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BHC-015: Event Financing and Accounting

BHC-015: Event Financing and Accounting

IGNOU Solved Assignment Solution for 2021-22

If you are looking for BHC-015 IGNOU Solved Assignment solution for the subject Event Financing and Accounting, you have come to the right place. BHC-015 solution on this page applies to 2021-22 session students studying in DEVMT courses of IGNOU.

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Assignment Solution

Assignment Code: BHC-015/AST/TMA-5/2021-22

Course Code: BHC-015

Assignment Name: Event Financing and Accounting

Year: 2021-2022

Verification Status: Verified by Professor

 

Note: The assignment has three sections. It contains questions, which require long, medium, and short answers. Along answer should not exceed 700-900 words. Medium answer should not exceed 400-500 words each. Short answers should not exceed 200 words each.

 

Long Answer Questions Maximum Marks:30 (30 x 1 = 30)

 

Attempt any One of the following:

 

Q1) What is Event Finance? Describe the different components of Event Financial Management.

Ans) The event planning and management process is primarily reliant on financial planning and administration. For all events, there will be expenses, but some will have both income and expenses. For event organisers, sponsors, partners, clients, and donors, the proper use of financial resources is a crucial problem. The money raised for an event comes from the host, business partners, sponsors, funders, or attendees (in profit-making events), and it is used to pay for all of the items and services purchased, hired, and staffing costs.

 

As a result, money should be used wisely, as the event's organisers are ultimately answerable to a range of stakeholders, including the event's financial performance. The process of obtaining, assigning, and accounting for financial resources associated with an event is referred to as "financial management." The success of events is contingent on meticulous preparation, monitoring, documentation, and financial management.

 

Money is a necessary resource for event projects; without it, no event can take place. Money is raised from the host, business partners, sponsors, funders, or event attendees (in profit-making events), and it is used to pay for all of the items and services purchased, as well as payments to the event personnel. Because the organisers are ultimately responsible to the various stakeholders, including clients who contribute to the event's financial success, money should be used wisely. Even for a small private meeting, the organiser must keep track of where money is spent and how much it costs. The success of events is contingent on meticulous preparation, monitoring, documentation, and financial management.

 

Financial management is the process of managing money related with an event. Obtaining, allocating, and accounting for an event's financial resources are all part of this process. Budgeting, accounting, revenue generation, pricing, bookkeeping, cash handling, and reporting are all aspects of financial management that influence and shape it. In order to accomplish the financial aim of the event, the event finances must be treated as an integrated system of practical budgets, right pricing, proper bookkeeping, acceptable controls, smart cash management procedures, and sustaining financial reporting.

 

The activity of event financial management is determined by the size of the event. Because event organisers are frequently unable to forecast the financial consequences of their decisions, appointing individuals / teams solely accountable for handling event funds may become necessary.

 

Accounting, budgeting, pricing, cash management, and reporting are the main components of event financial management. The numerous parts of event financial management are as follows:

 

Accounting: The process of building a system for recording financial transactions that tracks how, when, where, and why money enters and departs a project is known as accounting. It usually requires learning the system, working with finance personnel to keep it operational, and presenting all of the data in a digestible format.

 

Budgeting: A budget is a method of distributing the funds that come in and go out of a given event. Event planners can use budgeting to help them make decisions and stay in control. Budget management comprises forecasting expenses and revenues, allocating financial resources according to priorities, tracking budget performance, and revising budgets as needed to accomplish financial objectives if the event is lucrative.

 

Pricing: The computation utilised to meet the revenue generation criteria is referred to as pricing. The cost of an event accounts for a large portion of the overall budget. Financial management's pricing responsibilities include calculating direct and indirect expenses, determining profit criteria, and developing pricing structures.

 

Cash Management is the practise of developing procedures to govern how and when money enters and exits an event. The cash management function includes establishing payment rules and processes, designing cost controls, monitoring cash flows, and executing cash handling procedures.

 

Reporting: Reporting provides crucial financial information that can be used to make better judgments about future activities. It is responsible for maintaining financial records and preparing financial reports.

 

Because finance has an impact on all aspects of an event's components and activities, all financial management responsibilities must be assessed in light of the event's objectives.

 

Medium Answer Questions Maximum Marks:40 (20 x 2 = 40)

 

Attempt any Two of the following:

 

Q1) Discuss sponsorship proposal writing. How do you construct a sponsorship business plan?

Ans) Writing a proposal or letter to potential sponsors is a crucial exercise that must be done with care to guarantee that it receives the attention it deserves from corporate clients (sponsors). Because corporate event sponsorship is essentially a kind of advertising, the notion that the event will produce powerful impressions is a vital part of the proposal that attracts attention. These are the basic marketing goals and concepts that underpin sponsorship. When making initial contact with a potential sponsor, it's typically preferable to put together a single page that succinctly summarises what you have to offer. After that, it's quite simple to turn this one page into a letter, a presentation, or a proposal. The final proposal can be tailored to the needs and requests of the sponsor.

 

The following are some examples of information that could be included in the proposal:

  1. Information about the event management company / EMC as well as the organisation that is providing the sponsorship opportunity;

  2. Information on the proposed event, including its likely impact and traffic generated; and

  3. The amount of money needed to pursue the opportunity, as well as a synopsis of the rewards the sponsor will receive.

 

It is critical that the event firm / EMC refrain from discussing pricing at this time. Before you start negotiating the price, try to schedule a meeting to learn more about the sponsor's needs. You may, however, attach the price to your proposal for lower sponsorship levels and smaller bundles.

 

Both the sponsors and the event hosts benefit from the sponsorship. The corporate sponsor can advertise its brand while the event firm receives funding through a sponsorship proposal. If the event firm / EMC is new to business or has limited operations, obtaining sponsorship might be tough; nevertheless, past volunteers who have raised cash and gone forward can provide much-needed inspiration. The firm's bargaining and leadership skills improve as it acquires experience. Raising finances for an event is an excellent learning opportunity. It also necessitates patience and the ability to persuade others.

 

Q2) What kind of financial challenges can be faced by an Event Project? Discuss the factors which are limited to event finance.

Ans) The challenges that can be faced during an event project are discussed as follows:

 

Negotiating Employee Salaries and Benefits: This can be addressed by gathering data from businesses in a similar market area and using that data to get the market basket amount. Some upward or downward negotiations are acceptable depending on the potential employee's capabilities.

 

Event Salespeople Should Be Paid Properly: To begin, the salesman is given a tiny stipend until his or her commissions equal this amount. The stipend stops once she or he has equalled the amount of the draw, and the salesman only receives sales commission. In the second technique, the salesman already has accounts and can start earning commissions right away. Commissions typically vary from 3 to 7% of the gross sale. Finally, the salesperson is paid a salary plus commissions based on sales volume.

 

Slow Client Payment: It is prudent to have an open discussion with the Event Management Company's client and establish expectations in this regard. It's also a good idea to figure out how to get their payments faster. Dealing with the challenges can be as simple as picking up the payment cheque from the client, receiving online payments, and deciding payment splits, such as when to pay and how much to pay.

 

Short on Cash: Accounts payable and receivable should be carefully managed by financial managers. If, however, the event is faced with this problem owing to some unforeseen circumstance, the event managers must immediately contact the suppliers and inform them of their intention to pay. Fixed overhead spending can also be reduced or eliminated by event planners.

 

Vendors Directly Introducing Themselves to Clients: Vendors directly introduce themselves to clients. To avoid this, clear policies or agreements specifying what is and is not authorised by vendors should be in place. As a result, rather than depending on verbal commitments, it is preferable to establish written agreements between the two parties.

 

Employee is Fired; He or She starts their Own Business and Takes Your Clients with Them: This is a risk that the event industry must accept. In practise, employees have the freedom to make decisions that will benefit their careers, and clients have no restrictions on who they do business with. The easiest method to avoid this problem is to focus on employee retention policies and employee motivation so that the employee is kept.

 

The factors related to event finance are as follows:

  1. Budget Dynamics: This entails being aware of the fluidity of the environment in which events take place.

  2. Good financial management is built on transparency and clarity when communicating financial issues, according to the principles of good governance.

  3. Contingency Planning: This takes into account the backup finances in case of unforeseen risks or challenges.

  4. 'Big Bucket' is a phrase used to describe a large bucket of water. Costs are not quantifiable: This refers to the funder's expectation setting.

  5. Liquidity Planning: This entails effectively managing additional expenditures both before and after the event.

  6. Empowerment: Giving team members financial ownership might help them be more motivated and committed.

  7. Written agreements: Written agreements between different stakeholders and the event host about payment policies and other financial procedures avoid issues and discrepancies later on.

  8. Setting Priorities: Priorities for financial objectives must be established and communicated to all team members so that choices on the allocation of financial resources can be made more easily.

  9. Knowledge: To effectively implement plans and budget requirements, all team members and event organisers must have a basic understanding of finance.

 

Short Answer Questions Maximum Marks:30 (5 x 6 = 30)

 

Write short notes on any Five of the following:

 

Q1) Master budget and functional budget

Ans) The master budget and the functional budget are two types of budgets that can be used to manage the financial aspects of an event. The master budget, as its name implies, is for the entire event's cost and revenue, whereas the functional budget is for a specific department, cost centre, or event domain. The functional budget is a sub-budget of the master budget that provides for efficient financial resource management.

 

For food or stage, for example, a functional budget is created. There are two types of budgets for any event: a master budget and a functional budget for each area. The master budget includes many types of functional budgets created by various departments for various elements or cost centres, whereas the functional budget is created for a single programme element, cost centre, or department. Cash budgets, food budgets, advertisement budgets, venue budgets, hospitality budgets, sponsorship budgets, participation fee budgets, and other event aspects / department budgets are often provided in any event.

 

Q2) GST and LBET

Ans) The Products and Services Tax (GST) is a broad-based value-added tax that applies to both goods and services. The GST is expected to broaden the tax base and reduce the effective tax rate on products. It was created in order to turn India into a single market.

 

The LBET (Local Body Entertainment Tax) is a state-imposed entertainment tax that was absorbed into the GST legislation with the introduction of the GST legislation. However, the amusement tax, which is levied and collected by local governments such as panchayats and municipalities, is exempt from GST. As a result, LBET will continue to apply as a supplementary tax in addition to GST. LBET will be applied to sums payable for gaining access to the location where the entertainment is being held. The rates of entertainment taxes on events vary by state, as do the laws governing entertainment taxes.

 

Q4) Cost oriented pricing

Ans) The most basic pricing strategy is cost-oriented or cost-based pricing. To arrive at the ultimate price of the product, a particular percentage of the targeted profit is added to the cost of the product. The overall cost of the product's manufacture is the cost of the product. A specified monetary amount or percentage is added to the cost of an event in cost-oriented pricing. The computation of desired margins or profit margins is required for this pricing strategy. Cost-plus pricing, mark-up pricing, and cost-plus fixed fee pricing are all examples of cost-oriented pricing.

 

Q5) Types of financial statements

Ans) The types of financial statements are:

 

The balance sheet depicts the assets, liabilities, and owner's equity (retained earnings) of the event business. It's a list of a company's assets (what it owns) and liabilities (what it owes to others) as of a given date, usually the last day of the accounting period, such as March 31, 2018. The three sections of a conventional balance sheet are assets, liabilities, and shareholder's equity.

 

Income Statement: An income statement, also known as a profit and loss statement, illustrates a company's revenue from operations, operating expenses, and the resulting net profit or loss for a given period of time. The income statement contains useful information for investors, such as the company's sales, profitability, retained earnings, gross profit, and operating income.

 

A cash flow statement, also known as a statement of cash flows, is a financial statement that is used to forecast future spending. It reveals whether there will be enough money to complete the planned activities and whether the cash inflow will be sufficient to cover the expenses. It's crucial for determining an event company's liquidity and long-term stability.

 

Q6) Cash flow statement

Ans) A cash flow statement, also known as a statement of cash flows, is a financial statement that is used to forecast future spending. It reveals whether there will be enough money to complete the planned activities and whether the cash inflow will be sufficient to cover the expenses. It's crucial for determining an event company's liquidity and long-term stability. To build efficient cost management techniques, event organisers must first understand cash flow. Cost-control techniques ensure that funds are properly gathered, safeguarded, and dispensed.

 

The cash-flow statement is used to convert the accrual accounting method used to create the income statement and balance sheet to a cash basis. Under the accrual method, the balance sheet and income statement represent the event company's performance. For the income statement and balance sheet, the accrual method of accounting is often chosen since it more correctly connects revenue sources to the expenses incurred in obtaining those specific revenue sources. However, knowing the exact position of cash, which is derived from the cash-flow statement, is necessary to gain an accurate image of the event company.

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