Assignment Brief (RQF)

Unit 5: Accounting Principles

Assignment Brief 2
Student Name/ ID Number
Unit Number and Title Unit 5: Accounting Principles
Academic Year 2022
Unit Assessor
Assignment Title Assignment 2 – Financial Statements and Budgets
Issue Date Slot 16
Submission Date Slot 38

Submission Format
Format
 This assignment is an individual work.
 You must use font Times New Roman (Cambria), size 12, set number of the pages and line
spacing at 1.5 lines. Margins must be: left: 2.5 cm; right: 2 cm; top: 2 cm and bottom: 2 cm.
 You should use in-text references and a list of all cited sources at the end of the essay by
applying the Harvard referencing style.
 The recommended word limit is 2500 - 3000 words (+/-10%), excluding the tables, graphs,
diagrams, appendixes and references. You will not be penalized for exceeding the total word
limit.
 The cover page of the assignment has to be the Assignment Front Sheet 2.
Submission
 Students are compulsory to submit the assignment in due date (slot 40) and in a way
requested by the Tutor.
 The form of submission will be a soft copy posted on http://cms.greenwich.edu.vn/.
 Remember to convert the word file into PDF file before the submission on CMS.
Note
 The individual Assignment must be your own work, and not copied by or from another
student.
 If you use ideas, quotes or data (such as diagrams) from books, journals or other sources,
you must cite your sources, using the Harvard style.

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 Make sure that you understand and follow the guidelines to avoid plagiarism. Failure to
comply with this requirement will result in a failed assignment.

Unit Learning Outcomes

LO2. Prepare basic financial statements for unincorporated and small business organisations in
accordance with accounting principles, conventions and standards.

LO3. Interpret financial statements.

LO4. Prepare budgets for planning, control and decision-making using spreadsheets.
Transferable skills and competencies developed

 Managing financial data.

 Reasoning and analytical skills.
 Written communication using a range of media.
 Manipulating and interpreting data using spreadsheets
 Effective communication of relevant information across the organisation and to appropriate
stakeholders.
 Creation and interpretation of information and showing how that information can be used
most effectively to add value to the organisation.
 Ability to use quantitative skills to manipulate data, evaluate, estimate and model business
problems.
 Application of accounting knowledge to consistently deliver high-quality, accurate data and
information in a timely fashion.

Vocational scenario
Assumed that you have successfully completed your six-month probation as a Graduate Trainee at

PwC. You have now been working on several tasks with the provision of accountancy and

consultancy services to businesses in order to identify clients who have high growth potentials and

scalable business models. In addition, you also provide supports and guidance on budgeting for a

business with the aim to understand how budgeting can be used to inform efficient resource

allocation and assist effectively in control and decision making.

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Assignment Activity and Guidance

*This assignment guidance is for reference only and can be customized by the tutor to meet
specific needs

Task 1: Producing Financial Statements

You are initially working with an educational institute (ABC) that provides training to individuals
who pay tuition directly to the school. It also offers training to groups in off-site locations. You are
provided the raw data for an unadjusted trial balance of ABC on December 31st, 2020 along with
additional information from the following descriptions that require adjusting entries on December
31st as presented in the spreadsheet (Excel Sheet 1 – Task 1). In addition, all the below information
(numbers) from (a) to (h) will be given by the tutor.

Additional Information

 An analysis of ABC’s insurance policies shows that $3,000 of coverage has expired.
 An inventory count shows that teaching supplies costing $2,000 are available at year-end.
 Annual depreciation on the equipment is $10,000.
 Annual depreciation on the professional library is $5,000.
 On September 1, ABC agreed to do five courses for a client for $2,500 each. Two courses
will start immediately and finish before the end of the year. Three courses will not begin
until next year. The client paid by cash in advance for all five courses on September 1, and
ABC credited Unearned Training Fees.
 On October 15, ABC agreed to teach a four-month class (beginning immediately) for an
executive with payment due at the end of the class. On December 31, $4,000 of the tuition
has been earned by ABC.
 ABC’s two employees are paid weekly. As of the end of the year, two days’ salaries have
accrued at the rate of $150 per day for each employee.
 The balance in the Prepaid Rent account represents rent for December.

Your supervisor as a Key Account Manager has asked you to compile the adjusted trial balance and
the year-end financial statements (Income Statement and Balance Sheet) for ABC taking into
consideration accounting principles, conventions and standards. In addition, you will need to make
and show appropriate adjustments to both the income statement and the balance sheet.

Task 2: Analysing and Interpreting Financial Statements

You will select a company in a specific industry (would be individually diversified and customised
by the tutor) that you can access its consolidated financial statements for conducting the ratio

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analysis in order to understand the company’s financial performance compared to other firms in the
same industry and further pinpoint strengths and weaknesses for managers to form business
strategies and initiatives.

Firstly, compute or identify the ratios in terms of Liquidity and Efficiency, Solvency, Profitability
and Market Prospects for your chosen company from 2016-2020.

In addition, compare the performance of an organisation over time using financial ratios and
present the trend analysis in figures/charts.

Furthermore, evaluate the organisational performance with reference to relevant benchmarks for
the chosen industry.

Finally, critically evaluate financial statements to assess organisational performance using a range
of measures and benchmarks to make justified conclusions.

Task 3: Preparing budgets

You have now been asked to work with a start-up business (HAC). The business is particularly in
need of support and guidance with budgeting and how it can be used to inform efficient resource
allocation and support effective control and decision making.

You are given a raw budget data in spreadsheet format (Excel Sheet 2 – Task 3) for the next year
business plan that were prepared some months earlier. All the below information (numbers) from
(a) to (i) will be given by the tutor.

 At the end of this year, HAC will have an overdraft of $10,000 for the short-term plan
within one year and the bank will ask for eliminating that borrowing by the end of next
year.
 Throughout next year, the business plans to spend more for the marketing budget
(advertising expense) which in turn generates these increases in sales. Payments for
advertising of $3,000 will be made at the end of every quarter.
 The selling expenses will be costed about 10% of each month’s sales revenue and are
payable in the following month.
 The selling price per unit will be $22 throughout the year. 40% of sales are normally made
on two months’ credit. The other 40% are settled within the month of sale. Additionally, the
rest 20%, customers pay with a credit card. The charge made by the credit card business is
2.0% of the sales revenue value and will be added to the selling expenses for the month of
sale. The credit card business pays back the money to HAC in the month concerned.
 Raw materials will be held for one month before they are taken into production. Suppliers

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allow one month’s credit. HAC uses one unit of raw material to produce one finished good
and the cost of raw material is $5 per unit.
 The direct labour cost will be $6 per unit of production. This is a variable cost and be paid
in the month concerned.
 Various fixed production overheads run at $1,500 a month from October this year and
increase by $50 every three months, including a steady $50 each month for depreciation.
Overheads are planned to be paid 70% in the month of production and 30% in the following
month.
 To support the business to increase budgeted production level, a new small machine, costed
$12,000 will be purchased and set up in January. In the contract with supplier, HAC agreed
to pay in 4 months from February to May with equal amounts of money.
 There will be 300 units of raw material inventories at the beginning of December this year.
 The opening cash balance is planned to be $1,000 on 1 January.

You have to review its plan and accomplish the following tasks:

1. Draw up the cash budget for next year and present information in figures/charts.
2. An evaluation of the role that budgets play in the effective planning and control of
resources in an organisation such as your client’s. This will include both benefits and any
limitations of using budgets and the extent to which they can help identify problems and
corrective actions.
3. Prepare the budgeted income statement (operating profit) for next year.
4. Furthermore, how the actual operating profit would be changed due to the impacts of
scenarios below (using variance analysis)?
 Discounting prices by 20% leads to increase in sales volume per month by 10%
 Increasing advertising expense by 10% to generate an additional 20% in sales revenue
 Only offering customers one-month sales credit
The reconciliation should include all the mentioned variances.

Recommended Resources

Weblinks

Accounting Coach courses. Available at:

https://www.accountingcoach.com/accounting-basics/explanation

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Industrial Benchmarkings can be found at:

Vietnam Worldwide
https://www.vcsc.com.vn/ https://www.investing.com/
https://www.stockbiz.vn/ https://www.reuters.com/
https://finance.tvsi.com.vn/ https://www.fidelity.com/
http://www.bizstats.com/
https://www.msn.com/en-us/money
https://finance.yahoo.com/screener

Textbook

Atrill, P. and McLaney, E. (2018) Accounting and Finance for Non-Specialists.

11th Ed. Harlow: Pearson.

Weetman, P. (2019). Financial and Management Accounting: An Introduction.

Harlow: Pearson.

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Unit Assessment Criteria

Pass Merit Distinction

LO2. Prepare basic financial statements for unincorporated

and small business organisations in accordance with
accounting principles, conventions and standards.

P3 Prepare financial statements

from a given trial balance for sole M2 Produce financial
LO2 & LO3
traders, partnerships and not-for- statements from a given trial
profit organisations, to meet balance, making appropriate
D2 Critically evaluate
accounting principles, adjustments.
financial statements to
conventions and standards.
assess organisational
performance using a range
LO3. Interpret financial statements
of measures and
benchmarks to make
P4 Calculate and present financial
M3 Evaluate and justify the justified conclusions.
ratios from a set of final accounts.
use of appropriate statistical
methods supported by
P5 Compare the performance of specific organisational
an organisation over time using examples.
financial ratios.

LO4. Prepare budgets for planning, control and decision-making using spreadsheets.

P6 Prepare a cash budget from

given data for an organisation M4 Identify corrective D3 Justify budgetary

using a spreadsheet. actions to problems revealed control solutions and their

by budgetary planning and impact on organisational
P7 Discuss the benefits and control for effective decision making to ensure
limitations of budgets and organisational decision efficient and effective
budgetary planning, and control making. deployment of resources.
for an organisation.