CPPREP5006 - Written Questions v1

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Academy of Real Estate *

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CPPREP5006

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Accounting

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May 21, 2024

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CPPREP5006 - Manage operational finances in the property industry (Release 2) Written Questions Written Questions Page | 1 of 15 © Real Estate Academy Australia Version 1.0 – November 2021 RTO 32426

CPPREP5006 - Manage operational finances in the property industry (Release 2) Written Questions Question 1 Analyse and record processes for the following aspects for a real estate agency and departments (e.g. residential sales, property management). (a) Managing budgets The following sources of funding are used by the agency: commissions from property sales, commissions from property management, the selling of a portion of an existing rent roll, bank loans, and other investments in the company such as business partners. The agency loses money when: Staff salaries are paid and fixed costs like electricity and facility expenses. Creating the balance sheet and profit and loss statement using budgets will allow you to assess the health of your company. (b) Financial control systems Budgets for revenues and cash flows. Budgeting involves cash flow forecasts, predicted profit forecasts, and a breakeven point knowledge that helps put things in perspective. A cashflow budget is only concerned with the specific month that cash needs to be available to cover bills, but a profit budget typically allots a share of each category of the annual expected operating expenses to each month in order to match the months’ income. A cashflow budget estimates the available finances at the conclusion of a particular month, while a profit budget calculates the predicted profit for each month. Even if a company is making profit, there may be months when overdraft facilities are needed but haven’t yet been set up. (c) Financial Management Requirements To support the achievement of department and agency KPIs, it is required to deploy a variety of resources in accordance with financial management standards. These could include stock needs, physical, human and financial resources and goods and services that need to be ordered and acquired. Page | 2 of 15 © Real Estate Academy Australia Version 1.0 – November 2021 RTO 32426

CPPREP5006 - Manage operational finances in the property industry (Release 2) Written Questions Question 2 a) What is a financial plan? Resources should be made available for planned operations, and financial systems and procedures should monitor, record, and report income and expenses as well as aid in the execution of the business plan. Effective systems will enable business owners and managers to analyze data, anticipate possible issues, and make adjustments to increase the cost- effectiveness of operations. Systems and procedures that are carefully thought out can reduce the likelihood of financial abuse. Effective financial management is crucial for ensuring future business growth. b) What is included in a financial plan? 1.Capacity for financial planning to prepare and balance budgets and forecast cash flow 2. Management of cash and payments including petty cash, to ensure this is not openly abused, but also enables activities to be implemented efficiently 3. Reporting systems, including how expenditure information and documents are reviewed 4. If accounting systems can track costs back to different budget lines, within different projects 5. Procurement systems to ensure all payments are for genuine supplies and are allocated to planned and authorized budget lines Question 3 a) What is a budget? A budget is a forecast of revenue and expenses for a specific future period of time that is usually prepared and updated on a regular basis Page | 3 of 15 © Real Estate Academy Australia Version 1.0 – November 2021 RTO 32426

CPPREP5006 - Manage operational finances in the property industry (Release 2) Written Questions b) What is included in a budget? The best financial budget combines a short term, month to month plan for at least a year with a long term, quarter to quarter plan that you use for financial statement reporting. It should be prepared during the 2 months prior to the conclusion of the fiscal year to give enough time for adequate data gathering. c) What is the purpose of a budget? It is crucial to budget for both the income statement and the balance sheet, even though many financial budgets only include plans for the income statement. This makes it possible for you to think about potential cash flow requirements for your entire business, rather than just as they relate to income and expenses. For instance, if your company had been operating for a few years and you decide to hire new sales people, you would need to weigh the effects of supporting them through the reward system for at least the first year. d) Design and implement strategies to establish and maintain link between individuals responsible for budgets and individuals operating financial control systems. A commitment to a good system entails a commitment to better staffing and increased training. Develop a staff performance system that assigns full accountability for the procedural components of individual positions within the firm in addition to a practice of hiring and competent personnel for the accounting functions. These procedures offer a great amount of strength and comfort in the procedural parts of the business, especially when coupled with an independent audit of these processes with the goal of accuracy and continual improvement. Question 4 a) What is cash flow budget? In order to put things into perspective, budgeting involves predicted profit budgets, cash flow budgets, and knowledge of one’s breakeven point ( which is the fixed Page | 4 of 15 © Real Estate Academy Australia Version 1.0 – November 2021 RTO 32426

CPPREP5006 - Manage operational finances in the property industry (Release 2) Written Questions costs divided by the gross profit%). A cash flow budget is only concerned with the specific month that cash needs to be available to cover the bills, but a profit budget typically allots a share of each category of the annual expected operating expenses to each month in order to match the month’s income. b) What are the five steps in developing a cash flow budget? 1.Effective credit sales (debtors) collection based on strong credit management that minimizes bad debts 2. Achieving a stock turn rate that is in line with industry requirements, demonstrating that no surplus stocks are kept 3. Preserving a gross profit margin for the sector that does not indicate excessive discounting 4. Making payments to creditors within the permitted credit perios offeed, where possible taking advantage of early payment discounts 5. Keeping an eye on running expenses, comparing them to the planned amounts, and looking into any negative variations Question 5 List three types of information that can be used to forecast income. 1. Bookkeeping 2. Balance sheet 3. Profit and loss statement Question 6 What is a profit and loss statement? A financial statement known as an income statement, also known as a profit and loss statement, shows how revenue, or money received from the sale of goods and services before expenses are deducted, is converted into net income, or the Page | 5 of 15 © Real Estate Academy Australia Version 1.0 – November 2021 RTO 32426

CPPREP5006 - Manage operational finances in the property industry (Release 2) Written Questions outcome after all revenues and expenses have been taken into account, r the “bottom line.” Question 7 What is a statement of financial position? A balanced sheet or statement of financial position is an overview of the financial balances in financial accounting. S of a particular date, such as the conclusion of its financial year, assets, liabilities, and ownership equity are listed. A balance sheet is the only one of the four fundamental financial statements th only applies at one particular point in time. Question 8 List three financial control system process you can implement as part of business planning to manage debtors and in turn minimize financial risk to the agency. 1. Detecting overlaps and anomalies. Financial budgets, financial reports, profit and loss statements, balance sheets, etc, present the overall performance and/or operational picture of a business. Hence, while formulating financial control policies, it is very important to detect any overlaps and/or anomalies arising out of the data available. It helps in detecting any existing loopholes I the current management framework and eliminating them. 2. . Timely updating Financial control is the essence of resource management and hence the overall operational efficiency and profitability of a business. Timely updates of all available data are very important. In addition, updating all management practices and policies concerning the existing financial control methods is also equally as important. 3. Analyzing all possible operational scenarios 4. Before implementing a fixed financial control strategy in an organization, it is important to thoroughly evaluate all possible operational scenarios. Viewing the policies from the perspectives of different operational scenarios – such as profitability, expenditures, safety, and scale of production or volume – can provide the necessary information. Also, it helps establish an effective financial control policy that covers all operational aspects of the organisation. Page | 6 of 15 © Real Estate Academy Australia Version 1.0 – November 2021 RTO 32426

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