You have been asked by the owner of a new consultancy called Voyager to prepare the master budget. The consultancy consists of the owner who charges out at $68 per hour and the junior staff who are charged out at $42 per hour. The owner has advised you that the following hours are forecast for each quarter.
The consultancy has a credit system of payments with 60% of payment received the quarter in which they are earned and the remaining 40% earned the following quarter. The opening accounts receivable is $13,200 incl GST. The GST is accounted for on an accrual basis.
- Prepare a quarterly revenue receipts forecast and cash collections forecast for the next financial year.
Revenue Receipts Forecast
|Quarter||Junior||Senior||Total||Junior @ $42/hr||Senior @ $68/hr||Total||GST||Total GST inc|
Cash Collections Forecast
- The owner will purchase a new vehicle in the September quarter for $27,500. In December they will purchase photocopiers for $5,500 and a computer system for $5,500 with an upgrade in March for a further $2,750. Each item is inclusive of GST. Prepare the Capital Expense Budget for the financial year.
Capital Expenditure Budget
|Total (net GST)|
- The information in the table is based on source documentation from the company’s previous operations. GST Expenses are shown.
Depreciation is $700 per quarter and tax payable at 30% of net profit per quarter. Wages for the senior staff are $8,000 per quarter and junior $5,000.
Complete the expense budget, budgeted statement of financial performance; you will need to add the non GST items to the expense budget, and the cash flow budget which has an opening cash balance of $42,000. The opening GST liability is 2,000 and the opening PAYG tax instalment is 2,500.
|Sub Total GST inclusive|
|Net of GST|
|Subtotal Cash Items|
Budget statement of financial performance
|Income tax 30%|
|GST Collected on Sales|
|GST Paid on Expenses|
|GST Paid on Capital Acquisitions|
Budget statement of cash flows
|Add Collections from revenues|
|Total cash available|
|Less estimated cash payments|
|Cash Payments in expense budget|
|Closing cash balance|
- Use the cash budget to prepare a graph of quarterly revenue received, payments made and closing cash position.
- Explain the graph by answering:
- Which quarter has the highest payments, what causes this?
- What advice would you give about the purchase of capital items?
- Approximately what effect would not be purchasing the capital items have?
- Which quarter has the highest revenue received?
- Describe the position of closing cash throughout the year. The owner realises that there will be significant expenses in this first year of operations. Identify in which quarter the milestone of revenues exceeding expenditures occurs. What effect does this have on cash?
- Suppose that Voyager has non-current assets valued at $55,000 with accumulated depreciation at the beginning of the year of 20,000. Use the depreciation expense for the forecast year and other relevant items to complete the budgeted statement of financial position as at 30th June. Assume no depreciation on new non-current assets and all equity is represented by retained profits.
Budget statement of financial position
As at 30 June
|Cash at bank|
|Total Current assets|
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