Box Hill College Kuwait Question 241 Financial Planning and

Box Hill College Kuwait Question 2-4.1: Financial Planning and 43 Payroll Management (10 . What are the two main purposes of a business budget? (2 ndel oint sidb What is a payroll record? What information is included on a payroll record? (5 points) 10 identify 2 expenses for the follewing business phases-(3 points) Start-up * expansion more ” more Question 3-4.2: Financial Records and Financial Statements (25 points) Part A (10 polnts):- Ayman has owned a computer repair business for 3 years. The first year, Mir. Ayman barely earned a profit. The next year\'s profit was more substantial. As shown in the table, he has just recelved the financial results from the third year and wants to compare them to those of the second year of LAST YEAR 28,000 78,250 15,000 17.850 THIS YEAR 28,000 80,725 $13,750 18,210 7,075 $2,020 RENT REVENUES GOILINVENTORY UTILITIES SUPPLIES $1,020

Solution

2-4.1

Business budget:

This is the plan for future revenues and expenses; this is based on assumptions and expectations.

Purposes: (1) budget helps to execute the business plan. Suppose a business wants to expand in new market; but before going into such expansion, it must prepare the budget for knowing the amount of expenses to spend.

(2) Budget helps to understand how much loan it requires to take. Suppose in the above case, the business requires $20,000 but it has $15,000 in hand; therefore, the remaining ($20,000 - $15,000 =) $5,000 should be taken as loan.

Payroll:

This is the record of payments to employees and its related liabilities. It is prepared by the employer, and it shows gross to net pay amounts after deducting all necessary deductions (such as FICA tax, Medicare tax, insurance, etc).

Information: It includes the name of employee, date of payment, gross amount of salary or wages, amount of deductions, and the net payment.

2 expenses:

Start up: This is a new business in the market. Since the business is new it requires research and development, and market survey. Therefore, there should be “research and development cost” and “market survey cost”.

Ongoing operation: This is a continuing business operation. It incurs recurring expenses like, utility expense, manager’s salary, etc.

Expansion: Once a business expands, normally it requires loan and permit for doing business. Therefore, expenses are “interest on loan” and “permit license”.