Unit 5 Accounting Principles - Assignment

Higher Nationals
Internal verification of assessment decisions – BTEC (RQF)

INTERNAL VERIFICATION – ASSESSMENT DECISIONS
Programme title Pearson HND in Business
Assessor Internal Verifier
Unit(s) Unit 5 – Accounting Principles
Assignment title Accounting in Context and Budgetary Control.
Student’s name
List which assessment Pass Merit Distinction
criteria the Assessor has
awarded.
INTERNAL VERIFIER CHECKLIST
Do the assessment criteria awarded

match those shown in the assignment Y/N
brief?
Is the Pass/Merit/Distinction grade

awarded justified by the assessor’s Y/N
comments on the student work?
Has the work been assessed
Y/N
accurately?
Is the feedback to the student:
Give details:
• Constructive?
Y/N
• Linked to relevant assessment
criteria? Y/N
• Identifying opportunities for

improved performance? Y/N
• Agreeing actions? Y/N
Does the assessment decision need

Y/N
amending?
Assessor signature Date
Internal Verifier signature Date

Programme Leader signature (if
Date
required)
1
Mohammed Yusuf MGM Unit 5: Accounting Principles Assignment 01
Confirm action completed
Remedial action taken
Give details:
Internal Verifier
Date
signature
Programme Leader
Date
signature (if required)
2
Higher Nationals - Summative Assignment Feedback Form
Student Name/ID
Unit Title Unit 5 – Accounting Principles
Assignment Number Assignment 1 of 2 Assessor

Date Received 1st
Submission Date
submission
Date Received 2nd
Re-submission Date
submission
Assessor Feedback:
LO1 Examine the context and purpose of accounting

Pass, Merit & Distinction P1 P2 M1 D1
Descripts
LO2 Prepare basic financial statements for unincorporated and small business organisations in accordance
with accounting principles, conventions, and standards
Pass, Merit & Distinction P3 M2 D2

Descripts
LO3 Interpret financial statements
Descripts
LO4 Prepare budgets for planning, control and decision-making using spreadsheets.
Descripts
Grade: Assessor Signature: Date:
3
Resubmission Feedback:
Grade: Assessor Signature: Date:
Internal Verifier’s Comments:
Signature & Date:
* Please note that grade decisions are provisional. They are only confirmed once internal and external moderation has taken place and grades decisions have
been agreed at the assessment board.
Assignment Feedback
Formative Feedback: Assessor to Student
Action Plan
Summative feedback
4
Feedback: Student to Assessor
Student signature Date
Pearson
Higher Nationals in
Business
Unit 5: Accounting Principles
Assignment 01
5
General Guidelines
1. A Cover page or title page – You should always attach a title page to your assignment. Use previous page as your cover
sheet and make sure all the details are accurately filled.
2. Attach this brief as the first section of your assignment.
3. All the assignments should be prepared using a word processing software.
4. All the assignments should be printed on A4 sized papers. Use single side printing.
5. Allow 1” for top, bottom , right margins and 1.25” for the left margin of each page.
Word Processing Rules
1. The font size should be 12 point, and should be in the style of Time New Roman.
2. Use 1.5 line spacing. Left justify all paragraphs.
3. Ensure that all the headings are consistent in terms of the font size and font style.
4. Use footer function in the word processor to insert Your Name, Subject, Assignment No, and Page Number on
each page. This is useful if individual sheets become detached for any reason.
5. Use word processing application spell check and grammar check function to help editing your assignment.
Important Points:
1. It is strictly prohibited to use textboxes to add texts in the assignments, except for the compulsory information. eg:
Figures, tables of comparison etc. Adding text boxes in the body except for the before mentioned compulsory
information will result in rejection of your work.
2. Avoid using page borders in your assignment body.
3. Carefully check the hand in date and the instructions given in the assignment. Late submissions will not be accepted.
4. Ensure that you give yourself enough time to complete the assignment by the due date.
6
5. Excuses of any nature will not be accepted for failure to hand in the work on time.
6. You must take responsibility for managing your own time effectively.
7. If you are unable to hand in your assignment on time and have valid reasons such as illness, you may apply (in writing)
for an extension.
8. Failure to achieve at least PASS criteria will result in a REFERRAL grade .
9. Non-submission of work without valid reasons will lead to an automatic RE FERRAL. You will then be asked to
complete an alternative assignment.
10. If you use other people’s work or ideas in your assignment, reference them properly using HARVARD referencing
system to avoid plagiarism. You have to provide both in-text citation and a reference list.
11. If you are proven to be guilty of plagiarism or any academic misconduct, your grade could be reduced to A REFERRAL
or at worst you could be expelled from the course
7
Student Declaration
I hereby, declare that I know what plagiarism entails, namely to use another’s work and to present it as my own
without attributing the sources in the correct way. I further understand what it means to copy another’s work.
1. I know that plagiarism is a punishable offence because it constitutes theft.

2. I understand the plagiarism and copying policy of the Edexcel UK.
3. I know what the consequences will be if I plagiaries or copy another’s work in any of the assignments for this
program.
4. I declare therefore that all work presented by me for every aspect of my program, will be my own, and where I
have made use of another’s work, I will attribute the source in the correct way.
5. I acknowledge that the attachment of this document signed or not, constitutes a binding agreement between
myself and Edexcel UK.
6. I understand that my assignment will not be considered as submitted if this document is not attached to the
attached.
Student’s Signature: Date:

(Provide E-mail ID) (Provide Submission Date)
8
Higher National Certificate/Diploma in Business
Assignment Brief
Student Name /ID Number
Unit Number and Title Unit 5: Accounting Principles
Academic Year
Unit Tutor
Assignment Title Accounting in Context and Budgetary Control and Production and
Interpretation of Financial Statements
Issue Date
Submission Date
IV Name & 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
9
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.
Unit Learning Outcomes:
LO1 Examine the context and purpose of accounting.

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.
LO3 Interpret financial statements.
Learning Outcomes and Assessment Criteria
Pass Merit Distinction
LO1 Examine the context and purpose of accounting
P1 Examine the purpose of M1 Evaluate the context and

the accounting function purpose of the accounting D1 Critically evaluate the role of
within an organisation. function in meeting accounting in informing decision making
organisational, stakeholder to meet organisational, stakeholder and
P2 Assess the accounting and societal needs and societal needs within complex operating
function within the expectations. environments.
10
organisation in the context of
regulatory and ethical
constraints.
LO4 Prepare budgets for planning, control and decision-

making using spreadsheets.
P6 Prepare a cash budget

from given data for an D3 Justify budgetary control solutions
organisation using a M4 Identify corrective actions and their impact on organisational
spreadsheet. to problems revealed by decision making to ensure efficient and
budgetary planning and effective deployment of resources.
control for effective
P7 Discuss the benefits and organisational decision
limitations of budgets and making.
budgetary planning, and
control for an organisation.
Pass Merit Distinction
LO2 Prepare basic financial statements for unincorporated and

small business organisations in accordance with accounting D2 Critically evaluate financial
principles, conventions, and standards. statements to assess organisational
performance using a range of measures
P3 Prepare financial and benchmarks to make justified
statements from a given trial conclusions.
M2 Produce financial
balance for sole traders,
statements from a given trial
partnerships and not-for-
balance, making appropriate
profit organisations, to meet
adjustments.
accounting principles,
conventions and standards.
LO3 Interpret financial statements.
P4 Calculate and present M3 Evaluate the performance

financial ratios from a set of of an organisation over time,
final accounts. using financial ratios with
reference to relevant
P5 Compare the performance benchmarks.
of an organisation over time
11
using financial ratios.
Assignment Brief and Guidance:
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:
 the purpose and scope of accounting in complex operating environments

 a critical evaluation of the accounting function in informing decision making and
meeting stakeholder and societal needs and expectations
 the main branches of accounting and job skillsets and competencies
 accounting systems and the role of technology in modern-day accounting
 issues of ethics, regulation and compliance and the extent to which they are constraints
or threats to the organisation.
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.
Sales are forecast as follows:
12
Year 1 Year 2
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1
Modified tool units 4,050 4,200 4,350 3,900 4,050
The selling price of each unit will be Rs.90.
The cost of production of each unit is specified as follows:
Rs.
Cost of standard unit purchased 24
Direct labour 30
Fixed overhead 10
64
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
1. Produce, for each quarter of the first year of trading:
(a) the sales budget.
(b) the production budget; and
(c) the cash budget.
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
13
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.
14
Grading Rubric
Feedback
Grading Criteria Achieved
P1 Examine the purpose of the accounting

function within an organisation.
P2 Assess the accounting function within

the organisation in the context of regulatory
and ethical constraints.
P6 Prepare a cash budget from given data

for an organisation using a spreadsheet.
P7 Discuss the benefits and limitations of

budgets and budgetary planning, and control
for an organisation.
M1 Evaluate the context and purpose of the

15
accounting function in meeting
organisational, stakeholder and societal
needs and expectations.
M4 Identify corrective actions to problems

revealed by budgetary planning and control
for effective organisational decision making.
D1 Critically evaluate the role of accounting

in informing decision making to meet
organisational, stakeholder and societal
needs within complex operating
environments.
D3 Justify budgetary control solutions and

their impact on organisational decision
making to ensure efficient and effective
deployment of resources.
P3 Prepare financial statements from a

given trial balance for sole traders,
partnerships and not-for-profit
organisations, to meet accounting
principles, conventions and standards.
P4 Calculate and present financial

ratios from a set of final accounts.
P5 Compare the performance of an

organisation over time using financial
ratios.
M2 Produce financial statements from

a given trial balance, making
appropriate adjustments.
M3 Evaluate the performance of an

organisation over time, using financial
16
ratios with reference to relevant
benchmarks.
D2 Critically evaluate financial

statements to assess organisational
performance using a range of measures
and benchmarks to make justified
conclusions.
Contents
SECTION A.........................................................................................................19
The Role of Accounting in an Organization........................................................................20
1 What is Accounting?............................................................................................20
1.2 What Are the Different Types of Accounting?..............................................................20
1.4 Purpose of Accounting.......................................................................................22
What is the Purpose of Accounting?.............................................................................22
2.Code of ethics......................................................................................................23
What Is an Accounting Standard?.........................................................................25
Understanding Accounting Standards..................................................................25
Why Are Accounting Standards Useful?...............................................................26
What Are International Financial Reporting Standards (IFRS)?..................................26
What Are International Accounting Standards (IAS)?...............................................26
Understanding International Accounting Standards (IAS).........................................27
Sri Lanka Accounting standards............................................................................27
17
What is an Accounting Framework?.......................................................................28
REGULATORY FRAMEWORK IN ACCOUNTING..........................................................28
Rules and regulations for accounting in Sri Lanka....................................................29
What is sustainability governance?........................................................................30
SECTION B.........................................................................................................32
1.Budgets............................................................................................................33
2.Explain the benefits and limitations of budgets, budgetary planning, and budgetary control for Tools Ltd.. .35
Budgets:...........................................................................................................35
Budgetary Planning:..............................................................................................36
Budgetary Control:................................................................................................36
SECTION C.........................................................................................................39
1.Sole trader..........................................................................................................40
2. Partnership........................................................................................................43
3.Limited company..................................................................................................45
4.Cash Flows.........................................................................................................53
SECTION D.........................................................................................................55
Investment Ratio.....................................................................................................56
Liquidity Ratio.......................................................................................................57
Profitability Ratios...................................................................................................59
Leverage ratios.......................................................................................................61
The performance of an organisation over time using financial ratios with reference to the relevant benchmarks63
References...........................................................................................................64
18
19
SECTION A
20
The Role of Accounting in an Organization
1 What is Accounting?
Accounting is the activity of keeping records of a company's financial transactions. Journal entries are how
the accountants condense the transactions. In bookkeeping, these entries are utilized. According to the rules
set forth by the auditors and other governing agencies, the accountants create the books of accounts. The
accountants may adhere to IFRS (International Financial Reporting Standards) or generally accepted
accounting principles (GAAP)
An analyst can gain a good picture of the company's financial status by reading the book of accounts.
Therefore, the book of accounts is required to determine the firm valuation for publicly traded corporations
(economictimes,2023).
1.2 What Are the Different Types of Accounting?
Accountants may be required to record particular transactions or work with particular information sets. This
makes it possible to divide most accountants into a number of broad categories.
Financial Accounting
The procedures used to produce interim and yearly financial statements are referred to as financial
accounting. The balance sheet, income statement, and cash flow statement are all-inclusive summaries of the
financial outcomes for all transactions that take place within an accounting period. The majority of
businesses have their financial statements audited yearly by a third-party CPA firm.
A few entities, such publicly traded firms, are required by law to conduct audits.
21
However, as part of their loan covenants, lenders frequently also demand the findings of an external audit
once a year. As a result, for one reason or another, the majority of businesses will conduct annual audits.
Managerial Accounting
Financial accounting and managerial accounting both use a lot of the same data, but managerial accounting
organizes and uses the data differently. Specifically, in managerial accounting, a report is produced on a
monthly or quarterly basis that the management team of a company can use to decide how to run the
company. Budgeting, forecasting, and numerous financial analysis tools are only a few of the additional
accounting-related aspects that managerial accounting also includes. In essence, this refers to any data that
could be beneficial to management.
Cost Accounting
Cost accounting aids organizations in decision-making regarding costing, just as managerial accounting aids
organizations in decision-making regarding management. In essence, cost accounting takes into account
every expense involved in manufacturing a good. This data is used by analysts, managers, business owners,
and accountants to estimate how much their products should cost. While money is viewed as a measure of a
company's economic performance in financial accounting, it is viewed as an economic factor in production
in cost accounting.
Tax Accounting
Tax accountants frequently utilize a different set of rules than financial accountants when reporting a
company's financial situation. Depending on the type of return being submitted, these regulations may be
determined at the federal, state, or municipal level. Tax accounts strike a compromise between adhering to
reporting requirements and aiming to reduce a company's tax bill through strategic decision-making. The
strategic development of the organizational chart, the operations, the compliance, the reporting, and the
remittance of tax responsibility are all often overseen by a tax accountant for a business (Fernando, 2022).
22
1.4 Purpose of Accounting
What is the Purpose of Accounting?
The purpose of accounting is to accumulate and report on financial information about the performance,
financial position, and cash flows of a business. This information is then used to reach decisions about how
to manage the business, or invest in it, or lend money to it. This information is accumulated in accounting
records with accounting transactions, which are recorded either through such standardized business
transactions as customer invoicing or supplier invoices, or through more specialized transactions, known as
journal entries (accounting,2023).
The goal of accounting is to give organizations a methodical and thorough approach to record, report, and
analyze financial transactions and information. Accounting has various important uses.
1. Financial RecordingAccounting facilitates the correct and organized recording of financial

transactions, such as sales, purchases, expenses, and investments. This makes sure that every
financial transaction is accurately recorded and can be tracked back when necessary.
2. Financial Reporting: The income statement, balance sheet, and cash flow statement are only a few of
the financial statements that accounting generates. Making strategic business decisions requires
having access to these financial accounts, which give a quick overview of the organization's
performance and position.
3. Decision-making: Accounting-provided financial data enables business owners, managers, investors,
and other stakeholders to make well-informed choices regarding resource allocation, investment
opportunities, expansion plans, and other operational elements of the firm.
4. Performance evaluation: By contrasting financial statements from several time periods, accounting
enables firms to evaluate their ongoing financial performance. This assessment aids in discovering
patterns, advantages, disadvantages, and opportunities for growth.
5. Compliance and Legal Requirements: Accounting makes sure that businesses abide by the legal and
financial reporting laws set forth by the appropriate regulatory bodies. For tax reporting, auditing,
and complying with regulations, accurate financial records are essential.
6. Accounting offers a standard language for expressing financial information to a variety of
stakeholders, including investors, creditors, lenders, employees, and the general public. Building
confidence and credibility through transparent and honest financial reporting.
7. Resource Allocation: Accounting facilitates effective resource allocation by offering insights into the
costs and advantages related to various corporate operations. This aids in maximizing resource usage
and accomplishing corporate objectives.
8. Calculation of Profit and Loss: Accounting computes and keeps track of the company's revenue and
outlays, which ultimately determines its profitability. For determining if a business is viable and
sustainable, this information is essential.
23
9. Planning and Budgeting: Accounting data is useful in creating future financial plans and budgets.
Organizations can create reasonable financial goals and deploy resources in the appropriate ways by
examining past data and predicting future trends.
10. Risk management: Accounting offers a summary of the company's financial responsibilities,
liabilities, and assets, which helps in detecting and managing financial risks. Making wise risk
management decisions is aided by this information (Fernando, 2023).
2.Code of ethics
What Exactly Is an Ethics Code?
A code of ethics is a set of guiding principles intended to help professionals conduct themselves in the
workplace honestly and morally. An organization's mission and basic values, the professional standards to
which they are held, the way in which professionals should handle challenges, and other topics may all be
included in a code of ethics statement. (Hayes, 2023).
An "ethical code," often known as a code of ethics, can cover topics including employee conduct policies,
professional practice standards, and corporate ethics. (Hayes, 2023).
Understanding Codes of Ethics

Business ethics is the study of how moral ideals influence how businesses operate. Employer-employee
relations, discrimination, environmental concerns, bribery, insider trading, and social responsibility are
common topics that fall under the general heading of business ethics. (Hayes, 2023).
Even though there are numerous laws that establish fundamental ethical norms for the corporate world, it is
primarily up to a company's leadership to create an ethics code.
The employees or members of both enterprises and trade organizations are often expected to abide by some
form of code of ethics. A violation of the organization's code of ethics may lead to dismissal or termination.
A code of ethics is crucial because it outlines expectations for conduct in detail and establishes the
foundation for an early warning (Hayes, 2023).
Many businesses have made the decision to incorporate climate factors in their code of ethics due to the
significance of climate change and how human behavior has had a significant impact on the environment.
These principles cover how the business is committed to operating sustainably or how they plan to transition
to doing so. (Hayes, 2023).
This dedication to sustainability frequently raises a company's expenses, but given that customers are
growing more selective about the organizations they interact with, it is frequently worthwhile to pay the
price to uphold a positive reputation. (Hayes, 2023).
24
No of the size of the company, management is expected to set an example of moral behavior for all
employees to follow. When administrators uphold the code of ethics, it conveys that all staff members are
expected to do the same. (Hayes, 2023).
Types of Codes of Ethics

A code of ethics can take many different forms, but its main objectives are to make sure that a company and
its employees are abiding by local, state, and federal laws, acting in a way that can be regarded as
exemplary, and conducting business in a way that benefits all parties. The following are three categories of
business ethics codes.
Compliance-Based Code of Ethics

Laws govern many aspects of company, including hiring practices and safety requirements. In addition to
establishing rules for behavior, compliance-based codes of ethics also specify the consequences for
infractions. (Hayes, 2023).
Certain regulations regulate company conduct in particular sectors, including the banking industry. To
uphold rules and laws, these sectors create compliance-based codes of ethics. Typically, formal training is
required for employees to learn the standards of behaviour. Individual employees may experience
consequences for breaking rules since disobedience can result in legal concerns for the corporation as a
whole. (Hayes, 2023).
Some businesses designate a compliance officer to guarantee that the objectives and guiding principles of
the code of ethics are upheld. This person is responsible for monitoring employee behavior to promote
conformance and staying current on changes to regulation codes. (Hayes, 2023).
Instead of focusing on individualized behavior monitoring, this kind of code of ethics is based on
unambiguous guidelines and well-defined penalties. Some compliance-based codes of conduct do not foster
a culture of moral responsibility within the organization despite rigorous conformity to the law. (Hayes,
2023).
Value-Based Code of Ethics

A company's basic values are addressed by a code of ethics that is founded on values. It might include
guidelines for appropriate behavior in relation to the environment and the general welfare. Value-based
ethical rules could necessitate more self-control than compliance-based codes, according to Hayes (2023).
Some rules of conduct include wording that speaks to both values and compliance. For instance, a chain of
grocery stores may establish a code of conduct that emphasizes the importance of health and safety laws to
the business over profit. Additionally, that supermarket chain can indicate that it would not get into contracts
with vendors who breed animals inhumanely or feed them hormones (Hayes, 2023).
Codes of Conduct for Various Professions

Codes of ethics and conduct are required by law for some professions, such as those in the finance or
medical areas (Hayes, 2023).
25
Accountants
The American Institute of Certified Public Accountants (AICPA) states that certified public accountants,
who are not typically regarded as fiduciaries to their clients, are still expected to uphold similar ethical
standards, such as integrity, objectivity, truthfulness, and avoiding conflicts of interest (Hayes, 2023).
Financial Consultants
A fiduciary duty is an ethical standard that applies to financial advisors who are registered with the
Securities and Exchange Commission (SEC) or a state regulator. In addition to being required by law, they
are also bound by a code of loyalty to operate in their clients' best interests (Hayes, 2023).
What Is an Accounting Standard?

A unified collection of guidelines that serve as the foundation for financial accounting rules and practices is
known as an accounting standard (Kenton,2023).
Understanding Accounting Standards

According to Kenton, (2023) Accounting standards increase financial reporting's openness across the board.
The commonly used set of accounting standards for creating financial statements in the US is known as
generally accepted accounting principles (GAAP).
The International Accounting Standards Board (IASB) has established the International Financial Reporting
Standards (IFRS), which are used by international businesses that report financial accounts and are not
subject to U.S. GAAP.
In the United States, both public and private institutions frequently apply widely accepted accounting
standards. Most of the rest of the world employs IFRS. The use of these standards is needed by multinational
organizations. When creating financial statements, the International Accounting Standards Board (IASB)
creates and interprets the accounting standards used by the various international communities.
All facets of an entity's financial picture, including its assets, liabilities, income, outlays, and shareholders'
equity, are covered by accounting rules. Revenue recognition, asset classification, permissible depreciation
methods, what qualifies as allowable depreciation, lease classifications, and outstanding share measurement
are a few instances of specific accounting rules.
In the 1930s, the New York Stock Exchange and the American Institute of Accountants, which is now
known as the American Institute of Certified Public Accountants, attempted to introduce the first accounting
standards.
The Securities and Exchange Commission was established as a result of this endeavor, which was followed
by the Securities Act of 1933 and the Securities Exchange Act of 1934.
26
The Governmental Accounting Standards Board has also produced accounting standards for all state and
municipal governments' use of accounting principles.
Accounting standards define the timing, measurement, and presentation of economic events. Accounting
standards make sure that pertinent information is given about the firm to external entities including banks,
investors, and regulatory bodies. These technical declarations have established the parameters for financial
reporting measures and secured reporting transparency.
Why Are Accounting Standards Useful?

Accounting standards increase financial reporting's openness across the board. They provide the timing and
format for identifying, measuring, and displaying economic events. Accounting standards make sure that
pertinent information is given about the firm to external entities including banks, investors, and regulatory
bodies. These technical declarations have established the parameters for financial reporting measures and
secured reporting transparency (Kenton,2023).
What Are International Financial Reporting Standards (IFRS)?

The International Accounting Standards Board (IASB) has established the International Financial Reporting
Standards (IFRS), which are used by international businesses that report financial accounts and are not
subject to U.S. GAAP. They were created to harmonize accounting standards and procedures across all
businesses and nations. In comparison to GAAP, IFRS is regarded to be more dynamic because it is
frequently updated in response to a constantly shifting financial environment (Kenton,2023).
What Are International Accounting Standards (IAS)?

International Financial Reporting Standards (IFRS), which have now been accepted by the majority of the
world's major financial markets, replaced International Accounting Standards (IAS), a set of regulations for
financial statements, in 2001.
The International Accounting Standards Board (IASB), an impartial organization with headquarters in
London, released both sets of standards.
The IFRS are not used in the United States. Instead, public firms in the United States are required to adhere
to Generally Accepted Accounting Principles (GAAP) by the U.S. Securities & Exchange Commission.
IFRS adoption was also rejected by China and Japan (Kenton,2023).
27
Understanding International Accounting Standards (IAS)
International Accounting Standards (IAS) were the first international accounting standards that were issued
by the International Accounting Standards Committee (IASC), formed in 1973. The goal then, as it remains
today, was to make it easier to compare businesses around the world, increase transparency and trust in
financial reporting, and foster global trade and investment Globally comparable accounting standards
promote transparency, accountability, and efficiency in financial markets around the world. This enables
investors and other market participants to make informed economic decisions about investment
opportunities and risks and improves capital allocation. Universal standards also significantly reduce
reporting and regulatory costs, especially for companies with international operations and subsidiaries in
multiple countries (Kenton,2023).
Sri Lanka Accounting standards

The Accounting Standards Committee is authorized under the Sri Lanka Accounting and Auditing Standards
Act No. 15 of 1995 to recommend the Sri Lanka Accounting Standards for adoption throughout the nation
via the Council of the Institute of Chartered Accountants of Sri Lanka. The said standards must be followed
in order for Sri Lanka's Specialized Business Enterprises (SBEs) to operate. The "Accounting Standards
Committee" is to be established in accordance with the Act in order to support the Council of CA Sri Lanka
in the proclamation of these standards.
Since January 1, 2012, Sri Lanka has adopted the International Accounting Standards Board's (IASB) most
recent pronouncements.
Several important goals are covered by the standard-setting process' objectives. First and foremost, it aims to
provide a system of accounting rules that serve the public good. These requirements must be of the highest
caliber, clear to understand, and enforceable. They are made so that high-quality, clear, and comparable
financial information must be disclosed in all reports, but especially in financial statements. The ultimate
objective is to give users of this information the knowledge they need to make wise economic decisions. The
second objective is to promote the wide acceptance and strict application of these standards throughout the
financial reporting industry. Due consideration is given to the unique requirements while accomplishing
these goals.
The International Financial Reporting Standards published by the International Accounting Standards Board
(IASB) are adopted by the Council of the Institute of Chartered Accountants of Sri Lanka in order to
accomplish the aforementioned goals (Slaasc,2023).
28
According to the Sri Lanka Accounting and Auditing Standards Act, No. 15 of 1995, "Specified Business
Enterprises" must prepare and present their financial statements in accordance with Sri Lanka Accounting
Standards, and the Council of the Institute of Chartered Accountants of Sri Lanka is authorized to adopt Sri
Lanka Accounting Standards (Slaasc,2023).
Accounting standards with the prefixes SLFRS and LKAS are included in Sri Lanka Accounting Standards.
The Sri Lankan accounting standards that correlate to IFRS and IAS are referred to as SLFRS and LKAS,
respectively. SLFRSs is the abbreviation used most frequently to refer to Sri Lankan accounting standards.
Additionally, the Council of the Institute of Chartered Accountants of Sri Lanka adopted all IFRIC and SIC
statements made by the IASB on the advice of the Accounting Standards Committee. Sri Lanka Accounting
Standards also include Financial Reporting Guidelines published by the Institute and Statements of
Recommended Practices (SoRPs), Statements of Alternate Treatment (SoATs) (Slaasc,2023).
To further ease the burden of financial reporting for the nation's SMEs, the Accounting Standards
Committee has recommended the adoption of the Sri Lanka Accounting Standard for Small and Medium
Sized Entities (SLFRS for SMEs) and Sri Lanka Accounting Standards for Smaller Entities (SLFRS for
Smaller Entities) (Slaasc,2023).
What is an Accounting Framework?

A documented set of standards known as an accounting framework is used to measure, recognize, display,
and disclose the information included in the financial statements of an entity. The financial statements of an
organization must have been prepared in accordance with a recognized framework in order for auditors to
render a clean audit opinion on them.
International financial reporting standards (IFRS) and generally accepted accounting principles (GAAP) are
the two accounting systems that are most frequently employed. The majority of the rest of the world uses
IFRS, while entities in the United States use GAAP. These two frameworks are intended to be broadly
applicable, making them suitable for the majority of business kinds. There are additional accounting
frameworks known as other comprehensive bases of accounting (OCBOA) that are created for unique
circumstances (accountingtools,n.d).
REGULATORY FRAMEWORK IN ACCOUNTING

According to Adjei (2021) The International Accounting Standards Board (IASB) released this framework
to lay out and clarify the ideas underpinning the creation and presentation of financial statements for
external users.
The accounting regulatory framework fulfills a number of vital functions. In the first place, it offers priceless
assistance to the International Accounting Standards Board (IASB) in the creation of upcoming accounting
standards as well as the ongoing evaluation of current ones. Second, it provides a framework for decreasing
the variety of alternative accounting approaches and boosting financial reporting consistency. Thirdly, it
helps organizations that set national standards create their own national standards. Additionally, even when
29
dealing with subjects not covered by international accounting standards, the framework helps accountants
apply appropriate accounting principles while generating financial statements. Additionally, it helps
accountants establish qualified judgements on how closely financial statements adhere to pertinent
accounting principles. The ability to clearly read financial statements prepared in conformity with
International Accounting Standards is ensured by its crucial function in assisting users of financial
statements in understanding the information included therein.
The framework examines a number of important subjects. These include defining who their intended users
are, outlining the basic goals guiding the development of financial statements, and looking at the
fundamental presumptions that support their construction. The framework also explores the qualitative traits
that financial statements must have in order to be trustworthy and informative. It also examines the
components of financial statements, taking into account how they are assessed and recognized. The
framework also discusses the concepts and tactics that surround the complex idea of capital upkeep.
Together, these subjects offer the framework and rules essential for ethical financial reporting methods.
Rules and r egulations for accounting in Sri Lanka

Several laws, including the Companies Act No. 7 of 2007, Securities and Exchange Commission Act No. 36
of 1987, Banking Act No. 30 of 1988, Finance Business Act No. 2012, Regulation of Insurance Industry Act
No. 27 of 2011, Inland Revenue Act No. 9 of 2015, Microfinance Act No. 6 of 2016, and Accounting and
Auditing Standards Act No. 15 of 1995, specify the requirements for corporate financial reporting in Sri
Lanka. (ifac,2020).
The Companies Act No. 7 of 2007 specifies obligations for financial reporting and audits for businesses that
are incorporated under the Act, although it is silent on the standards that must be followed (ifac,2020).
Specific business enterprises (SBEs) are required to prepare financial statements in accordance with the
accounting standards established by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)
under the Accounting and Auditing Standards Act No. 15 of 1995. The Sri Lanka Financial Reporting
Standards (SLFRS) have been adopted by the institute. The 2013 edition of the International Financial
Reporting Standards (IFRS) served as the foundation for the development of SLFRS. As SLFRS for SMEs,
CA Sri Lanka has also embraced IFRS for SMEs. Any company may apply for SLFRS for SMEs, with the
exception of SBEs, as stated below. (ifac,2020).
The Accounting and Auditing Standards Act defines small and medium-sized entities (SMEs) in Sri Lanka
as including a variety of companies and organizations. Listed firms, financial institutions including banks,
insurance companies, factoring companies, finance companies, and leasing companies are all included in
this. Unit trusts, investment management firms, stockbrokers, stock dealers, and stock exchanges are also
covered. This category also includes public corporations that participate in the sale of commodities or the
rendering of services. Non-listed companies also fall under this category if they meet the following
requirements: an annual turnover of more than LKR 500 million; shareholders' equity of more than LKR
100 million; gross assets of more than LKR 300 million; liabilities to banks and other financial institutions
of more than LKR 100 million; and a workforce of more than 1,000 people (ifac,2020).
30
All SBEs must do audits, according to the 1995 Accounting and Auditing Standards Act No. 15. According
to the act, only Chartered Accountants (CAs), who are members of CA Sri Lanka and possess a Certificate
to Practice, are qualified to conduct audits in accordance with the standards for auditing established by CA
Sri Lanka. The same law gives CA Sri Lanka the authority to establish national auditing standards, and the
organization has done so by adopting the Sri Lankan Auditing Standards (SLAuS). SLAuS are created using
the 2013 International Standards on Auditing (ISA) version, with adjustments made for local regulations
(ifac,2020).
Several other laws create specific requirements for certain Small and Medium-sized Enterprises (SBEs), in
addition to the financial reporting standards established in the Accounting and Auditing Standards Act and
Companies Act:
For businesses with stock market listings, the Securities and market Commission Act No. 36 of 1987
specifies requirements for financial reporting. The Securities and Exchange Commission is designated as the
regulatory body in charge of monitoring compliance at all listed firms.
Comprehensive financial reporting standards are required for all banks under the Banking Act No. 30 of
1988. The Central Bank of Sri Lanka (CBSL) is designated in this act as the main regulatory authority in
charge of policing the banking industry. Additionally, the Microfinance Act No. 6 of 2016 and licensed
financial firms established under the financial Business Act of 2012 are also subject to regulatory control by
the CBSL.
All insurance businesses must now comply with particular financial reporting criteria set forth in the
Regulation of Insurance Industry Act No. 27 of 2011. The Insurance Board of Sri Lanka is designated by
this law as the regulatory body in charge of ensuring that insurance companies adhere to these reporting
requirements (ifac,2020).
What is sustainability governance?

Governance of organizations that is both legal and fosters a good life for everyone, both now and in the
future, is known as sustainability governance.
There are legal frameworks that support sustainability, are neutral toward sustainability, and condone
unsustainable behavior and governance. Knowing the laws that support sustainability is the cornerstone of
sustainability governance, as we have previously stated. Any sustainability governance program must, at its
heart, have a method to know and stay current on what the law requires of the organization that it is
controlling because legislation is so tremendously disorganized (Watson,2020).
31
Beyond that, one must understand the behaviors that are prudent, ethical, and sustainable. It can be
challenging to determine what is sustainable, and it is unavoidable that acts taken in the name of
sustainability may turn out to be unsustainable over the long term, especially the very long term. However,
being aware of a sustainability imperative will eventually prompt corporate behaviors that are pro-
sustainable, particularly if you view it from the standpoint of justice in the here and now. As organizations
optimize for operations and performance through a sustainability lens, test, or framework, both from the
perspective of the organization itself (like, will the company be around for 200 years or more) and from the
perspective of the planet and society at large, we will become better at knowing what actions are wise, just,
and sustainable. Scientific inquiry will ascertain what contributes to sustainability and what does not; what
behaviors encourage sustainability and what behaviors do not (Watson,2020).
As a result of the requirement for sustainability governance, non-financial issues are now increasingly
considered when making and managing investments. ESG elements are becoming more significant in
investing choices and are something that businesses must account for and report on. The Global Reporting
Initiative, the International Integrated Reporting Council, and the Economics of Mutuality have all done
some excellent ground-breaking work in the area of ESG accounting and reporting. ESG accounting and
reporting, however, are still in their infancy compared to financial accounting and reporting. In due course,
it's conceivable that generally accepted accounting principles (GAAP) for environmental, social, and
governance issues (ESG) will be formed, furthering our capacity to govern sustainably (Watson,2020).
32
SECTION B
33
1.Budgets
SALES BUDGET
Q1 Q2 Q3 Q4
NO of sales units 4050 4200 4350 3900
Value per unit 90 90 90 90
Estimated sales 364500 378000 391500 351000
PRODUCTION BUDGET
Q1 Q2 Q3 Q4
Sales Units 4050 4200 4350 3900
Less:Opening
Inventory -500 -420 -435 -390
Add: Closing inventory 420 435 390 405
Producton Units 3970 4215 4305 3915
CASH BUDGET
Q1 Q2 Q3 Q4
CASH AT THE BEGINNING 0 -95820 10380 123080
CASH INFLOWS
Trade Receivables 121500 369000 382500 378000
CASH OUTFLOWS
DM COST 63520 99200 102600 97080
DL COST 119100 126450 129150 117450
OH COST 34700 37150 38050 34150
TOTAL CASH OUTFLOWS 217320 262800 269800 248680
CASH SURPLUS/DEFICIT -95820 10380 123080 252400
WORKINGS
DM
BUDGET
34
Q1 Q2 Q3 Q4
Production
unit 3970 4215 4305 3915
Cost of standard unit purchased 24 24 24 24
Dm cost of Production 95280 101160 103320 93960
DL Budget
Q1 Q2 Q3 Q4
Production
units 3970 4215 4305 3915
wages per
unit 30 30 30 30
119100 126450 129150 117450
OH
BUDGETS
Q1 Q2 Q3 Q4
Production
units 3970 4215 4305 3915
OH usage Per unit 10 10 10 10
39700 42150 43050 39150
DEPRICIATION -5000 -5000 -5000 -5000
34700 37150 38050 34150
10000/
DEPRICIATION for the year 5
20000
20000/
DEPRICIATION for 1 quarter 4
5000
ES Q1 = 364500 Q2= 378000 Q3=391500 Q4=351000

M M
1 2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
12150 12150 12150
0 0 0
12600 12600 12600
35
0 0 0
13050 13050 13050
0 0 0
11700
0
or 12150 36900 38250 37800
Q 0 0 0 0
CHASES Q1 = 95280 Q2= 101160 Q3=103320 Q4=93960

M
1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
3176
31760 31760 0
3372 3372 3372
0 0 0
3444 3444
0 34440 0
3132 3132
0 0
ases for 9920 10260 9708
Q 63520 0 0 0
2.Explain the benefits and limitations of budgets, budgetary planning, and

budgetary control for Tools Ltd.
Budgets, budgetary planning, and budgetary control have several benefits and limitations for Tools Ltd.
Let's explore them in detail:
Budgets:
Benefits of Budgets:
1. Financial Planning: Tools Ltd. uses budgets as a well-organized foundation for its financial planning.
They provide accurate resource estimation and allocation, ensuring that the company's financial
goals and objectives are in line.
36
2. Goal Setting and Performance Evaluation: Tools Ltd. can define particular financial goals and targets
thanks to the budget. The company can assess its performance and, if necessary, make corrections by
comparing actual performance to the budgeted figures. Budgets aid in pinpointing problem areas and
monitoring development over time.
3. Resource Allocation: Budgets make it easier to allocate resources effectively. Based on their
relevance and anticipated returns, various departments, initiatives, or activities may get funding that
is prioritized and distributed by Tools Ltd. This guarantees that resources are used effectively and in
line with the strategic goals of the business.
4. Budgets serve as a foundation for decision-making within Tools Ltd. The business can decide on
investments, cost-cutting initiatives, pricing strategies, and other financial matters by having a clear
picture of predicted revenues, expenses, and cash flows.
Limitations of Budgets:
1. Rigidity: Budgets are frequently created using assumptions and estimations, which might not fully
reflect the dynamic business environment. If unanticipated occurrences or changes take place
throughout the budget term, Tools Ltd. may run into problems that call for flexibility and alterations
to the initial budget.
2. Time-consuming: Especially for large firms like Tools Ltd., creating, reviewing, and maintaining
budgets can take a lot of effort. It necessitates compiling and evaluating financial data, working with
several departments, and guaranteeing correctness and completeness. Managerial focus may be
diverted from other crucial activities as a result.
3. Limited Accuracy: Budgets are naturally prone to errors and uncertainty since they rely on
projections and underlying assumptions. If the budgeted figures drastically differ from the actual
performance, Tools Ltd. may encounter difficulties since it could result in inefficient planning and
decision-making. (Rajak,2023).
Budgetary Planning:
Benefits of Budgetary Planning:
1. Strategic Alignment: Tools Ltd. uses budget planning to make sure that its financial strategies are in
line with its strategic objectives. It makes sure that the financial resources of the business are
allocated to support the major projects and goals listed in its strategic plan.
2. Coordination and Communication: Tools Ltd. departments and stakeholders collaborate throughout
budgetary planning. It makes it easier for teams to communicate and work together, assuring a united
strategy for hitting financial goals.
37
3. Expense Control: Tools Ltd. may successfully identify and control its expenses through budgetary
planning. It gives the business the ability to establish spending caps, distribute resources wisely, and
keep tabs on costs, encouraging cost-consciousness and enhancing overall financial performance.
Limitations of Budgetary Planning:
1. Lack of Flexibility: Annual budget cycles are one example of a defined timeframe in which
budgetary planning frequently operates. This may make it more difficult for Tools Ltd. to adjust to
changing market conditions or respond rapidly to unforeseen changes, which could make the plans
less useful or effective.
2. Overemphasis on Quantitative elements: Budgetary planning frequently places an excessive amount

of emphasis on quantitative and financial measures, thereby neglecting qualitative elements that
could affect Tools Ltd.'s performance. Along with financial considerations, other factors including
market developments, employee involvement, and customer happiness should be taken into account
(Sona, 2023).
Budgetary Control:
Benefits of Budgetary Control:
1. Performance measurement: Budgetary control enables Tools Ltd. to assess performance by

contrasting actual results with planned sums. It assists in identifying areas of underperformance or
overperformance, allowing for prompt corrective action.
2. Cost-Reduction: Effective cost monitoring and management are made possible by budgetary control
for Tools Ltd. The organization can see cost overruns and take the necessary action to cut costs,
increase efficiency, and maximize profitability by comparing actual expenses to projected levels.
3. Decision Making and Accountability: Budgetary control gives Tools Ltd. rapid access to reliable
financial data, enabling data-driven decision making. It aids in assessing managers' performance
based on adherence to financial goals and makes them accountable for their budget-related duties.
Limitations of Budgetary Control:
1. Resistance to Change: Employees who see budgetary control as a rigorous and constrictive
procedure may be resistant to its implementation. Tools Ltd. risks demotivating its staff and losing
their commitment if it doesn't explain the benefits and include them in the budgetary control system.
2. Unrealistic Goals: Having staff perform poorly due to exceedingly ambitious or unrealistic budgeting
goals. Tools Ltd. must make sure that the budgetary control system establishes ambitious but doable
goals that promote a supportive and fruitful work environment.
38
3. Incomplete Performance Assessment: Since budgetary control largely focuses on financial
performance, a complete picture of Tools Ltd.'s performance may not be available. For a more
complete evaluation, non-financial criteria like client satisfaction, employee involvement, and
innovation should also be considered (Sona, 2023).
39
SECTION C
40
1.Sole trader
Statement of Comprehensive Income for the year ended 31st March 2019.
for Saman Trading
RS (000) RS (000)
REVENUE 71000
LESS COST OF SALES
OPENING INVENTORY 7700
PURCHASES 30000
LESS CLOSING INVENTORY -6900 30800
GROSS PROFIT 40200
Decrease in provision for doubtful debts 986
41186
Less expenses :
Sales Commision 4300
Telephone and Electricity 8310
Insurance 2600
Salaries and Wages 13000
Bank loan - 14% 2660
Depreciation :
Building 2000
Motor Vehicle 1760
Office Equipment 660
BAD DEPTS 300 35590
Net Profit 5596
41
Statement of Financial position as at 31st March 2019.
for Saman Trading
RS (000) RS (000) RS (000)

ASSETSS
Non-Current Assets
Land 11000
Building 40000
less: accumulated depriciation -12000 28000
Motor Vehicle 8800
less: accumulated depriciation -4640 4160
Office Equipment 5500
less: accumulated depriciation -1740 3760 35920
46920
Current assets
inventory 6900
Trade Recievables 13000
Doubtfull debts -300
provision for doubt full
debt 12700
2% less -254 12446
prepaid expense
(insuarance ) 1060
Cash in hand 5240 25646
Total assets 72566

42
Capital & Liabilities
Capital
Capital as at 01st April

2018 28000
Net Profit 5596
less drawings -2400 3196 31196
Non Current Liabilities

bank loan 19000
Current Liabilities
trade payables 15200
accrued expense
telephone and electricity 710
bank loan interest 2660
bank overdraft 3800 22370
total capital and liabilities 72566
Workings
workings
rs
W1 (000)
Trade IN
receivables 13000 SOFP
bad debts -300 in IS
IN
12700 SOFP
IN
pf dd 2% -254 SOFP
IN
12446 SOFP
old pfd 1240

New pf dd 2% -254
Decrease in
pfdd 986 in IS
since provision has reduced by 986 it is treaated as other income
43
2. Partnership
Statement of Comprehensive Income for the year ended 31st March 2018
for ABN Associates
RS RS
REVENUE 3800000
Less cost of sales 1900000

Gross Profit 1900000
expenses
Operational Expenses 850000
Depreciation 180,000
Patners loan interest 20% 40000
1070000
net profit 830000
APPROPRIATION ACCOUNT
44
Less Intrest on capital
Amal 50000
Bimal 40000
Nimal 40000 130000
Surplus for the
year 700000
share of profit Amal 4 280000
Bimal 3 210000
Nimal 3 210000
DR Partners current account CR

Amal Amal Bimal Nimal
Description Bimal Nimal Description
RS RS RS RS RS RS
Balance 1.4.2017 125000 85000 Balance 1.4.2017 225000
Drawing
s 445000 175000 Intrest on capital 50000 40000 40000
Intrest on partners loan 40000
share of profit 280000 210000 210000
Statement of Financial position as at 31st March 2018.

Balance c/d 110000 205000 Balance c/d 50000
for ABN Associates
555000 300000 290000 555000 300000 290000
Balance b/d 50000 Balance b/d 110000 205000
RS RS RS
ASSETSS
Non-Current Assets
Property, Plant & Equipment 850000
less: accumulated depriciation -180000
670000
Current assets
closing Inventory 465000
Trade Recievables 280000
cash at bank 500000
Total assets 1915000
Capital & Liabilities
Capital account
Amal 500000
Bimal 400000
Nimal 400000 1300000
current account 45
Mohammed Yusuf Amal
MGM Unit 5: Accounting Principles Assignment 01110000
Bimal 50000
Nimal 205000 365000
Non Current Liabilities
Partners loan 200000
Current Liabilities
trade payables 150000
total capital and liabilities 2015000

3.Limited company
Statement of P/L and Other comprehensive income
for the year ended 31st March 2015 for Wiskam PLC
(Rs'000
(Rs'000) )
Revenue 19300
Cost of sales 12000 -400 -11600
Gross profit 7700
46
Other income (Discount ) 120
7820
Less: Expenses
Distribution costs 230

Administration expenses 3715
other expenses 330
Profit before interest and tax 3545
Financial costs 220
Profit on ordinary
activities before tax 3325
Corporation tax 220
Profit on ordinary
activities after tax 3105
Other Comprehensive Income

Change in revaluation reserve of
Property Plant & Equipment
Revaluation excessive (Building) 1500
4,605.0
Total Comprehensive Income 0
Statement of changes in equity for the year ended 31.03.2015

Share capital Revaluation reserve General reserve Retained earnings Total
Description
(RS(000)) (RS(000)) (RS(000)) (RS(000)) (RS(000))
Opening Balance 10000 700 7500 18200
Transfer 300 -300 0
Total
Comprehensive 1500 4605 6105
Income
47
Dividends -2000 -2000
Reserve
1500 -1500 0
Capitalization
Revaluation Loss
-700 -700
(land)
Closing Balance 11500 1500 300 8305 21605
48
Statement of financial position
Wiskam PLC as at 31.03.2015
(Rs'000) (Rs'000)
Non current assets
Property, plant & equipment 22820
Lease 1080
Total Non Current Assets 23900
Current Assets
Inventory 350
Trade receivables 1080
Cash 895
Prepaid advertising 100 2425
Total assets 26325
Equity
Share capital 11500
Revaluation reserves 0
General reserves 300
Retained earnings 8305 20105
Non current liabilities

Lease creditor 600
Bank loan 1200 1800
Current liabilites
Trade Payables 1650
Bank Overdraft 145
Accrued Income tax 45
Accrued Bank Loan Interest 120
EPF Payable 10 % & 15% 500
ETF payable 60
Lease interst payable 100
Lease creditor 300
Dividend Payable 1500 4420
Total capital and liabilities 26325
49
Administration expenses (Rs'000)
Depreciation 1000
Machine Lease 120
Salary 1800
EPF 10% and 15% 500

ETF 60
Telephone 175
audit fee 60
Total 3715
Distribution costs (Rs'000)
Irrecoverable debts 40
Provision for doubtful debts 20
Advertising 100
Discount 50
Sales Commision 20
Total 230
Financial costs (Rs'000)
Bank loan interest 120

Lease interest 100
Total 220
50
Other Expenses (Rs'000)
Revaluation loss 300
Donation 30
total 330
Income tax (Rs'000)

Currrent Year 220
Paid -175
payable 45
Right to use the Lease property (Rs'000)

Machine 1200
Less: Accumulated Depreciation -120
Total 1080
Figures are in RS(000)
1800*100
2000
ross Salaries and wages : =
90
2000*0.1
PF 10% for employees = 200
2000*0.15
PF 15% Employers = 300
PF 10% and 15% Payable 500
500 goes to the current liability
Lease
Creditor
A/C
Right to Use of
Lease deposit A/C 300 Property 1200
Balance C/D 900

51
1200 1200
Balance b/f 900
400-100
Current liabilty - = 300
900-300
Non- Current Liabilty = 600
Property plant and Equipment

Property Plant &
Equipment 22,820.00
Right to Use of Property 1200
Balance C/D 24,020.00

24,020.00 24,020.00
Balance b/f 24,020.00
PPE
note 4
52
description Land Building M.vehicle Computer total
opening balace 16000 5000 4200 600 25800
purchases 400 400
revaluations -1000 1500 500
disposal 0
D. ads for
revaluation
Closing balance 15000 6500 4200 1000 26700
depriciation
opening balance -1500 -1260 -120 -2880
depriciation 10% -500 -420 -80 -1000
carriying value 15000 4500 2520 800 22820
WORKINGS
W1 rs (000)
IN
Trade receivables 1240 SOFP
bad debts -40 in IS
IN
1200 SOFP
IN
pf dd 10% -120 SOFP
IN
1080 SOFP
old pfd 100

pf dd 10% -120
53
pfd to add to expenses -20 in IS
SINCE PFDD INCRESED YOU ADD 20 TO
EXPENCES
rs (000)
Cost of sales (purchases) 12000
computer system -400
11600
w2 rs (000)
marketing expense for 2 years 200
marketing expense for 1 year -100
prepaid expense for the year 100 In sofp
marketing expence for the year 100 in IS
W3 Depreciation =10% (Values are in RS(000))

Building: 5000x10% = 500
Motor Vehicle: 4200x10%=420
Computer system: 600x10%=60
New computer: 400x10%x(6/12)=20
Total computer depreciation 60+20=80
Bank loan Interest rs (000)

Bank loan 1200
interest 10%
120
54
4.Cash Flows
Statement of cash flows for Cash Generation plc
for the year ended 31 December 2019
Rs.
Rs.
(‘000
(‘000)
)
Cash flows from operating activities

Profit from operations 2950
Adjustments
Add: Depreciation on non-current assets 300
decrease in inventories 500
(Increase) in trade and other receivables -800
Increase/ in trade and other payables 110
Decrease in receivables 10
Increase in payables 60
3130
Less: Interest paid -700

Less: Tax paid -950 -1650
1480
Net cash from/used in operating activities
Cash flows from investing activities

Fixed deposit interest 85
Payments to purchase NCA -120
Purchase of Plant Property & Equipment -220
Add :Proceeds from disposal of non-current assets 70
Net cash from/used in investing activities -185
Cash flows from/used in financing activities

Issue of shares 500
Less: Dividends paid -655
55
Net cash from financing activities -155
1,140.0
Net increase in cash and cash equivalents 0 1140
Cash and cash equivalents at the beginning of the year 300
1,440.0
Cash and cash equivalents at the end of the year 0
workings
2,265.0
Profit before tax
0
Financial Expenses (Loan interest) 760
Other income (Fixed deposit interest) -75
2,950.0
Profit from operations 0
depreciation 300
inventory at 31.03.2014 1500

inventory at 31.03.2015 1000
500
debtors/trade receivables as at 31.03.2014 1400

debtors/trade receivables as at 31.03.2015 2200
-800
Trade Payables/Creditors 2014.03.31 750

Trade Payables/Creditors 2015.03.31 860
-110
56
57
SECTION D
Investment Ratio
Earnings Per Share = Net profit after tax - preference share dividend
Number of ordinary shares issued
Year 1 = 56
500
= 0.112 pence per share
Year 2 = 63
58
500
According to the ratio calculation, the Earnings Per Share of Peter (Television) plc has increased from 0.112
pence per share in year 1 to 0.126 pence per share in Year 2
59
Total According to the ratio
Dividen calculation, the Price
Dividend Per share (DPS) = d paid
No of Ordinary Share Earnings ratio of Peter
Outstanding (Television) plc has increased
from 1803.57143 times in
Yea
r1 = 25 year 1 to in 2198.4127 times
500
in Year 2
Yea
r2 = 30
500
According to the ratio calculation, the Dividend Per Share of Peter (Television) plc has increased from 0.05
pence per share in year 1 to 0.0 6 pence per share in Year 2
Liquidity Ratio
Current Ratio = Current Assets

Current Liabilities
Year 1 = 198
74
60
= 2.676 :1
Year 2 = 220
95
= 2.316 :1
According to the ratio calculation, the Current Ratio of Peter (Television) plc has decreased from 2.676:1 in
year 1 to 2.316:1 in Year 2.
Liquid ratio = Current Assets - Inventory

Current Liabilities
Year 1 = 198-82
74
= 116
74
= 1.568 :1
Year 2 = 220-115
95
= 105
95
= 1.11 :1
According to the ratio calculation, the liquid Ratio of Peter (Television) plc has decreased from 1.568:1 in
year 1 to 1.11:1 in Year 2.
61
Cash ratio = Cash & cash equivalents
Current Liabilities
Year 1 = 46
74
= 0.62162162 :1
Year 2 = 6
95
= 0.06315789 :1
According to the ratio calculation, the Cash Ratio of Peter (Television) plc has decreased from 0.62162162:1
to 0.06315789:1 in Year 2.
Profitability
Ratios
Gross profit as a percentage of revenue = Gross profit x 100

Revenue
Year 1 = 252 x 100
600
= 0.42 x 100
= 42 %
Year 2 = 288 x 100

720
= 0.4 x 100
62
= 40 %
According to the ratio calculation, the Gross profit as a percentage of revenue of Peter (Television) plc has
decreased from 42% in year 1 to 40% in Year 2.
Net profit as a percentage of revenue = Net profit x 100

Revenue
Yea
r1 = 56 x 100
600
0.09333333
= 3 x 100
= 9.3 %
Yea
r2 = 63 x 100
720
= 0.0875 x 100
= 8.75 %
According to the ratio calculation, the Net profit as a percentage of revenue of Peter (Television) plc has
decreased from 9.3% in year 1 to 8.75% in Year 2.
Return on Assets = Net profit x 100

total assets
Year
1 = 56 x 100
1316
63
= 0.042553191 x 100
= 4.255319149 %
Year
2 = 63 x 100
1375
= 0.045818182 x 100
= 4.581818182 %
According to the ratio calculation, the Return on Assets of Peter (Television) plc has increased from
4.255319149% in year 1 to 4.581818182% in Year 2.
Return on equity = Net Income x 100

total equity
Yea
r1 = 56 x 100
842
0.06650831
= 4 x 100
6.65083135
= 4 %
Yea
r2 = 63 x 100
880
0.07159090
= 9 x 100
7.15909090
= 9 %
64
According to the ratio calculation, the Return on equity of Peter (Television) plc has increased from
6.650831354% in year 1 to 7.159090909% in Year 2.
Leverage ratios
Debt-to-Assets Ratio = Total Debt

Total
Assets.
Year 1 = 768
1316
= 0.58358663
Year 2 = 785
1375
= 0.57090909
According to the ratio calculation, the Debt-to-Assets Ratio of Peter (Television) plc has decreased from
0.58358663 in year 1 to 0.57090909 in Year 2.
Debt-to-Equity Ratio = Total Debt

Total
Equity
Year 1 = 768
842
= 0.91211401
Year 2 = 785
880
= 0.89204545
According to the ratio calculation, the Debt-to-equity Ratio of Peter (Television) plc has decreased from
0.91211401 in year 1 to 0.89204545 in Year 2.
65
Today
Debt-to-Capital Ratio = Debt
Total Debt + Total Equity
Year 1 = 768
842+768
= 768
1610
= 0.47701863
Year 2 = 785
880+785
= 785
1665
= 0.47147147
According to the ratio calculation, the Debt-to-Capital Ratio of Peter (Television) plc has decreased from
0.47701863 in year 1 to 0.47147147 in Year 2.
The performance of an organisation over time using financial ratios with reference to the relevant
benchmarks
The company's profits per share (EPS) increased from 0.112 to 0.126 over the course of the two years,
showing a favourable trend in profitability when the financial features are considered. On the other hand,
from 9.3% in Year 1 to 8.75% in Year 2, the company's net profit as a proportion of revenue has somewhat
66
declined. In addition, the gross profit as a share of revenue fell from 42% in Year 1 to 40% in Year 2,
indicating a rise in the company's cost of goods sold as a proportion of revenue.
A fall in the company's current ratio, which measures liquidity, from 2.676 in Year 1 to 2.316 in Year 2 may
indicate a decline in the company's capacity to fulfill short-term obligations. In addition, the liquid ratio
dropped from 1.568 in Year 1 to 1.11 in Year 2, indicating a diminished capacity of the company to fulfill
critical obligations. The corporation's ability to meet short-term obligations with its available cash has
reduced, as seen by the sharp reduction in the cash ratio from 0.621 in Year 1 to 0.063 in Year 2.
Investors are ready to pay more for the company's profits, as seen by the company's price-to-earnings (P/E)
ratio, which climbed from 1803.57143 in Year 1 to 2198.4127 in Year 2.
It is important to keep in mind that the market segment, size, and other factors may have an impact on the
company's ratios when compared to industry standards for the television industry. However, it looks that the
company's liquidity situation is worse than the industry average based on the data that is currently available.
References
1. HM Hub. (n.d.). Advantages and Disadvantages of Budgeting. [Online]. Available at:
https://hmhub.in/advantages-disadvantages-of-budgeting/ (Accessed 30 July 2023).
2. HM Hub. (n.d.). Budgetary Control: Advantages and Disadvantages. [Online]. Available at:
https://hmhub.in/budgetary-control-advantages-disadvantages/ (Accessed 30 July 2023).
67
3. Investopedia. (n.d.). Accounting. [Online]. Available at:
https://www.investopedia.com/terms/a/accounting.asp (Accessed 30 July 2023).
4. The Economic Times. (n.d.). Accounting. [Online]. Available at:

https://economictimes.indiatimes.com/definition/accounting (Accessed 30 July 2023).
5. Investopedia. (n.d.). Accounting. [Online]. Available at:

https://www.investopedia.com/terms/a/accounting.asp (Accessed 30 July 2023).
6. Investopedia. (n.d.). Code of Ethics. [Online]. Available at:

https://www.investopedia.com/terms/c/code-of-ethics.asp#:~:text=A%20code%20of%20ethics
%20sets (Accessed 30 July 2023).
7. Sri Lanka Accounting and Auditing Standards Monitoring Board. (n.d.). Accounting Standards.
[Online]. Available at: http://www.slaasc.lk/accounting/accountStandards.php (Accessed 30 July
2023).
8. AccountingTools. (n.d.). Accounting Framework. [Online]. Available at:

https://www.accountingtools.com/articles/accounting-framework (Accessed 30 July 2023).
9. The Public Sector Accounting. (n.d.). Regulatory Framework in Accounting. [Online]. Available at:
https://thepublicsectoraccounting.com/what-is-regulatory-framework-in-accounting/#:~:text=This
%20framework%20was%20issued%20by,financial%20statements%20for%20external%20users.
(Accessed 30 July 2023).
10. Libryo. (n.d.). What Is Sustainability Governance? [Online]. Available at:

https://blog.libryo.com/what-is-sustainability-governance#:~:text=Sustainability%20governance
%20is%20governance%20of,permit%20unsustainable%20behaviour%20and%20governance.
11. International Federation of Accountants (IFAC). (n.d.). Sri Lanka. [Online]. Available at:
https://www.ifac.org/about-ifac/membership/profile/sri-lanka#lre0 (Accessed 30 July 2023).
12. Investopedia. (n.d.). Accounting Standard. [Online]. Available at:

https://www.investopedia.com/terms/a/accounting-standard.asp#toc-what-is-an-accounting-standard
13. Investopedia. (n.d.). International Accounting Standards (IAS). [Online]. Available at:
https://www.investopedia.com/terms/i/ias.asp (Accessed 30 July 2023).
68

Unit 5 Accounting Principles - Assignment

Uploaded by

Copyright:

Available Formats

You might also like

Unit 5 Accounting Principles - Assignment

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Unit 5 Accounting Principles - Assignment

Uploaded by

Copyright:

Available Formats

Higher Nationals

Internal verification of assessment decisions – BTEC (RQF)

Assessor Internal Verifier

Unit(s) Unit 5 – Accounting Principles

Assignment title Accounting in Context and Budgetary Control.

Do the assessment criteria awarded

Is the Pass/Merit/Distinction grade

• Identifying opportunities for

• Agreeing actions? Y/N

Does the assessment decision need

Internal Verifier signature Date

Assessor signature Date

Unit Title Unit 5 – Accounting Principles

Assignment Number Assignment 1 of 2 Assessor

LO1 Examine the context and purpose of accounting

Pass, Merit & Distinction P3 M2 D2

Grade: Assessor Signature: Date:

Grade: Assessor Signature: Date:

Internal Verifier’s Comments:

Signature & Date:

Assessor signature Date

Student signature Date

Word Processing Rules

1. I know that plagiarism is a punishable offence because it constitutes theft.

Student’s Signature: Date:

Student Name /ID Number

Unit Number and Title Unit 5: Accounting Principles

IV Name & Date

Unit Learning Outcomes:

LO1 Examine the context and purpose of accounting.

Learning Outcomes and Assessment Criteria

Pass Merit Distinction

LO1 Examine the context and purpose of accounting

P1 Examine the purpose of M1 Evaluate the context and

LO4 Prepare budgets for planning, control and decision-

P6 Prepare a cash budget

Pass Merit Distinction

LO2 Prepare basic financial statements for unincorporated and

LO3 Interpret financial statements.

P4 Calculate and present M3 Evaluate the performance

Assignment Brief and Guidance:

 the purpose and scope of accounting in complex operating environments

Sales are forecast as follows:

The cost of production of each unit is specified as follows:

P1 Examine the purpose of the accounting

P2 Assess the accounting function within

P6 Prepare a cash budget from given data

P7 Discuss the benefits and limitations of

M1 Evaluate the context and purpose of the

M4 Identify corrective actions to problems

D1 Critically evaluate the role of accounting

D3 Justify budgetary control solutions and

P3 Prepare financial statements from a

P4 Calculate and present financial

P5 Compare the performance of an

M2 Produce financial statements from

M3 Evaluate the performance of an

D2 Critically evaluate financial