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Answer the following questions:
1. What are meant by the terms assets and liabilities?
2. What is a bank statement and how does it assist in identifying discrepancies?
3. What is the GST, who pays it and how is it calculated when shown as a GST exclusive price and as a GST inclusive price?
4. Describe the differences between accrual accounting and cash accounting?
5. Explain the following:
a. General ledger
b. Chart of accounts
d. Double entry accounting
Iain Hew owns The French Travel Agency, at Cape Drayton, Queensland and is thinking of buying new office furniture in three months’ time (December, 20XX) at a cost of $65,000. The old furniture will be sold at that time for $3,000. Assume an opening bank balance of $50,000 at the beginning of October. Other details include:
1. Iain estimates $70,000 sales for each month. Half these sales are received in cash and half are received in the next month as they are credit sales. Octobers credit sales from September, amount to $35,000.
2. Purchases amount to 25% of sales (excluding scrap) and are paid for in cash.
3. Labour costs are $20,000 each month.
4. Superannuation ($3,000), rent (3,000), energy bills ($2,000), miscellaneous ($2,500) are all paid monthly.
5. Transport costs to the dock, town accommodation areas, and general couriering work amount to $1,000 per month.
6. Rates are paid once in October of $5,000. Requirements:
1. Prepare a cash budget for each month for The French Travel Agency, with the view to advising Iain whether he is in a position to pay $65,000 cash for the furniture at the end of the third month (December). Include also an accurate heading for this cash budget.
2. Suppose your balance at end was negative, what (new approaches) actions to rectify the problem would you consider?
3. Who would you consult and inform in relation to resource decisions?
Recalculate The French Travel Agency’s cash budget for the same period if:
1. sales still averaged $70,000 per month,
2. with sales averaging 90% cash and 10%, debtors for September were $ 6,000
3. purchases averaging 30% of sales
4. bank balance to start was $4,000
5. all else remains the same.
6. is there a problem with resource decisions?
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