John and Jim are brothers who have worked within the building sector for several years. John is a plumber who has been working for a large plumbing business and Jim is a carpenter who works for a large city residential housing construction company. They have decided that they want to start their own business which would be the building of residential properties. With their combined experience within the industry they feel now is a great time to branch out on their own. Before they move forward with their plans, you have agreed to assist them with the research and planning of the new business which they hope to call JIMMON CONSTRUCTIONS. They dont want to proceed with the business until they are sure that they have covered all legal and risk aspects of starting and maintaining the new business. They estimate that the business will exceed the existing GST tax threshold of $75,000.00 for the financial year so they will need to register for GST and their actual paid staffing levels will warrant the need to declare and make PAYG payments as well. The business will specialise in residential construction and the brothers have enlisted your help to establish all aspects of setting up the business as well as identifying and addressing any potential risks. You have already been assisting in this area and have: 

• established the business set-up as a partnership
 
• obtained an ABN
 
• set up GST registration as the business is expected to exceed an income of $75,000.00 for the financial year
 
• established specific licenses and permits which a residential construction company must have in order to operate legally
 
• locate the building code of practice which must be followed

You are required to complete the financial plan for the business and establish the financial reports which will be presented to Jim and John. You will also need to provide them with some background information regarding financial reporting as they have no experience in this area of the business and would like to have a better understanding of the financial aspects of JIMMON CONSTRUCTIONS.

 Activities Overview for using the case study organisation: The following activities will provide you with the skills and knowledge to compile the necessary financial information and data which is used when reporting on the financial activity for JIMMON CONSTRUCTIONS. You have been provided with a series of tasks to demonstrate your knowledge in this area as well as demonstrate your skills in preparing the necessary financial statements and statutory reports which are required for a small business. For the purpose of completing the following activities you will need to conduct the necessary research to establish the statutory reporting requirements as needed and understand the processes to be undertaken, to analyse and calculate the necessary financial information needed to determine where the business is situated financially. You will be required to submit a reference document which lists all research you have undertaken to complete your assessment. Activity 1: Financial reports Activity based on Jimmon Constructions. Activity 1 choice 1: Case study Jimmon Constructions As part of the financial planning for JIMMON CONSTRUCTIONS, you need to develop several financial reports which have been listed below and provide additional information to Jim and John on areas such as the principles used when preparing financial reports (such as cash projections, profit and loss statements and balance sheets) as they have informed you that they have no understanding of these areas of the business. You will be required to submit a report for Activity 1 which includes: 

• Completing the following financial reports: 
  • Statement of Cash Flow forecast for the month of July
   
  • Projected Profit and Loss Statement for the 3 months ending 30 September
   
  • Balance Sheet forecast as at 30 September

 Templates for the financial reports are provided in Appendices A, B & C for you to complete. Based on your completed financial plan and the additional information provided below, complete the following financial reports provided in: 

• Task 1 complete Appendix A: Statement of Cash Flow forecast for the month of July,
 
• Task 2 complete Appendix B: Projected Profit and Loss Statement for the 3 months ending 30 September and
 
• Task 3 complete Appendix C: Balance Sheet forecast as at 30 September

 When completing the financial reports, please take into account the following information: 

• Cash Flow forecast is to be completed for July only
 
• Projected Profit Statement to be based on the property information provided below for the period July  September
 
• Balance Sheet forecast is to be prepared as at the end of September
 
• profit margins, mark ups, and prices (e.g. hourly charge out rates)
 
• the break-even sales point for the business

 Additional Information for Case study There is one property ready to commence in July (total Revenue $340,247.00 with payments from the customer as follows:                  

Deposit	To be paid July	$17,012.35
Base stage	To be paid July	$ 34,024.70 includes slab, site works, temporary fencing
Frame stage	To be paid August	$51,037.05 includes frames, trusses quarter electrical and plumbing costs
Enclosed stage	To be paid August	$119,086.45 includes bricks/tiles, quarter electrical and plumbing
Fixing stage	To be paid September	$68,049.40 includes internal cabinetry, tiling, balance of plumbing, electrical and 90% painting
Practical completion and handover	To be paid October	Driveway, final preparation of site for handover

 The following amounts have been provided to complete the financial reports: Cash flow amounts for the month of July:            

Payments to suppliers	$22,600.00
Interest payments	$450.00
Income tax paid	$846.00
GST paid	$7,250.00
GST collected	$5,000.00
General expenses	$6,000.00

 

• Jimmon Constructions plans to buy a new Hi Lux Ute in July at a cash price of $35,600 as mentioned in the case study.Cash at bank on 1^st July is $350,000.00
 
• Each partner will withdraw $2,000.00, per month as per the Business Plan
 
• Receipts from customers are to be calculated by students
 
• Wages paid are to be calculated by students (refer to Projected Profit/Loss figures)
 
• All other payments: Cash expenses for July should be equal to cash spent on the Cash Flow Forecast

 Projected Profit/Loss figures for 3 months ended 30 September:                                                                                                      

Variable costs	Amount	Incurred unless it states otherwise
Equipment rental	$1,500.00	July
Electrical supplies	$3,000.00 per month	August & September
Fuel and oil	$600.00 per month	July, August, September
Plans and permits	$1,200.00	July
Safety fencing	$1,600.00	July
Site costs	$3,000.00	July
Travelling costs	$450 per month	July, August, September
Toilet hire	$600.00 per month	July, August, September
Tipping fees	$600.00 per month	July, August, September
Concrete slab	$15,000	July
Subcontractors	$80.00 per hr	150 hrs in July 187.50 hrs in August 125 hrs in September
Cabinetry	$20,000	September
Plumbing supplies	$5,000 per month	August & September
Painting costs	$13,500	$13,500 incurred in September. Only 90% was paid in September
Tiling & flooring	$5,000.00 per month	August & September
Frames and trusses	$4,000	August
Bricks & tiles	$10,000	August
Fixed costs
Postage	$50.00 per month	July, August, September
Office supplies	$200.00	July, August, September
Motor vehicles expenses	$400.00 per month	July, August, September
Depreciation of vehicles	$416.67 for July, thereafter $713.33
Depreciation of equipment	10% of cost p.a.	Equipment at cost $40,000
Depreciation of furniture & fittings	5% of cost p.a.	Furniture & fittings at cost $20,000
Telephone	$300.00	July, August, September
Freight	$7,000	$2,000 for months of July & August; $3,000 for September
Staff amenities	$280	July, August, September
Superannuation	9.5% on wages each month	July, August, September but paid in October for the 3 months
Wages	$3,846.15 per week (average of 4 weeks/month)	July, August, September, paid each week
Rent	$1,800 per month	July, August, September
Insurance	$3,200 p.a.	July, August, September
Electricity	$325.00 per month	July, August, September
Interest	$460.00 per month	July, August, September

 Note: Students are to calculate income earned each month Additional information to complete the Balance Sheet: 

• Cash at bank as at 30 September is $450,339.78
 
• Inventory on hand is $8,250.00
 
• 2 Hi Lux UTEs with a total value of $85,600 (accumulated depreciation $1,843.33)
 
• Equipment valued at $40,000 (Accumulated depreciation $1,000)
 
• Furniture and fittings valued at $20,000 (accumulated depreciation $250.00)
 
• Amounts owing on credit cards $4,350.00
 
• Amounts owing to suppliers $20,324 as at 30 September
 
• GST collected balance as at 30 September $12,921.18
 
• GST paid balance as at 30 September $7,607.50
 
• PAYG withholding payable as at 30 September $2,978
 
• Bank loan $250,000 (payable in 10 years)
 
• Both partners contributed $150,000 each to the business at start-up
 
• Both partners withdraw $2,000 each per month
 
• Students are to calculate amounts owing by customers (October)
 
• Students are to calculate superannuation payable
 
• Retained Profit (Equity) is the amount of total profit as per projected Profit & Loss

 Break-even sales point and profit Information  Fixed Costs: $34,970.45 Variable Costs: $139,550.00 Total Costs: $174,520.45 Total Income July-Sept: $289,209.95 Total wages for Jim & John each / house: $50,000.00 Price of House: $340,247.00 

1. Using the figures above, calculate

 

• the break-even point.
 
• profit for Jimmon Constructions to build the house.

 

1. Based on a 26 week building time and a 35 hour week each for Jim and John, calculate the hourly rate they will need to charge to earn $50,000 wages each.
 
2. Include a Reference page for all research you have conducted during this activity.

 Appendix A Statement of Cash Flow for month of July                                                

Cash flow from operating activities
Receipts from customers
Payments to suppliers
Payments to employees
Interest payments
Interest received
Taxes paid
General expenses
GST paid GST collected
Net cash flow from operating activities
Cash flow from investing activities
Purchases of equipment
Other  new vehicle purchase
Other
Net cash flow from investing activities
Cash flow from financing activities
Proceeds from borrowings
Drawings from business investment
Drawings by partner  Jim
Drawings by partner  John
Net cash flow from financing activities
Net increase (decrease) in cash held
Cash at beginning of period
Cash at end of period

 Note: Receipts from customers and payments to employees are to be calculated by students Appendix B Projected Profit and Loss for the 3 months ending 30 September                                                                                                                                                                                                                                               

Jimmon Constructions	July	August	September	Total
Income
Cost of Sales
Gross Profit
Expenses
Net Profit/Loss

 Appendix C Balance Sheet as at 30 September                                                                                  

BALANCE SHEET - JIMMON CONSTRUCTIONS September
Assets
Current Assets
Total Current Assets
Non-Current Assets
Total Non-current assets
Total Assets
Liabilities
Current Liabilities
Non-current liabilities
Total Liabilities
Net Assets
Owners Equity
Owners capital  Jim
Owners capital  John
Drawings  Jim
Drawings  John
Total owners equity

 Checklist for Assessment 2 Activity 1 Report on Financial Reports               

Case study
Completed report
Financial plans using the templates provided complete the financial reports and ensure that you have included: Appendix A: Cash Flow
Appendix B: Projected Profit Statement
Appendix C: Balance Sheet
profit margins
the break-even sales point for the business
Include a Reference page for all research you have conducted during this activity.

 

 Attachments: 

 

Portfolio-of-....doc