Unit 5 Accounting Principles

Assignment brief

Student name/id number

Unit number and title Unit 5 Accounting Principles

Academic year 2024/2025

Unit tutor Maha Awan

Assignment title Financial Portfolio Analysis for Global Tech

Issue date 18/03/2025

Draft Submission deadline for 17/05/2025

formative feedback
Final Submission deadline 04/07/2025

IV name & date Lisa Bartlett (ESCG) 18/03/2025

Submission format

• This assignment should be a financial portfolio, prepared in a Word Format using Arial or Calibri
font, size 12. The portfolio should be accompanied by an Excel Sheet containing all financial
calculations.
• Language used should be formal and with professional terminology.
• No text should be placed inside text boxes. No page borders should be used. Work that makes use
of text boxes or page borders will not be accepted and returned to the learner for correction and
resubmission in the correct format.
• You are required to make use of headings, paragraphs, subsections, and illustrations as
appropriate, and all work must be supported with research and in-text references using the
Harvard referencing system. Please include references at the end of the assignment using the
Harvard referencing system.
• Start each answer on a new page and pages should be numbered, please highlight each question
clearly.
• The recommended word limit addressing all the tasks is 4500 words, with +/- 10% margin,
although you will not be penalised for exceeding the total word limit.
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.

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 Evidence Summary of evidence required by the student Format
Checklist
Activity1 Purpose and role of accounting in an Microsoft Word for
organisation Activities 1-4 whereas a
Note: word count for this activity is 1500 words. spreadsheet (MS Excel) to
The reasoning provided must have recent be used in addition to
references as well. display the calculations
Activity2 Preparation of financial statements for various used.
businesses
Note: all calculations should be done on excel.
Include appropriate
Adjustments in financial statements as required.
Word count for this activity is 800 – 1000 words.
Activity3 Ratio interpretation
Note: all calculations should be done on excel.
Word count for this activity is 800 – 1000 words.
Activity4 Preparation of cash budget
Note: discussion on the budgetary controls is an
important part of the
Assessment. All calculations should be done on
excel. Word count for this activity is 800 – 1000
words.

Vocational scenario

You need to carefully read all instructions before attempting any of the tasks. The assignment must
be addressed concerning the learning outcomes 1 to 4. You will be assessed through the Financial
Portfolio that will be submitted under pass, merit and distinction criteria.

Scenario:
Global Tech Solutions is a rapidly expanding technology company specializing in cloud-based
solutions for small to medium-sized enterprises (SMEs). They have experienced significant growth
in recent years, but their accounting and financial processes are struggling to keep pace. They have
hired your consultancy firm to assess their current financial standing and provide recommendations
for improved financial management.

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 Assignment activity and guidance
Tasks & role:

You are a financial analyst at an accountancy and financial services consultancy. Your senior
manager has assigned you to lead the Global Tech solutions project. You will be responsible for
creating a comprehensive 'financial assessment report ' to be presented to the company's executive
team. They have given you the activity to assess the financial reports of various businesses units and
investigate the best route forward. Your recommendations should be based on support from the
financial statements. You will do this by creating a ‘financial portfolio’ with supportive financial
statements to share with the senior management of the organisation.

Activity 1: Purpose And Role of Accounting in Global Tech (LO1)

Your senior manager wants you to start with an internal memo explaining to the Global Tech solutions
team why accounting is important. The memo will be used to educate the importance of accounting
to all staff in Global Tech solutions. In your memo:

a) Examine the importance of accounting function and categories including cost accounting,
management accounting, and financial accounting within an organisation. Explain how each
category supports decision-making, performance measurement, and overall organizational
success for Global Tech.
b) Discuss the regulatory environment impacting Global Tech solutions. Explain how corporate
governance impacts financial reporting. Discuss the ethical considerations that the accounting team
needs to adhere to.

The evaluation should be drawn from a critical perspective where you look at the different sides of the
argument, presented by various authors. The evaluation should clearly assess the usefulness of
these functions by examining their strengths and weaknesses with evidence from different
perspectives in the form of an argument making a valid conclusion. The purpose and context of these
accounting functions should also be evaluated critically on how they meet the organisational,
different stakeholder and societal needs and expectations at large regarding informed decision-
making in complex operating environments.

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 Activity 2: Preparing Financial Statements for Global Tech Solutions (LO2)

Provided below are the trial balances for (1) sole trader, (2) partnership (3) clubs and societies
organisation. You are required to prepare financial statements from the data below. Explain how these
financial statements meet the accounting principles, conventions and standards set. The financial
statements should also include appropriate adjustments as required. Using the information given for
the three different independent business units, prepare the financial statements. You will also need
to address how the financial statements meet accounting principles. After preparing the financial
statements as directed, you are required to critically evaluate the financial data to assess the
financial performance for Global Tech and present your recommendations based on justified
conclusions drawn from the financial data calculated.

Scenario 2: Simplified Sole Trader Tech Startup Division

Imagine Global Tech solutions started as a small sole trader before becoming a large company.
Below is the trial balance as of December 31st, 2024.

Account Debit Credit (£)

(£)
Bank 8,000
Revenue (consulting services) 85,000
Software purchases 30,000
Rent expense 12,000
Salaries and wages 25,000
Office supplies 3,000
Equipment 15,000
Accumulated depreciation - 3,000
equipment
Owner's equity 80,000
Total 93,000 93,000

Additional Information:
• Depreciation for the year on equipment is £1,500.
• Salaries accrued but unpaid at year-end are £2,000.
• Office supplies on hand at year-end are valued at £500 (already included in the £3,000).

Required for Scenario 2A:

a) Prepare an Income Statement for the tech startup division for the year ended December 31,
2024.
b) Prepare a Balance Sheet as of December 31, 2024.

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 Scenario 2B: Partnership - Global Tech Software Development Team
Two partners, Alice and Bob, run Global Tech solution's software development team.
• Alice contributed £120,000 capital, and Bob contributed £80,000.
• Interest on capital is allowed at 5% per annum.
• Alice receives a monthly salary of £5,000.
• Alice's drawings were £15,000, and Bob's drawings were £10,000.
• Interest on drawings is charged at 2% on drawings. Alice's interest on drawings was £300 and
Bob's was £200.
• Profits and losses are shared equally.
• Net profit for the year (before salaries and interest on capital) is £150,000.

Required for Scenario 2B:

a) Prepare the Profit and Loss Appropriation Account for the software development team for the
end of financial year.
b) Prepare the Partners' Current Accounts for Alice and Bob for the end of financial year.

Scenario 2C: Not-For-Profit - Employee Social Club

The employees run an employee social club. The following information is for the year ended
December 31, 2024:
• Subscriptions received: £12,000
• Donations received: £3,000
• Event Income: £8,000
• Rent paid: £2,000
• Event Expenses: £6,000
• Prizes Awarded: £4,000
• General Expenses: £1,000

Additional Information:
• Outstanding Subscriptions: £500
• Prepaid Rent: £200

Required for Scenario 2C:

a) Prepare an Income and Expenditure Account for the Employee Social Club for the year
ended December 31, 2024.
b) Critically evaluate the financial statements to assess organisational performance. Use the
figures calculated in the tasks above to draw your conclusions & justify your
recommendations for Global Tech.

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 Activity 3: Financial Ratio Analysis of Global Tech Solutions (LO3)

Global Tech Solutions is seeking a significant loan to fund further expansion. The bank has requested a
financial ratio analysis to assess the company's creditworthiness. You have been provided with the following
abridged financial information:

Global Tech Solutions - Income Statement for the Year Ended December 31, 2024

Item Amount (£)

Revenue 2,500,000

Cost of Goods Sold 1,500,000

Gross Profit 1,000,000

Operating Expenses 400,000

Operating Profit 600,000

Interest Expense 50,000

Profit Before Tax 550,000

Tax 150,000

Net Profit 400,000

Global Tech Solutions - Balance Sheet as of December 31, 2024

Asset Amount (£) Liability & Equity Amount (£)
Fixed Assets 1,200,000 Share Capital 800,000

Inventory 300,000 Retained Earnings 500,000

Accounts Receivable 400,000 Long-Term Debt 500,000

Cash 100,000 Accounts Payable 200,000

Total Assets 2,000,000 Total Liabilities & Equity 2,000,000

Additional Information:
• Opening Inventory: £250,000
• Credit Sales: 70% of Total Revenue

The ratios for the previous year are as follows:

• Gross Profit Margin: 38%
• Inventory Turnover Ratio: 5.2
• Operating Profit Margin: 22%
• Current Ratio: 2.4:1
• Quick Ratio: 1.1:1
• Receivables Turnover (days): 50 days
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 • Debt-to-Equity Ratio: 0.55:1

Required for Scenario 3:

I. Calculate the following ratios:
a) Gross Profit Margin
b) Inventory Turnover Ratio
c) Operating Profit Margin
d) Current Ratio
e) Quick Ratio (Acid Test Ratio)
f) Receivables Turnover Ratio (in days)
g) Debt-to-Equity Ratio
II. Compare and evaluate the performance of Global Tech Solutions over time. Provide a reasoned
conclusion on the company’s financial health and its ability to secure the loan, referencing relevant
benchmarks and considering the strengths and weaknesses of the evidence.

Activity 4: Cash Budgeting for Global Tech Solutions (LO4)

Global Tech Solutions is planning a significant marketing campaign in the first quarter of 2025. They need to
prepare a cash budget to manage their cash flow effectively. Prepare a cash budget for the months of January,
February, and March 2025 using the following data:

Month Sales Forecast (£) Purchases Forecast

(2024-2025) (£)
December 300,000 180,000

January 350,000 200,000

February 400,000 220,000

March 420,000 210,000

Additional Information:
• Cash balance at the beginning of January 2025: £80,000
• Sales: 60% collected in the month of sale, 30% in the following month, and 10% two months after the
sale.
• Purchases: Paid one month after purchase.
• Monthly operating expenses (excluding depreciation): £60,000 (paid in cash).
• A marketing campaign will cost £100,000, paid in January.
• The company plans to purchase new equipment for £50,000 in February (paid in cash).
• A loan repayment of £20,000 is due in March.
• Depreciation is £5,000 per month.

Required for Activity 4:

a) Prepare a Cash Budget for January, February, and March 2025.
b) Discuss the benefits and limitations of cash budgeting for Global Tech Solutions.
c) Discuss the budgetary planning and control system for organisations.
d) Identify potential problems and their corrective actions in budgetary planning for Global Tech.
e) Justify the budgetary control solutions proposed and how would their impact on the organisational
decision making be effective and efficient in deployment of their resources.

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 Recommended resources
Student resource library:
Available at: https:// hnglobal.highernationals.com/subjects/ resource-libraries

Textbooks:
a) Attrill, P. And Mclaney, E. (2018). Accounting And Finance For Non-Specialists. 11th
Edition. Harlow. Pearson.
b) Drury, C. (2015). Management And Cost Management. 9th Edition. Cengage Learning.
c) Seal, W. Et Al (2018). Management Accounting. 6th Edition. Maidenhead. Mcgraw-Hill.
d) Weetman, P. (2019). Financial And Management Accounting: An Introduction. Harlow.
Pearson.

Websites:
https://www.accountingcoach.com
https://www.accaglobal.com
https://www.cimaglobal.com
https://www.corporatefinanceinstitute.com

SIRMLIVE – Moodle (www.sirmlive.uk)

You will find reference readings, including website articles, videos and case studies,
embedded within each learning week of this unit within your enrolled unit shell.

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Learning outcomes and assessment criteria
Pass Merit Distinction

Lo1 Examine the context and purpose of accounting

D1 Critically evaluate the
P1 Examine the purpose of M1 Evaluate the context and role of accounting in
the accounting function purpose of the accounting informing decision-
within an organisation. function in meeting making to meet
organisational, stakeholder organisational,
P2 Assess the accounting and societal needs and stakeholder and societal
function within the expectations. needs within complex
organisation in the context operating environments.
of regulatory and ethical
constraints.
Lo2 Prepare basic financial statements for unincorporated and
small business organisations in accordance with accounting
principles, conventions and standards

P3 Prepare financial M2 Produce financial

statements from a given statements from a given trial
trail balance for sole balance, making Lo2 and lo3
traders, partnerships and appropriate adjustments. D2 Critically evaluate
not-for- profit organisations, financial statements to
to meet accounting assess organisational
principles, conventions and performance using a
standards. range of measures and
Lo3 Interpret financial statements benchmarks to make
justified conclusions.
P4 Calculate and present M3 Evaluate the
financial ratios from a set of performance of an
final accounts. organisation over time,
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.
Lo4
P6 Prepare a cash budget M4 Identify corrective D3 Justify budgetary
from given data for an actions to problems control solutions and
organisation using a revealed by budgetary their impact on
spreadsheet. planning and control for organisational decision
P7 Discuss the benefits and effective organisational making to ensure
limitations of budgets and decision making. efficient and effective
budgetary planning, and deployment of resources.
control for an organisation.

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 Glossary of commonly used command words
Analyse Examine something in very close detail and from a number of angles.
Identify the important points and chief features and understand their
relationships.
Carry out Implement; do; execute; use a range of skills to perform a task, research
or activity; undertake an activity of a practical nature
Compare Show how two or more things are similar.
Communicate Convey or exchange spoken or written information
Contrast Look at two or more things and draw out differences. State whether the
differences are significant.
This is a development of ‘evaluate’ where the candidate debates the
Critically validity of claims from the opposing views and produces a convincing
evaluate argument to support the conclusion or judgement; weigh arguments for
and against something, assess the strength of evidence on both sides.
Define Give the exact meaning of.
Describe Give a detailed account of the main features or characteristics
Devise Plan a complex procedure, system or mechanism) by careful thought
Discuss Write about the most important characteristics of something. Give
arguments for and against, look at it from a variety of perspectives.
Distinguish Identify the differences between two items.
Assess the worth or usefulness of something; examine strengths and
Evaluate weaknesses, arguments for and against and/or similarities and
differences; judge the evidence from the different perspectives and
make a valid conclusion or reasoned judgment. Use evidence to support
your opinion.
Explain Make it clear why something happens or why it is the way it is.
Interpret Explain the meaning or significance of information or data that you are
presenting.
Present Show for others to scrutinise or consider; formally deliver (e.g. In verbal,
written or graphical format); produce an information for an audience, e.g.
At the conclusion of the project to demonstrate what has been done and
the outcome.
Produce Make, create or form something.
Justify Provide evidence that supports an argument or idea.

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