1. Reasons for previous profits and losses
Profits realized by the Houzit Ltd were due to the increased sales during the public and school holidays that fell into this quarter.
Losses for the quarter were caused by the prevailing tough economic conditions. The harsh business conditions were characterized by the current economic recession which had a profound impact on the retail sector. Secondly, losses could be attributed to the raising interest rates that had been actualized by the banks courtesy of the increased upward international pressure. Houzit was exposed to these high interest rates on loans since a huge portion of its loan funds were based on variable interest rates whose changes are directly proportional to the prevailing market conditions. These varying interest rates were eating into the revenues of Houzit Ltd.
Thirdly, discounts advanced to generate sales during the quarter were eating into the revenues of the company and could result in losses for the business. Finally, the high wages and salaries were a huge expense on the company that significantly reduced the gross profit of the company and thus could lead to the realization of losses
2. Current Statutory Requirements for Tax Compliance
Houzit Ltd is required by statutory requirements to comply with the tax regulations in place. For instance, the company is required to pay a corporation tax, which is a specific percentage of its net income. In case of a net operating loss, this tax is to be backdated for two years or moved forward for 20 years until when it is entirely exploited. Also, the company is required to withhold and remit income tax for its employees to the government. This tax is to be deducted by the employer from the salaries of its employees (King and Fullerton, 2010).
The company is also required to file a payroll tax, and primarily he Social Security tax which is to be levied on both the employer and the employee. Other taxes comprise excise tax, State taxes and local taxes such as property tax and sales tax, taxes that are bound to increase the tax liability of the business entity. To note, the business entity is required to file a tax return which gives a report on entire taxable income and allowable deductions (King and Fullerton, 2010).
Tax Liabilities of Houzit Pty Ltd
Payroll tax- $ 19,741
Luxurious vehicle tax- $ 12,000
Corporation/Income tax- (30% * 5,333) = $1,600
3. Review and Recommendation of commercially available Financial Management Software
The need for accurate financial data for planning purposes has requires a business entity to use robust financial management software for its accounting undertakings. The maintenance of accurate financial data facilitates the monitoring of the growth trajectory taken by the business. Based on this data, adjustments can be effected on the business model to allow for the required optimal growth of the enterprise. In light of this, choosing the most appropriate financial management software for a business is an uphill task which requires the buyer to be fully informed on the different software types available in the market. Such ample information will enable the buyer to choose the most software for their business needs.
Though there are various options that can be employed to handle financial data, using financial management software in compiling and processing this data is the most ideal option. This suitability of financial management software is pegged on their merits such a low cost in comparison to hiring a financial officer, the ability of the software to work at any given time its required to work, its knowledge base which is in form of condensed business knowledge and its ability to help the user learn various issues relating to financial analysis.
Diverse financial management software are readily available in the commercial market today with every software being characterized by its merits and demerits. Therefore, when choosing financial management software the buyer should consider the strength of its features, the quantity, quality and usability of its output, ease of use, the extent to which it can be integrated with the existing accounting software and the extent to which it is linked to other useful services.
Considering these factors, two software options come into the forefront; that is Sage Intacct and QuikBooks Enterprise. Both software are ideal for small, medium and large enterprises and can be run on any operating system platform. Sage Intacct provides a cloud-based accounting platform. The software also provides real-time financial and operational awareness while at the same time automating core processes. In addition to availing to its user key accounting applications, the software incorporates in-built reporting platforms and dashboards whilst providing mechanisms for time, revenue and expenses management and project accounting.
Moreover, the software can be integrated with other applications such as payroll and point-of-sale systems courtesy of its open API structure. Generally, its advantages range from the ease with which inventory and stock movement can be tracked and its ability to manage multiple business points-of-location.
On the other hand, QuickBooks Enterprise provides management functionality for multiple users, locations, large quantities of data and workflow of inventory. The software also allows for the customization of reporting tools to enable users conduct data analysis and make information-based business decisions. Its strengths include a user-friendly interface and detailed reporting tools.
On the basis of this review, Sage Intacct is the most appropriate financial management software for Houzit Ltd as it has more merits compared to QuickBooks Enterprise.
4. Implications of Probity when preparing and revising budgets
Probity warrants that complete accountability is available for the purposes of managing different entries made into the budget regardless of whether the transaction relating to the figure is real or abstract. Probity also ensures that ethics, rules and regulations relating to financial responsibility are adhered to during the budget-making process. Also, probity ensures that confidential information is treated as such and not haphazardly released to non-concerned parties during the budgeting process (Osisioma, 2013).
5. Critical dates and initiatives that will require or generate resources for Houzit Pty Ltd in the next financial cycle
a. Repayment of a loan interest amount of $112,600 for the financial year 2011/2012 by June 30 2012
b. Expenditure of the advertisement budget of $600,000 for the financial year 2011/2012
c. Reduce salaries and wages figure to comply with the industry benchmark of 11% financial year 2011/2012
6. Items to include in the budgets for Houzit Pty Ltd
i. Transportation costs
ii. Office expenses
iii. Capital expenditures
iv. Pre-paid expenses
v. Receivables written-off
7. Internal controls that can improve risk management for Houzit Pty Ltd
a. Maintain audit trials to establish the path of transactions made for every revenue figure earned.
b. Comply with the established accounting standards and guidelines
c. Implement and apply the risk mitigation measures and procedures that have been recommended.
King, M.A. and Fullerton, D., 2010. The taxation of income from capital: a comparative study of the United States, the United Kingdom, Sweden and West Germany. University of Chicago Press.
Osisioma, B.C., 2013. Budgeting, Auditing and Governance: implementing the Accountability Framework.