecting
financial statistics to provide valuable information about your business.
• All of the information is used by the accountant, to advise you on your business
performance and offer you strategic advice on improving profitability and building
your business.
• It is important to keep accurate and up-to-date financial records.
• The key reason for keeping accurate and up-to-date financial records are:
• Financial records provide information to allow you to monitor the performance of your
business
• It is a legal requirement.
• You are required to keep financial records for a minimum of five years after they are
prepared, obtained or the transactions completed
• Your obligations to maintain records for five years continue even if you sell, close, or
retire from your business
• The records need to be in plain English and allow for ease of access should the tax office
ever wish to see them
• To complete your business activity statements and other tax obligations when they are
due, it will be easier and faster if you maintain good financial records
• The Australian Taxation Office's Record-Keeping Evaluation Tool is designed to help you find out which
business records you need to keep and to evaluate how well your company is meeting its record-keeping
responsibilities.
• They also provide calculators, different rates and business tools, as well as information on record keeping for
small business on their website.
• It is a legal requirement that a company keeps all of its financial records that are:
Correctly registered and explain its transactions and financial position and performance
 Enable genuine and fair financial statements to be prepared and audited
• ‘Financial records’ include receipts, cheques, invoices, documents and working papers that explain the ways and
means by which all the financial reports have been prepared.
• Some financial records include:
• Financial statements
• General journal and general ledger
• Asset register
• Computer backup discs
• Cash records
• Bank account statements, bank reconciliations and bank loan documents
• Sales/debtor records
• Work-in-progress records
• Job/customer files
• It is essential that organisational policies and procedures relating to record keeping and filing are evaluated to
ensure that they remain relevant to the changing profiles and actions within the organisation.
• It is essential that organisational policies and procedures relating to record keeping and filing are evaluated to
ensure that they remain relevant to the changing profiles and actions within the organisation.
• Organisational policies and procedures may also include :
• Working with others
• Participating in ongoing learning
• Monitoring and evaluating own performance
• Managing own time and priorities
• Applying goals and visions
• Recording and filing systems must be adequate in size, complexity, and in ease of use for
organisations.
• The following standard format generally applies to accounting policy and procedures:
• Title
• Purpose
• Definitions
• Roles and responsibilities
• Procedural content
• Performance measures (where applicable)
• Documents/ Forms/Guidance Notes (where applicable)
• References
The End