Healthy Harvest Cafe has been operating for two years. The owner, Sarah, prepares monthly budgets and compares them to actual results using variance reports. Recently, she has noticed some significant variances in both her Cash Flow Statement and Income Statement. Sarah is unsure how best to use these reports to improve her business.
b. List three potential causes of an unfavourable variance in the Cash Flow Statement for Healthy Harvest Cafe.
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Create Free Account Log inThis is a free VCE Units 3 & 4 Accounting practice question worth 3 marks, testing your understanding of Variance reports. It falls under Budgeting and decision-making in Unit 4: Recording, reporting, budgeting and decision-making. Submit your answer above to receive instant AI-powered marking and personalised feedback.
In this unit, students further develop their understanding of accounting for a trading business owned by a sole proprietor and the role of accounting as an information system. Students use the double entry system of recording financial data and prepare reports using the accrual basis of accounting and the perpetual method of inventory recording. Both manual methods and ICT are used to record and report. Students extend their understanding of the recording and reporting processes, with the inclusion of balance day adjustments and alternative depreciation methods. They investigate both the role and the importance of budgeting in decision-making for a business. They analyse and interpret accounting reports and graphical representations to evaluate the performance of a business. Using this evaluation, students suggest strategies to business owners to improve business performance. Where appropriate, the accounting procedures developed in each area of study should incorporate application of the Conceptual Framework and financial indicators to measure business performance, as well as the ethical considerations, including financial, social and environmental considerations, faced by business owners when making business decisions.
Business owners must plan for future activities if they are to successfully manage the business. Preparing budgeted accounting reports provides the owner with information that will assist in managing and developing strategies to improve business performance. Students prepare and analyse budgeted accounting reports, both manually and using ICT, and suggest strategies to improve the performance of the business. They also discuss and evaluate the ethical considerations associated with business decision-making and business improvement. Outcome 2 On completion of this unit, the student should be able to prepare budgeted accounting reports and variance reports for a trading business, using financial and other relevant information, and model, analyse and discuss the effects of alternative strategies on the performance of a business.
* the use of variance reports and trends for Cash Flow Statements and Income Statements
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