#Accounting

GROUP ASSIGNMENT AND GUIDELINES

Due date: 2.00 pm on 24th June 2024 (Monday of week 10)

Weighting: 25%
Length: 2000 words

Students are required to form sub-groups within their respective tutorial groups (i.e., all group
members must belong to the same tutorial). Each group must have a maximum of 4 members.
You are allowed to determine your group members. However, you must ensure that the group is
diversified enough to ensure balanced distribution across nationality, gender, and ethnicity. This
is to provide an opportunity for you to expand your connections and understand others outside
your current networks.

Part A (25 marks)

Revenue Recognition in a Software Development Company
Scenario
You are an accounting student analyzing the financial practices of "TechSolutions Inc.," a software
development company that creates custom software solutions for various industries. The
company’s revenue streams include one-time sales of software licenses, ongoing subscription
services, and long-term contracts for custom software development.

Revenue Streams and Details

1. One-time Software Licenses TechSolutions Inc. sells software licenses for $100,000
each. In 2023, they sold 10 licenses.

2. Subscription Services The company offers subscription services at $2,000 per month per
customer. As of 2023, they have 50 customers on annual subscriptions.
 3. Long-term Contracts The company engages in long-term custom software development
contracts. In 2023, they signed a $1,000,000 contract to be completed over two years,
with milestones for payment and delivery.

Current Practices and Issues

 The company currently recognizes revenue from one-time software licenses at the point
of sale.
 Subscription revenue is recognized monthly as services are provided.
 For long-term contracts, revenue is recognized only upon completion of major
milestones, leading to uneven revenue reporting.

The CFO of TechSolutions Inc. has asked you to evaluate their current revenue recognition
practices and provide recommendations to ensure compliance with accounting standards -
Revenue from Contracts with Customers.

Required:
1. Revenue Recognition for Software Licenses (5 marks)
Explain how should TechSolutions Inc. recognize revenue from the sale of one-time
software licenses? At what point is the revenue considered earned and realizable?

2. Subscription Services (5 marks)

For ongoing subscription services, explain how should TechSolutions Inc. recognize
revenue? Explain the process of recognizing revenue over time as the services are provided.

3. Long-term Contracts (5 marks)

Describe the methods TechSolutions Inc. can use to recognize revenue from long-term
contracts for custom software development. Explain the criteria which must be met to
recognize revenue over time versus at a point in time?
4. Disclosure Requirements (5 marks)
Discuss the disclosure requirements related to revenue recognition. What information must
TechSolutions Inc. include in its financial statements to comply with these requirements?

5. Ethical Considerations (5 marks)

Discuss the ethical considerations TechSolutions Inc. must keep in mind when recognizing
revenue and how can proper revenue recognition practices enhance transparency and trust
with stakeholders?
[Total: 25 Marks]

Part B (25 marks)

Question 1 (8 marks)
Based on the interim results below for Cabben Fashion Limited, it has shown a favourable
receivables turnover ratio. Discuss 4 possible strategies that Cabben Fashion Limited have
implemented to achieve an improved receivable turnover from 135 days to 91 days to solve the
cash flow problem.

Cabbeen Fashion Limited

(incorporated in the Cayman Islands with limited liability)

Cabbeen announces 2018 interim results

Profit for the period increased by 24.1% to RMB109.1 million
*** ***

(1 August 2018, Hong Kong) Cabbeen Fashion Limited ("Cabbeen" or the "Company",
including subsidiaries, the "Group", HKSE stock code: 2030), one of the leading menswear
designer brands in China, announces its results for the six months ended 30 June 2018 (the
"period").

Results and Operation Highlights:

Financial Highlights
 Revenue increased by 37.5% to RMB 558.1 million.
 Gross profit increased by 23.0% to RMB 267.3 million, with gross profit margin at 47.9%.
 Profit for the period increased by 24.1% to RMB109.1 million, with net profit margin at
19.6%.
 Basic earnings per share were RMB 0.1640, up 31.3% from the same period in 2017.
 Resolved to declare an interim dividend of 13.2 HK cents per share.

Encouraging results from e-commerce business

  Revenue from online shops increased 66.9% from the same period in 2017 to RMB 214.0
million.
 The number of membership and fan accounts on WeChat as of 30 June 2018 were
3,119,000 (30 June 2017: 1,944,000), of which 360,000 members (30 June 2017: 337,000)
made purchases amounted to RMB 788.6 million (30 June 2017: RMB 681.6 million).

Improved overall inventory

 Up to 30 June 2018, sell-through rate of the Group's 2017 collections was 81.5% and 2018
spring/summer collections was 56.0%.
 Average inventory turnover days improved to 200 days from 296 days for the same period
in 2017.

Further enhanced financial robustness

 Cashflow from operating activities improved to net inflow of RMB48 million from net
cash outflow during the first half of 2017.
 Average turnover days of trade and bills receivables improved to 91 days from 135 days
for the first half of 2017.
 Cash and cash equivalents, pledged deposits, financial assets and time deposits with initial
terms of over three months totaled RMB 994.9 million, up from RMB945.6 million on 31
December 2017.
 Net debt position on 30 June 2018 improved to RMB 25.3 million, down from RMB 153.5
million on 31 December 2017.

Extracted from irasia.com, August 1, 2018

http://www.irasia.com/listco/hk/cabbeen/interim/2018/intpress.htm

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Question 2 (17 marks)

You are the Chief Financial Officer (CFO) of a mid-sized furniture manufacturing company that
produces high-quality, custom-designed furniture. Recently, your company has been experiencing
significant cash flow issues, primarily due to high receivable turnover days. The business model
involves purchasing raw materials like wood, fabric, and hardware on credit. These materials are
then used to manufacture custom furniture, which is stored as inventory until sold.

Your company sells the finished products on credit to a variety of customers, including retail stores
and interior design firms. In the meantime, you need to cover ongoing expenses such as payroll,
utilities, and other operational costs. The problem arises when customers delay payments,
disrupting the cash cycle. This delay in receiving payments is causing a cash flow crunch, making
it challenging to meet day-to-day financial obligations and increasing the company's receivable
turnover days.

1) Discuss four strategies to improve cash flow position. (8 marks)

2) Suggest two strategies to revise the company's credit policies to reduce receivable turnover
days and encourage quicker payments from customers. (4 marks)

3) High receivable turnover impacts the overall financial stability of the company. Discuss
the long-term implications if this issue is not addressed. (5 marks)

[Total: 25 Marks]

General Expectations for Group Assignment

Where computations are relevant, you must show ALL calculations clearly. You should give some
thought, however, to the most effective way to present the material – you must provide clear,
concise explanations using a combination of MS Word and MS Excel.

Your assignment must be prepared in 1½ spacing on single sided pages with 3 cm left & right
margins, and 2.5 cm top & bottom margins. Please use Times News Roman font (size 12).
Only one assignment should be submitted on behalf of the group. Please ensure that the
assignment is submitted together with the assignment cover sheet.

A word length is required to be placed on all assignments. Where explanations are necessary, just
short and concise answers are sufficient. The group assignment should not exceed 2000 words in
length – this is inclusive of all headings, references, calculations etc. Penalties will be imposed
on all assignments exceeding 2000 words. Penalties will be applied for violating the word limit
(10% deduction per 100 words over the limit). Please note that words contained in the assignment
cover sheet and also reference list should not be included in the overall word count.

The word count must be printed on the assignment cover sheet. Markers cannot be expected to
look for the word count elsewhere. Marks will be deducted if the word count is not on the
assignment cover sheet. Students are expected to present a paper of professional quality. At the
very least, check spelling and grammar. Ensure that all aspects of the requirements have been
addressed.

Submission of Assignment
You are required to submit a soft copy of your assignment in the link uploaded by your tutor on
mytimes before 2.00 pm on 24th June 2024. Assignments submitted via alternative modes will
not be accepted.

Only one assignment should be submitted on behalf of the group. Please make sure that all student
names (spelled correctly) appear on the assignment cover sheet.

Extensions
Extensions to the assignment due date will only be approved in exceptional cases and for reasons
that could not have been foreseen at the commencement of the study period. All extension requests
must be made by email to the module leader prior to the due date and time. In this regard, please
note that:
 Heavy workloads are not normally considered grounds for extensions as you are expected to
plan your study period with the pre-set due dates in mind.
 Extensions will only be granted in exceptional and unforeseen circumstances supported by
documentary evidence (medical certificate, or an employer’s letter of a crisis, or other third-
party evidence) submitted before the due date, as noted earlier. Students requesting
extensions within one week of the due date will be required to provide drafts of work-to-
date in support of their application.
 For all approved applications for extension, the maximum length of time allowable is five days
from the original submission deadline.

Late submission of assignment without permission

Assignments submitted within 24 hours after the published deadline will be penalized as below:
a. A mark of more than 50% for the assessed piece of work will be reduced to 50%.
b. A mark of 50% or less will stand.
Assignments will not be accepted after the 24 hours window and will be recorded as a non-
submission. A mark of ZERO will be awarded.

Non-Submission of Assignment
Students who do not submit their assignment will be deemed to have forfeited their right to a
second attempt (re-sit) of the module. These students will be required to repeat the module with
attendance and undertake all assessments again (as their third attempt (repeat)).
Note: Students are granted only four attempts at a module. If you do not pass the module in
the fourth attempt, you will be excluded from the Dual Award programme.
Feedback and Mark for Group Assignment
The mark and feedback on the assignment will be provided on a Feedback Form. The purpose of
the feedback is to help you to assess your ability to apply the knowledge and concepts taught in
the module in sufficient depth, as well as your progress toward meeting the module objectives.
The feedback and marks for the assignment will be given to you within four weeks of your
submission of the assignment.

Assessment Offences
Taylor’s University treats any acts of dishonesty relating to assessment of University courses very
seriously. It is vital that students acquaint themselves with the University’s policy on plagiarism
(refer to TU-UWE Programme Guide 2020). Students are advised that the Harvard referencing
styles should be consistently adopted for all pieces of assessment.

Assessment Offences is defined here as passing off the work of others as one’s own including
copying (reproducing or imitating), cheating, collusion (agreement to deceive, using words or
ideas of colleagues or other students and passing them off as your own), plagiarism and other
breaches of assessment or other examination regulations. Cheating, collusion and plagiarism are
the use of unfair means of presenting work for assessment or of aiding another student to do so.
Also preventing or attempting to prevent another student from being able to be assessed properly.

Allegations of and investigations into assessment offences will be dealt with in accordance with
the regulations and procedures in force at Taylors University for the course. Subject to any specific
requirements of external validating or professional bodies, where a student is found to have
committed an assessment offence a decision must be taken either to take no further action or to
impose an appropriate penalty which may include failing the student and determining whether or
not the student will be permitted another assessment attempt.

Where it is decided that further action should be taken, one of the following penalties may be
imposed:
- resubmission and reduce the mark for the relevant piece of assessment; or
- to reduce the mark for the relevant piece of assessment; or
- to reduce the mark awarded for the relevant piece of assessment to zero; or
- that the student be deemed to have failed the module and to determine whether to permit
any further attempts in accordance with the Academic Regulatory Framework.

Marking Criteria (to be inserted after the cover page of the assignment)
 Group Assignment (25%) Marks

Part A
- Revenue recognition principle concept and its implication /25

Part B
- Strategies that businesses can implement to improve receivable turnover days.
- Strategies that businesses can implement to solve the cash flow problems.

/25

TOTAL MARKS /50

List of students (State full name & tutorial group in block capital)

1. ………………………………………. …………………………..
Dual
Award
Programme 2. ……………………………………………………………………
- Group Assignment Cover Sheet 3. ……………………………………………………………………

4. ……………………………………………………………………
Fold corner of EACH copy separately and seal to obscure your name
Please complete the form (in capital letters) and attach it securely to the front of your assignment
5. ……………………………………………………………………
before submitting your assignment.
Student ID: ………………………………………………. 6. …………………………………………………………………… Student ID:
……………………………………………….

Student ID: ………………………………………………. Student ID:

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Student ID: ………………………………………………. Student ID:

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Name of module: ………………………………………………Name of tutor:
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Module code: B U S

Assignment title:
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Due date & time:

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We have read and understood the TU Dual Award Regulations on cheating, plagiarism and
collusion. We declare that this piece of work is our own and does not contain any unacknowledged
work from any other sources.

We authorise the University to test any work submitted by us, using text comparison software, for
instances of plagiarism. We understand this will involve the University or its contractor copying
our work and storing it on a database to be used in future to test work submitted by others.

Note: The attachment of this statement on any electronically submitted assignments will be deemed
to have the same authority as a signed statement.
Signed: Signed: Signed: Date:

Signed: Signed: Signed:

DUAL AWARD PROGRAMME ASSIGNMENT FEEDBACK Mark*

*This mark is provisional and is

subject to moderation and approval
by the examining board