Unit 5 Accounting Principles

Assignment Brief

Student Name/ID Number

Unit Number and Title Unit 5 Accounting Principles

Academic Year 2022/2023

Unit Tutors Dr. Rana Ali, Maha Awan

Assignment Title Accounting Management in Businesses

Issue Date 20/03/2023

Submission Date 14/07/2023

IV Name & Date Lisa Bartlett (ESCG) 16/03/23

Submission Format

● This assignment must be electronically submitted in Word format (using Word

processor for e.g. Microsoft Word) and calculations (using excel spreadsheets e.g.
Microsoft Excel).
● Students should select Arial or Calibri font, selecting size 12.
• The language used should be formal and professional terminology.
• No text should be placed inside text boxes. No page borders should be used. Work that
makes use of text boxes or page borders will not be accepted and will be returned to
the learner for correction and resubmission in the correct format.
• You are required to make use of headings, paragraphs, subsections, and illustrations
as appropriate, and all work must be supported with research and in-text referencing
using the Harvard referencing system.
• Please include references at the end of the assignment using the Harvard referencing
system.
• Start each answer on a new page and pages should be numbered, please highlight each
question clearly.
• Students are required to digitally accept the learner's declaration of authenticity
before submitting their assignment for submission.
• The recommended word limit addressing all tasks is 4000 words, with +/- 10% margin,
although you will not be penalised for exceeding the total word limit

Unit Learning Outcomes

LO1 Examine the context and purpose of accounting.

LO2 Prepare basic financial statements for unincorporated and small business organisations
in accordance with accounting principles, conventions and standards.
LO3 Interpret Financial statements.

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

Vocational scenario

You need to carefully read all instructions before attempting any of the tasks. The assignment
has to be addressed concerning the learning outcomes 1 to 4. You will be assessed through the
Financial Portfolio that will be submitted under Pass, Merit and Distinction criteria.

Scenario:
AWS Ltd is a large accountancy firm that undertakes extensive business consultancy work for
its client base. They have a central head office and regional offices. The firm also
has a policy of taking on smaller niche clients, where they feel there is potential for rapid
growth.

Assignment activity and guidance

Tasks & Role

You have recently joined AWS Ltd as a Graduate Trainee attached to their SME Units, offering
accountancy and financial services to businesses. As part of your ongoing training, you have been
asked to undertake some activities. They have given you the task to assess the financial reports of
various businesses and investigate the best route forward. Your recommendations should be based
on support from the financial statements. You will do this by creating a ‘Financial Portfolio’ with
supportive financial statements to share with the senior management of the organisation

TASK 1: Purpose and Role of Accounting in an Organisation

Your supervisor, one of the firm’s key account managers, has asked you to commence the portfolio
by writing 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 practically cover relevant academic theory, making use of
headings, images and illustrations.

In your blog, you are required to examine the different functions and categories of accounting,
explaining why each holds importance and what is their purpose in an organisation. Provide a sound
reason or rationale for the role of regulatory constraints in the accounting functions discussed
above. Assess the ethical constraints to be mindful of when completing the accounting functions.

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The purpose and context of these accounting functions should also be evaluated on how they meet
the organisational, different stakeholder and societal needs and expectations at large with regard to
informed decision-making. The evaluation should clearly assess the usefulness of these functions
by examining their strengths and weaknesses with evidence from different perspectives in the form
of an argument making a valid conclusion. The evaluation should be drawn from a critical
perspective where you look at the different sides of the argument, presented by various authors.

TASK 2: Preparation of Financial Statements for Various Businesses (LO2)

Provided below are the trail balances for (1) Sole Trader, (2) Partnership (3) Clubs and Societies
organisation. You are required to prepare financial statements from these trail balances. Explain
how these financial statements meet the accounting principles, conventions and standards set. The
financial statements should also include appropriate adjustments as required.

Scenario 2A
Mr. SIA TOFU has been in business for many years. His accountant has extracted the following
trial balance from his books of accounts as at 31 March 2022:

DR£ CR£
BANK 1,200
CAPITAL 33,000
CASH 300
DRAWINGS 6,000
INSURANCE 2,000
OFFICE EXPENSE 15,000
OFFICE FURNITURE AT COST 5,000
Office furniture: accumulated
2,000
depreciation at 1 April 2021
Provision for bad and doubtful
500
debts at 1 April 2021
PURCHASES 55,000
SALARIES 25,000
SALES 100,000
STOCK AT 1 APRIL 2021 10,000
TRADE CREDITORS 4,000
TRADE DEBTORS 20,000
139,500 139,500

Notes: The following additional information is to be taken into account.

1. Stock at 31 March 2022 was valued at £15,000.
2. The insurance included £500 worth of cover which related to the year to 31 March 2023.
3. Depreciation is charged on office furniture at 10 per cent per annum of its original cost (it
is assumed not to have any residual value).
4. A bad debt of £1000 included in the trade debtors balance of £20,000 is to be written off.

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 5. The provision for bad and doubtful debts is to be maintained at a level of 5 per cent of
outstanding trade debtors as at 31 March 2022, i.e., after excluding the bad debt referred to
in note 4 above.
6. At 31 March 2022, there was an amount owing for salaries of £1000.
Required:
(a) Prepare Mr. SIA TOFU income statement for the year to 31 March 2022.
(b) Prepare a balance sheet as at that date.

SCENARIO: 2B

Alex and Nutria are partners sharing profit and losses in the ratio of 3:2. On 1st April 2021 their
capitals were: Alex was £80,000 and Nutria £40,000.

As a Graduate trainee, you have been given a task from your manager to prepare Profit and Loss
Appropriation Account and the Partner’s Capital Accounts at the end of April 30th, 2022, after
considering the following items:

(a) Interest on Capital is to be allowed £. 5% per annum.

(b) Partners ‘salaries are given as mentioned: Alex of £6,000 and Nutria £4,500.
(c) Interest on partner’s drawings @ 6% p.a. Drawing: Alex £20,000 and Nutria £15,000.
(d) £7,100 is to be transferred to Reserve Account.

The net profit for the end of the year on April 30th, 2022 was £46,500.

SCENARIO: 2C

The Dominion Golf club’s financial year ends on 31 December when annual accounts are
prepared for submission to club members. The following information relates to the year ending
31st December 2022.

Receipts £ Payments £
140,00
Member’s subscription received 80,000 Supplier of catering material
0
Catering receipts 222,500 Secretary’s honorarium paid 22,500
Sundry expense 16,200
Catering wages paid 23,000
Amount paid for new grass
8,590
mowers
Ground staff wages 45,000
Administration expense 27,000

Additional Information:
1. The amount received for member subscriptions includes £500 in respect of the year to 31
December 2021 and £400 in respect of the year to 31 December 2023.

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 2. At 31 December 2021 £250 of member’s subscription had been paid for the year to 31
December 2022 and at 31 December 2022 £320 subscription remained unpaid for the
year.
3. Inventories of catering material were: 1 January 2022 £2,500, 31 December 2022 £2,800.
4. Depreciation on grass mower for the year was £540.
5. There were no trade payables for catering materials at the beginning of the year, but
£2,000 was owing to trade payables at the end of the year.

Required:
(a) Prepare catering trading account for the year ended 31 December 2022.
(b) Prepare an income and expenditure account for the year ended 31 December 2022

Task 3: Ratio Interpretation (LO3)

From the data presented in scenario 3, calculate and present financial ratios from the given financial
statements. Compare and critically evaluate the performance of the organisation over time using
ratios calculated. The comparison should be evaluated to understand the performance of the
organisation based on the strengths and weaknesses of the evidence, justified with references to the
relevant benchmarks in order to provide a reasoned conclusion of the comparison.

SCENARIO: 3

One of the leading and successful companies: Shams Ltd, has produced its financial statement for
the year 2022 and wants your company to review its performance over the year. Financial Data is
provided and your manager wants a comprehensive analysis of the business performance (including
calculation) included in your portfolio.

Shams Ltd Income Statement for the year ended 31 December 2022

2022
£,000
Sales Revenue (40% cash 1,500
sales)
Cost of Sales (750)
Gross Profit 750
Office expense (Include (125)
Int. on debentures)
Selling expense (125)
Profit before Tax 500
Tax (250)
Net Profit 250

Statement of Financial Position as at 31 December 2022

2022

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 £,000 £,000
Non-Current Assets (Book 5,500
Value)
Current Assets
Stock 175
Debtors 350
Bills Receivables 50

Cash 225
800
Fictious Assets 100
6,400
Share Capital 2,000
10% Preference shares 2,000
Reserves 1,100
5,100
Non-Current Liabilities-
Loan
10% Debentures 1,000
Current Liabilities
Bank Overdraft 150
Creditors 100
Bills Payable 45
Outstanding Expense 5
300
6,400

Additional Information:
Besides the details mentioned above, the opening stock was £3,25,000. Taking 360 days of the
year, calculate the following ratios;
1. Gross Profit Margin
2. Stock Turnover Ratio
3. Operating Profit Margin
4. Quick Ratio
5. Debtor Days
6. Creditor Days

Values of the ratios calculated in 2021 are following:

1. Gross Profit Margin: 55%
2. Stock Turnover Ratio: 4 times
3. Operating Profit Margin: 30%
4. Quick Ratio: 3:1
5. Debtor Days: 170 Days
6. Creditor Days: 82 Days

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Task 4: Preparation of a Cash Budget (LO4)

From the planning data given below in scenario 4, prepare a cash budget for Mr Wayne through
the help of a spread sheet. Discuss the benefits and limitations of this budget and budgets in general
along with a discussion on the budgetary planning and control system for organisations. The
discussion should mention the important characteristics of budgetary planning and control system,
looking at advantages and disadvantages from various perspectives (make use of references).

Following this, identify the problems and their corrective actions found in the budgetary planning
and control for making the organisational decision making more effective.

Justify the budgetary control solutions proposed and how would their impact on the organisational
decision making be effective and efficient in deployment of their resources. The justification should
be sound and have supportive evidence with the help of references in order to validate the argument.

SCENARIO: 4

A Client named Mr Wayne is planning to expand his business. He has asked your firm to prepare
a cash budget of business for him for April, May and June 2022.
Month Sales Purchase Wages Expense
January (Actual) £80,000 £45,000 £20,000 £5,000
February (Actual) £80,000 £40,000 £18,000 £6,000
March (Actual) £75,000 £42,000 £22,000 £6,000
April (Budgeted) £90,000 £50,000 £24,000 £6,000
May (Budgeted) £85,000 £45,000 £20,000 £6,000
June (Budgeted) £80,000 £35,000 £18,000 £5,000

You are further informed that:

1. 10% of purchases and 20% of sales are for cash.
2. The average collection period of the business is half a month and credit purchases are
paid off regularly after one month.
3. Wages are paid half monthly and the rent of £500, excluded from expenses, is paid monthly.
4. Cash and bank balance on April 1 was £15,000, 1 May was £11,700 and 1 June was £12,700
and the company aims to keep it below this figure at the end of every month. The excess
cash is placed in fixed deposits.

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Evidence Summary of evidence required by Word Submission Document
checklist student Count Format
TASK 1 Purpose and Role of Accounting in 1500 Blog Report/
an Organisation Commentary
Notes: The reasoning provided must MS Word
have recent references as well. .docx
TASK 2 Preparation of Financial 750 Financial
Statements for Various Businesses Statements Calculations:
Note: All calculations should be done MS Excel
on excel. Include appropriate .xlsx
adjustments in financial statements as
required.
TASK 3 Ratio Interpretation 750 Interpretation
Note: All calculations should be done
on excel.
TASK 4 Preparation of Cash Budget 1000 Cash Budget
Note: Discussion on the budgetary
controls is an important part of the
assessment. All calculations should be
done on excel.

Recommended Resources
Student Resource Library. Available at:
https:// hnglobal.highernationals.com/subjects/ resource-libraries

Textbooks:
Atrill, P. and Mclaney, E. (2018). Accounting and finance for non-specialists. 11th Edition.
Harlow. Pearson.
Drury, C. (2015). Management and Cost Management. 9th Edition. Cengage Learning.
Seal, W. et al (2018). Management Accounting. 6th Edition. MaidenHead. McGraw-Hill.
Weetson, P. (2019). Fnancial and Management Accounting: An Introduction. Harlow.
Pearson.

Websites
https://www.accountingcoach.com
https://www.accaglobal.com
https://www.cimaglobal.com
https://www.corporatefinanceinstitute.com

SIRM Moodle
You will find reference readings, including website articles, videos and case studies,
embedded within each learning week of this unit at your SIRM enrolled unit.

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Learning Outcomes and Assessment Criteria
Pass Merit Distinction
LO1 Examine the context and purpose of accounting

P1 Examine the purpose of the M1 Evaluate the context and D1 Critically evaluate the
accounting function within an purpose of the accounting role of accounting in
organisation. function in meeting informing decision-making
organisational, stakeholder to meet organisational,
P2 Assess the accounting and societal needs and stakeholder and societal
function within the expectations. needs within complex
organisation in the context of operating environments.
regulatory and ethical
constraints.

LO2 Prepare basic financial statements for unincorporated and

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

P3 Prepare financial M2 Produce financial

statements from a given trail statements from a given trail
balance for sole traders, balance, making appropriate Lo2 and Lo3
partnerships and not-for-profit adjustments. D2 Critically evaluate
organisations, to meet financial statements to
accounting principles, assess organisational
conventions and standards. performance using a range
LO3 Interpret financial statements of measures and
benchmarks to make
P4 Calculate and present M3 Evaluate the performance justified conclusions.
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
using financial ratios.

LO4 Prepare budgets for planning, control and decision making

using spreadsheets. LO4
P6 Prepare a cash budget from M4 Identify corrective actions D3 Justify budgetary control
given data for an organisation to problems revealed by solutions and their impact
using a spreadsheet. budgetary planning and on organisational decision
P7 Discuss the benefits and control for effective making to ensure efficient
limitations of budgets and organisational decision and effective deployment of
budgetary planning, and making. resources.
control for an organisation.

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Glossary of commonly used command words

Analyse Examine something in very close detail and from a number of angles.
Identify the important points and chief features and understand their
relationships.

Carry out Implement; do; execute; use a range of skills to perform a task,
research or activity; undertake an activity of a practical nature

Compare Show how two or more things are similar.

Communicate Convey or exchange spoken or written information

Contrast Look at two or more things and draw out differences. State whether the
differences are significant.

This is a development of ‘evaluate’ where the candidate debates the

Critically validity of claims from the opposing views and produces a convincing
evaluate argument to support the conclusion or judgement; Weigh arguments
for and against something, assess the strength of evidence on both
sides.

Define Give the exact meaning of.

Describe Give a detailed account of the main features or characteristics

Devise Plan a complex procedure, system or mechanism) by careful thought

Discuss Write about the most important characteristics of something. Give

arguments for and against, look at it from a variety of perspectives.

Distinguish Identify the differences between two items.

Assess the worth or usefulness of something; Examine strengths and

Evaluate weaknesses, arguments for and against and/or similarities and
differences; Judge the evidence from the different perspectives and
make a valid conclusion or reasoned judgment. Use evidence to
support your opinion.

Explain Make it clear why something happens or why it is the way it is.

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Interpret Explain the meaning or significance of information or data that you are
presenting.

Show for others to scrutinise or consider; formally deliver (e.g. in verbal,

Present written or graphical format); Produce an information for an audience,
e.g. at the conclusion of the project to demonstrate what has been
done and the outcome.

Produce Make, create or form something.

Justify Provide evidence that supports an argument or idea.

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