Unit Level, Number and Title Level 4: Unit 5 Accounting Principles
Credit Value 15
Unit Type Core
Assignment Title Unit 5 Accounting Principles
Academic Year 2023/2024
Unit Tutor Muhammad Basit Ali
Issue Date: 17/05/2024
05/08/2024 Submission Date
Unit Introduction Management accounting is a profession that supports
management decision-making, planning and performance management systems. Management accountants provide expertise in financial reporting and control to assist management in the formulation and implementation of an organisation's strategy by providing appropriate financial information and undertaking related accounts administration. Unit Aim The overall aim of this unit is to introduce fundamental accounting principles that underpin financial operations and support good and sustainable decision-making in any organisation. Students will develop a theoretical and practical understanding of a range of financial and management accounting techniques. Unit Outcomes Students will be able to assist senior colleagues in producing and analysing budgets, drawing up simple financial statements and using financial ratios to interpret performance. Students will also explore wider aspects of accountancy, especially ethics, transparency, and sustainability, and gain fundamental knowledge and skills that will enable them to progress to a higher level of study.
1 Submission Format The evidence submissions for this unit are a Research Report, Financial Statements, and Cash Budget.
This should be written in a concise, formal business style using 1.5 spacing and a font size of 12. Preferably, you can use Arial or Calibri font style. You must use appropriate headings, paragraphs, and subsections and ensure that the report is justified and aligned. You need to bold the headings and subheadings, add page numbers, and include a clear task and assignment/evidence title. You must submit your assignments in MS Word format.
You must proofread the assignments for spelling, grammar, and function errors. You may use digital proofreading, such as Grammarly. You may wish to sign up for a free Grammarly account.
www.grammarly.com
You must avoid using American spellings in your assignments or in any written work. You are required to use British spellings only. You can use the following link to see the difference as an example:
http://www.tysto.com/uk-us-spelling-list.html
All tasks must be produced in a professional academic writing style and should include evidence of your research with references. This includes linking research coherently to your writing and using referencing, such as a bibliography, citing and quotes. You are required to submit original work without plagiarism, and you need to reference your work where required. You are required to use the Harvard referencing style. You may wish to read the information on the link given:
Please remember the Turnitin Policy and that your similarity should NOT exceed 25%. Make sure you submit your assignment before the deadline, or as per policy, you will be capped at a Pass for late submission. You should focus on command words and key phrases in producing your evidence. Please refer to the document provided in the glossary of key terms that define evidence requirements, as this would be helpful. The document can be accessed on CANVAS.
2 The unit enables the students to develop the following skills and knowledge areas:
Knowledge and Understanding Transferable skills
Cognitive skills • Theoretical and practical understanding • Problem-Solving of a range of financial and management • Critical thinking/Analysis accounting techniques. • Decision Making • Students will be able to assist senior • Digital Literacy and Numeracy colleagues in producing and analysing • Critical thinking and analytical skills budgets, drawing up simple financial • Effective communication skills statements and using financial ratios to interpret performance. Intra-personal skills • Planning and Priortising • Self-Management • Teamwork • Independent learning
Assignment Tasks
Unit 5 Task Evidence required Learning outcomes
Accounting covered Principles A Research Report LO1 B Financial Statements (Part1 and 2) LO2, LO3 C Cash Budget LO4 Note: In order to successfully pass the module, you need to ensure you achieve, as a minimum, all the Pass criteria. 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. LO4 Prepare budgets for planning, control and decision-making using spreadsheets.
Task A Scenario
Tesco plc has been a prominent player in the UK retail industry for decades, with operations spanning multiple countries. As one of the largest retailers in the UK and a multinational corporation, Tesco plc operates in a highly regulated environment, with stringent oversight from regulatory bodies such as the Financial Reporting Council (FRC) and the UK Government's Department for Business, Energy & Industrial Strategy (BEIS). Additionally, Tesco plc is committed to upholding high
3 ethical standards in its financial reporting practices to maintain the trust and confidence of its stakeholders. In this task, you will conduct a thorough assessment of Tesco plc's accounting function, focusing on its adherence to regulatory requirements and ethical standards.
Task A- Assignment Activity Research Report
The working title you have been given for the report is ‘The role of accounting in Tesco’. The report must be presented as a research paper that is engaging and practical, covering relevant academic theory and using, for example, headings, images, and illustrations. Your report 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.
Task A- The Guidance You May Use (LO1)
You need to complete a Research Report of 1000- 1200 words maximum, where you need to include the following elements: ➢ Title Page ➢ Table of Contents 1. Introduction and Background: Introduce the accounting function of Tesco plc, different branches of accounting, e.g., financial, management, auditing, tax, and forensic accounting, and users and uses of financial information, context, and purpose of financial and management accounting. 2. Explanation and Analysis: ➢ Critically evaluate the purpose of the accounting function in decision-making, meeting organisational, stakeholder, societal needs and expectations in Tesco’s Case. ➢ Critically evaluate how accounting principles contribute to effective financial management. You need to review Tesco's financial statements, including the income statement, balance sheet, and cash flow statement accessible through their website, to make a critical review of their compliance with regulatory requirements and their accuracy and completeness.
4 ➢ Critically evaluate Tesco's compliance with the relevant accounting standards, including the International Financial Reporting Standards (IFRS) adopted by the UK. ➢ Critically assess the effectiveness of Tesco's internal controls framework in ensuring the reliability of financial reporting and preventing fraudulent activities. ➢ Critically review Tesco's code of conduct and ethics policies to ensure they address key ethical principles such as integrity, honesty, and transparency in financial reporting. 3. Conclusion: Summarise the findings to conclude your report. 4. References: Include references to link your analysis with current and relevant academic research. The research report should include contemporary examples, recommendations and references to relevant academic theories and models. Note: You are not allowed to use text boxes and page borders in MS Word. You are expected to write your report in a professional academic writing style. You are required to include academic references in Harvard style with in-text citations. An academic form of writing includes linking research coherently to your writing and using referencing, such as a bibliography, examples, citing, and quotes. You must effectively use headings, sub-headings, bullet points and subsections as appropriate. The recommended word limit is 1000–1500 words, excluding references, although you will not be penalised for going under or exceeding the total word limit. Key tips: In Task A, you can consider taking further support from the prompts below: • The accounting function in an organisation: Different branches of accounting, e.g. financial, management, auditing, tax and forensic accounting. Career opportunities in accounting and roles and responsibilities, e.g. accounts clerk, accounts assistant, qualified accountant. Roles in commercial finance, e.g. cost analyst, business controller, pricing professionals and global business services, e.g. purchase pay (P2P) professionals and report-to-report (R2R) professionals.
• Users and uses of financial information. Interrelationships between the accounting and finance functions of other areas of the organisation and increasingly complex operating environments. Context and purpose of financial and management accounting: The purpose and scope of accounting include recording, reporting, and analysing information to inform decision-making. Role of supporting and new information technologies to support accounting and decision making. Management accounting information, including systems, e.g. cost accounting, inventory management, and job costing. The benefits (streamlined reporting, accuracy), risks and limitations (security threats, loss of data through power outages) of management accounting information.
Task A- Research Report Structure
1. Title page (Name, unit title, assignment title, date, etc.) 2. Table of contents 3. Introduction 4. Explanation and Analysis (headings and sub-headings)
5 5. Recommendations 6. Conclusion 7. References
Task B- Financial Statements (LO2, LO3)
Note: The Microsoft Excel sheet has provided you with all the data and key information for the tasks. The Tabs have been created on the same Excel sheet to perform the solution and answers to the numerical problems for Task B and C. You must submit the complete sheet (Task B and C) with answers on Canvas along with Task A, which is a written report in MS Word. Task B Scenario Part 1- You are a newly hired accountant at Zee’s Accounting Firm. Your first task is to prepare financial statements for three different types of entities: a sole trader, a partnership, and a not-for-profit organisation. Each entity has provided you with a trial balance containing all their account balances for the current accounting period. Your task is to use this trial balance to prepare the necessary financial statements in accordance with accounting principles, conventions, and standards." Part 2- Your objective is to calculate and present relevant financial ratios to evaluate their performance. Additionally, you will compare the performance of each organisation over time by analysing financial ratios from previous periods. Part 1- Task B Compulsory Instructions: ➢ The data has been given in the Excel sheet as Trail Balance for John Doe (sole trader), Smith & Johnes (partnership), and Community Centre (not-for-profit organisation). For each entity (sole trader, partnership, not-for-profit organisation), prepare the following financial statements: 1. Income Statement. 2. Statement of Financial Position (Balance Sheet) ➢ Produce financial statements from a given trial balance, making appropriate adjustments. • Ensure that each financial statement complies with relevant accounting principles, conventions, and standards. • Calculate any necessary totals and subtotals accurately. • Present the financial statements in a clear and professional format. • Make the necessary amendments to the financial statements that have been produced for the sole trader, partnership and non-profit organisation. For example, a sole trader can revise the cost of sales if the sole trader wants to achieve a gross profit of 70%. • Critically analyse the income statement for the not-for-profit organisation to assess its current performance and make relevant conclusions and recommendations for the organisation.
6 • Critically interpret financial statements and provide explanations or additional information to support your calculations and conclusions. • Use appropriate headings, titles, and formatting to make your assignment easy to read and understand. Part 2- Task B Compulsory Instructions: ➢ Data is the same as for Part 1, given in the Excel sheet as Trial Balance. The formulas and explanations for the given ratios have been given as well. Instructions: ➢ Calculate the following financial ratios for each organisation: 1. Profitability Ratios: Gross Profit Margin, Net Profit Margin (for sole trader and partnership) 2. Not-for-Profit Specific Ratio: Program Expense Ratio, Administrative Expense Ratio (not-for-profit organisation) • Present the financial ratios in a clear and organised format, labelling each ratio appropriately. • Interpret the results of each ratio analysis, discussing what the ratios reveal about each organisation's financial health and performance. • Based on the financial ratio analysis, provide recommendations for each organisation, highlighting areas of strength and areas needing improvement. Task C- Cash Budget Scenario: You are a financial analyst at BlueSky Enterprises, a consulting firm specialising in financial management. Your task is to prepare a cash budget for an organisation and provide an in-depth discussion on the benefits and limitations of budgets and budgetary planning, as well as the importance of budgetary control for organisational success. Cash Budget: Data has been provided on an Excel sheet. Instructions: ➢ Prepare a Cash Budget based on the data, considering the January opening balance. • Use a Microsoft Excel spreadsheet to calculate the net cash flow at the end of each month. • Compare the monthly cash flow over the three months. • In the next step, identify and evaluate the current problem that will affect profitability and liquidity. • Propose and justify a solution to the problem that has been identified and explain why. • Discuss the benefits of budgets and budgetary planning for organisations (see the tips given below to explain your answer).
7 Key Tips: • Advantages of budget planning (how much cash is coming in and going out) and how much money is left at the end of the month (liquidity) to meet expenses. • Through budget and budget planning, we can make core decisions about the running of the business. For example, if we want to increase the net cash flow, we can either increase the sales revenue or reduce our expenses. The amount can be determined based on the net cash flow we want to achieve. We can also have an estimate of money left (net cash flow) for the business if we want to expand, which costs money. • Limitations- the budget planning and budget may be affected by other unforeseen external factors (PESTEL), and therefore, any decisions made on budget planning can be inaccurate. • Propose and justify a solution to the problem that has been identified and explain why. (For example, if you want to increase sales or reduce expenses, explain why.) • Identify the current problem (e.g., cash flow is falling, and the company has less money to spend on other expenses) that will affect profitability and liquidity.
Recommended Resources for the Module.
Please note that the resources listed are examples for you to use as a starting point in your research – the list is not definitive. Weblinks www.accountingcoach.com www.accaglobal.com www.cimaglobal.com www.corporatefinanceinstitute.com
Textbooks • ATRILL, P. and McLANEY, E. (2018) Accounting and Finance for Non-Specialists. 11th Ed. Harlow: Pearson. • DRURY, C. (2015) Management and Cost Accounting. 9th Ed. Cengage Learning. SEAL, W. et al (2018) Management Accounting. 6th Ed. Maidenhead: McGraw-Hill. • WEETMAN, P. (2019). Financial and Management Accounting: An Introduction. Harlow: Pearson.
Learning Outcomes and Assessment Criteria
Pass Merit Distinction
LO1 Examine the context and purpose of accounting.
8 P1 Examine the purpose of M1 Evaluate the context and D1 Critically evaluate the role the accounting function purpose of the accounting of accounting in informing within an organisation. function in meeting decision-making to meet P2 Assess the accounting organisational, stakeholder organisational, stakeholder function within the and societal needs and and societal needs within organisation in the context of expectations. complex operating regulatory and ethical environments. constraints.
LO2 Prepare basic financial statements for
LO2 and LO3 D2 Critically unincorporated and small business organisations in evaluate financial statements to accordance with accounting principles, conventions assess organisational and standards. performance using a range of P3 Prepare financial M2 Produce financial measures and benchmarks to statements from a given trial statements from a given make justified conclusions. balance for sole traders, trial balance, making partnerships and not-for- appropriate adjustments. profit organisations to meet 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 P5 Compare the reference to relevant performance of an benchmarks. organisation over time using financial ratios.
LO4 Prepare budgets for planning, control and decision-
making using spreadsheets.
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 on using a spreadsheet. budgetary planning and control organisational decision-making to ensure efficient and effective for effective organisational deployment of resources. decision-making. P7 Discuss the benefits and limitations of budgets and, budgetary planning, and control for an organisation.
