Aos 4 - Sac

Question 1

Reasons for a seperate bank account

Answer 1

-seperate entity accounting principle
-Ease of monitoring financial performance and position of the business
-ease of calculating business expenses and income

Question 2

Reason for: Seperate entity accounting principle

Answer 2

The owners finances are seperate to that if the business and therefore should be recorded separately (this is easier to do with seperate bank accounts)

Question 3

Define: business bank account

Answer 3

This is a checking or savings fund separate from the owners personal bank account

Question 4

Business bank accounts are important because:

Answer 4

-the business is a seperate entity from the person; finances should be seperate
-easier to keep track of financial performance
-fees such as interest are seperate from personal expenses

Question 5

Factors to consider when choosing the right bank account:

Answer 5

-bank fees - there may be a monthly or annual fee for the account

-interest rates - savings account will earn interest, overdrafts and credit cards will be charged interest

-overdraft facility - this allows the bank balance to go negative, improving the businesses access to cash

-credit cards
-convenience and support

Question 6

Financial control systems

Answer 6

-budgeting
-cash-flow management
-control of accounts receivable
-inventory control
-auditing

Question 7

Define: financial control systems

Answer 7

Financial control systems help the owner monitor, record and evaluate the businesses financial success

Question 8

Financial control systems are important because:

Answer 8

• so you can keep track of your business and it’s profits
  -the government requires record to be kept for tax purposes
  -allows the owner to make decisions about the future of the business

Question 9

A new business could potentially suffer financial problems because of:

Answer 9

-poor systems
-lack of cash flow
-incorrect pricing

Question 10

Accounting crash course

Answer 10

Profit = revenue - expenses
Break-even point = the amount of revenue needed to meet all expenses (when profit = 0)

Question 11

Definitions

Answer 11

Revenues - money earned from selling your good/service

Expenses - money paid to run the business

Start up costs - price of opening the business

Fixed costs - expenses which must be paid regardless of sales (electricity, rent, marketing, wages)

Variable costs - expenses which increase with more sales (materials, packaging, postage)

Question 12

Define: budgeting

Answer 12

Refers to predicting or estimating the value of the businesses financial control performance for a given period of time in the future

Question 13

Why budgeting is important:

Answer 13

-used to control the business
-helps the business establish standard and use them as a benchmark against which to compare actual events
-by comparing actual with planned results the business could ask questions about why or why not certain targets were reached or why results were better than anticipated

Question 14

Define: cash-flow

Answer 14

The money being transferred into and going out of the business

Question 15

Manage your cash flow by:

Answer 15

-chasing up people who owe you money regularly
-ensure customers are paying the correct amount of time
-offer discounts for cash-paying customers or prompt payment

Question 16

Define: accounts receivable

Answer 16

The outstanding invoices or payments that a business has - the money that the business is owed by its customers

Question 17

Strategies to control accounts receivable:

Answer 17

+ set the right credit terms - typical payment cycle ranges from 30-90 days
- longer payment term extends more credit to customers, shorter payment terms should result in the business being paid faster

+offer a variety of payment methods to make payment easier
- bonuses/rewards for early payment (discounts, gifts, free shipping), late payment fees could also be used to encourage prompt payments

Question 18

Define: inventory

Answer 18

Materials on hand to complete production - businesses hold large inventories to make sure that they don’t run out of materials

Question 19

Define: inventory control

Answer 19

Is a system businesses use to ensure the costs associated with maintaining an inventory of materials are kept to a minimum

Question 20

Inventory control strategies:

Answer 20

• not allowing materials to remain idle and making sure the materials are available for production when needed
• using both physical control of inventory and through accounting control (inventory recording system)
  -conduct stock takes, compare what is expected to be available any differences outline problems with stock control

Question 21

Define: auditing

Answer 21

The process of testing and eveluating a businesses accounting processed and internal controls

It’s important because it provides the business with valuable feedback and improve accounting processes and internal controls of a business

Question 22

Define: record-keeping

Answer 22

Record all transactions (expresses/revenues) in a table

Question 23

Legal requirements of business

Answer 23

• business is a highly regulated area of law in Australia
• business laws exist to protect the public, employees and business owners from dangerous activity or exploitation
• unincorporated businesses (sole traders, partnerships) are legally the same as their owners

Question 24

Registering a business name

Answer 24

-unique business name
-business should trademark their name
- entrepreneurs can name their business something other than their legal name

Question 25

Registering a website domain

Answer 25

-without a unique domain name, it will be hard for a business to develop an online presence
-.com.au, .net.at domain addresses require an ABN
-domain name should be easy to read, fine and relate to their business name

Question 26

Tips for choosing perfect domain name

Answer 26

-make it easy to type
-keep it short
-use keywords
-target your area
-avoid numbers and hyphens

Question 27

Trade practises legislation:

Answer 27

This area of law determines acceptable behaviour for sellers and buyers in Aus, including:
-product safety
-pricing
-competition
-false advertising

Question 28

Tax compliance:

Answer 28

Paying tax = compulsory
Aus tax office (ato) is responsible for collecting tax and identifying tax fraud/evasion

Question 29

Types of business taxes include:

Answer 29

-income tax
-goods and services tax
-fringe benefits tax
-PAYG

Question 30

Work safe insurance

Answer 30

WORK HEALTH AND SAFETY ACT 2001 outlines a large area of law called occupational health and safety, ensures the safety of workers at businesses

Question 31

All business must take out work safe insurance for their employees, if they are injured in the workplace, it covers:

Answer 31

• replacement of lost income
• medical rehabilitation treatment costs
  -legal costs
  -lump sum compensation in the event of a serious injury

Question 32

Define: policy

Answer 32

A set of broad guidelines to be followed by all employees when dealing with important areas of decision making. Acts as a guiding principle

Question 33

Define: procedures

Answer 33

Support policies. They are a series of actions or steps enabling a policy to be put into practise or to resolve a dispute in the event of a breach of policy.

Question 34

Effective policies:

Answer 34

-recognise the rights of people within the organisation
-are clearly expressed and easily understood
-are clearly and widely communicated

Question 35

Common corporate policies:

Answer 35

-recruitment policies
- customer service policies
- supplier policies
-accounting policies

Question 36

Policy development process:

Answer 36

PROBLEM - identify the issue
ANALYSE - research policies of other organisations as alternatives
CONSULT - stakeholders are informed of possible policy change and feedback is sought from them
DRAFT - a draft policy is written based on research and stakeholder input
REVIEW - policy is reviewed with stakeholder input and adjustments can be made
APPROVAL - senior management sign off on the policy and it’s implemented in the organisation
MONITOR - evaluate and assesses using set criteria if the change was effective as solving the original problem