Table of Contents

INTRODUCE.................................................................................................................................2

1. Examine the purpose of the accounting function within an organization............................3

1.1 Types of Accounting and differnces...................................................................................3

1.2 Types of various users for private university....................................................................3

2. Assess the accounting function within the organization in the context of regulatory and
ethical constraints..........................................................................................................................4

2.1 What are the cost allocation methods?..............................................................................4

2.2 What is IMS?........................................................................................................................8

3. Prepare financial statements from a given trial balance for sole traders. partnerships.
and not-for-profit organizations to meet accounting principles, conventions and standards.
.......................................................................................................................................................10

3.1 What is accounting cycle?.................................................................................................10

CONCLUSION............................................................................................................................22

REFERENCES............................................................................................................................23

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 INTRODUCE
The report is written to provide financial information for the company that manufactures the air
cooler. This report will re-analyze my learning process. There are three tasks that I need to
complete which are examining the purpose of accounting in an organization. assessing the
accounting function in an organization in the context of regulatory and ethical constraints. and
preparing financial statements from certain trial balances for partnerships. sole proprietorships.
and nonprofits to meet convention fundamentals and accounting standards.

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LO1 Examine the context and purpose of accounting.

1. Examine the purpose of the accounting function within an organization.

1.1 Types of Accounting and differnces
There are two types of Accounting: Finance Accounting and Management Accounting

 Financial accounting provides finance information to external users and financial

statement or report. To work with the following purposes:
- Profit. loss. income. expense. etc.
- Assets. liability
- Cashflow
 Management acccounting provides financial information to internal users. The main
tasks in the internal area are planning to achieve goals. control and decision making.

Difference between financial and management accounting

Table 1. 1

Financial account Management account

Users External Internal
Time period 12 months Monthly. quarter
Base Accounting standard Cost and benefit
Past or future Past Future

1.2 Types of various users for private university

There are two types of various: Internal and External

 Internal: users who are involved in day-to-day business activities such as the director/ CEO.
managers. staff. and workers.
 External: do not involve in day-to-day business activities such as customers ( who buy or not).
shareholders ( who invest or not). government ( tax). banks ( lend money or not). suppliers or
not.

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 Table 1. 2

Internal
Principal: the manager and operator of all
activities of the university in accordance with
the regulations of the Ministry of Education
and Training.
Aministrators: under the direction of the
principal. is responsible for implementing
plans and developing development strategies
for the school.
Lecturers: a person who directly participates
in the teaching process as well as builds an
environment for students to develop their full
potential to apply in their careers and later
life.
Labor: ensure that the environmental
protection at the university is always green-
clean-beautiful
External
Student: who directly study and work in the
university
Government: create conditions for
universities to develop and maintain the
quality of training as well as the organization
that runs the system
Businesses: universities are always
connected with businesses for mutual
benefit. Businesses need workers and
students need jobs after graduation
Club: it is a place for students to exchange
and organize social activities.

2. Assess the accounting function within the organization in the context of regulatory and
ethical constraints
2.1 What are the cost allocation methods?
Cost allocation is the use of representation to receive resources (not directly measurable)
rather than to specific individuals. There are two methods of cost allocation: The absorption
costing method and the Marginal costing method.

SavesSaves – Cost = Profit or loss

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  Absorption costing method

AC is a method in which we allocate cost into manufacturing and non-manufacturing to calculate

profit.

Sales – cost (MC & NMC) = Profit or loss

 Absorption costing

Table 2. 1

January February March

Sales 5700 6000 6300
COGS 3173 3600 3465
GP 2527 2400 2835
(NMC) 0 0 0
NP 2527 2400 2835

 Working
Sales = Sales unit * selling price
per unit
January = 190 * 30 = 5700

February = 200 * 30 = 6000

March = 210 * 30 = 6300

- COGS = Manufacturing cost per unit * COGS units

 COGS = DMC per unit + DLC per unit + OHC per unit * (Opening inventory + Production
unit) – Closing
January = (4.5 + 2.5 + 4 +5.7) * (0 + 220 – 30) = 3173
February = (4.5 + 2.5 + 4 + 7) * (30 + 180 – 10) = 3600

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 March = (4.5 + 2.5 + 4 + 5.5) * (10 + 230 – 30) = 3465

Gross Profit = Sales – COGS

January = 5700 – 3173 = 2527
February = 6000 – 3600 = 2400
March = 6300 – 3465 = 2835
- NMC = 0
January = February = March = 0

Profit = Gross profit – NMC

January = 2527 – 0 = 2527

February = 2400 – 0 = 2400

March = 2835 – 0 = 2835

To calculate the profit of this lesson, you must first change these calculation ( Ingredients 1 =
0.50 x 3 = 1.5; Ingredient 2 = 0.75 x 3 = 3; Ingredients 1 + Ingredients 2 = 1.5 + 3 = 4.5; Labour
= 0.50 x 5 = 2.5; VOH = 0.50 x 8 = 4) about the same unit. Then start calculating sales, we will
output these numbers in turn according to the months (5700, 6000, 6300). Find the value of
manufacring and multiply by the value of COGS units found, we will calculate COGS with the
value of the months respectively (3173, 3600, 3465). Calculate gross profit, after taking the value
of sales and COGS (2527, 2400, 2835). Because there is selling & distribution, NMC=0. And
after recording the value of GP and NMC, we can easily find profit (2527, 2400, 2835).

 Marginal costing method

MC is a method in which we allocate cost into fixed and variable to calculate profit.

Sales – cost (FC & VC) = Profit or loss

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  Marginal costing

Table 2. 2

January February March

Sales 5700 6000 6300
VMC 2090 2200 2310
VNMC 0 0 0
Contribution Margin 3610 3800 3990
FMC 1260 1260 1260
FNMC 0 0 0
Net profit 2350 2730 2730
 Working

Sales = Sales unit * selling price per unit

January = 190 * 30 = 5700

February = 200 * 30 = 6000

March = 210 * 30 = 6300

VMC = VMC per unit * units

 (DMC per unit + DLC per unit + VOH per unit) x (Opening inventory + Production –
Closing inventory)
January = (4.5 + 2.5 + 4) * [0 + 220 – (220 – 190)] = 2090
February = (4.5 + 2.5 + 4) * [(30 + 180) – (210 – 200)] = 2200
March = (4.5 + 2.5 + 4) * [(10 + 230) – (240 – 210)] = 2310
- VNMC = 0
January = february = march = 0

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 Margin = Sales – VMC – VNMC

January = 5700 – 2090 – 0 = 3610

February = 6000 – 2200 – 0 = 3800
March = 6300 – 2310 - 0 = 3990

FMC = Cost expected per year/12 months

January = February = march = 15120/12 = 1260
- FNMC = 0
January = february = march = 0

Net profit = Margin – FMC – FNMC

January = 3610 – 1260 – 0 = 2350

February = 3800 – 1260 – 0 = 2540
March = 3990 – 1260 – 0 = 2730
To calculate the net profit of this article, the same as above is to change ingredient 1,
ingredient 2, labor, VOH to the same unit. Starting with the sales calculation, we will have the
results respectively (5700, 6000, 6300). To calculate VMC, we must find the value of VMC per
unit and multiply by units to give the numbers in turn (2090,2200,2310). To calculate net profit,
it is necessary to know the values of Margin, FMC, FNMC according to the applied formulas
that will give the results respectively (2350, 2540, 2730).
2.2 What is IMS?
IMS is an application used for accounting. including the posting of salary summary
transactions. budgeting. etc. All financial and physical transactions of the department are
reflected in IMS. JIC is seen as a production and distribution system. Purchase more raw
materials to meet unexpected needs of customers. on the contrary, JIT is a system of
eliminating waste in production. To buy materials time to time. Ordering costs are the money

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 you pay for purchasing and placing orders. Including inventory, inventory control and shipping.
Carrying costs are known as holding costs and inventory carrying costs. i.e. the costs a business
has to pay to keep inventory in stock.

IMS JIT JIC

Material inspection cost £75.000 0
Material storage cost 0 £30.000
Material movement cost 60% £25.000
Process 1 £45.000 £45.000
Process 2 £35.000 £35.000
Factory OH cost £50.000 £50.000
Additional cost £25.000 0
Total £245.000 £185.000

The JIT model helps to reduce storage costs. This is a model that helps small businesses
because warehousing is expensive and takes a lot of company resources. JIT production will
reduce the risk of overproduction, and reduce the error rate because orders are placed in advance
and comply with customer requirements, while JIC is characterized by a large inventory,
warehouse.

Variables that need to be understood in the EOQ model

T: Total cost of inventory in one year;

P: Purchase unit price; Q: Order
Quantity; Q*: Optimal order quantity;
D: Annual quantity demanded; K:
Fixed cost per order; h: the annual
holding cost per unit or the cost of
storing the commodity.

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LO2 Prepare basic financial statements for unincorporated and small business
organizations by accounting principles. conventions. and standards

3. Prepare financial statements from a given trial balance for sole traders. partnerships.
and not-for-profit organizations to meet accounting principles, conventions and standards.
3.1 What is accounting cycle?
 An accounting circle is the process prepare a financial statement.
There are 5 steps in the accounting cycle
- Source documents: physical facilities that are recorded when a business transaction
occurs. Source documents are evidence of anykind of economy activities.
- Journal: This is a book of prime entry in the company's journal . When debiting one or
more accounts and crediting one or more accounts. there is always a balance between debit
and credit.
o Rules
Assets = Dr increase. Cr decrease
Liabilities = Cr increase. Dr decrease
Equity = Cr increase. Dr decrease
Income, profit = always Cr
Expense, loss = always Dr
o Steps
1. Find source document
2. Find two items or account affected
3. Check these items/ Account increase or decrease
4. Convert increase, decrease into Debit. Credit
5. Make journal entry & Dr. Item always first then Credit item

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 Record business transactions

1. Bought raw material on credit from Mr. X amount of £5.000 at 10% discount.

Raw material account Dr 4.500

Account payable account Cr 4.500

Raw material account Dr 500

Discount received Cr 500

2. Sold material to Mr. P on credit £2.000

Account receivable Dr 2000

Sales revenue Cr 2000
Acc. receiv. is assets that assets increase so it Dr. Revenue is income but income is always Cr.

3. Borrow money from ACB bank £4.000

Cash Dr 4000
Bank loan Cr 4000
Cash is assets and when assets increase it is always Dr. A bank loan is an unpaid loan, so it is Cr.
4. Issued share to investor amount of £$2.000

Cash Dr 2000
Share capital Cr 2000

5. Paid insurance £65

Insurance expense Dr 65
Cash Cr 65
Insurance expense is an upfront fee so it is an asset, the increased cost should be Dr. That the
cash we pay for insurance will decrease so cash Cr.

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6. Out of £20.000 sales. only 50% money received from Account receivable amount

Cash Dr 10000
Account receivable Dr 10000
Sales revenue Cr 20000

7. Paid income tax to government amount of £500

Tax expense Dr 500

Cash Cr 500
We have to pay tax so if tax expense increases, always Dr. Cash payments to the government
decrease, so cash Cr.

8. Paid salary to employees £3.000

Salary expense Dr 3000

Cash account Cr 3000
Salary expense it is expense so Dr. pay employees, so the company's cash decreases, so cash Cr.

9. £1.000 paid as insurance expense

Insurance expense Dr 1000

Cash Cr 1000

10. Dividend paid to shareholder amount of £200

Dividend expense Dr 200

Cash Cr 200

11. Depreciation on machinery 10% of £10.000

Depreciation expense Dr 1000

Machinery Cr 1000

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 12. 10% interest paid to bank on £20.000 borrowings

Interest expense Dr 2000

Cash account Cr 2000

13. Dividend received from Company B. £300

Cash Dr 300
Dividend income Cr 300

14. £3000 value product sold to customer on 70% credit and 30% cash

Cash Dr 900
Account receivable Dr 2.100
Sales revenue Cr 3.000

15. £4000 borrowed money returned to ACB bank

Bank loan Dr 4000

Cash account Cr 4000

16. Machinery sold and got £300 loss

Loss of machine Dr 300

Machinery Cr 300
Loss machinery is money loss but loss is always Dr. Machinery will decrease, it is an asset so
assets decrease. Therefore, machinery Cr.

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 - Ledger: journal entries will be posted to the general ledger so that a summary of all
transactions for individual accounts can be seen.

Raw material
DR account CR
No. Transaction Amount No. Transaction Amount
1 1 5.000

Balanc
e 5.000

Account
DR payable CR
Transactio Transactio Amoun
No. n Amount No. n t
1 1 4.500

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 4.500
Balanc
e

DR Discount received CR
Transactio Transactio Amoun
No. n Amount No. n t
1 1 1 500

500 Balance

DR Account receivable CR
Transactio Transactio Amoun
No. n Amount No. n t
2 2 2.000 0
6 6 10.000
14 14 2.100

Balance 14.100

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DR Sales revenue CR
Transactio Transactio Amoun
No. n Amount No. n t
2 2 2.000
6 6 20000
14 14 3.000

25.000 Balance

Accumulated
depreciation-
DR Machinery CR
Transactio No
No. n Amount . Transaction Amount
16 16 1.000 11 11 1.000

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 0 Balance

DR Bank loan CR
Transactio Transactio Amoun
No. n Amount No. n t
15 15 4.000 3 3 4.000

0 Balance

DR Cash CR
No Transactio Amoun
No. Transaction Amount . n t
3 3 4.000 5 5 65
4 4 2.000 7 7 500
6 6 10.000 8 8 3.000

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 13 13 300 9 9 1.000
14 14 900 10 10 200
16 16 8.700 12 12 2.000
15 15 4.000
Balance 15.135

DR Share capital CR
Transactio Transactio Amoun
No. n Amount No. n t
4 4 2.000

2.000 Balance

DR Salary expense CR
Transactio Transactio Amoun
No. n Amount No. n t
8 8 3.000

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Balance 3.000

Income tax
DR expense CR
Transactio Transactio Amoun
No. n Amount No. n t
7 7 500

500
Balanc
e

DR
Dividend expense CR
Transactio Transactio Amoun
No. n Amount No. n t
10 10 200

Balance 200

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 DR Dividends income CR
Transactio Transactio Amoun
No. n Amount No. n t
13 13 300

300 Balance

Depreciation
DR expense CR
Transactio Transactio Amoun
No. n Amount No. n t
11 11 1.000

Balance 1.000

DR Interest expense CR
Transactio Transactio Amoun
No. n Amount No. n t
12 12 2.000

Balanc 2.000
e

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 - Trial balance: At the end of an accounting period such as quarterly, monthly, or yearly
depending on the company. the total balance is calculated for the accounts.

TRIAL BALANCE

ACCOUNTS DEBIT £ CREDIT £

RAW MATERIAL 5.000
DISCOUNT RECEIVED 500
ACCOUNTS PAYABLE 4.500
ACCOUNTS RECEIVABLE 14.100
SALES REVENUE 25.000
CASH 15.135
SHARE CAPITAL 2.000
INSURANCE EXPENSE 1065
INCOME TAX EXPENSE 500
SALARY EXPENSE 3000
DIVIDEND EXPENSE 200
DEPRECIATION EXPENSE 1000
INTEREST EXPENSE 2.000
DIVIDEND INCOME 300
MACHINERY 10.000
LOSS ON DISPOSAL OF
MACHINERY 300
TOTAL 42.300 42.300

- Finance statement: which provides information about company financial position.

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22
 CONCLUSION
This report has clarified my learning and mission process. The audit of accounting purposes in an
organization further clarifies the assessment of the accounting function in an organization in the
context of regulatory and ethical constraints. The preparation of financial statements from the
balance has also been completed. So accounting is a life-sustaining of the whole business. It
plays a very important role in operating and tracking revenue and expenses. In addition. it also
helps businesses ensure compliance with statutory requirements.

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REFERENCES

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