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1. What are the procedures businesses put in place for minimising financial risk? Mention at
least 4.
First, is necessary to define what a risk is. A risk is an adverse event that may hinder the performance of a
business due to either internal or external factors. Financial probity covers the procedures to minimise
risks. Those are activities to manage and reduce risk in everyday business operations is an integral part
in the success of a business. Many businesses implement risk management plans to assist with the risks
the business may face. A risk management plan recognizes these risks and provides a strategy to deal
with them should they occur. This plan include the identification, analyses, evaluate and manage of risks.
Some of that procedures are:
 Accountability
 Transparency
 Impartiality
 Confidentiality.
2. Describe at least 4 principles of accounting and financial systems.

 Cost principle: The cost principle requires that assets be recorded at the cash amount (or the
equivalent) at the time that an asset is acquired. The amount recorded will not be increased for
inflation or improvements in market value. It is also known as the historical cost principle. For
example, the cost principle means that a long-term asset purchased for the cash amount of
$40,000 will be recorded at $40,000. If the same asset was purchased for a down payment of
$10,000 and a formal promise to pay $20,000 within a reasonable period of time and with a
reasonable interest rate, the asset will also be recorded at $40,000.

 Conservatism: If a situation arises where there are two acceptable alternatives for reporting an
item, conservatism directs the accountant to choose the alternative that will result in less net
income and/or less asset amount. Conservatism helps the accountant to "break a tie." It does not
direct accountants to be conservative. For example, potential losses in a company will be
reported on the financial statements or in the notes, but potential gains will not be reported.

 Full Disclosure Principle: If certain information is important to an investor or lender using the
financial statements, that information should be disclosed within the statement or in the notes to
the statement. As an example, a company is named in a lawsuit that demands a significant
amount of money. When the financial statements are prepared it is not clear whether the
company will be able to defend itself or whether it might lose the lawsuit. As a result of these
conditions and because of the full disclosure principle the lawsuit will be described in the notes to
the financial statements.

 Matching Principle: This accounting principle requires companies to use the accrual basis of
accounting. The matching principle requires that expenses be matched with revenues. For
example, sales commission’s expense should be reported in the period when the sales were
made (and not reported in the period when the commissions were paid).

3. Describe 3 international and local legislation and convention that are relevant to financial
management.

Australia's financial regulatory consists of three agencies, each with specific functional responsibilities:

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  The Australian Prudential Regulation Authority (APRA): Responsible for prudential
supervision. It is an integrated prudential regulator responsible for deposit-taking institutions
(banks, building societies and credit unions) as well as friendly societies, life and general
insurance and superannuation. APRA is charged with developing prudential policies that balance
financial safety and efficiency, competition, contestability and competitive neutrality.

 The Australian Securities and Investments Commission (ASIC): Responsible for market
integrity and consumer protection across the financial system. It administers and enforces a
range of legislative provisions relating to financial markets, financial sector intermediaries and
financial products, including investments, insurance, and superannuation and deposit-taking
activities. ASIC's aim is to protect markets and consumers from manipulation, deception and
unfair practices and, more generally, to promote confident participation in the financial system by
investors and consumers.

 The Reserve Bank of Australia (RBA): Responsible for monetary policy, overall financial system
stability and regulation of the payments system. The RBA has no obligation to protect the
interests of bank depositors or other creditors of banks; rather, its task is to deal with threats to
financial stability that have the potential to spill over to economic activity and consumer and
investor confidence. In the event of such threats, the RBA retains its discretionary role of ‘lender
of last resort’ for emergency liquidity support.

4. Explain the following terms:

 Asset: An asset is an economic resource that can be owned, and is expected to provide future
economic benefits. For example, cash, accounts receivable; inventory; prepaid expenses; and
property and equipment.

 Debt: A debt is a duty or obligation to pay money, deliver goods, or render service under an
express or implied agreement. One who owes, is a debtor; one to whom it is owed, is a creditor or
lender.

 Liability: A liability is an obligation arising from a past business event. It is reported on a

company's balance sheet. Liabilities are also part of the basic accounting equation: Assets =
Liabilities + Stockholders' Equity.

 Break-even point: The break-even point is the revenues necessary to cover a company's total
amount of fixed and variable expenses during a specified period of time. The revenues could be
stated in dollars (or other currencies), in units, hours of services provided, etc.
 Budget: A budget is a formal statement of estimated income and expenses based on future plans
and objectives. In fact, a budget is a document that management makes to estimate the revenues
and expenses for an upcoming period based on their goals for the business.

 Depreciation: The depreciation is the reduction of recorded cost of a fixed asset in a systematic
manner until the value of the asset becomes zero or negligible. For example, buildings, furniture,
office equipment, machinery etc.

 Owner’s equity: Owner's equity is one of the components of the accounting equation: Assets =
Liabilities + Owner's Equity. Owner's equity represents the owner's investment in the business
minus the owner's draws or withdrawals from the business plus the net income (or minus the net
loss) since the business began.

 Expenses: An expense is an outflow of money or assets to another individual or company as

payment for an item or service.

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  Revenue: A revenue is the income generated from sale of goods or services, or any other use of
capital or assets, associated with the main operations of an organization before any costs or
expenses are deducted.

5. Outline the following requirements of the Australian taxation office:

 GST: It means the goods and services tax is a value-added tax levied on most goods and
services sold for domestic consumption. The GST is paid by consumers, but it is remitted to the
government by the businesses selling the goods and services. As it’s almost always included in
the price on the shelf. The cost of GST is 10%.

 Company TAX: The Company TAX in Australia is a company business structure that taxed as a
separate legal entity that does its own tax return. These businesses are required to lodge an
annual corporate tax return which shows: the company’s income deductions, the income tax it is
liable to pay, based on profits (the difference between income and deductions).

 PAYG: It stands Pay As You Go. This system allows the business to meet their income tax
obligations by making payments at the end of each quarter of the year. These quarterly payments
go towards the expected income tax obligation accumulated from the business and investment
income for the current financial year.

 ABN: It stands The Australian Business Number (ABN). An Australian Business Number (ABN) is
a unique 11 digit number that identifies the business to the government and community. An ABN
doesn't replace the tax file number, but it is used for various tax and other business purposes.

 Superannuation: Superannuation is money saved during the working life to help support the
financial needs when employees retire. A superannuation is an organizational pension program
created by a company for the benefit of its employees. It is also referred to as a company pension
plan.

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