Financial report Part 1 Question 1 1. In this the accounting method used are accrual accounting. Revenues and expenses are recorded in accrual accounting as soon as they are incurred. Accountants must use accrual accounting according to generally accepted accounting principles (GAAP[B1] ). 2. Evaluation of the income tax rate applied[B2] Tax expense = 201,000 Net profit before tax = 670,000 Rate of income tax = 201,000 / 670,000 *100 Rate of income tax = 30% 3. The GST implications for Perfect Plants Pty Ltd[B3] Despite the fact that the lettuce will ultimately be consumed by humans, the seedlings are taxable under the GST Act. Upon payment of the GST by the plant nursery, market gardeners can claim GST credits for the GST included in seedling prices. A plant nursery will charge GST and we will collect it from them. 4. Record keeping and storing requirements[B4] Including tax invoices, receipts, payroll records, tax returns, activity statements, salary and wage records, and super contributions for workers, Perfect Plants Pty Ltd must maintain all records for five years. 5. The Australian Bureau of Statistics (ABS) has[B5] published a number of publications that reveal how small businesses contribute to the economy of Australia and how they operate. Perfect Plants Pty Ltd. The survey collects data on a number of key economic indicators by business size (number of employees) and industry, including: employment, wages, salaries, sales, total income, total expenses, operating profit before tax, and industry value added (IVA). 6. Recommendations[B6] It is important for them to regularly monitor their business’ progress. The business owner should be informed of the amount of money that is in the bank, how many sales they are making, and how much stock is on hand. On a monthly basis, they should review how they are doing compared to their goals. [B1]How do you know they have used the accrual method, also you need to comment if this appropriate for this business and why ? [B2]Comments on tax rate used and if this is correct check ATO website. There are different rates for different turnover levels [B3]This is not how GST works, need to talk about the turn over etc , see slides and who needs to be registered and how to report. Also discuss how do you know they have been registered for GST, which reports show this [B4]What are the ATO and ASCI requirements for this, this was covered in the first 2 lessons [B5]This is not what its asking , its talking about identifying different sources documents used to prepare reports . See power point slides on source documents [B6]The recommendations should be based on the report available if they are appropriate and what else should they have, this was discussed in details. Also regarding comments you have made from the other points above.
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