COLLEGE OF BANKING AND FINANCIAL STUDIES DEPARTMENT OF PROFESSIONAL STUDIES Assignment front sheet Assignment - 1 Qualification Unit number and title Pearson BTEC Level 5 HND Diploma in Business Unit 10: Financial Accounting and Reporting Semester Batch IV Spring 2015-16 Student name Assessor name Ms.Sujatha Bhat/Mr.Ali Al Asmi Student No. Internal Verifier (IV) name Mr. Gnanendran Date issued Completion date Submitted on -Nov-2016 – Formative -Nov-2016 – Summative Assignment title Learning Outcome LO 1 LO 2 Learning Outcome Regulatory framework for financial reporting and presentation of information in accepted formats for publication Assessment Criteria In this assessment you will have the opportunity to present evidence that shows you are able to: Task no. Understand the regulatory framework for financial 1.1 reporting 1.3 Assess the implications for users 3 1.4 Explain how different policies are dealt with by accounting and reporting standards 4 Be able to prepare financial statements from complete or 1.2 2.3 Describe the different users of financial statements and their needs Explain the legal and regulatory influences on financial statements Prepare a consolidated balance sheet and profit and loss account for a simple group of companies financial Evidence (Page no) 1 2 5 incomplete records LO 3 Be able to present financial information in accepted formats for publication 3.1 3.2 Explain how the information needs of different user groups vary Prepare financial statements in a form suitable for publication by a sole trader, partnership and limited company 1 6 Learner declaration I certify that the work submitted for this assignment is my own and research sources are fully acknowledged. Student signature: Date: 1 In addition to the above PASS criteria, this assignment gives you the opportunity to submit evidence in order to achieve the following MERIT and DISTINCTION grades Grade Descriptor Indicative characteristic/s Contextualisation To achieve M1, you will make effective judgements by comparing different M1 Identify and apply strategies to find appropriate solutions users of financial statements as to how they use those information for decision making by linking to various financial statements prepared by the Effective judgements have company (Task 1). been made. To achieve M1 you have to make an effective judgment on application of relevant IAS and IFRS. (Task 5). To achieve M1, you should use effective judgment while making the adjustments in the financial statements. ( task 6) M2 Select / design and apply appropriate methods / techniques M3 Present and communicate appropriate findings A range of methods and techniques have been To achieve M2 you will have to use range of information to explain the applied importance of consistency in accounting policy. (Task 4). A range of sources of information has been used To achieve M3, you will have to explain a range of legal and regulatory influence including the regulation for stock exchange listing. Also explain both International and local Accounting Standards. (Task 2). To achieve M3 you will have to use a coherent and logical approach The appropriate structure and approach has been used assessing the implication for the users of financial statement. (Task 3) To achieve M3, you should use the appropriate structure as specified by IAS/IFRS in preparing the consolidated balance sheet. You should demonstrate the interdependence on Non-Controlling Interest, Goodwill and retained earning calculation. You have to solve the problem accurately and balance the consolidated SOFP. (Task 5) 2 To achieve M3, you should use an appropriate structure specified by IAS/IFRS in preparing the SOFP and the income statement. You should validate the result by balancing the SOFP. You will have to solve the problem accurately and balance the SOFP by applying creative thinking (Task 6) To achieve D1, you have to make conclusions through synthesis of ideas D1 Use critical reflection to evaluate own work and justify valid conclusions and have been justified when assessing the implication of each accounting concepts/assumptions/qualitative characteristics. You should explain the Realistic improvements have been proposed against defined characteristics for success fundamental and enhancing qualitative characteristics and link how enhancing characteristics strengthen the fundamental characteristics.(Task 3) To achieve D1 you answer should reflect a critical evaluation on when a firm can change its accounting policy and validate your conclusion. (Task 4). D2 Take responsibility for managing and organising activities To achieve D2, you will have to demonstrate autonomy and independence Autonomy/independence has been demonstrated by bringing more information like how company legislation is linked to Accounting standards for detailed accounting guidance. (Task 2). To achieve D3, you should show convergent and lateral thinking on how D3 Demonstrate convergent /lateral / creative thinking different user groups use the financial statement for decision making. You Innovation and creative should illustrate conflicting interest of different user groups in using the thought have been applied financial statement for decision making. Also describe why businesses need A range of sources of to produce financial statements and why company has to follow accounting information has been used procedures in order to produce financial information. (Task 1). 3 Assignment Brief Purpose of this assignment The manner in which items and transactions are treated and presented in the financial statements may affect an investor's perception of the position and performance of the business. Whilst individual accounting standards can be developed to deal with specific issues it is also important that there is a framework that sets out the wider purposes that accounting standards are intended to achieve. This assignment will help you understand the importance of accounting regulations, the importance of accounting information to different user groups with varied needs and the need to present financial statements in standardized formats Task 1 – LO1 & 3 - Assessment Criteria 1.1 & 3.1 (M1, D3): Describe the different users of financial statements and their needs. Explain how the information needs of different user groups vary The objective of financial reporting is to provide information about the reporting entity that is useful for certain group of people who need to know that information. The regulatory framework does not only prevent preparers of financial statements from misleading users; but is also developed to ensure that the information in the financial statements actually does meet users’ needs. Describe, Who exactly are these "users of financial statements"? Also, what information do they need and what decisions do they make? To achieve pass you must;  List out and describe the different users of financial statements  Identify different components of financial statements to be prepared by the company  Explain how the information needs of different user group vary To achieve M1, you will make effective judgements by comparing different users of financial statements as to how they use those information for decision making by linking to various financial statements prepared by the company To achieve D3, you should show convergent and lateral thinking on how different user groups use the financial statement for decision making. You should illustrate conflicting interest of different user groups in using the financial statement for decision making. Also describe why do businesses need to produce financial statements and why company has to follow accounting procedures in order to produce financial information 4 Task 2 – LO1 - Assessment Criteria 1.2 (M3, D2): Explain the legal and regulatory influences on financial statements The preparation of financial statements of Limited Liability Companies is closely regulated. The regulation comes from three main sources: Company Law, Accounting standards and Stock exchange listing requirements. Explain clearly the regulatory framework relating to Company Legislation, Accounting standards and other sources of regulations. To achieve pass you must;  Identify legal and regulatory influences.  Explain how legal and regulatory aspects influence the content and the form of the financial statements. To achieve M3, you have to explain a range of legal and regulatory influence including the regulation for stock exchange listing. Also explain both International and Local Accounting Standards. To achieve D2, you will have to demonstrate autonomy and independence by bringing more information like how company legislation is linked to Accounting standards for detailed accounting guidance. Task 3 – LO4 - Assessment Criteria 1.3 (M3,D1): Assess the implications for users. The general objective of financial reporting is to provide useful information to the users of Financial statements. Therefore, the Framework for the Preparation and Presentation of Financial Statements requires financial statements to be prepared on the basis that they comply with certain accounting concepts, underlying assumptions and (qualitative) characteristics”. Identify four accounting concepts/assumptions/qualitative characteristics and assess the implication of each of the above concepts/assumptions/qualitative characteristic on the users of financial statements 5 To achieve pass you must;  Identify four accounting concepts/assumptions/qualitative characteristics.  Explain each of the concepts/assumptions/Qualitative characteristics, which you have selected for users of financial statement and Assess the implication of the above for the users. To achieve M3 you will have to use a coherent and logical approach assessing the implication for the users of financial statement. To achieve D1, you have to make conclusions through synthesis of ideas and have been justified when assessing the implication of each accounting concepts/assumptions/qualitative characteristics. You should explain the fundamental and enhancing qualitative characteristics and link how enhancing characteristics strengthen the fundamental characteristics. Task 4 – LO1 - Assessment Criteria 1.4 (M2,D1): Explain how different policies are dealt with by accounting and reporting standards. The accounting policies are the specific policies and procedures that are used by a company to prepare its financial statements. Describe with examples, how different policies are dealt with by accounting and reporting standards referring to Inventory (IAS 2) and Depreciation (IAS 16) To achieve pass you must;  Explain the relevant accounting standards pertaining to depreciation and inventory  Explain the importance of the concept of consistency in valuation of inventory and methods of depreciation though accounting standards. To achieve M2 you will have to use range of information to explain the importance of consistency in accounting policy. To achieve D1 your answer should reflect a critical evaluation on when a firm can change its accounting policy and validate your conclusion. 6 Task 5 – LO2 - Assessment Criteria 2.3 (M1,M3): Prepare a consolidated balance sheet and profit and loss account for a simple group of companies The Statement of Financial Position (SFP) of D Ltd. and Z Ltd. are as under: Statement of Financial Position as on December 31, 2015 Non current Assets: D Ltd $ 70000 Z Ltd $ 16000 Land and Buildings 15000 2000 Investment (80% shares in Z Ltd) 60000 Plant and Equipment Current assets: Inventory 90000 40000 Trade and other Receivables 50000 24000 Cash at Bank 20000 20000 305000 102000 Equity share capital of R.O.1 each 65000 20000 Share premium 35000 10000 Retained Earnings 70000 25000 Secured loans 45000 20000 Trade and other Payables 60000 20000 Accrual and other Liabilities 30000 7000 305000 102000 Total Assets Liabilities Current Liabilities: Total Equity and Liabilities The following additional information is provided: D Ltd acquired an 80% holding in Z Ltd on January 1, 2015. On that day the balances of retained earnings of Z Ltd stood at $12,500. D Ltd‘s accounts show $5,000 owing to Z Ltd; Z Ltd’s accounts show $5,000 owed by D Ltd. No impairment of goodwill has occurred to date. 7 You are required to prepare the consolidated Statement of Financial Position of D Ltd as on 31st December 2015. (B) On 1 January 2015 P acquired 60% of the ordinary shares of S. At the time of acquisition the Retained earnings of S stood at $20,000. The following statement of Profit and Loss Account have been produced by P and S for the year ended 31 December 2015. P S $ $ Sales 630,000 Cost of Sales (210,000) Gross Profit 420,000 260,000 (105,000) 155,000 Distribution Cost (90,000) (30,000) Administration expenses (60,000) (45,000) Profit from Operations 270,000 Investment income from S Profit before taxation 18,000 288,000 Tax Profit after Taxation (65,000) 223000 80,000 80,000 (13,000) 67,000 During the year ended 31 December 2015 P had sold $42,000 worth of goods to S. These goods had cost P $28,000. On 31 December 2015 S still had half of these goods in Inventories. Goodwill impairment for the year is $2,000. On 31 December 2015, both P and S revalued their Freehold land, resulting in a revaluation surplus of $8,000 and $5,000 respectively. Calculate Group revenue, Cost of sales and prepare a Consolidated Income statement for the year ended 31 December 2015 Explain why consolidated financial statements are useful to the users of financial statements (as opposed to just the parent company’s separate (entity) financial statements. (Provide Reference to IAS and IFRS wherever applicable) To achieve pass you must  Show the Group structure, calculation of Goodwill, NCI, and Group reserve and prepare the consolidated balance sheet of D Ltd as on 31 December 2015.  Calculate the group revenue, Cost of sales and prepare the consolidated 8 Comprehensive Income statement for the year ended 31 December 2015. To achieve M1 you have to make an effective judgment on application of relevant IAS and IFRS. To achieve M3, you should use an appropriate structure as specified by IAS/IFRS in preparing the consolidated balance sheet. You should demonstrate the interdependence on NonControlling Interest, Goodwill and retained earning calculation. You have to solve the problem accurately and balance the consolidated SOFP. Task 6 – LO3 - Assessment Criteria 3.2 (M1,M3): Prepare financial statements in a form suitable for publication by a sole trader, partnership and limited company The following trial balance was extracted from the books of B Ltd at 31 December 2015. Dr Cr $ $ Share Capital: 60,000 shares of $ 1 each Inventory in trade (Opening) 60,000 23,428 8% Loan Notes 20,000 General Reserve Land (at Cost) Plant and Machinery(at Cost) Bad Debts Wages and Salaries Purchases 10,000 59,600 13,000 601 29,820 90,620 Sales 196,748 Allowance for Bad Debts 850 Accumulated Depreciation: Plant & Machinery Insurance Office Expenses Balance at Bank Rates 750 693 4,142 29,544 2,010 Profit and Loss Account ( Opening) Trade Receivables 3,900 16,923 Trade Payables 12,989 Rent Received Directors Remuneration 2,390 26,000 9 General Expenses 11,246 307,627 307,627 You are given the following information: 1. Inventory in trade as on 31 December 2015 amounted to $6,426. 2. Bad debts to be written off are $2,700. The provision for bad debts is to be allowed at 5% of Trade Receivables. 3. Rent receivable due at 31 December, 2015 amounted to $ 130. 4. Insurance paid in advance at 31 December 2015 amounted to $ 86. 5. Depreciation on Plant and Machinery is to be provided for at the rate of 20% p.a. reducing balance method. 7. The outstanding Loan Notes interest is to be provided. 8. $ 7,000 is to be transferred to General Reserve. 9. Provision is to made for dividend at 20% on the issued capital. 10. Provide tax @ 20%. 11. The allocation of expenditure between distribution and administration expenses is as follows: Cost of sales Wages and Salaries Rates General Expenses Directors Remuneration Office Expenses Bad Debts Insurance Depreciation – Plant and Machinery Distribution Expense Administration Expense 100% 100% 100% 100% 100% 100% 100% 100% 10 You are required to prepare: a) A Income Statement for the year ended 31 December 2015 b) A statement of Financial Position (Balance Sheet) as at 31 December 2015 (in compliance with IAS1) To achieve pass you must • Show the steps in calculating depreciation, provision for doubtful debts. • Prepare the income statement and the statement of financial position. To achieve M1, you should use an effective judgment while making adjustments in the financial statements. To achieve M3, you should use an appropriate structure specified by IAS/IFRS in preparing the SOFP and the income statement. You should validate the result by balancing the SOFP. You will have to solve the problem accurately and balance the SOFP by applying creative thinking 11 Evidence checklist Evidence presented Summary of evidence required by student Recognize different financial statements and Understanding on Task 1 different uses of accounting information and why they use those information. Task 2 Able to explain legal and regulatory influences Assess the implication of Accounting Task 3 concepts/assumptions/qualitative characteristic on Task 4 financial statements Explanation on how different policies are dealt referring to IAS 16 the users of and 2 Task 5 Prepare consolidated Income statement and SOFP Task 6 Prepare financial statement for publication. Guidance notes:  Use standard document formats and structures.  Word process the documents.  Use 12 point Arial or Times New Roman script.  Provide a list of references and use the Harvard referencing system.  Complete the title page and sign the statement of authenticity.  Upload the entire assignment in MS word format only on Turnitin.  Staple only once to keep the pages of your work together.  Late submission, late work will only be marked on the next occasion the unit is taught.  Submit the work along with the Turnitin report to the respective assessors in their offices.  Collect the assignment submission form duly signed by the assessor and the learner.  Grades are subject to External Verification. Word count: 2500 words 12 Achievement Summary Pearson BTEC Level 5 HND Diploma in Business Qualification Unit Number and title Unit 10: Financial Accounting and Reporting Student Number Criteria Reference Assessor name CA.Sujatha Bhat Mr.Ali Al Asmi IV name Mr. Gnanedran Student name To achieve the criteria the evidence must show that the student is able to: Achieved? (tick) LO1 1.1 Describe the different users of financial statements and their needs 1.2 Explain the legal and regulatory influences on financial statements 1.3 Assess the implications for users 1.4 Explain how different policies are dealt with by accounting and reporting standards LO2 2.3 Prepare a consolidated balance sheet and profit and loss account for a simple group of companies LO3 3.1 Explain how the information needs of different user groups vary 3.2 Prepare financial statements in a form suitable for publication by a sole trader, partnership and limited company Higher Grade achievements (where applicable) Grade descriptor Achieved? (tick) M1: Identify and apply strategies to find appropriate solutions Grade descriptor D1: Use critical reflection to evaluate own work and justify valid conclusions M2: Select/design and apply appropriate methods/techniques D2: Take managing activities M3: Present and appropriate findings D3: Demonstrate convergent/lateral /creative thinking communicate 13 responsibility for and organising Achieved? (tick) Assignment Feedback Formative Feedback: Assessor to Student Action Plan Summative feedback 14 Feedback: Student to Assessor Assessor Signature Date IV Signature Date Student Signature Date 15
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