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1951-1651743519889-Unit 5 Accounting Principles - Assignment 1
1951-1651743519889-Unit 5 Accounting Principles - Assignment 1
S.P.Devindi Lalithya
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Higher Nationals - Summative Assignment Feedback Form
Student Name/ID S.P.Devindi Lalithya /E179170
Unit Title Unit 5 – Accounting Principles
Assignment Number Assignment 1 of 2 Assessor
07.12.2023 Date Received 1st
Submission Date submission
Date Received 2nd
Re-submission Date submission
Assessor Feedback:
LO2 Prepare basic financial statements for unincorporated and small business organisations in accordance
with accounting principles, conventions, and standards
LO4 Prepare budgets for planning, control and decision-making using spreadsheets.
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* Please note that grade decisions are provisional. They are only confirmed once internal and external moderation has taken place and grades decisions have
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Devindilalithya11@gmail.com 07.12.2023
Pearson
Higher Nationals in
Business
Unit 5: Accounting Principles
Assignment 01
General Guidelines
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Devindilalithya11@gmail.com 07.12.2023
Higher National Certificate/Diploma in Business
Assignment Brief
Academic Year
Unit Tutor
Issue Date
Submission Date
Submission format
The submission is in the form of a portfolio of evidence compiled from the evidence produced for two
assignments that include the following.
Section A
A blog that should make use of headings, sub-sections, columns and appropriate business-related images and
illustrations. This format offers the opportunity to present academic and theoretical information in a practical,
contextualised and creatively written way. The recommended word limit for the case study is 1,500–2,000 words,
although you will not be penalised for going under or exceeding the total word limit. All work must be supported
with research and referenced correctly using the Harvard referencing system (or alternative referencing system).
You will need to provide a bibliography using the Harvard referencing system (or an alternative referencing
system). Inaccurate use of referencing may lead to issues of plagiarism if not applied correctly.
Section B
You will also submit budget reports (Sales budget, Production budget & Cash budget) with relevant
interpretations. You will insert sections of your spreadsheet into the memorandum. The recommended word
limit for the memorandum is 1,000–1,500 words, although you will not be penalised for going under or exceeding
the total word limit. Referencing for both submissions should use the Harvard system (or an alternative system).
The submission is in the form of a portfolio of evidence compiled from the evidence produced for two
assignments that include the following.
Section C
A constructed set of financial statements (income statement and statement of financial position) for the business
in question. The word count is 2,000–2,500 words, although you will not be penalised for going under or
exceeding the total word limit. A bibliography should be provided using the Harvard referencing system (or an
alternative system). Inaccurate use of referencing may lead to issues of plagiarism if not applied correctly.
Section D
A detailed letter to a named client. The letter must be clear worded, well-structured and should make use of
appropriate business language and terminology. The letter can also include clearly labelled tables and charts.
The word count is 2,000–2,500 words, although you will not be penalised for going under or exceeding the total
word limit. A bibliography should be provided using the Harvard referencing system (or an alternative system).
Inaccurate use of referencing may lead to issues of plagiarism if not applied correctly.
LO4 Prepare budgets for planning, control and decision-making using spreadsheets.
LO2 Prepare basic financial statements for unincorporated and small business organisations in accordance with
accounting principles, conventions, and standards.
Section A
Your supervisor, one of the firm’s Key Account Managers, has asked you to prepare a blog that will be
used to market and promote its accounting services to new and existing clients. The working title you
have been given for the blog is ‘The role of accounting in an organisation’. The blog must be presented
as an online blog in an engaging and practical way, covering relevant academic theory, making use of,
for example, headings, images and illustrations. Your blog should include the following, but is not
limited to:
Section B
Tools Ltd is a new business which has been formed to buy standard machine tool units and adapt them
to the specific needs of customers.
The business will acquire fixed assets costing Rs.100,000 and a stock of 500 standard tool units on the
first day of business. The fixed assets are expected to have a five-year life with no residual value at the
end of that time.
Rs.
Direct labour 30
Fixed overhead 10
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The fixed overhead per unit includes an allocation of depreciation. The annual depreciation is calculated
on a straight-line basis and is allocated on the basis of a cost per unit to be produced during the year.
Suppliers of standard tool units will allow one month’s credit. Customers are expected to take two
months’ credit.
Wages will be paid as they are incurred in production. Fixed overhead costs will be paid as they are
incurred.
The stock of finished goods at the end of each quarter will be sufficient to satisfy 10% of the planned
sales of the following quarter. The stock of standard tool units will be held constant at 500 units.
It may be assumed that the year is divided into quarters of equal length and that sales, production and
purchases are spread evenly throughout any quarter.
Required
2. Explain the benefits and limitations of budgets, budgetary planning, and budgetary control for
Tools Ltd.
3. Compare any other organization which operates with the similar business activities and explain
how organizations are adapting budgetary planning and budgetary control to respond to
financial problem. Further, Justify budgetary control solutions and their impact on
organizational decision making to ensure efficient and effective deployment of resources.
Section C
a. Prepare final accounts for sloe traders, partnerships and limited companies in according with
appropriate principles, conventions and standards. (Please refer the excel sheet for required
information).
b. Prepare Cash flow statement of Ruba PLC. Find the cash balance for the year ended by using
relevant accounting formats. (Please refer the excel sheet for required information).
c. Compare the essential features of each financial statement (Complete set of Financial Statements) to
analyse the differences between them in terms of purpose, structure, content Etc.
Section D
These local businesses do not make use of contemporary software to support its book-keeping and
accounting function. This is something which concerns you as you feel that it represents an opportunity
for the business to save time and resource. Your supervisor, one of the firm’s Key Account Managers,
has asked you to compile the year-end financial statements ready for submission and provide, for your
client. You should prepare some detailed analysis of the figures produced, which will be presented in
the form of a letter.
a. Calculate and interpret following ratios from the given information in the excel sheet.
Investor ratios
Liquidity ratios
Leverage ratios
Profitability ratios
b. critically evaluate the performance to the business year on year (making reference to data you have
calculated, and data provided from the previous year), with reference to relevant benchmarks as
well as any limitations of using financial ratios as performance measures with a justified
conclusions and recommendations for your client.
Grading Rubric
Feedback
Grading Criteria Achieved
Contents
1. The role of Accounting in an Organization............................................................................2
Executive Summary...............................................................................................................2
1.1. The purpose of accounting in complex operating environments within an organization:2
1. 2. The Scope of accounting in complex operating environments within an organization: 3
1.2.1. The accounting function within the organisation in the context of regulatory and ethical
constraints..........................................................................................................................3
1. Financial Record Keeping:.............................................................................................3
2. Financial Reporting:.......................................................................................................4
3. Internal Controls:...........................................................................................................4
4. Auditing..........................................................................................................................4
5. Tax Compliance.............................................................................................................4
1.3. The context and purpose of the accounting function in meeting organisational, stakeholder, and
societal needs and expectations:.............................................................................................5
1.3.1. The main branches of accounting and job skillsets and competencies:...................5
1.3.2. Accounting systems and the role of technology in modern-day accounting:..........6
2. Budgets for planning, control, and decision-making using spread sheets:............................6
2.1. A cash budget from given data for an organization using a spread sheet:......................6
2.1.1. Budgetary Reports:...................................................................................................6
2.1.2. Workings:.................................................................................................................7
2.2. Benefits and limitations of budgets and budgetary planning, and control for an organisation 7
2.2.1. Budgets:....................................................................................................................7
2.2.2. Budgetary Planning:.................................................................................................7
2.2.3. Budgetary Control:...................................................................................................7
2.3. Corrective actions to problems revealed by budgetary planning and control for effective
organisational decision making..............................................................................................7
2.3.1. Common Problems in Budgetary Planning and Control:.........................................8
2.3.2. How Organizations are Adapting to Budgetary Planning and Control in Responding to Financial
Problems:............................................................................................................................8
2.3.3. Corrective Actions to Problems Revealed by Budgetary Planning and Control for Effective
Organizational Decision-Making:......................................................................................8
3. Basic financial statements for unincorporated and small business organisations following accounting
principles, conventions, and standards.......................................................................................8
4. Interpret financial statements.................................................................................................9
4.1 Explanation:...................................................................................................................10
4.2Financial Ratio................................................................................................................11
4.2.1 . Conclusions and Recommendations.....................................................................12
List of figures
Figure 1 Types of Accounting 5
List of Tables
2
standards becomes more intricate, making the accounting function vital for legal and
ethical financial reporting. (scribd, n.d.)
3
Ethical constraints require accountants to maintain the integrity of financial records,
ensuring that information is truthful, transparent, and free from manipulation. This
involves avoiding conflicts of interest and upholding honesty in financial reporting.
2. Financial Reporting:
Organizations are often required to produce financial statements and reports on a
regular basis. These reports must comply with specific regulations and standards
established by relevant authorities, such as the Securities and Exchange Commission
(SEC) in the U.S. for publicly traded companies. (planful, n.d.)
3. Internal Controls:
Establishing and maintaining internal controls is crucial to comply with regulations
such as the Sarbanes-Oxley Act (SOX) in the U.S., which mandates internal control
assessments and certifications to prevent financial fraud.
Internal controls are also important from an ethical standpoint to safeguard against
fraudulent activities and ensure the accuracy of financial information. (audit.ucsf.edu,
n.d.)
4. Auditing
External audits, conducted by independent auditors, are often required to ensure that
financial statements comply with accounting standards and regulations. This is a
regulatory requirement for many organizations.
5. Tax Compliance
The accounting function is responsible for ensuring that the organization complies
with tax regulations and accurately calculates and reports its tax liabilities.
4
Ethical constraints in tax compliance include avoiding aggressive tax avoidance
strategies that may be legal but are considered unethical. Accountants should uphold
ethical standards in tax planning and reporting.
1.3.1. The main branches of accounting and job skillsets and competencies:
5
Figure 1 Types of Accounting
(relivingmbadays, 2013)
Accounting encompasses distinct branches, each serving specific purposes. Financial
accounting focuses on external reporting, portraying an organization's financial
position. Managerial accounting aids internal decision-making through cost analysis
and budgeting. Auditing ensures the accuracy and reliability of financial information.
Tax accounting deals with tax compliance. Forensic accounting investigates financial
irregularities. A skilled accountant requires competencies in financial analysis, data
interpretation, regulatory compliance, and proficiency in accounting software to
navigate these specialized fields effectively.
2.1.2. Workings:
The workings section of a cash budget in a spread sheet showcases the step-by-step
calculations and formulas employed. This transparent breakdown enhances
accountability and facilitates understanding, ensuring that stakeholders can grasp the
financial intricacies underpinning the budget.
7
promptly. Budgetary control is crucial for maintaining financial discipline, fostering
accountability, and optimizing organizational performance.
8
3. 1 Basic financial statements for unincorporated and small business
organisations following accounting principles, conventions, and
standards.
Creating accurate financial statements from a trial balance involves meticulous
adjustments to align with accounting principles. In the context of sole traders,
partnerships, and companies, these adjustments cater to specific entity characteristics,
ensuring compliance with accounting conventions and standards. The tailored
approach reflects each business structure's nuances, presenting a true financial picture.
Additionally, the inclusion of cash flow statements enhances comprehensive
reporting, shedding light on a business's liquidity and operational efficiency, crucial
for informed decision-making and financial transparency.
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Other Income 1000 1,000
4.1 Explanation:
1. Beginning Cash Balance: The amount of cash the organization has at the
beginning of the month.
2. Inflows:
3. Outflows:
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Loan Repayment: If the organization has any loans, the repayment amount.
4. Net Cash Flow: Calculated as the sum of inflows minus the sum of outflows.
5. Ending Cash Balance: The sum of the beginning cash balance and the net cash
flow, representing the cash available at the end of the month.
This is a basic example, and in a real-world scenario, you would likely have more
line items and a more detailed breakdown of expenses and revenues. You can use
spreadsheet software like Microsoft Excel or Google Sheets to create and update
this budget as needed.
4.2Financial Ratio
Financial ratio analysis involves examining various financial metrics to evaluate a
company's performance, financial health, and efficiency. Here are some key
financial ratios and what they can indicate: (corporatefinanceinstitute, n.d.)
1. Liquidity Ratios:
This ratio measures a company's ability to cover its short-term liabilities with
its short-term assets. A ratio above 1 indicates good short-term liquidity.
2. Profitability Ratios:
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Net Profit Marginn
This ratio shows the percentage of revenue that translates into profit. A higher
margin indicates better profitability.
ROA measures how efficiently a company uses its assets to generate profit.
12
Generate accurate and timely financial reports to provide a clear overview of the
company's financial health.
Use key performance indicators (KPIs) to track and measure financial performance
against goals.
References
accaglobal, n.d. accaglobal. [Online]
Available at:
https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-
exams-study-resources/f7/technical-articles/performance-appraisal.html
[Accessed 07 12 2023].
13
jargon, B., n.d. Accounting. [Online]
Available at: https://businessjargons.com/accounting.html
[Accessed 28 11 2023].
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