Unit 5: Accounting Principles

Accounting in Context and Budgetary Control

The submission format includes an essay, a report, and a budget prepared using a spreadsheet.  The reports should be written in a concise, formal business style using 1.5 lines spacing and Times New Roman font with a font size of 12.  You are required to make use of headings, paragraphs, and subsections as appropriate.

  • All work must be supported with research and references using the Harvard referencing system. 
  • The recommended word limit is 2,000–2,500 words, although you will not be penalized for exceeding the total word limit.
Unit Learning outcomes (LOs)
LO1: Examine the context and purpose of accounting.
LO4: Prepare budgets for planning, control, and decision-making using spreadsheets.  
Transferable skills and competencies developed
Reasoning and analytical skills   Written communication using a range of media   Manipulation and interpretation of data using spreadsheets   Effective communication of relevant information across the organisation and to appropriate stakeholders   Creation and interpretation of information, showing how that information can be used most effectively to add value to an organisation.
LO1:  Examine the context and purpose of accounting.
Vocational scenario
  You are invited to a panel discussion organised by the Association of Accounting Technicians (AAT). You are required to prepare a paper discussing the importance of the accounting department as a business function in any organisation.  The discussion should also evaluate the necessity for a regulatory framework for the accounting profession and the impact of this on the stakeholders and users of accounting information. Your essay may cover the points given in para (i), (ii) and (iii) below:      
Assignment activity and guidance:
  Examine the purpose and scope of the accounting function within different business organisations using appropriate real-life examples. (1)   Assess the accounting function considering regulation and ethical issues that confront accountants and the extent to which these are beneficial constraints to them. (2)   You may evaluate the context and purpose of the accounting function in meeting organisational, stakeholder, and societal needs and expectations and critically evaluate the role of the accounting function in informing decision-making and meeting organisational, stakeholder, and societal needs and expectations.     
LO4: Prepare budgets for planning, control, and decision-making using spreadsheets.
Vocational Scenario  
You are employed as Account Assistant at Discount Supermarket Ltd, a medium-sized food retail company.  The company went through a difficult year and management is keen to keep an eye on the company budget going forward.  You are required to prepare cash budget projections for Discount Supermarket for the first half of the financial year- January to June 2025, enabling them to plan how to manage their cash flow effectively.  
Assignment activity and guidance:
Discount Supermarket Ltd, has provided the following information on their expected sales, purchases and projected expenses.  Please note that the business pays annual rent of £35,000 on April 1st each year. The Marketing Consultant receives £4500 each month.  The business will purchase a motor vehicle in March 2025 costing £90,000 and corporation tax of £15,000 is due by 30 June 2025. Discount Supermarket Ltd:  Projected Sales & Purchases:  January – June 2025 Month Sales Purchases Jan-25 80,000 25,250 Feb-25 92,000 23,750 Mar-25 85,500 21,375 Apr-25 94,000 24,250 May-25 80,000 20,000 Jun-25 79,000 19,750   Requirement: You are requested to prepare a cash budget for the period from January to June 2025 from the data given in the table above. Prepare a short memo to your supervisor and include: The six-month cash budget for Discount Supermarket Ltd prepared using a spreadsheet (6) that shows expected cash inflow and outflows and monthly balances over the six months i.e., January to June 2025.  Discuss the implication of the budget and advise the client on any possible actions necessary.   An evaluation of the role that budgets play in the effective planning and control of resources in an organisation. This should include both the benefits and any limitations of using budgets (7) and the extent to which they can help identify problems and corrective actions . You may justify the budgetary policy by an outline of a range of budgetary control solutions, with examples, to support organisation decision-making and ensure efficient and effective use of resources.  
  
  
 
 Unit Learning Outcomes 
   LO2: Prepare basic financial statements for unincorporated and small businesses, and organisations by accounting principles, conventions, and standards. LO3: Interpret financial statements.   
 Transferable skills and competencies developed 
 Managing financial data.Written communication using a range of media.Manipulating and interpreting data using spreadsheets.Effective communication of relevant information across the organisation and to appropriate stakeholders.Creation and interpretation of information and showing how that information can be used most effectively to add value to the organisation.Ability to use quantitative skills to manipulate data, evaluate, estimate, and model business problems.Application of accounting knowledge to consistently deliver high-quality, accurate data and information in a timely fashion.   
 LO2: Prepare basic financial statements for unincorporated and small business organisations in accordance with accounting principles, conventions, and standards. 
 Vocational Scenario 
 Abdu Smallah started business as a sole trader with a capital of £2000 which he used to purchase goods for retail.  The end of his first year of trading was successful.   In his second year of trading, his brother Rahman joined him as a partner in the business.  They registered as Abdu and Rahman Partnership.  The brothers both invested into the partnership (Abdu £35000 and Rahman (£25000).  They share profits in the ratio 60/40 respectively.  They agreed not to charge interest on their capital.   The Partnership is a member of the Association of Small and Medium-sized Retailers (ASMR).     You are required (3): To prepare the financial statements for Abdu Smallah’s first year of business that ended 31 December 2023, using the trial balance given below.To prepare the financial statements for Abdu and Rahman Partnership for the year ended 31 December 2024 based on the trial balance and notes given.To prepare the financial statements for ASMR Association for the year ended 31 December 2024 based on the trial balance given below. .     
 Assignment activity and guidance:     Trial Balance for Abdu Smallah as at 31 December 2023   £ £ Cash & Bank 20,300   Capital   2,000 Accounts payable              500 Sales        31,700 Cost of Sales                7,000   Administrative expenses 5,500   Miscellaneous expenses                1,400     34,200      34,200   Trial Balance for Abdu and Rahman Partnership as at 31 December 2024           £ £ Land & Property                  121,000   Motor vehicle                     35,000   Cash & Bank                     33,850   Capital -Abdu                      35,000 Capital -Rahman                      25,000 Current account- Abdu                      3,600 Current account- Rahman                      2,875 Accounts receivable                   25,400   Accounts payable                      15,200 Cost of sales                     40,500   Sales                     226,625 Wages & Salaries                     23,200   Rent                         8,700   Utilities                         8,500   Insurance                     10,000   Travel expense                       1,500   General admin expenses                           650                        308,300           308,300   The following adjustments must be taken into account at the end of the financial year 31 December 2024 for Abdu and Rahman Partnership A client owing £2,000 is declared bankrupt. He can only settle £1500 of his debt The gas bill for December 2024 of £2550 was paid on 31 January 2025.The company bookkeeper has retrieved two invoices totalling £2000 that were not billed to clients.  This must be accounted for in the year ended 31 December 2024.  Client A immediately paid her invoice in cash £850 and Client B’s will settle her invoice for £1150 on 31//01/2025. The business depreciates its Land & Property at 2% per annum and its motor vehicles at 20% per annum.  The vehicle was purchased on 1 January 2024. The business overpaid its insurance company in 2024.  The insurance charge for the year should be £9000.       
LO3: Interpret financial statements.
Vocational Scenario
Araba Group plc has made a bid for another company.  The management of that company wants to be sure that Araba Group plc is the right company for them to be a part of and has asked you to review the Groups financial statements for the past two years.  You are required to calculate the key performance ratios (KPR) and use these to evaluate the business in terms of its profitability, liquidity, efficiency of operations and the returns on investment.  You may consider other relevant benchmarks for business sustainability.

Requirement:

You are required towrite a report on Araba Group plc showing the calculation of relevant key performance ratios (KPR) for 2024(P4) and comparison of the performance of the organisation over 2023 and 2024 using the KPR calculated for 2023 and 2024 and any other relevant benchmarks to determine profitability, liquidity, efficiency of operations and the returns on investment over time (P5)

The report may also include a critical evaluation of the performance of the business (referring to the financial statements and the KPRs calculated) concerning relevant benchmarks as well as any limitations of using financial ratios as performance measures, and justified conclusions and recommendations for your client.

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