Unit 5 Accounting Principles - BTEC Level 4 Higher National Certificate in Business

Assignment - Importance of Understanding the Principles of Accounting for Planning, Control and Decision-Making in Different Organisations

Scenario and Activity 1: Report and Financial Statements

You have been hired as an entry-level Accounting Specialist in Akabane Accounting Service, a sole proprietorship business located in Southeast London. They offer accounting services to small businesses in the UK. One of the essential expectations of the job is your understanding of the basic accounting principles and preparation of budgets for planning, control and decision-making using spreadsheets and other financial statements.

Your need to prepare financial statements and interpret financial ratios for long-time customers of the company, Saitama Enterprises and Mocharon Company. However, you first must demonstrate your understanding of the context and purpose of accounting. So, your first task is to produce a report covering relevant topics and concepts on accounting principles. Financial statements and financial ratios provide information on business activities and its performance so it is also important that you have the relevant knowledge in these areas so you can prepare them accordingly. As an accounting specialist, your mathematical skills will also be tested as you need to ensure that you are making the right calculations.

In your report, you should:
• Define accounting
• Examine the purpose of the accounting function within an organisation
• Assess the accounting functionwithin an organisation in the context of regulatory and ethical constraints
• Evaluate the context and purpose of the accounting function in meeting organisational, stakeholder and societal needs and expectations.
• Critically evaluate the role of accounting in informing decision-making to meet organisational, stakeholder and societal needs within complex operating environments.
• Briefly explain how financial statements are prepared for sole traders, partnerships and not-for-profit organisations, to meet accounting principles, conventions and standards.
You are given the unadjusted trial balance of Saitama Enterprisesalong with the adjustments made for the year. You now need to make the relevant adjusting entries and produce the adjusted trial balance. Based on this, you produce financial statements such as income statement and balance sheetfor Saitama Services for the year 2021.

Information on the adjustments to be made are as follows:
a. Saitama Enterprises pays £2,500 rent for December
b. Customer pays Saitama Enterprises£3,700 for services rendered the previous month.
c. The company's equipment is said to have a 10-year life period. Depreciation expense is calculated using straight line method.
d. £18,000 of supplies were used in December.

Lastly, MocharonCompany has requested for an interpretation of financial ratios that will inform the company of its performance in terms of profitability, efficiency, liquidity. You need to calculate their financial ratios based on the following income statement and balance of the company for the years 2019, 2020, and 2021. You include in your report its interpretation, mainly comparing and evaluating its performance for those three years on the following ratios with reference to relevant benchmarks.
a.Current Ratio e. Total Asset Turnover
b. Quick Ratio f. Debt to Asset Ratio

c. Receivables Turnover g. Return on Asset

d. Inventory Turnover h. Return on Equity

You conclude your report by critically evaluating financial statements to assess organisational performance using a range of measures and benchmarks to make justified conclusions.

Scenario and Activity 2:Cash Budget and Memo

Another client, Fukuro Limited, has asked your company to guide them on the concept of budgeting and how it can be used to inform efficient resource allocation and support effective control and decision making.
Fukuro Limited is having issues on managing its cash flows, so your advice on budgeting would greatly help them to be able to control its resources. You need to assist them in preparing a cash budget. They have asked you to prepare a memorandum containing an excel spreadsheet of a cash budget for Fukuro Limited from the given data attached:

Cash Balance on 1 April 2021 is £18,000
Equipment amounting to £45,000 is due for delivery in May for which 10% is payable on delivery, and the rest to be paid after 3 months
Advance tax of £5,300 each is payable in January and June 2021.
Direct Labour cost is £5,000 every month
Direct Materials in January amounts to £3,000, and increases by 10% every month

The cash budget must be done in a spreadsheet in the template provided above.
In your memorandum, you also:
• discuss the benefits and limitations of budgets and budgetary planning, and control for the organisation.
• identify corrective actions to problems revealed by budgetary planning and control for effective organisational decision making
• justify budgetary control solutions and their impact on organisational decision making to ensure efficient and effective deployment of resources

Attachment:- Accounting Principles.rar