SITXFIN002 Interpret Financial Information

ASSESSMENT TOOL
Qualification SIT50116 Diploma of Travel and Tourism Management

Cluster number and name: TD 2.1 Interpret financial information
Units of competency: SITXFIN002 Interpret financial information
Student’s ID: Please advise all students to insert their ID this column and on all pages, they submit.
Assessor’s name: Please ensure your name or assessor name is inserted.
Assessment Task 1 - Knowledge Questions

Assessment task description
 This is the first (1) assessment task which consists of eighteen (18) written knowledge questions. You must complete all
the knowledge questions at the required level to get a “Satisfactory” outcome.
Purpose of the assessment task
The purpose of this assessment task is to assess your knowledge in the following:
Knowledge to: identify distinct financial terminologies used in preparation of financial statements, identify, access and
interpret financial information and reports necessary to monitor business performance define distinct types of elements of
financial reports pertinent to operational or departmental activities, implement cash accounting method used for recording and
reporting of goods and services tax (GST), to identify the impacts of financial accounting for operations manager in planning
and decision making and the responsibility the individuals hold, identify the purpose of chart of accounts and fundamentals of
double entry bookkeeping, use the knowledge gained through training and learner resources, identify the key features that
must be present in a financial management software to effectively manage the increasingly complex and multi-faceted
transactions and processes.
the timeframe for analysing and providing information on operational and departmental activities, collect, review,
interpret/understand and analyse/review text-based business information from a range/number of sources
Assessment conditions and resources
Assessment will be conducted in a safe simulated classroom environment where you will have access to technology such as
computer, internet, WIFI, software to produce business documents, sample style guides and policies and procedures
Questions:
1.1. Explain any five (5) financial terminologies used in preparation of financial statements in hospitality and tourism industry.
(Guide 150-200 words) Financial ratios are used to simplify financial and non-financial data to monitor and improve
business performance. What information and financial reports are required to calculate financial ratios? Identify and
explain in 200-250 words.
Balance Sheets
A balance sheet is designed to communicate the “book value” of a company. It’s a simple accounting of all of the company’s
assets, liabilities, and shareholders’ equity, and offers analysts a quick snapshot of how a company is performing and expects
to perform.
Income Statements
An income statement is a report that a company generates in order to communicate how much money it has earned over a
period of time. They’re often found as quarterly and annual reports.
 Operating expenses, which detail every expense the company encountered during the reporting period
SITXFIN002 Assessment Tool Version 26 Issued /4/2017

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 Depreciation, which quantifies the extent to which a company’s assets (for example, aging equipment or vehicles)
have lost value over time
 Net income, which subtracts the company’s expenses from its gross revenue in order to determine its total level of
profits or loss
 Earnings per share (EPS), which divides net income by the total number of outstanding shares
Cash Flow Statement
A cash flow statement is a report that details how a company receives and spends its cash. These are also called cash inflows
and outflows.
 Operating activities, which details cash flow generated from the company delivering upon its goods or services,
including both revenue and expenses
 Investing activities, which details cash flow generated from the buying or selling of assets, such as real estate,
vehicles, and equipment (using free cash and not debt)
 Financing activities, which details cash flow from both debt and equity financing
Statement of Shareholders’ Equity
The statement of shareholders’ equity is a financial statement that details changes in the equity held by shareholders, whether
those shareholders be public or private investors.
Management’s Discussion and Analysis (MD&A)
The MD&A is a document written by the company’s management, which is designed to accompany financial reports
1.2. Following are the distinct types of elements of financial reports pertinent to operational or departmental activities:

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a. Budgets
A budget is an estimation of revenue and expenses over a specified future period of time and is utilized by
governments, businesses, and individuals. A budget is basically a financial plan for a defined period, normally a year
that is known to greatly enhance the success of any financial undertaking.
b. Cash flow statement
A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows a company
receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for
business activities and investments during a given period.
c. Covers
Refers to the financial ratios that calculate a company's margin of protection in servicing its debt and making
dividend payments. Cover is also used literally to denote the act of preserving the overall value of the portfolio, as in
providing cover against market volatility
d. Expenditure
An income and expenditure statement is a type of financial document designed to identify all forms of income that is
received within a given period, while also documenting all payments or expenditures that were related to that same
period.
e. Labour and wages
Wage labour usually referred to as paid work, paid employment, paid labour, or (critically or pejoratively) wage
slavery, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their
labour power under a formal or informal employment

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f. Occupancy rates
Occupancy rate is the ratio of rented or used space to the total amount of available space. Analysts use occupancy
rates when discussing senior housing, hospitals, bed-and-breakfasts, hotels, and rental units, among other categories.
g. Purchases
A purchase means to take possession of a given asset, property, item or right by paying a predetermined amount of
money for the transaction to be completed successfully. In other words, its' an exchange of money for a particular
good or service.
h. Receivables aging report
Accounts receivable aging (tabulated via an aged receivables report) is a periodic report that categorizes a company's
accounts receivable according to the length of time an invoice has been outstanding. It is used as a gauge to determine
the financial health of a company's customers.
1.3. Explain in 30-50 words each, the following key elements of financial record keeping and key terminologies in accounting
systems:
a. General ledger
It holds a complete record of all transactions taking place within a specified accounting period. Major examples of
individual accounts in a general ledger include asset accounts, liability accounts, and equity accounts
b. Subsidiary ledger
A subsidiary ledger stores the details for a general ledger control account. Once information has been recorded in a
subsidiary ledger, it is periodically summarized and posted to a control account in the general ledger, which in turn is
used to construct the financial statements of a company

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c. Journal
A journal is a detailed account that records all the financial transactions of a business, to be used for the future
reconciling of accounts and the transfer of information to other official accounting records, such as the general ledger.
d. Cash flow
The term cash flow refers to the net amount of cash and cash equivalents being transferred in and out of a company.
Cash received represents inflows, while money spent represents outflows. The amount of cash or cash-equivalent
which the company receives or gives out by the way of payment(s) to creditors is known as cash flow. Cash flow
analysis is often used to analyse the liquidity position of the company.
e. Transactions
A transaction involves a monetary exchange for a good or service. Accrual accounting recognizes a transaction
immediately after it is finalized, regardless of when payment is received or made. By contrast, cash accounting, used
mostly by smaller businesses, records a transaction only when money is received or paid out.
f. Receipts
Receipts are an official record that represents proof of a financial transaction or purchase. Receipts are issued in
business-to-business dealings as well as stock market transactions. Receipts are also necessary for tax purposes as
proof of certain expenses.
g. Disbursements

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In business accounting, a disbursement is a payment in cash during a specific time period and is recorded in the
general ledger of the business. This record of disbursements shows how the business is spending cash over time.
Payments of dividends to shareholders are often termed disbursements.
h. Invoices
An invoice is a document that maintains a record of a transaction between a buyer and seller, such as a paper receipt
from a store or online record from an e-tailer. Invoices are a critical element of accounting internal controls and
audits.
i. Accounts payable
Refers to an account within the general ledger that represents a company's obligation to pay off a short-term debt to
its creditors or suppliers. Accounts payable is a liability and not an asset. Accounts payable entries result from a
purchase on credit instead of cash. They represent short-term debts, so the company reports AP on the balance sheet
as current liabilities
j. Debtors
In general, a debtor is a customer who has purchased a good or service and, therefore, owes the payment in return to
the supplier. Customers/suppliers are called debtors/creditors for accounting purposes.
k. Creditors
A creditor is an individual or entity that is owed money. Typically, the creditors of a business are its suppliers, which
have provided it with goods and services, and in exchange expect to be paid by an agreed-upon date. Or, the business
owes money to a lender, which also expects to be repaid at a later date.

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1.4. What purpose does a reconciliation serve? What are the distinct types of account reconciliations? Explain in 100-150
words.
Reconciling the accounts is a particularly important activity for businesses and individuals because it is an opportunity to
check for fraudulent activity and to prevent financial statement errors. Reconciliation is typically done at regular intervals,
such as monthly or quarterly, as part of normal accounting procedures.
The process of reconciliation ensures the accuracy and validity of financial information. Also, a proper reconciliation
process ensures that unauthorized changes have not occurred to transactions during processing.
There are five main types of account reconciliation:
Bank reconciliation
Bank reconciliation or bank statement reconciliation is the process of verifying the bank balance in a business’ books of
account by comparing them with the statement of account issued by its bank (called the bank reconciliation statement).
Bank reconciliation is a type of internal control used by many companies to verify the integrity of data between the bank
records and their official records.
Customer reconciliation
In customer reconciliation or accounts receivable reconciliation, an entity compares the outstanding customer balance or
bills to the accounts receivable as entered in its general ledger. Customer reconciliation statement acts as proof that there is
no material inaccuracy in the accounts of the company. It helps unveil any error or irregularities in customer-related
accounting. It will also help identify fraudulent activity pertaining to accounts receivable.
Vendor reconciliation
Vendor reconciliation is defined as the reconciliation of accounts payable for a vendor with the statement provided by the
particular vendor. Here, an entity reconciles vendor balance in its books of accounts with the balance in the books of the

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vendor. It ensures that there are no discrepancies or mistakes in the amount a vendor charges an entity and the goods or
services the entity receives from the vendor.
Inter-company reconciliation
Intercompany reconciliation is the process in which a parent company consolidates all the general ledgers of its
subsidiaries in order to eliminate intercompany flows. The process identifies possible mismatches between subsidiaries due
to mistakes in invoicing and other transactions such as loans, deposits and interests
Business-specific reconciliation
Every business needs to prepare other reconciliations based on specific needs. Costs of Goods reconciliation is a good
example here. A business that has any form of inventory should prepare this reconciliation statement to match balances on
the cost of goods sold account
1.5. Assume the bank statements of your organisation has an unpresented cheque that has been recorded in the bank statement.
Does it require any adjustment in the balance sheet? Explain in 50-80 words.
An unpresented check is also referred to as an outstanding check or a check that has not yet cleared the bank. In the bank
reconciliation, the unpresented or outstanding check is deducted from the balance per the bank in order to arrive at the adjusted
or corrected balance per bank.

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When constructing a bank reconciliation, you would deduct any unpresented checks from the cash balance calculated by the
bank, since the bank does not yet have a record of the check
1.6. Why are the bank charges, the direct debits and credits recorded on the bank statement but not in the cash books? Explain
in 100-150 words.
Some entries that may have been made by the bank in the bank statement may not appear in the account holder’s cash book.
These include:
1. The notification of bank charges may have been sent by the bank before the month-end but may have been received by the
account holder after the month-end.
2. Checks deposited by the account holder may have been returned unpaid.
A bank immediately notifies the account holder if any check is returned unpaid, but such a notification may reach the account
holder after the month-end, particularly if the check was returned in the last few days of the month.
3. A deposit is received for the account holder directly by the bank. The account holder may, in many cases, learn of such a
direct deposit only on receipt of their monthly statement.
4. A payment is made by the bank on behalf of the account holder without the latter issuing a check (e.g. standing order
payments for rent or insurance premiums).
1.7. What do you mean by the term ‘cost accounting’. Explain fixed and variable costs included in financial statements with
examples. Write your answer in 100-150 words.
Cost accounting is a form of managerial accounting that aims to capture a company's total cost of production by assessing the
variable costs of each step of production as well as fixed costs, such as a lease expense.

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Cost accounting is an accounting process that measures all of the costs associated with production, including both fixed and
variable costs. The purpose of cost accounting is to assist management in decision-making processes that optimize operations
based on efficient cost management.
Cost accounting involves determining fixed and variable costs. Fixed costs are expenses that recur each month regardless of
the level of production.
Examples include:
-Rent,
-Depreciation
-Interest on loans
-Lease expenses
1.8. Explain in 100-150 words, the cash accounting method used for recording and reporting of goods and services tax (GST).
Businesses with an aggregated turnover of less than $10 million can choose to account for their GST using the cash accounting
method.
Accounting on a cash basis means you account for GST on the business activity statement that covers the period in which you
receive or make payment for your sales and purchases.
The advantages of the cash accounting method are that:
 the money flowing through your business is better aligned with your activity statement liabilities, so it's easier to
manage your cash flow
 it's suited to smaller businesses that handle cash transactions
Most larger businesses must use the non-cash accounting method. Small businesses can choose to use either the cash method
or the non-cash method.

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Using the non-cash method means you account for GST on the business activity statement that covers the period in which you
either:
 received any payment or you have issued the tax invoice before receiving payment (for a sale)
 received the invoice from your supplier before making the payment, or made any payment for a purchase.
This method is better suited to businesses that are not paid immediately and is:
 a way to track your true financial position – what is owed and what you owe
 helpful if you are dealing with multiple contracts and large amounts of money.
Non-cash accounting can be more complicated than cash accounting and you may need assistance from your registered tax or
BAS agent.
1.9. What are the impacts of financial accounting for operations manager in planning and decision making? Explain in 100-
150 words.
Operation managers need to know how the business is performing so they need to see the financial accounts to see how much
profit or loss is made and the reasons thereon. They also need management accounts to know usage such as hours, labour, and
cost recoveries per products or services. These information will impact their strategic thinking and lead them to make wise
decisions on how much to pay for wages, how much technicians are required, best prices for the input raw materials
Most operations are now integrated with production linked to sales, purchases, inventory holdings, and the financials and each
transaction updates the entire system. I believe that is the MRP\ERP that most operation personnel use. An increase in sales
reduces finished goods which in turn reduces work in progress and which triggers raw material purchases and so on can take a
course on Finance for non financial managers and he will understand basic trading accounts, costing, gross profits and the
basic financial statements.

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1.10. What is the purpose of chart of accounts? How are the chart of accounts listed based on the distinct categories of
accounts? Write your answer in 100-150 words.
A chart of accounts (COA) is an index of all the financial accounts in the general ledger of a company. In short, it is an
organizational tool that provides a digestible breakdown of all the financial transactions that a company conducted during a
specific accounting period, broken down into subcategories
The account names are listed in the chart of accounts in the same order in which they appear in company's financial
statements. Usually, the balance sheet accounts (i.e., assets, liabilities and owner's equity) are listed first and income statement
accounts (i.e., revenue and expense) are listed later.
In a chart of accounts, accounts are shown in the order that they appear on your financial statements. Consequently, assets,
liabilities, and shareholders' equity (balance sheet accounts) are shown first, followed by revenue and expenses (income
statement accounts).
1.11. What are the fundamentals of double entry bookkeeping? How would you state the debit and credit rule in double-entry
bookkeeping? Write your answer in 100-150 words.
In double-entry bookkeeping, all transactions are entered twice: once as a debit and once a credit. Debits are usually placed on
the left, while credits are on the right. Generally speaking, debits increase asset accounts, while credits decrease assets.
The main rule for the double-entry system entry is 'debit the receiver and credit the giver'. The debit entry for a transaction will
be on the left side of the general journal, while the credit entry will be on the right side of the journal.
The double-entry rule is thus: if a transaction increases an asset or expense account, then the value of this increase must be
recorded on the debit or left side of these accounts.
1.12. How does accrual accounting differentiate from the cash basis of accounting? Explain in 50-100 words.

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The difference between cash and accrual accounting lies in the timing of when sales and purchases are recorded in your
accounts.
Cash accounting recognizes revenue and expenses only when money changes hands, but accrual accounting recognizes
revenue when it's earned, and expenses when they're billed (but not paid)
The cash basis of accounting recognizes revenues when cash is received, and expenses when they are paid. This method does
not recognize accounts receivable or accounts payable.
1.13. List and explain in 100-150 words, the key elements of financial recordkeeping and terminology used for transactions,
receipts and disbursements?
Financial statements are used to provide financial information and determine the profitability of a company. To best
understand financial statements, it's important to understand the five elements of financial statements. Which are, assets,
liabilities, equity, revenues and expenses.
Financial record-keeping is simply keeping records of all the financial transactions of your business, e.g., recording sales,
entering vendor bills, and processing payroll. Basically, you will be tracking all movements of your money, both in and out of
your bank account.
Is the process of keeping or recording information that explains certain business transactions. Record keeping is a requirement
under tax law.
1.14. When does the private organisations publish financial reports for accounting period? Explain in 150-200 words.
For internal financial reporting, an accounting period is generally considered to be one month. A few firms compile financial
information in four-week increments, so that they have 13 accounting periods per year. Whatever accounting period is used
should be applied consistently over time.

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A reporting period, also known as an accounting period, is a discrete and uniform span of time for which the financial
performance and financial position of a company are reported and analyzed. In other words, the data contained in the financial
statements are generated by the company’s finance professionals from operations during the reporting period.
 A reporting period is the time span for which a company reports its financial performance and financial position.
 A company can choose to use the traditional calendar year of 12 months or adopt a 12-month fiscal year.
 Companies use the same reporting periods in order to make a comparison of the current financial performance and
financial position with those of the previous years.
1.15. What are the key features that must be present in a financial management software to effectively manage the increasingly
complex and multi-faceted transactions and processes? Explain in 100-150 words.
A financial management software solution can empower an organization to more effectively manage the increasingly complex
and multi-faceted transactions and processes it is faced with due to globalization, mergers and acquisitions, changing market
conditions, business expansion and diversification, and other critical events
1. Automation and Management of End-to-End General Accounting Procedures
Financial management software systems streamline and enhance all basic administrative financial processes from start to
finish, such as accounts payable, accounts receivable, cash flow management, purchasing, payroll, and general ledgers.
2. Support for Worldwide Financial Processes
With a financial management software package, companies have the tools and technologies they need such as support for
multiple currencies and conversions, languages, country-specific laws and guidelines, and multi-national transactions to better
coordinate activities that span multiple departments and business units, and improve the execution and management of all
financial tasks across all global locations.

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3. Planning and Forecasting
Companies who utilize financial management software solutions have a dramatically enhanced ability to leverage historical
data to predict future financial activities such as trends and patterns in income, revenues, and expenses. Additionally, a
financial management software system can allow an organization to understand how certain potential scenarios, such as
market conditions, acquisitions, or the additional of new business units, can impact its financial status. This makes strategic
planning more accurate and successful.
4. Cash Flow Management and Tracking
Tracking income as it is recognized by disparate departments and business units and monitoring how funds are spent across
various divisions and locations are faster, easier, and more accurate with a financial management software package. By
streamlining consolidations, allocations, budgets, and other cash flow management tasks and activities across an entire
enterprise, financial management software delivers a complete, unhindered, real-time view of cash flow status as well as all
related transactions.
5. Advanced Reporting and Analysis
The ability to rapidly generate thorough, consistent, and highly accurate balance sheets, profit and loss statements, budget
allocations, and other important financial reports is a key feature of today’s most popular financial management software
applications. Many financial management software packages also provide in-depth ad hoc analysis capabilities, so that
financial professionals can easily create custom reports to satisfy their own unique information needs.
Many of the financial management software packages on the market today are built on powerful architectures that provide:
 Advanced security features to prevent unauthorized access to confidential financial data.

 Web-based access to eliminate cumbersome client/server implementations and maintenance while ensuring anytime,
anywhere access to vital financial information.
 Seamless integration with other business applications to ensure rapid information sharing and full collaboration.
1.16. Describe in 20-30 words, the purpose of each of the following elements of financial reports:
a. Sales

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Sales are the proceeds a company generates from selling goods or services to its customers: In accounting terms, sales
comprise one component of a company's revenue figure. On an income statement, sales are typically referred to as
gross sales.
b. Stock
Preferred stock, common stock, additional paid‐in‐capital, retained earnings, and treasury stock are all reported on the
balance sheet in the stockholders' equity section
c. Transactions
A transaction for financial accounting purposes is an economic event that has a monetary impact on the financial
statements. Each monetary transaction is recorded in a journal, and the journal entries are then sorted by account and
posted to a ledger
d. Transactions exempted
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any
regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer's
operations and that no new securities are being issued
e. Units sold
The unit sales number on a balance sheet represents the total sales of a product in a given period. This sales
information is used to determine the price point that allows for the greatest profit per unit considering the actual cost
of production
f. Variance
A variance report is a document that compares planned financial outcomes with the actual financial outcome. In other
words: a variance report compares what was supposed to happen with what happened. Usually, variance reports are
used to analyze the difference between budgets and actual performance.

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g. Wastage
Special items are reported on the income statement and are separated out from other categories of income and
expenses so investors can more accurately compare the company's numbers across accounting periods.
1.17. When is it required to analyse the operational and financial activities in an organisation? Explain in 100-150 words.
There are three main types of business activities: operating, investing, and financing. The cash flows used and created by each
of these activities are listed in the cash flow statement. The cash flow statement is meant to be a reconciliation of net income
on an accrual basis to cash flow.
The goal of financial analysis is to analyse whether an entity is stable, solvent, liquid, or profitable enough to warrant a
monetary investment. It is used to evaluate economic trends, set financial policy, build long-term plans for business activity,
and identify projects or companies for investment.
 Analyse the Balance Sheet
 Analyse the Income Statement
 Analyse the Cash Flow Statement
 Financial Ratio Analysis

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Assessment Task 2 – Practical tasks

This is the second (2nd) assessment task which incorporates a scenario and practical activity where you will be required to
develop your first business document. In the first task you will identify and break down the task from the case study
information. In the second task you will create the document, present it to your trainer and save it using organisational
guidelines.
This assessment task is designed to evaluate student’s ability to interpret financial information and
correctly complete each of the following financial information documents or reports used to monitor overall business
performance:
account summaries and balances, balance sheets, bank deposit documentation, bank statements, banking summaries,
business activity statements, credit card transaction statements, invoices, journal entries, merchant statements, merchant
summaries, profit and loss statements, trial balance, provide financial information using correct financial terminology on six
different operational or departmental financial activities listed in the knowledge evidence.
computer, internet, WIFI, software to produce business documents, sample style guides and policies and procedures.
Activities:
2.1. Journal Entries
Double-entry bookkeeping, in accounting, is a system of bookkeeping so named because every entry to an account
requires a corresponding and opposite entry to a different account. This lesson will cover how to create journal entries
from business transactions. Journal entries are the way we capture the activity of our business.
As you have learned that when a business transaction requires a journal entry, we must follow these rules:
 The entry must have at least 2 accounts with 1 DEBIT amount and at least 1 CREDIT amount.
 The DEBITS are listed first and then the CREDITS.
 The DEBIT amounts will always equal the CREDIT amounts.
a) Complete the following journal entries using spreadsheet software. The owner invested $30,000 cash in the
corporation. We analysed this transaction by increasing both cash (an asset) and common stock (an equity) for
$30,000. We learned you increase an asset with a DEBIT and increase an equity with a CREDIT. The journal entry
would look like this:
Debit Credit
Cash $30,000
Equity $30,000
b) Purchased $5,500 of equipment with cash. We analysed this transaction as increasing the asset Equipment and
decreasing the asset Cash. To increase an asset, we debit and to decrease an asset, use credit. This journal entry
would be:

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Debit Credit
Equipment $5,500
Cash $5,500
c) Purchased a new truck for $8,500 cash. We analysed this transaction as increasing the asset Truck and decreasing
the asset Cash. To increase an asset, we debit and to decrease an asset, use credit. This journal entry would be:
Debit Credit
Truck $8,500
Cash $8,500
d) Purchased $500 in supplies on account. We analysed this transaction as increasing the asset Supplies and the liability
Accounts Payable. To increase an asset, we debit and to increase a liability, use credit. This journal entry would be:
Debit Credit
Supplies on account $500
Accounts Payable $500
e) Paid $300 for supplies previously purchased. Since we previously purchased the supplies and are not buying any new
ones, we analysed this to decrease the liability accounts payable and the asset cash. To decrease a liability, use debit
and to decrease and asset, use debit.
Debit Credit
Cash $300
f) Paid February and March Rent in advance for $1,800. When we pay for an expense in advance, it is an asset. We
want to increase the asset Prepaid Rent and decrease Cash. To increase an asset, we debit and to decrease an asset,
use credit.
Debit Credit
Expense in advance 1,800
Cash 1,800
g) Performed work for customers and received $50,000 cash. We analysed this transaction to increase the asset cash
and increase the revenue Service Revenue. To increase an asset, use debit and to increase a revenue, use credit.
Debit Credit
Cash $50,000
Service Revenue $50,000
h) Received $5,000 from customers from work previously billed. We analysed this transaction to increase cash since
we are receiving cash and we want to decrease accounts receivable since we are receiving money from customers
who we billed previously and not new work we are doing. To increase an asset, we debit and to decrease an asset,
use credit.
Debit Credit
Cash $5,000
Accounts receivable $5,000
i) Paid office salaries $900. We analysed this transaction to increase salaries expense and decrease cash since we paid
cash. To increase an expense, we debit and to decrease an asset, use credit.
Debit Credit
Office salaries $900.
Cash $900.
j) Paid utility bill $1,200. We analysed this transaction to increase utilities expense and decrease cash since we paid
cash. To increase an expense, we debit and to decrease an asset, use credit.
Debit Credit

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Utilities expense $1,200

Cash $1,200
2.2. In this task you must demonstrate your ability apply accounting equation, create a spreadsheet and prepare income
statement at the end of December 31.
Comprehensive Problem 1.
“Break-a-leg Adventures” company has the following account balances:
Cash, $6,000; Accounts Receivable, $7,000; Prepaid Rent, 1,900; Prepaid Insurance, $1,200 Supplies, $950; Equipment,
$7,000; Trucks, $10,000; Accounts Payable, $2,700; Common Stock $25,000; Retained Earnings $6,350.
Business transactions during December are presented as follows:
1. Company received cash from clients for services, $7,500
2. Company paid to creditors $600,
3. Paid office rent for the month of December, $950,
4. Company billed client for accounting services on account, $8,200
5. Supplies were purchased on account, $450,
6. Company received cash from clients billed previously, $4,200
7. Cast 77 received an invoice for services from Copy Plus for December (the invoice will be paid next month),
$550,
8. Cast 77 paid monthly salaries, $4,700,
9. Utilities expense were paid, $380,
10. Miscellaneous expense was paid, $250,
11. Paid for monthly insurance, $200
12. Dividends were paid, $750.
Required:
 Apply the basic accounting equation (create a spreadsheet, please see comprehensive example) to complete a
transaction analysis for each transaction (hint: enter the balances provided first).
 Prepare income statement at the end of December 31.
 Prepare statement of retained earnings equity at the end of December 31.
 Prepare balance sheet at the end of December 31.
2.3. In this task you must prepare entries in the general journal, post journal entries to three-column
general ledger accounts and prepare a trial balance as of December 31. Read the scenario below and
complete the activity.
Scenario
Trim Lawn, Inc., is a lawn care company. Thus, the company earns its revenue from sending its trucks to customers’
residences and certain commercial establishments to care for lawns and shrubbery. Trim Lawn’s trial balance at the end of the
first 11 months of the year follows:

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Journal Entries Debit Credit

Rent $3,000
Cash $3,000

Accounts Payable $33,600
Cash $33,600

Advertising Expense $1,500
Cash $1,500

Utilities Expense $1,050
Accounts Payable $1,050

Supplies Expense $240

Cash $75,000
Accounts Receivable $75,000

Entertainment
Expense $450
Cash $450

Cash $6,000

Gas oil $270

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Cash $270


Suministros $12,000
Cash $12,000

Salaries $15,300
Cash $15,300

Dvidend $4,000
Cash $4,000

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TRIM LAWN, INC

Trial Balance
November 30
Acct.
No Account Title Debits Credits
100 Cash $63,740
103 Accounts Receivable 88,600
150 Trucks 102,900
160 Office Furniture 8,400
200 Accounts Payable $ 33,600
300 Capital Stock 30,000
310 Retained Earnings, 2010 January 1 30,540
400 Service Revenue 371,010
505 Advertising Expense 18,300
506 Gas an d Oil Expense 21,900
507 Salaries Expense 65,850
511 Utilities Expense 2,310
515 Rent Expense 15,000
518 Supplies Expense 75,600
531 Entertainment Expense 2,550
$465,150 $465,150
31 December GENERAL BALANCE

100 Cash $74.620
103 Accounts Receivable $87.100
150 Trucks $102.900
160 Office Furniture $9.450

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200 Accounts Payable $1.290

300 Capital Stock $30.000
310 Retained Earnings, 2010 $26.540
January 1
400 Service Revenue $450.510
505 Advertising Expense $19.800
506 Gas an d Oil Expense $22.170
507 Salaries Expense $81.150
511 Utilities Expense $2.310
515 Rent Expense $18.000
518 Supplies Expense $87.840
531 Entertainment Expense $3.000

100 Cash $74.620
103 Accounts Receivable $87.100
150 Trucks $102.900
160 Office Furniture $9.450
200 Accounts Payable $1.290
300 Capital Stock $30.000
310 Retained Earnings, 2010 $26.540
January 1
400 Service Revenue $450.510
505 Advertising Expense $19.800
506 Gas an d Oil Expense $22.170
507 Salaries Expense $81.150
511 Utilities Expense $2.310
515 Rent Expense $18.000
518 Supplies Expense $87.840

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531 Entertainment Expense $3.000

$508.340 $508.340
Dec. 2 Paid rent for December, $ 3,000.

5 Paid the accounts payable of $ 33,600.
8 Paid advertising for December, $ 1,500.
10 Purchased a new office desk on account, $ 1,050.
13 Purchased $ 240 of supplies on account for use in December.
15 Collected cash from customers on account, $ 75,000.
20 Paid for customer entertainment, $ 450.
24 Collected an additional $ 6,000 from customers on account.
26 Paid for gasoline used in the trucks in December, $ 270.
28 Billed customers for services rendered, $ 79,500.
30 Paid for more December supplies, $ 12,000.
31 Paid December salaries, $ 15,300.
31 Paid a $ 4,000 cash dividend. (The Dividends account is No. 320.)
TASK INSTRUCTIONS
1. Prepare entries in the general journal for the preceding transactions for December.
Debit Credit
Cash 7,500
Account Payable 7,500
Supplier 600
Cash 600
Rent 950
Cash 950
Collected 8,200
Services 8,200

Cash $7.500

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Accounts Receivable $7.500

Acreedor Creditors $600
Cash $600

Rent $950
Cash $950

Collected $8.200

Suppliers $450

Cash $4.200

Services $550

Salaries $4.700
Cash $4.700

Services $380
Cash $380

Expenses $250

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Cash $250

Insurance $200
Cash $200

Dividend $750
Cash $750

Dividend $4,000
Cash $4,000
2. Post the journal entries to three-column general ledger accounts.
Cash $74,620
Trucks $102,900
Office Furniture $9,450
Account Payable $1,290
Capital Stock $30,000
Retained $26,540
Advertising Expenses $19,800
Gas and Oil $12,170
Salaries $81,150
Utilities $2,310
Rent $18,000
Suppliers $87,840
Entertainment $3,000

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3. Prepare a trial balance as of December 31.
Balance 31 December
100 Cash 9,870
103 Accounts Receivable 1,900
150 Trucks 10,000
160 Office Furniture 7,000
200 Accounts Payable 0

300 Capital Stock 25,000 + 3100
310 Retained Earnings, 2010 January 1 5,600
400 Service Revenue 15,700
505 Advertising Expense 500
506 Gas an d Oil Expense 380
507 Salaries Expense 4,700
511 Utilities Expense 250
515 Rent Expense 200
518 Supplies Expense 1,400
531 Entertainment Expense 0
$49,400 $49,400

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Account Title Debits Credits

Cash $9.870
Prepaid Rend $1.900
Insurance $1.200
Suministers $1.400
Equipments $7.000
trucks $10.000
Accounts payables $3.100
Capital Stock $25.000
Retained Earnings $5.600
Service Revenue $15.700
Rent $950
Services $550
Salaries $4.700
Advertising Expense $380
Utilities Expense $250
Insurance $200
$49.400 $49.400
Assessment Task 3 – Practical tasks

This is the third (3rd) assessment task which incorporates a scenario and practical activity where you will be required to
develop your first business document. In the first task you will identify and break down the task from the case study
information. In the second task you will create the document, present it to your trainer and save it using organisational
guidelines.
This assessment task is designed to evaluate student’s ability to interpret financial information and
correctly complete each of the following financial information documents or reports used to monitor overall business
performance:
account summaries and balances, balance sheets, bank deposit documentation, bank statements, banking summaries,
business activity statements, credit card transaction statements, invoices, journal entries, merchant statements, merchant
summaries, profit and loss statements, trial balance, provide financial information using correct financial terminology on six
different operational or departmental financial activities listed in the knowledge evidence..

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computer, internet, WIFI, software to produce business documents, sample style guides and policies and procedures.
Interpret Financial Information for a business
Instructions to students
In this task, you will be required to interpret the financial information for the company called “Coffeeville” by accessing the
following website
https://australiantrainingproducts.com.au/simulationsibsa/
3.1. Read the scenario below and complete the activities.
Scenario
You are the finance manager for the company called Coffeeville. Coffeeville is family owned café. Siblings Rufus and
Emma Belcastran have both trained and worked in the hospitality industry over the years. They decided to pool their
skills, knowledge and passion for quality to open Coffeeville in 2009.
Since then, the Belcastrans have been providing quality products to the busy city population. The family-oriented siblings
understand the importance of healthy communities and they endeavour to run a business that values and supports
communities on a local and global scale. The owners are thinking of expanding their business and have asked you to
review the financial records.
Access the company’s website and access its financial data from the “Intranet” tab. Review and
explain the range of financial information and reports you would require to monitor business
performance of Coffeeville.
 Key Financial Reports. A wide variety of financial reports exist.

 Current Ratio. "Your current assets divided by your current liabilities equals your current ratio," says Lammers.
 Daily Sales Revenue.
 Gross Profit.
 Gross Margin Ratio.
 Cash Flow.
 Working Capital.
3.2. For the purpose of this assessment task, the financial year ending will be 2018 in all the statements. You must now
identify, access and interpret range of financial information and reports required to monitor business performance and
write a report for your manager (your assessor) about the business performance. (SHORT)
You report must include figures and explanations of the business performance and include information on:
 Key objectives and financial review of the business
 assumptions
 balance sheet forecast
 profit and loss
 expected cash flow
 break-even analysis
 Expenses for 2018
 Gross profit

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 Net profit for 2018

Your report must be 2 pages and include data from the financial year. (LONG)
SALES BUDGET
Q1 Q2 Q3 Q4
SALE 3.142.822 3.771.386 4.085.668 4.714.232 $
COST OF GOOD 2.199.975 2.199.975 2.199.975 2.199.975 $
NET INCOME 5.342.797 5.971.361 6.285.643 6.914.207 $
EXPENSES
– Accounting Fees 2.500 2.500 2.500 2.500
– Interest Expense 21.127 21.127 21.127 21.127
– Bank Charges $ 400 $ 400 $ 400 $ 400
– Depreciation $ 42.500 $ 42.500 $ 42.500 $ 42.500
– Insurance $ 3.348 $ 3.348 $ 3.348 $ 3.348
– Store Supplies
– Advertising $ 67.500 $ 67.500 $ 67.500 $ 67.500
– Cleaning $ 5.008 $ 5.008 $ 5.008 $ 5.008
– Repairs & Maintenance $ 16.068 $ 16.068 $ 16.068 $ 16.068
– Rent $ 659.127 $ 659.127 $ 659.127 $ 659.127 $
– Telephone $ 3.749 $ 3.749 $ 3.749 $ 3.749
– Electricity Expense $ 6.695 $ 6.695 $ 6.695 $ 6.695
– Luxury Car Tax
– Fringe Benefits Tax $ 7.000 $ 7.000 $ 7.000 $ 7.000
– Superannuation $ 42.874 $ 42.874 $ 42.874 $ 42.874
– Wages & Salaries $ 476.375 $ 476.375 $ 476.375 $ 476.375 $

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– Payroll Tax $ 22.628 $ 22.628 $ 22.628 $ 22.628

– Workers’ Compensation $ 9.528 $ 9.528 $ 9.528 $ 9.528
NET INCOME 32.155 32.155 32.155 32.155 $
Net Profit (Before Tax) $
Income Tax
Net Profit
PROFIT BUDGET Qtr 1 Qtr 2 Qtr 3
BUDGET Total Budget $

$ 3.142.822 $ 3.771.386 $
4.085.668
Total Sales $ $
$ 3.394.248 $ 4.073.097 $
16.971.237 4.412.521
Bathroom fittings 30% $ 5.091.371 $ 1.018.274 $ 1.221.929 $ 1.323.756
Bedroom fittings 25% $ 4.242.809 $ 848.562 $ 1.018.274 $ 1.103.130
Mirrors 15% $ 2.545.686 $ 509.137 $ 610.965 $ 661.878
Decorative items 10% $ 1.697.124 $ 339.425 $ 407.310 $ 441.252
Lighting fixtures 20% $ 3.394.247 $ 678.850 $ 814.619 $ 882.504
BALANCE
Assets
Current Assets
– Cash On Hand 55.000
– Cheque Account 160.314
– Deposits Paid 950.000

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– Trade Debtors 975.000
– Merchandise Inventory 1.430.000
Total Current Assets 3.570.314
Fixed Assets
– Motor Vehicles At Cost 500.000
– Motor Vehicles Accum Dep -125.000
– Furniture & Fixtures At Cost 2.250.000
– Furniture & Fixtures Accum Dep -770.000
– Office Equip At Cost 400.000
– Office Equip Accum Dep -115.000
Total Fixed Assets 2.140.000
Total Assets 5.710.314
Liabilities
Current Liabilities
– MasterCard 14.860
– Trade Creditors 679.000
– GST Collected 1.571.411
– GST Paid -987.626
– Superannuation Payable 120.000
– Luxury Car Tax Payable 9.747
– income Tax Payable 436.928
– PAYG Withholding Payable 44.872
Total Current Liabilities 1.889.192
Long-Term Liabilities 0
– Bank Loans 1.508.459

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Total Liabilities 3.397.651
Equity
– Owner/Shareholder’s Equity 500.000
– Retained Earnings 1.565.982
– Dividends Paid -1.200.000
– Current Year Earnings 1.456.428
Total Equity 2.322.410
CASH FLOW
CASH FLOW ANALYSIS – GST 2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
GST Collected 1.571.411 392.853 392.853 392.853 392.853
Less GST Paid 9.747 2.437 2.437 2.437 2.437
GST Payable 1.561.664 390.416 390.416 390.416 390.416
DEBTORS
AGED TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4

DEBTORS
BUDGET
Sales 16.971.237 3.142.822 3.771.386 4.085.668 4.714.232
% Debtors 80% 2.514.258 3.017.109 3.268.534 3.771.386
Sales
Total Debtors %
Current %
30 Days % 0 314.282 377.139 408.567
60 Days % 0 0 157.141 188.569

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90 Days % 0 0 0 157.141
3.3. You have presented the report to the owner. The owner now wants you to review the financial report you prepared in
task 3.2 for impacts on the operational activities to expand the business and advise on the company’s expansion
opportunities
You must comment on:
 Impact of the financial information of the organisation deciding to expand
 Your responsibility to resolve discrepancies
 Explanatory notes on operational or departmental financial activities
 Outstanding accounts:
o Payable
o Receivable
 Sales performance
 Stock levels
 Any variance from projection
 Total equity available for expansion, etc.
You can access the acconting terminologies from the following hyperlink to gain knowledge on terminologies:
https://www.business.gov.au/info/run/finance-and-accounting/finance/key-financial-terms
Your report must include the following and be completed within the designated timelines given to you by the ower
(assessor).
(GUIDE: LONG)
In relation to the income they increased by 8% in relation to the budget, this implies that the sales
were much higher than the established in relation to the budget, it may be due to the promotion that
has been made, in relation to the expenses these were increased due to inflation of 4% and that
implies that several costs associated with inflation will increase, the other thing to consider is the
acquisition of a vehicle that generated an additional outlay of money not considered
There is a good balance of income vs. expenses and that represents a good financial management but
it is necessary to continue working on this so that expenses can be minimized and thus work on

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those that can be negotiated to reach preferential values and that these are less or at least the same
defined in the budget, you have to be especially careful with inflation that generates an impact on
money flows and that implies that the company must generate action plans to mitigate these impacts
on the balance sheet of the organization . In relation to sales, an increase of 8% is a very good
increase considering the market is contracted and that implies that the maximum figures can be 3%
All assumptions and basis have been considered in the balance, budget, cash flow and debtor those
that have been prepared according to the instructions of the company and the necessary actions to
achieve the maximum reflection in relation to costs, income and expenses defined by the year
according to company projections
Accurate, timely and relevant Budget Monitoring Reports help provide project expenditure varies
from these estimates when we begin implementing project activities. Makes notes against
each budget line showing a variance of more reasons they find for the variances and to
record any action they need to take

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SITXFIN002 Interpret Financial Information

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ASSESSMENT TOOL

Qualification SIT50116 Diploma of Travel and Tourism Management

Assessment Task 1 - Knowledge Questions

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

Cash Flow Statement

Statement of Shareholders’ Equity

Management’s Discussion and Analysis (MD&A)

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

b. Cash flow statement

e. Labour and wages

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

h. Receivables aging report

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

There are five main types of account reconciliation:

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

The advantages of the cash accounting method are that:

 it's suited to smaller businesses that handle cash transactions

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

1. Automation and Management of End-to-End General Accounting Procedures

2. Support for Worldwide Financial Processes

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

3. Planning and Forecasting

4. Cash Flow Management and Tracking

5. Advanced Reporting and Analysis

 Advanced security features to prevent unauthorized access to confidential financial data.

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

 Analyse the Balance Sheet

 Analyse the Income Statement

 Analyse the Cash Flow Statement

 Financial Ratio Analysis

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

Assessment Task 2 – Practical tasks

2.1. Journal Entries

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

Utilities expense $1,200

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

Journal Entries Debit Credit

SITXFIN002 Assessment Tool Version 26 Issued /4/2017

TRIM LAWN, INC

No Account Title Debits Credits