Accounting Principles ACC205

Student Name/ID Number

Unit Number and Title

Unit 5: Accounting Principles

Academic Year

Unit Tutor

Assignment Title

Financial Reports for Different Types of Organisation (Sole Trader, Partnership and Not-for-Profit)

Issue Date

Submission Date

Submission Format

The assignment submission is in the form of:

a portfolio of evidence that includes financial statements (income statements, balance sheets, forecasted budgets) with accompanying spreadsheets, supplemental notes and a financial summary.

Your portfolio of evidence should be appropriately indexed, and your chosen format should ensure it is presented in a practical and clear way.

Unit Learning Outcomes

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

Transferable skills and competences developed

Understand business finance: how to manage budgets and financial forecasting

Able to monitor budgets, provide reports, consider financial implications of decisions and adjust approach and recommendations accordingly

Manipulation and interpretation of data using spreadsheets

Creation and interpretation of information, showing how that information can be used most effectively to add value to an organisation

Vocational scenario

Your line manager at the accounting firm* has received many enquiries since your presentation at the last event from members of the local small business network who need help preparing their organisations financial reports. You are to be made responsible for three different types of organisation (sole trader, partnership and not-for-profit) that require financial statements and their next financial years budget planning.

Sole trader

A local carpenter, Joseph, has been enjoying steady success with 5% year-on-year profit. However, he is faced with a crucial financial decision. He is considering taking on a new apprentice to expand his business and meet the growing demand for his services. Hiring an apprentice comes with immediate costs, such as wages and training expenses. This will put pressure on his profit margins in the short term, but the long-term growth potential of having an extra skilled worker could lead to increased financial returns. Joseph needs help to analyse if his current profit, though modest, can support this expansion without causing financial instability.

Partnership

Hussain & Sons, a partnership of estate agents, faces a pressing financial challenge. Its profit margins have been dwindling over the last two years due to rising staff wage costs coupled with a decrease in demand for buying/selling houses in the local community. The partnership is determined to achieve financial stability over the next five years, and aware that it needs to strike a delicate balance between reducing operational costs, adjusting staff structures and devising innovative new marketing and sales strategies to stimulate demand in a challenging local housing market.

Not-for-profit

Astrid, the dedicated leader of an established local not-for-profit animal charity, is contemplating opening another shelter for animals in a nearby town. The charity, relying on donations and meticulously managed financial accounts, is eager to expand its impact and reach as part of its 20-year in-service celebrations. However, the financial impact of launching a new shelter on existing operations poses a considerable dilemma. Astrid and her team are grappling with upholding their mission to maintain high standards of care and support for animals in the community without overstretching resources or risking closure.

*As selected for Authorised Assignment Brief 1 (AAB1) to meet local needs.

Assignment activity and guidance

Financial statements

Based on financial information provided by your tutor, you should prepare and produce an income statement, balance sheet and forecasted budgets for all three organisations. It is recommended you use digital software in preparing financial statements, such as Microsoft Excel, Google Sheets or a similar alternative. These statements must include detailed supplemental notes to identify which accounting standards were used, explanation of

any assumptions made to prepare the statements and policies adopted.

Financial summaries

A financial summary for each organisation should critically evaluate year-on-year comparisons of their financial performance. You must show the use of calculated financial ratios, giving reasons for your choices and highlighting any limitations, as a tool to evaluate performance. Any analysis carried out must make use of a range of relevant measures and benchmarks to inform your conclusions. Finally, you should discuss the use of budgets and budgetary planning to reveal any corrective actions for effective decision-making relevant to each organisations owner(s). Your critical evaluation should inform justification for suggested budgetary control solutions to ensure the efficient and effective deployment

of resources.

Recommended resources

Please note that the resources listed are examples for you to use as a starting point in your research the list is not definitive.

Websites

www.accountingtoday.com Accounting Today (General reference)

www.fasb.org Financial Accounting Standards Board (General reference)

www.frc.org.uk Financial Reporting Council (General reference)

Textbooks

Atrill, P. and McLaney, E. (2021) Management Accounting for Decision Makers. 10th Ed. Harlow: Pearson.

Bhimani, A., Horngren, C.T., Datar, S.M. and Rajan, M.V. (2019) Management and Cost Accounting. 8th Ed. Harlow: Pearson.

Fridson, M. and Alvarez, F. (2022) Financial Statement Analysis Workbook: A Practitioners Guide. 5th Ed. Hoboken, NJ: Wiley Finance.

Ittelson, T.R. (2022) Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports. 3rd Ed. Newburyport, Mass: Career Press.

Harrison, W.T., Horngren, C.T., Thomas, C.W. and Tietz, W.M. (2019) Financial Accounting: International Financial Report Standards. 12th Ed. Harlow: Pearson.

Marshall, D., McManus, W. and Viele, D. (2023) Accounting: What the Numbers Mean. 13th Ed. London: McGraw Hill.

Weygandt, J.J., Kimmel, P.D. and Kieso, D.E. (2020) Financial Accounting. 11^th Ed. Hoboken, NJ: John Wiley & Sons.

Wild, J. (2021) Financial Accounting: Information for Decisions. 10th Ed. New York: McGraw Hill.

Pass

Merit

Distinction

LO1 Examine the context and purpose of accounting

P1 Examine the purpose of the accounting function in an organisation.

P2 Assess the accounting function in the organisation in the context of regulatory and ethical constraints.

M1 Evaluate the context and purpose of the accounting function in meeting organisational, stakeholder and societal needs and expectations.

D1 Critically evaluate the role of accounting in informing decision-making to meet organisational, stakeholder and societal needs in complex operating environments.

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

LO2 and LO3

P3 Prepare financial statements from a given trial balance for sole traders, partnerships and not-for-profit organisations, to meet accounting principles, conventions and standards.

M2 Produce financial statements from a given trial balance, making appropriate adjustments.

D2 Critically evaluate financial statements to assess organisational performance using a range of measures and benchmarks to make justified conclusions.

LO3 Interpret financial statements

P4 Calculate and present financial ratios from a set of final accounts.

P5 Compare the performance of an organisation over time using financial ratios.

M3 Evaluate the performance of an organisation over time, using financial ratios with reference to relevant benchmarks.

LO4 Prepare budgets for planning, control and decision- making using spreadsheets

P6 Prepare a cash budget from given data for an organisation using a spreadsheet.

P7 Discuss the benefits and limitations of budgets and budgetary planning and control for an organisation.

M4 Identify corrective actions to problems revealed by budgetary planning and control for effective organisational decision- making.

D3 Justify budgetary control solutions and their impact on organisational decision-making to ensure efficient and effective deployment of resources.