The Importance Of Accurate Financial Record Keeping And Analysis

Why Accurate Financial Record Keeping is Necessary

Question 1 Why is it necessary for organisations to collect, index, file and maintain accurate financial records? Discuss in 30 to 50 words2

The main reason for the organisations to collect the data, index file and maintain accurate records is to have a record of how the business is operating, to determine how the business is growing financially and which processes are assisting them, it will also display where the money has been invested and which areas are left for potential investments. Basically it determines the performance of the business as a whole.

Question 2. Collect three pieces of financial data. Each piece of data must come from a different source. Submit a copy of the data and your comments in response to these activities to your trainer/ assessor.

The three pieces of the financial data is balance sheet, profit and loss and cash flows.

Balance sheet of Wesfarmers

Balance Sheet
WESFARMERS LTD  (WFAFF) Cash Flow Flag BALANCE SHEET
Fiscal year ends in June. AUD in millions except per share data.	2017-06
Assets
Current assets
Cash
Cash and cash equivalents	1013
Short-term investments
Total cash	1013
Receivables	1633
Inventories	6530
Prepaid expenses
Other current assets	491
Total current assets	9667
Non-current assets
Property, plant and equipment
Land	2369
Fixtures and equipment	13544
Other properties	2783
Property and equipment, at cost	18696
Accumulated Depreciation	-9256
Property, plant and equipment, net	9440
Equity and other investments	703
Goodwill	14360
Intangible assets	4576
Deferred income taxes	971
Other long-term assets	398
Total non-current assets	30448
Total assets	40115
Liabilities and stockholders’ equity
Liabilities
Current liabilities
Short-term debt	1347
Accounts payable	6615
Deferred income taxes	292
Deferred revenues
Other current liabilities	2163
Total current liabilities	10417
Non-current liabilities
Long-term debt	4066
Deferred revenues
Pensions and other benefits	180
Other long-term liabilities	1511
Total non-current liabilities	5757
Total liabilities	16174
Stockholders’ equity
Common stock	22242
Other Equity	133
Retained earnings	1509
Accumulated other comprehensive income	57
Total stockholders’ equity	23941
Total liabilities and stockholders’ equity	40115

QANTAS AIRWAYS LTD  (QUBSF) Statement of  CASH FLOW
Fiscal year ends in June. AUD in millions except per share data.	2017-06
Cash Flows From Operating Activities
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-1368
Property, plant, and equipment reductions	34
Acquisitions, net
Purchases of investments	-16
Sales/Maturities of investments
Sales of intangibles
Other investing activities	-696
Net cash used for investing activities	-2046
Cash Flows From Financing Activities
Debt issued	419
Debt repayment	-453
Repurchases of treasury stock	-564
Cash dividends paid	-264
Other financing activities	8
Net cash provided by (used for) financing activities	-854
Effect of exchange rate changes	-9
Net change in cash	-2909
Cash at beginning of period	1980
Cash at end of period	-929
Free Cash Flow
Capital expenditure	-1368
Free cash flow	1336
Supplemental schedule of cash flow data
Cash paid for income taxes	4
Cash paid for interest	164

TELSTRA CORP LTD ADR  (TLSYY) CashFlowFlag INCOME STATEMENT
Fiscal year ends in June. AUD in millions except per share data.	2017-06
Revenue	25912
Cost of revenue	10958
Gross profit	14954
Operating expenses
Research and development
Sales, General and administrative	8100
Other operating expenses	4787
Total operating expenses	12887
Operating income	2067
Interest Expense	729
Other income (expense)	4309
Income before taxes	5647
Provision for income taxes	1773
Net income from continuing operations	3874
Net income from discontinuing ops
Other	17
Net income	3891
Net income available to common shareholders	3891
Earnings per share
Basic	1.63
Diluted	1.63
Weighted average shares outstanding
Basic	2394
Diluted	2394
EBITDA	10817

From the above analysis it can be referred that the balance sheet of the Wesfarmers is containing the assets and liabilities. The current assets and the current liabilities are under recorded under the proper head. The cash flows of the Qantas Airways have been collected from the annual report of Qantas Airways 2017. However, the income statement of Telstra can be recorded form bot the above sources

Evaluate in 30 to 50 words the usefulness of the data to those who might be required to provide a report on financial activity.

The data is useful to many people who include shareholders, suppliers, customers, employers, governments, prospective investors. The data is useful for the company to decide the investing decisions for the future purposes. The data is useful for the general public as well to record the effect of the company on the economy and the effects of the environment. The accurate data will be helpful in decision making (Warren and Jones, 2018).

Describe in 30 to 50 words how you could index the data to ensure it can be quickly located and referred to later.

The data can be indexed by pasting the links of the source form which the data has been recorded.

How can accurate coding help your organisation to ensure consistency and quality in financial analysis? Discuss in 50 to 80 words.

The accurate coding will keep the data organised and under one umbrella. The correct and accurate coding will make the financial statements more reliable and relevant for the users of the financial statements. The same format will be easy for the users to understand and they can analyse the data easily. Therefore, coding helps a lot in channelizing the data.

Collecting and Indexing Financial Data

Why might it be necessary to consolidate and/or convert financial data to allow it to be analysed in accordance with organisational requirements?
Explain how data might be consolidated or converted to allow it to be analysed. Discuss in 30 to 50 words

Data consolidation refers to the integration and recording of data from multiple available sources less than one umbrella. With the use of different software like tally, excel the raw data is used to and the figures are updated against the particular head and the formulas are linked with each other to create a double entry system.

1. You have been asked to calculate the moving average of a series of numbers. You need to include three days’ worth of data as part of the moving average.

Each day for nine days you obtain this data:

1. The data for day 1 is 300.
2. The data for day 2 is 300.
3. The data for day 3 is 270.
4. The data for day 4 is 720.
5. The data for day 5 is 330.
6. The data for day 6 is 240.
7. The data for day 7 is 240.
8. The data for day 8 is 210.
9. The data for day 9 is 240. Prepare a table in which you set out the actual data you received and the moving average (where applicable). Plot the actual data and moving average on a line graph.

A balance sheet is one of the financial statements which determine how the total assets are financed whether through debt or equity or how many assets are sufficient against the total obligations of the firm. It is a key driver which depicts both the financial model and accounting driver (Sunder, Sunder and Zhang, 2018).

1. Give three examples of assets

Three examples of assets are furniture, plant and machinery and building.

1. Give three examples of liabilities

The three examples of liabilities are secured loans, accounts payable and unsecured loans.

When should discrepancies be identified and dealt with? Discuss in 80 to 100 words

Discrepancy is that kind of data which falls in the area which is beyond the range of values or is otherwise indicated as an error (Beams, Brozovsky and Shoulders, 2017). The discrepancies shall be identified when the balances of the assets and liabilities do not coincide with each other. The variances can also be non-numerical also. A negative feedback from the employees can also be a discrepancy. This is also an indication that the discrepancies need to be dealt with. A negative response can hamper the productivity of the organisation.

What action should you take if a discrepancy occurs but you do not know how to fix it? Discuss in 30 to 50 words

The actions that shall be taken after arriving on the fact that the discrepancies have occurred can be of two types. First is the process of the instant rectification. Second is analysing all the possible causes and then finding out any kind of the additional discrepancies. An expert can also be hired in such a case. Management possess managerial skills and therefore they can lack in technical areas. Therefore, help can be taken from an expert or a skilled person to assure the rectification of errors.

An expense is an accounting term is money which is spent or incurred by the entity to generate the revenue (Reid and Myddelton, 2017).  Expenses generally depicts the cost of operating a business which is the sum total of the activities which are aligned towards making the profit.

1. Identify five expenses you or someone you know incurs on a regular basis.

The Usefulness of Financial Data for Decision-Making

Some of the expenses which are due on the regular basis are rent, property taxes, insurance of the vehicles, instalments of loan taken during the purchase of car and utility bills (De Simone, Klassen and Seidman, 2016).

1. What is the difference between cash and accrual based accounting? Discuss in 50 to 80 words

The cash basis and the accrual basis of accounting are two different method of accounting which is used to record the transactions. The major difference between the cash and accrual basis of accounting is that under the cash basis of the accounting the revenue is recorded when cash is received and the expenses are recorded when the cash is paid to the suppliers. Under the accrual basis of the accounting the revenue is recorded when earned and consumed entirely.

Tax Invoice Number 1013
Corner Servo
123 Beech Road
Plympton
ph 8123 4567
ABN 88 999 000 222
Supplied to:
EZ Mow
1 Princess Road
Para Hills SA 5096
3 Jan XXXX
Product	Description	Sub-total	GST	Line Total
SERVICE2	Service, tune-up, and oil change	175.00	17.50	192.50
	Total	192.50

1. If an invoice is for $109.89 including GST but the GST amount is not shown how much GST was included?

The GST amount is 9.89 and the original amount of the invoice is 100.

1. If you intend to sell a product for $75.50 (before GST) how much GST should you collect? What is the tax inclusive price for the product?

If the product is sold for $75.50 the amount of GST that shall be collected is $7.55.

• 1Locate an example of each of these documents:
  1. An invoice which is not a tax invoice.

If you cannot locate any type of required document create your own sample version containing all of the information which you would expect to find on it.

Label each document and specify whether you consider each one to be typical of similar documents within the same category. If not, explain in 30 to 50 words.

From these options which source document is the best evidence to show payment has been made?

A message on a Post-it note recording that Joe from accounts paid the electricity account on Thursday.

An invoice marked as having been paid by the employee who says they arranged payment.

Your organisation has purchased a new photocopier at a cost of $17,000. The purchase was made in July so there is no need to calculate depreciation for part of the first year. The copier will be out-dated and written off after five years at a book value of zero (Bobryshev, et al 2018).

Using the diminishing value method and the prime cost method, detail the cost each year to be allocated for reporting purposes and show the book value during each year.

Show your results in a table with comparisons between the two methods.

2 From where could you obtain information to ensure that your organisation’s statements and claims take full advantage of available benefits and allowances in accordance with statutory requirements? Discuss in 50 to 80 words.

The information can be obtained from the annual report or from the web site of the company. The information can also be obtained from the customer feedback as well. The benefits of the company availed can be asked by the employees who have been associated with the company from the long run. The compliance by the organisation will also depict the position and the performance of the company.

1. What is the ATO’s business portal used for? Discuss in 50 to 80 words

Accurate Coding for Consistency and Quality in Financial Analysis

The ATO’s business portal is a kind of a gateway to get the access of the online services and the businesses. It is used to provide the easy mechanism that allows the conduct of the transactions with the secure mode. The business can be managed easily and the services are tailored in such a manner which is beneficial for the customer.

1. How can organisations submit statutory requirement reports to the ATO? Discuss in 50 to 80 words

The procedure to submit the statutory requirement report to the ATO is to lodge a PAYG summary annual report as soon as the tax returns are filed. The different types of annual report along with the director’s report and all the appendix and the notes to accounts shall be attached and can be files electronically on the relevant portals created for each individual.

1. What are the three major obligations for taxation reporting?

The three major obligations for taxation reporting are to submit the business activity statement either monthly, quarterly or annually. All businesses registered for GST must lodge a BAS Business activity statement before the due date. And on the other hand the businesses that are not registered are required to submit the Instalment Activity Statement also known as IAS to pay the instalments.

1. You work for an organisation which is in financial difficulty.

After considering a variety of financial data you have decided to recommend that your organisation:

1. Reduce expenses.
2. Write-off thirty bad debts.
3. Change profit expectations.
4. Obtain finance to cover cash flow shortcomings.

What information will you provide to those responsible for decision-making within your organisation to support your recommendations? Discuss in 100 to 120 words.

The information required for the purpose of the decision making by the management to support the above recommendation sis as follows. For the reduction in the expenses the profit and loss statement shall be scrutinized, for the purpose of the writing off the third party bad debts allowance for doubtful accounts shall be analysed (Chambers, 2014). For the purpose of the change in the profit of the expectations the company shall focus on cost budgets and cash flow statements to see the variances. For obtaining finance to cover the cash flow shortcomings the information shall be obtained from the debt and equity statement. The company shall look into the documents and see how the funds have financed.

If recommendations are being made it is because the person making them believes them to be in the best interests of the organisation after considering the evidence which is available. For this reason there is no need for copies of that evidence to be provided.

I do not agree with this statement. The evidences are the proof and the key sources of the information which determines the authenticity of the data. These documents are the key drivers on the basis of which the recommendations have been made. On the basis of the evidences the recommendations were formed by the person. Therefore, it becomes highly necessary for him to keep evidences as a proof on the basis of which the judgement has been created. Otherwise he will be held responsible for the negligence of is duties.

1. To whom might reports and/or recommendations, relating to improved effectiveness and efficacy of functions and services be made? List six people that might require such communication

Consolidation and Conversion of Financial Data

The six people that require the report of recommendation are as follows.

1. Investors
2. Creditors
3. Banks while providing loans.
4. Management for forecasting and future decision making processes.
5. Employees
6. Lenders.
7. Recommendations should always be accompanied by relevant and concise supporting information. In a short sentence, explain why?

Performing financial analysis on your business with incorrect data will create a hassle for the firm. Therefore, the recommendation is necessary is one of the worst things a business can do (Haslam, et al 2015). Properly accounting for each and every individual transaction is extremely important. It is the summation of every individual transaction that culminates in a set of financial statements.

1. Your organisation has a turnover of approximately $12 million per annum. Last year it made a profit of $1.9 million.

Use the table to prioritise the issues referred to in the first column by placing a 1 alongside the issue which should be dealt with first, a 2 alongside the issue which should be dealt with next, a 3 alongside the issue which should be dealt with next and so on.

Issue	Priority
After reviewing a draft profit and loss statement it appears that the organisation might not achieve its profit goals by approximately $560 this financial year.
You have just had a meeting with the organisation’s auditors. They have informed you that the organisation might have been trading insolvent for approximately two months; however, they tell you that they might be mistaken as they do not have access to all data.
After calculating the break-even point for various products within your organisation you determine that the organisation’s biggest selling product is being sold at a small loss.
After preparing a cash flow budget you determine that the organisation will have a surplus of around $450,000 cash next month. You consider it would be prudent to invest the surplus.
You see that a supplier is no longer providing a discount on high volume sales. This will mean that the organisation will not be entitled to around $20,000 in discounted purchases in the coming financial year. You resolve to check whether a competitor offers a better deal.

1. Describe 10 issues that you could identify in statements, financial reports and/or financial data and which would require further review

The ten issues are as follows.

Incomplete data

At times the major issue is the incomplete data or information. Generally the financial statements are prepared for one accounting period which includes twelve months. Hence there is a possibility of disclosure of wrong information which can mislead the data. The correct financial position is determined by the true and complete financial statements.

Qualitative information is ignored

It is factual that only the quantitative information is included in the financial statements which are expressed in the monetary terms. But the qualitative information such as executives are managed efficiently, customer satisfaction and competitive strength cannot be expressed in the monetary terms. Though this information is not necessary but is required to be disclosed for real understanding.

Using historical cost

When the assets are measured at the historical cost it fails to change the values over the period of time. Therefore, the relevant accounting information becomes subjective, because the assets are less valuable.

Fraud and errors

There is always a possibility of the frauds and errors as the financial statements are prepared by the human. This will result in undermining the credibility and the relevance of the statements. Also there are high chances of the manipulation of the data to create false results.

Professional judgement

Professional judgement by the professionals of the accounting is difficult and not practically possible to apply consistently.

Cost benefit compromises  

Quality of the accounting information can be sacrificed due to the cost of generating the reliable information. The financial statements are used to determine the performance of the organisations which are used to predict the economic decisions.

Estimates

Normal accounting requires the procedure of the estimation when the accurate figures cannot be derived and just on the basis of pure guess the figures are obtained.

Verification

An audit of the financial statements cannot be 100 per cent accurate and cannot provide the absolute the guarantee. Even in the audits there are certain inherent limitations.

Balance sheet

Various assets and liabilities are recorded on the balance sheet and the real value is totally different form the book value. Hence the real position of the company cannot be traced.

Comparison is not possible

When different companies uses different policies and methods of calculations to arrive at the cost of inventory and assets that’s when the comparison of two companies fail and the performance of the company cannot be measured (Khan, 2014)

References

Qantas, (2018) Annual Report 2017 [online] Available from https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/annual-reports/2017AnnualReport.pdf [Accessed on 5th May 2018]

Reid, W. and Myddelton, D.R. (2017) The meaning of company accounts. New York: Routledge.

Bobryshev, A.N., Uryadova, T.N., Lyubenkova, E.P., Yakovenko, V.S. and Alekseeva, O.A. (2014) Analytical and management approaches to modeling of the accounting balance sheet. Life Science Journal, 11(8), pp.502-506.

Sunder, J., Sunder, S.V. and Zhang, J. (2018) Balance sheet conservatism and debt contracting. Contemporary Accounting Research, 35(1), pp.494-524.

Beams, F.A., Brozovsky, J.A. and Shoulders, C.D. (2017) Advanced accounting. Pearson.

Warren, C.S. and Jones, J., (2018) Corporate financial accounting. Cengage Learning.

De Simone, L., Klassen, K.J. and Seidman, J.K. (2016) Unprofitable affiliates and income shifting behavior. The Accounting Review, 92(3), pp.113-136.

Chambers, R.L. ed., (2014) An accounting thesaurus: 500 years of accounting. Elsevier.

Haslam, C., Tsitsianis, N., Andersson, T. and Gleadle, P. (2015) Accounting for business models: Increasing the visibility of stakeholders. Journal of Business Models, 3(1), p.62.

Safdar, R. and Yan, C., (2016) Information risk, stock returns, and the cost of capital in China. China Finance Review International, 6(1), pp.77-95.

Khan, S.A., (2014) Decision making using engineering economic tools: A real case study. Industrial Engineering & Management, 3(2), pp.1-6.

Morning Star, (2018) Balance sheet 2017 [online] Available from https://financials.morningstar.com/balance-sheet/bs.html?t=WFAFF®ion=usa&culture=en-US [Accessed on 5^th May 2018].

Invoice (2017) The ultimate guide to invoicing [online] Available from  https://due.com/blog/the-ultimate-guide-to-invoicing/ [Accessed on 5^th May 2018]

Amigo Bulls (2018), Income statement 2017, [online] Available from ttps://amigobulls.com/stocks/TLSYY/income-statement/annual [Accessed on 5^th may 2018].