Unit 05: Accounting Principles

Assignment Brief
Student Name/ID Number

Unit Number and Title UNIT 5: MANAGEMENT ACCOUNTING (LEVEL 4)

Academic Year 2021-2022

Unit Tutor
Internal Verifier

Assignment Title MANAGEMENT ACCOUNTING PRINCIPLES

Issue Date
Submission Date

Submission Format
The submission is in the form of an essay; a complete portfolio of financial statements; Ratio Analysis;
Cash Budget on Spread sheet.

The portfolio of Income Statements should demonstrate calculations using different types of the
busineeses.

The reports should be written in a concise, formal business style using single spacing and font style
calibri and size 11. You are required to make use of headings, paragraphs and subsections as
appropriate, and all work must be supported with research and referenced using the Harvard referencing
system. Please also provide a bibliography using the Harvard referencing system. The recommended
word limit is specified.

CALCULATIONS MUST BE DONE ON MS EXCEL.

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

LO 4 PREPARE BUDGETS FOR PLANNING, CONTROL AND DECISION-MAKING USING SPREADSHEETS

Transferable skills and competencies developed

Learning of Accounting rules and regulation

Using of MS Excel for simple and complex calculations

Vocational scenario
You have just joined a Chartered Accountant firm as a Trainee Accountant. The firm is in business since long and has
many clients requiring the Accountancy and Financial Services, as part of undergoing training you have been allocated
following tasks to complete.

SCENARIO 1

A CLIENT MR. FREDDY A SOLE TRADE AND HAVE JUST TAKEN OUT THE TRIAL BALANCE AS AT 31 ST DECEMBER 2021 AND WANT YOU TO
PREPARE ITS FINAL ACCOUNTS.

DR CR
$ $
CAPITAL 49,675
DRAWINGS 28,600
CASH AT BANK 4,420
CASH IN HAND 112
DEBTORS 38,100
CREDITORS 26,300
STOCK 01-01-2021 72,410
VAN 5,650
OFFICE EQUIPMENT 7,470
SALES 391,400
PURCHASES 254,810
RETURN INWARDS 2,110
CARRIAGE INWARDS 760
RETURNS OUTWARDS 1,240
CARRIAGE OUTWARDS 2,850
MOTOR EXPENSES 1,490
RENT 8,200
TELEPHONE CHARGES 680
WAGES AND SALARIES 39,600
INSURANCE 745
OFFICE EXPENSES 392
SUNDRY EXPENSES 216
468,615
468,615
ADDITIONAL INFORMATION:
 INVENTORY AT 31 DECEMBER 2021 WAS VALUED AT £89,404.
 WAGES DUE AND UNPAID ARE £1,500.
 RENT PAID IN ADVANCE £1,100.
 DEPRECIATION TO BE PROVIDED FOR AS FOLLOW; £9,040 ON OFFICE EQUIPMENT.
 OUTSTANDING TELEPHONE CHARGES £800.

SCENARIO 2
Scot and Joplin are in partnership. They share profits in the ratio: Scot 70 per cent; Joplin
30 per cent. The following trial balance was extracted as at 31 December 2021.

DR CR
$ $
Office Equipment at cost 9,200  
Motor Vehicle at cost 21,400  
Provision for depreciation as at 31-12-2020    
Motor Vehicles   15,200
Office Equipment   5,600
Stock as at 31-12-2020 30,400  
Debtors 41,940  
Creditors 32,216  
Cash at bank 2118  
Cash in Hand 317  
Sales   198,500
 Purchases 110,500  
Salaries 20,200  
Office expenses 2,130  
Discount allowed 800  
Current Accounts at 31.12.2020: Scot   7,521
: Joplin   7,900
Capital Account at 31.12.2020 : Scot   50,000
: Joplin   20,000
Drawings : Scot 17,500  
: Joplin 16,000  
304,721 304,721

The following notes are applicable at 31 December 2021.

 Stock 31 December 20X7 $41,312.
 Office expenses owing $240.
 Provide for depreciation: motor $5,000, office equipment @$2,000.
 Charge interest on capitals at 5 per cent.
 Charge interest on drawings: Scot $300; Joplin $200.

SCENARIO 3
The treasurer of the Long Lane Football Club has prepared a receipts and payments account, but members have
complained about the inadequacy of such an account. She therefore asks an accountant to prepare a trading account for
the Café, and an income and expenditure account and a balance sheet. The treasurer gives the accountant a copy of the
receipts and payments account together with information on assets and liabilities at the beginning and end of the year:

Long Lane Football Club

Receipts and Payments Account for the year ended 31 December 2020
Receipts Dr Payments Cr
$ $
Bank Balance as at 1-1-2020 524 Payment for bar supplies 38,620
Subscription Received for Wages:
2020 14,350 Groundsman and Assistant 19,939
Bar Sales 61,280 Barman 8,624
Donation Received 800 Bar Expenses 234
Repairs to stand 740
Ground upkeep 1,829
Secretary’s expenses 938
Transport cost 2,420
Bank Balance 31-12-2020 3,610
76,954 76,954

Additional Information 31.12.2019. 31.12.2020

$ $

Stock in the bar- at cost 4,496 5,558

Owing for bar supplies - 4,340

 The land and football stands were valued at 31 December 2019 at: land $40,000; football stands $20,000; the
stands are to be depreciated by $2,000 per annum.
 The equipment at 31 December 2019 was valued at $2,500, and is to be depreciated at $500 per annum.
SCENARIO 4

Silver Stone Ltd Profit and Loss account

2019 2020
$ $
Sales 550,000 750,000
Cost of Sales
Opening Stock 100,000 80,000
Purchases 200,000 320,000
300,000 400,000
Closing Stock 60,000 70,000
240,000 330,000
Gross Profit 315,000 420,000
Expenses
Depreciation 5,000 15,000
Office expenses 165,000 220,000
Other expenses 45,000 35,000
215,000 270,000
Net Profit 100,000 150,000

Silver Stone Statement of Financial Position

2019 2020
$ $
Fixed Assets 50,000 100,000
Equipment at cost (40,000) (30,000)
10,000 70,000
CURRENT ASSETS
Stock 60,000 70,000
Debtors 125,000 100,000
Bank 25,000 12,500
210,000 182,500
Total Assets 220,000 252,500

Capital 76,000 72,000

Profit 100,000 150,000
Drawings 60,000 70,000
116,000 152,000
Current Liabilities
Creditors 104,000 100,500
Total Capital & Liabilities 220,000 252,500

Scenario 5:

K. Brothers wish to approach the bankers for temporary overdraft facility for the period from October 2010 to December
2010. During the period of this period of these three months, the firm will be manufacturing mostly for stock.

Month Sales Purchases Wages

$ $ $
August 360,000 249,600 24,000
September 384,000 288,000 28,000
October 216,000 486,000 22,000
November 348,000 492,000 20,000
December 252,000 536,000 30,000
  50% of credit sales are realized in the month following the sales and remaining 50% in the second following.
 Creditors are paid in the month following the month of purchase.
 Wages are paid each moth
 Depreciation per month is $500.
 Rent paid in September and December is $2,000.
 Sundry expenses are $1,000 per month.
 Estimated cash on 01-10-2020 is $50,000/-

TASK 1- (LO1)
Commence your Report by examining the purpose of the accounting function within an organization also Assess the
accounting function within the organization in the context of regulatory and ethical constraints.

Accounting function provide key services to the business do your research and evaluate the purpose of the accounting
function in meeting organizational, stakeholder needs and expectations and critically evaluate the role played by
accounting function in making informed decision and how accounting function help business to meet different
stakeholders needs in complex business environment.

TASK 2 – SCENARIO 1, 2 & 3(LO2)

From the given scenarios above Prepare financial statements from the trial balance of sole traders, partnerships and not-
for-profit organizations, all relevant Financial Statements must be produced for all the 3 types of the business by making
proper adjustments to show your understanding of accounting principles, conventions, and standards. MUST BE DONE
IN MS EXCEL

TASK 3 – SCENARIO 4 (LO3)

From the data presented in scenario 3 calculate and present financial ratios from the given financial statements (3
Profitability, 3 Efficiency, 2 Liquidity ratios are required). Compare and critically evaluate the performance of the
organization over time using ratios calculated. Make justified conclusion and recommendations to business to improve its
performance. CALCULATIONS MUST BE DONE IN MS EXCEL

Task 4- Scenario 5 (LO 4)

From the data given above Prepare a cash budget using a spreadsheet. Discuss the benefits and limitations of budgets and
budgetary control systems for the given business. Identify the cash problem this business might face and recommend
corrective actions that can be taken by management by justifying how that solution can ensure better decision making and
efficient use of resources in business. CALCULATIONS MUST BE DONE IN MS EXCEL
Evidence checklist (summary of evidence required by student)

Task 1: Essay (1,000 to 1,500 words) Task 2: Financial Statements

Task 3: Report and Financial statement analysis Task 4: Report and Cash Budget
 LEARNING OUTCOME AND ASSESSMENT CRITERIA
PASS MERIT DISTINCTION
LO1 EXAMINE THE CONTEXT AND PURPOSE OF ACCOUNTING D1 CRITICALLY EVALUATE HOW
P1 EXAMINE THE PURPOSE OF THE MANAGEMENT ACCOUNTING SYSTEMS
ACCOUNTING FUNCTION WITHIN AN M1 EVALUATE THE CONTEXT AND AND MANAGEMENT ACCOUNTING
ORGANISATION. PURPOSE OF THE ACCOUNTING REPORTING IS INTEGRATED WITHIN
P2 ASSESS THE ACCOUNTING FUNCTION IN MEETING ORGANISATIONAL PROCESSES.
FUNCTION WITHIN THE ORGANISATION ORGANISATIONAL, STAKEHOLDER AND
IN THE CONTEXT OF REGULATORY SOCIETAL NEEDS AND EXPECTATIONS.
AND ETHICAL CONSTRAINTS.
LO2 PREPARE BASIC FINANCIAL STATEMENTS FOR UNINCORPORATED AND
SMALL BUSINESS ORGANISATIONS IN ACCORDANCE WITH ACCOUNTING
PRINCIPLES, CONVENTIONS AND STANDARDS
P3 3 PREPARE FINANCIAL
STATEMENTS FROM A GIVEN TRIAL M2 ACCURATELY APPLY A RANGE OF
BALANCE FOR SOLE TRADERS, MANAGEMENT ACCOUNTING
PARTNERSHIPS AND NOT-FOR-PROFIT TECHNIQUES AND PRODUCE
ORGANISATIONS, TO MEET APPROPRIATE FINANCIAL REPORTING LO2 AND LO3
ACCOUNTING PRINCIPLES, DOCUMENTS.
D2 CRITICALLY EVALUATE FINANCIAL
CONVENTIONS AND STANDARDS.
STATEMENTS TO ASSESS
LO3 INTERPRET FINANCIAL STATEMENTS ORGANISATIONAL PERFORMANCE
P4 CALCULATE AND PRESENT USING A RANGE OF MEASURES AND
FINANCIAL RATIOS FROM A SET OF M3 EVALUATE THE PERFORMANCE OF BENCHMARKS TO MAKE JUSTIFIED
FINAL ACCOUNTS. AN ORGANISATION OVER TIME. USING CONCLUSIONS.
P5 COMPARE THE PERFORMANCE OF FINANCIAL RATIOS WITH REFERENCE
AN ORGANISATION OVER TIME USING TO RELEVANT BENCHMARKS.
FINANCIAL RATIOS.
LO4 PREPARE BUDGETS FOR PLANNING, CONTROL AND DECISION MAKING
USING SPREADSHEETS.
P5 P6 PREPARE A CASH BUDGET
FROM GIVEN DATA FOR AN
ORGANISATION USING A
M4 IDENTIFY CORRECTIVE ACTIONS LO4
TO PROBLEMS REVEALED BY D3 JUSTIFY BUDGETARY CONTROL
SPREADSHEET.
BUDGETARY PLANNING AND CONTROL SOLUTIONS AND THEIR IMPACT ON
P7 DISCUSS THE BENEFITS AND FOR EFFECTIVE ORGANISATIONAL
LIMITATIONS OF BUDGETS AND ORGANISATIONAL DECISION MAKING
DECISION MAKING. TO ENSURE EFFICIENT AND EFFECTIVE
BUDGETARY PLANNING, AND
CONTROL FOR AN ORGANISATION. DEPLOYMENT OF RESOURCES.