What are the record keeping requirements for a business in Australia?

 Accountings record which describes financial position and transactions of the business

·         Keep the record of capital gain.

·         Correction of mistake or any changes in return

·         Keeping record of cash

1.      What is an audit and how often can a business be audited by the tax office?

        Audit is a process through which the financial information of the organization is evaluated. The audit determines whether the organization is keeping the financial record efficiently or not. The audit is conducted by the Tax office of Australia when it wants to deeply examine the issues related to tax. The tax office contacts the business for an audit and creates a professional relationship with business. Usually the tax office performs review first and then perform the audit however audit can be done without review as well.

2.      What records must a business keep for auditing purposes?

The following record must be kept for the auditing process:

·         Documents that provides evidence of calculation, intention and estimate

·         The computer files and electronic information is required

3.      What are the penalties for a business not keeping the required records?

If the business does not keep record as required by the Australian tax office than the business will have to pay 20 penalty units.

Part B

Question: 1

             Simpsons Pty Ltd. restaurant sold 54600 units of food and 20000 units of drinks according to which total revenue generated from the sales of food can be calculated as $573,300 a year. Total revenue of drinks and food was recorded as $623,300. Subtracting the cost of food and drinks ($267,160) from the revenue total earned profit in one year is equal to 356,160.

Question: 2

Simpsons Pty Ltd. was selling out food items and drinks to the targeted market at the price of 10.50 (food) and 2.50 (drink). Somehow, cost per unit was 4.60 and 0.80 respectively for food and drinks. Simpsons Pty Ltd. managerial analysis concluded that the company needs to bring down the cost of operations in order to enhance the profit of the year. Considering the requirement of decrease in cost management of Simpsons Pty Ltd. signed a contract with the beverages selling the company as a result of which prices of drinks were reduced from 4.60 to 0.50.

Somehow, at the same, it was decided that Simpsons Pty Ltd. must have to sell out at least 2000 units of drinks every month in order to gain a discount on beverages purchase. Furthermore, efforts were done to increase profit by at least 10% for the upcoming years. Based on new costs and prices, a budget is developed for the next year business operations of Simpsons Pty Ltd.

           In the budget total revenue expected to be earned from the sales of food items is around $780,780 on an annual basis. Somehow, the quarterly sales and monthly sales would be like $195,195 quarterly and $65,065 monthly. In addition, the estimated sales of drinks are 30000. Thus expected revenue to be generated from the sales of drinks is like $45,000 (annual), $11250 (quarterly) and $3750 (monthly). Although, efforts are done to reduce the cost of drinks so the overall cost of drinks and food items would also get change. The calculated cost for the sales of 60060 units (food) and 30000 units (drinks) would be $291,276 collectively ($276,276 food and $15,000 drinks). However, budgeted gross profit is $534,504 annually which is calculated by subtracting the total amount of cost from revenue or sales.

            The budget also includes quarterly details and monthly details. Quarterly and monthly sales and cost are calculated based on average. According to estimation average budgeted net profit in a quarter (4 months) would be around $130,751 and $43,584.

Question: 3

            Simpsons Pty Ltd. forecasted sales and cost of drinks and meals to develop a budget for future operations. While in the future sales and cost occurred with some difference. To find out this difference variance is calculated which elaborate on the key differences in revenue amounts, the quarterly expense of rent and wages, and the overall cost of service for meal and drinks. Variance calculated in gross profit and net profit are as $459,151 and $432,526.

Question: 4

a)

        Simpsons Pty Ltd. developed a statement for profit and loss based on forecast and prediction for future sales and profit. Somehow, the calculated and budgeted amounts were different from the actual results generated by the business operations of Simpsons Pty Ltd. in the first quarter of the year. Based on this difference, further improvements are made in the budgeted amounts of the next three quarters. The presented below budget is based on the amounts of sales, cost, and profit after making the required changes and adjustments in the previously estimated budget (the budget of the first quarter).

b)

            In the above mentioned table net profit and gross profit of the quarters is getting change. The key reason behind this change is the change in revenue and expense amounts. In the previous quarter (Q1), revenue was 20% more than budgeted sales. Considering this it can be said that sales are increasing over the period of time. Thus, sales in quarter 2, 3, and 4 are calculated with a continuous increase of 20% in the sales of food items. Somehow, sales of drinks are also estimated to be increased by the percentage of 20 over the next quarters.

            In addition, variance indicated that food cost was 30% higher than the budget forecasted. The units of beverages sold per quarter in the budget were forecasted as 20000. While actual sales results and variance analysis presented that total sold drinks were limited to 15,000 units only. Considering this information cost of drinks is calculated by multiplying per unit cost with 15000 units.

c)

According to the information cost control efforts were required to be done by the management of Simpsons Pty Ltd. to enhance profit thus the calculated costs for the next quarters are based on 10% reduction per quarter. Total variance recorded was around $6500 in the quarter only. High cost and expense indicate the need to decrease the cost and expense in order to secure future growth and profit. Simpsons Pty Ltd. will try to decrease its expense by 5%. Thus the total net profit will increase by each quarter.