Financial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information Needs

Financial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsAssignment front sheetQualification Unit number and titlePearson BTEC Level 5 HND Diploma in BusinessStudent nameUnit 10: Financial Accounting and Reporting (Ref: F/601/0864)Assessor nameMd Shahidul IslamDate issued Completion date Submitted on03 February 201411 April 2014Assignment titleFAR: Financial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsLearning OutcomeLearning outcomeAssessment CriteriaIn this assessment you will have the opportunity to present evidence that shows you are able to:Task no.Evidence (Page no)Understand the regulatory framework for financial reporting LO11.1 1.2 1.3 1.4Describe the different users of financial statements and their needs Explain the legal and regulatory influences on financial statements Assess the implications for users1A 1B 1AExplain how different laws/regulations are dealt with by accounting and reporting standards Be able to prepare financial statements from complete or incomplete records 2.1 Prepare financial statements for a variety of businesses from a trial balance, making appropriate adjustments Prepare financial statements from incomplete records Prepare a consolidated balance sheet and profit and loss account for a simple group of11B2ALO22.2 2.32B 2CLO3Be able to present financial information in accepted formats for publication Be able to interpret financial statements3.1 3.2companies 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 Calculate accounting ratios to assess the performance and position of a business Prepare a report incorporating and interpreting accounting ratios, including suitable comparisons3A3B4.1 4.24A 4BLO4Learner declaration I certify that the work submitted for this assignment is my own and research sources are fully acknowledged.Student signature:Date:2In 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 M1 Identify and apply strategies to find appropriate solutions Indicative characteristic/s Contextualisation To achieve M1, you will make effective judgements about information needs of different stakeholders of financial reporting for a range of business organizations, their implications for the users and their further use in interpreting the results and performance of the relevant companies. You are strongly advised to take the example of a UK organization/company to illustrate your analysis. (All tasks) To achieve M2, you will need to use suitable techniques to explore the external influence on business reporting from a range of stakeholders while you need to demonstrate the differential contents and information released by those organizations through their financial statements. You also need to explain critically how the financial reporting process works in particular context and its influence over the wider community of investors throughout the world. Again you are strongly advised to take one or more (where appropriate) UK based company(s) to show the impact of these factors on rational decision making by stakeholders. (All tasks) To achieve M3 the work you present will need to be in an acceptable format and will use business terminology accurately. (All tasks)Effective judgements have been made.An effective approach to study and research has been applied.M2 Select / design and apply appropriate methods / techniquesAppropriate learning methods/techniques have been applied.M3 Present and communicate appropriate findingsCommunication is appropriate for familiar and unfamiliar audiences and appropriate media have been used.3D1 Use critical reflection to evaluate own work and justify valid conclusions Conclusions have been arrived at through synthesis of ideas and have been justified.Realistic improvements have been proposed against defined characteristics for success.To achieve D1 you will need to draw conclusions that links between the factors influencing the financial reporting for a number of different business organizations in a global setting such as a UK organization trading with a foreign company and how it caters to the information needs of all stakeholders. You also need to demonstrate the influence of regulators and other players in the design of accounting standards. You will provide an evaluation, which will suggest how this knowledge might be of value to senior staff to help improve the financial reporting at your selected company. (All tasks) To achieve D2 you will have demonstrated an effective approach to independent research and study and will have met the deadline to submit the tasks and achieve the unit assessment criteria. (All tasks)D2 Take responsibility for managing and organising activities D3 Demonstrate convergent /lateral / creative thinkingActivities have been managed.4Assignment briefUnit number and title Qualification Start date Deadline/Hand-in date AssessorUnit 10: Financial Accounting and Reporting Pearson BTEC Level 5 HND Diploma in Business03 February 2014Assignment title Purpose of this assignmentFinancial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsIn this unit learners will prepare financial statements for different types of business, complying with relevant legal and regulatory provisions and the basic principles of group accounts. Learners will also develop tools for the interpretation of financial statements. It is essential for the success of any business that it has good financial control and record keeping. Lack of effective control, planning and recording can ultimately lead to poor financial results. Owners and managers need to be able to recognize the indications of potential difficulties and take remedial action when required. The unit considers the current regulations governing financial reporting, the formats of financial statements and the purpose of these statements for different users. Learners will use records to complete financial statements. They will consider various categories of business income and expenditure and use cash flow forecasts, monitoring and adjusting for the effective management of cash flow. They will measure financial performance using a profit and loss account and balance sheet and analyse the profitability, liquidity and efficiency of a business through the application of ratio analysis.Scenario You have recently assumed the position of a junior reporting accountant at a UK based company that grows locally and with this performance and incentive the company aspires to expand in the international markets. You are aware that there are a number of regulations that you have to comply while different stakeholders demand the financial information in a way to help them make efficient and rational decisions. Depending on the organization (where) you are positioned, the company management needs to comply with the Companies Act 2006, the UK Corporate Governance Code 2010 and other rules pronounced by the Department of Trade and Industry (DTI) and relevant government agencies. You are one of the team members responsible to deliver the financial results and therefore you are exposed to the following set of problems: Depending on the organization you have assumed the position of a junior reporting accountant, as stated in the scenario, attempt the following questions: Task 1A (LO1: 1.1, 1.3, and M1, M2, D1)5Q1.1: Why do the stakeholders of your organization need different range of information through financial reporting? Identify the stakeholders and explain what types of financial and non-financial information each of them are interested in? [AC1.1] Q1.2: How do the regulatory agencies try to address the needs of different users of financial statements? Discuss the implications of different regulatory agencies regarding the corporate financial reporting towards the users of financial statements. [AC1.3] Task 1B (LO1: 1.2, 1.4, and M2, D2) Q1.3: Explain why financial reporting as a discipline needs to be regulated? Discuss major regulatory bodies and their influence on the UK, European and global financial reporting. [AC1.2] Q1.4: (a) What are the provisions of financial reporting for the companies incorporated in the UK as per Companies Act 2006? (b) Discuss the main provisions of Companies Act 2006 pertaining to the profit and loss (Income statement) account, balance sheet and disclosures. (c) The 8th European Directives prescribe for regulations of the financial reporting in the EU region including UK. Discuss some provisions of the Directives relating to the financial accounting and reporting. [AC1.4] Task 2A (LO2: 2.1 and M2, D2) Q2.1: The trial balance of one of the sister concerns of your organization contains the following accounts at December 31, 2013, at the end of the company’s fiscal year covering the last 12 months. Trial Balance December 31, 2013 Debit(£) 300,000 59,000 120,000 416,000 50,000 50,000 Credit(£)Cash Accounts Receivable Store Supplies Merchandise Inventory Land Store Equipment Accumulated Depreciation-Store Eq. Accounts Payable Notes Payable Capital Drawings Sales Interest Revenue Sales Returns Sales Discounts Cost of Goods Sold Store Salaries Expense Advertisement Expense Freight out Utilities Expense68,000 50,000 60,000 800,000 10,000 480,000 3,000 12,000 8,000 300,000 25,000 16,000 7,000 17,000Insurance Expense Salaries Expense Total2,000 9,000 1,401,0001,401,000Adjustment data: Depreciation is £8,000 on store equipment (consider it as a selling expense). Store supplies on hand totalled £100,000. Salaries are paid only for 9 months. Assume the salaries incurred are equal for each month. Utilities are £1,500 per month. Advertisement expenses are paid for 2 years where the agency has signed to promote the next year as well. 6. The annual interest revenue for the company is £5,000. 7. Management has recently decided to keep a bad debt provision for 5% on the final balance of accounts receivables. Other data: 1. Salaries expense, utilities expense, and insurance expense are 100% administrative. 2. Store supplies expense and freight out are considered as selling expense. 1. 2. 3. 4. 5. Instructions Prepare an income statement for the year and a balance sheet at December 31, 20013. [AC2.1] Q2.2: The following information is available about the transactions of your company, a limited liability enterprise, for the year ended 31 December 2013. [Figures in £000] Depreciation 880Cash paid for expenses 2270 Increase in inventories? 370 Cash paid to employees 2820 Decrease in receivables 280 ? ? Cash paid to suppliers 4940 Decrease in payables 390 Cash received from customers 12800 Net profit before taxation* 2370 *Your company has no interest payable or investment income. Required: Compute the net cash flow from operating activities for the company’s cash flow statement for the year ended 31 December 2013 using the indirect method. [AC2.1]Task 2B (LO2: 2.2 and M3, D3) Q2.3: Your company has been running a sole distributorship of Ikea Tiles in East London area. Under an agreement with the manufacturers, your company purchases the Ikea tiles at a trade discount of 20% off list price and annually in May receives an agency commission of 1% of all the purchases for the year ended on the previous 31 March. For several years, your company has obtained a gross profit of 40% on all sales. In a burglary in January 2011, your company lost inventory costing £4,000 as well as many of its accounting7records. However, after careful investigations, the following information has been obtained covering the year-ended ? 31 March 2011. (a) Assets and liabilities at 31 March 2010 were as follows: Buildings At cost? Accumulated depreciation At cost? Accumulated depreciation £ 10,000 6,000 5,000 2,000 3,200 6,300 300 120 4,310 4,200 230Motor vehicleInventory: at cost Trade accounts receivable (for sales) Agency commission due Prepayments (trade expenses) Balance at bank Trade accounts payable Accrued vehicle expenses(b) Your company has been notified that it will receive an agency commission of £440 on 1 May 2011. (c) Inventory, at cost, at 31 March 2011 was valued at an amount £3,000 more than a year previously. (d) In October 2010 inventory costing £1,000 was damaged by dampness and had to be scrapped as worthless. (e) Trade accounts payable at 31 March 2011 related entirely to goods received whose list prices totaled £9,500. (f) Discounts allowed amounted to £1,620 whilst discounts received were £1,200. (g) Trade expenses prepaid at 31 March 2011 totaled £80. (h) Vehicle expenses for the year ended 31 March 2011 amounted to £7,020. (i) Trade accounts receivable (for sales) at 31 March 2011 were £6,700. (j) All receipts are passed through the bank account. (k) Depreciation is charged annually at the following rates.8Buildings Motor vehicle5% on cost20% on cost (l) Commissions received are paid directly to the bank account. (m) In addition to the payments for purchases, the bank payments were: Vehicle expenses Drawings? Trade expenses £6,720 4,300 7,360Unfortunately your company was not insured against loss of inventory owing to burglary or damage to inventory caused by damp. Required Prepare the income statement for the year ended 31 March 2011 and a statement of financial position on that date. [AC2.2] Task 2C (LO2: 2.3 and M3, D3) Q2.4: On 1 April 2010, Your Company acquired 75% of the ordinary share capital of Orset Limited for £180,000. At that date the balance sheet of Orset Limited was as follows: Sundry net assets £160,000 Share capital [100,000 Ordinary shares of £1 each] Accumulated profit £100,00060,000 £160,000At 31 March 2013, the balance sheets of the two companies were as follows Your Company Sundry net assets Investment in Orset £560,000 180,000 £740,000 Share capital [Shares of £1 each] Accumulated profit 500,000 240,000 Orset Limited £230,000 £230,000 100,000 130,000 £230,000£740,000 Goodwill arising on consolidation is to be amortized over five years.Required: Prepare the consolidated balance sheet of Your Company and its subsidiary as at 319March 2013 [AC2.3]Task 3A (LO3: 3.1 and M1, D1) Q3.1: Assuming that your company being one of the prestigious FTSE100 members on the London Stock Exchange requires to cater financial information to a wide range of users (stakeholders) including the owners (share holders), lenders (debenture holders and bankers), suppliers, employees, customers, government and the society as a whole. Explain how the information needs of different user groups vary. [AC3.1] Task 3B (LO3: 3.2 and M2, D2) Q3.2: What procedures should a listed company follow for publishing its financial statements in the annual report? Referring to the International Financial Reporting Standards (IFRS), discuss the steps of publishing the financials for your company. [AC3.2] Q3.3: Assume that your company plans to enter the US market at the start of 2015. Discuss the differential accounting standards and reporting regulations that your company would require to comply with. [AC3.2] Q3.4: You and your friend, Brador, have been in partnership for several years, compiling your financial statements for the year ending 31 March and sharing profits in the ratio 60:40 after allowing for interest on capital account balances at 5% per year. Extracts from their trial balance at 31 March 2013 are given below: Extracts Capital accounts: You Brador Current accounts: You Brador Drawings: You Brador Office equipment: Cost Accumulated depreciation, 1 April 2012 Notes £ 50,000 50,000 3800 2600 48400 36900 1 48300 12800 Debit Credit10Inventory, 1 April 2012 Trade receivables Allowance for doubtful debts, 1 April 2012 Sales revenue Purchases Rent paid Salaries Insurance Sundry expenses Notes:2 3 315600 68400 3800 448700 184600 30000 88000 4000 394004 5(1) Office equipment should be depreciated at 20% per year on the reducing balance basis. (2) Closing inventory amounted to £21,400. (3) Debts of £2,400 are to be written off, and the allowance for doubtful debts is to be adjusted to 5% of trade receivables. (4) Rent paid £30,000 is the amount for the nine months to 31 December 2012. From that date the rent was increased by 10%. (5) Insurance paid in advance amounted to £1,500. Required: (a) Prepare the partnership’s income statement and a statement showing the division of profit among the ? partners for the year ended 31 March 2013. (b) Write up the partners’ current accounts for the year ended 31 March 2013. [AC3.2] Task 4A (LO4: 4.1 and M2, D2) The extracts from actual financial statements of your company for the year 2012 and 2013 are presented below. The budget committee has also forecasted the 2014 financial statement. Find out company position using the ratios suggested and compare against the industry average and finally put your remarks on your company’s performance and suggest whe re there is a potential to improve on the current position. Balance Sheets as of 31st December 2012, 2013 and forecasted 2014 Balance Sheet: Assets: Cash and equivalents Short-term investments Account receivable Inventories Total current assets Gross Fixed Assets Less Accumulated Dep. Net Fixed Assets 2012 Actual £90000 486000 3512000 7152000 £11240000 4910000 1462000 3448000112013 Actual £72820 450000 6321600 12873600 £19268020 12029500 2631600 93979002014 Forecast £140000 716320 8780000 17164800 £26801120 11971600 3801200 8170400Total Assets Liabilities and Equity: Account payable Notes payable Accruals Total current liabilities Long term bonds Total debt Common Stock Retained earnings Total common Equity Total liabilities and equity£14688000 1456000 2000000 1360000 4816000 3234320 8050320 4600000 2037680 6637680 £14688000£28665920 5241600 7200000 4896000 17337600 10000000 27337600 4600000 (3271680) 1328320 £28665920£34971520 4368000 6000000 4080000 14448000 5000000 19448000 16809360 (1285840) 15523520 £34971520Income Statements for the years ended 31st December 2012, 2013 and forecasted 2014 Income Statement: Net sale Cost of goods sold Other expenses Depreciation Total operating Cost EBIT Less interest Earnings before taxes (EBT) Taxes 40% Net Income EPS DPS Book Value per share Market price per share 2012 £34320000 28640000 3400000 $189000 32229000 2091000 625000 1466000 586400 879600 0.88 0.22 60.638 80.210 2013 £58344000 57280000 6800000 1169600 65249600 (6905600) 1760000 (8665600) (53466240) (5199360) (5.199) 0.11 61.328 75.259 2014 £70356000 61000000 3129600 1200000 65329600 5026400 800000 4226400 1690560 2535840 1.014 0.22 60.209 84.652Using the financial information given and your own calculations incorporated into the following template, write a report to the CEO interpreting the company’s position to the industry average: Management of liquidity or short term solvency: 201 201 Ind Required Ratio: 0 2011 2 Avg Remarks Current Ratio 2.7 Quick Ratio 1.0 (Current ratio = Total current assets ÷ Total current liability) [Quick ratio = (Total current assets – inventory) ÷ (Total current liability – bank overdraft)] Required time ratio: 1. Average collection period 2. Account 201 0 201 2 Ind Avg 32 day 11.4122011Remarksreceivable ratio [Average collection period = (receivable × 365) ÷ sales] [Account receivable turnover = Annual sales ÷ A/C receivable] Assets management ratio : Required ratio : 2010 Remarks 1. Total assets turnover ratio 2.5 2. Fixed assets turnover ratio 2.5 3. Inventory turnover ratio 6.1 [Total assets turnover ratio = Annual sales ÷ Total assets] [Fixed assets turnover ratio = annual sales ÷ fixed assets] [Inventory turnover = (Cost of good sold ÷ inventory)] Assessment of profitability or activities ratio : Ind Required ratio: 2010 2011 2012 Avg Remarks 1. Gross profit margin ratio 15% 2. Net profit margin ratio 5% Gross profit margin = (Gross profit ÷ Total sales) × 100 Net profit margin = (Net profit ÷ Total sales) × 100 Ind Avg 201 1 201 2 Ind Avg201020112012Remarks3. Return on assets ratio 9% 4. Return on equity ratio 18% Return on assets = (Net profit ÷ Total Assets) × 100 Or return on assets = Net profit margin ratio × Assets turnover ratio. Return on equity = (Net profit ÷ Total Equity) × 100 [ Equity multiplier = Assets ÷ equity] Or return on equity = Net profit margin ratio × Assets turnover ratio × (assets ÷ equity) Debt Management Ratio: Required ratio: 2010 2011 2012 Ind Avg13Remarks1. Debt ratio 50% [Debt ratio = (Total liabilities ÷ Total assets) × 100] Ind 2010 2011 2012 Avg 2. Debt-Equity ratio 1.00 Debt-equity ratio = Total debt ÷ Total equity Ind Required ratio : 2010 2011 2012 Avg 3. Time interest earned ratio 6 [Time interest earned ratio = EBIT ÷ Annual interest expense] Assessment of Market Value Ind Required ratio: 2010 2011 2012 Avg 1. Price to earning ratio 14.2 2. Market to book value ratio 2.9 Price earning ratio = Price of stock ÷ earning per share. Market to book value ratio = Market price of stock ÷ book valueRemarksRemarksRemarksTask 4B (LO4: 4.2 and M3, D3) Scenario: You have been asked by your CFO to assess the performance of two companies listed on the London Stock Exchange (LSE) within a particular industry to examine which one of them would be the most suitable for investment in coming years. After an informal technical analysis, you decided to assess Next Plc and Burberry Plc as your future investment potentials. The 2013 annual reports of the companies can be downloaded from the links below: http://www.nextplc.co.uk/~/media/Files/N/Next-PLC/pdfs/latest-news/2013/ar2013.pdf http://www.burberryplc.com/investor_relations/annual_reports/financial_review?WT.ac=Annu al+Reports However, you can choose your pair of companies but make sure they are from the same industry and for the same financial year so that you can have a more insightful comparative analysis once you complete your ratio analysis with all the ratios listed above for 2012 and 2013. Please note that it is essential to interpret the results of each ratio highlighting the change in direction between the two years and which company is better or worse when considering a future investment.Materials for reading and consulting: a. Resources: 1. MS Powerpoint slides handed in during the sessions. 2. Other problem sheets and hard copy documents distributed in the class. b. Books:14Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2011). Principles of Accounting. 11th Ed. New York: Wiley. Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2011). Intermediate Accounting. 13th Ed. New York: Wiley. CIMA. Financial Accounting and Performance Evaluation. 2004 Word Count Learners must state the exact number of words they have used on the assignment submission form and comply with the word count of 3,500 with a margin of +/- 10%. However, please note that the calculations, tables, bibliography and appendices are excluded from word counts. Plagiarism and collusion Any act of plagiarism and collusion will be seriously dealt with according to the Edexcel plagiarism policy. Basically, plagiarism occurs when excerpts, ideas, passages taken from other sources are not properly acknowledged and referenced both in the body of the text and in reference. It is the learner’s responsibility to ensure that they understand all Edexcel guidelines with regards to plagiarism and what Edexcel considers to be an academic offence. Collusion can be understood as the submission of works produced in collaboration for an assignment based on the assessment of individual work. It is a severe academic offence to share a learner’s work with others who submit a part or the whole of it as their own work. The College has mechanisms in place to detect plagiarism and collusion. Learners must sign the declaration on the front of the assignment submission form.Submission Guidance and Policies for Edexcel Students This is an individual assignment. All parts of the assignment are required to be presented in a professional format, MS Word processed with full citation and references following Harvard system. Brit College strongly advises the learners to follow the guidance below: ? Brit College prefers Times New Roman 12 or Arial 11 in the body of the text. ? An assignment cover sheet and a receipt must be attached along with each submitted assignment. ? All assignments must have clear headings and sub-headings where necessary. ? Make sure you state the word count on the title page. ? Assignments must be printed in black and white. Late Submission and Resubmission ? Assignments will not be accepted for assessment by lecturers unless an extenuating circumstances form has been filled in and duly authorized by a member of staff. ? Students will receive the feedback form and guidance from the lecturer to improve in the areas of their weaknesses on their first submission. Please note that assignments can be resubmitted only once. A resubmitted assignment will be awarded a failed grade should it not meet the required pass grade marks and results in retaking the module. ? Please note that a resubmitted assignment will earn a maximum pass grade should it sufficiently meet the required criteria. ? A fine may also apply in case of resubmission.15Extensions and Extra-ordinary Circumstances ? Extensions are only granted for documented medical reasons and/or other documented serious interruptions relevant to your ability to study. ? Please note that extensions are not allowed due to your inability to organize your work. ? Should there be any extra-ordinary circumstances, the College should be made aware of this in writing. ? The college preserves the right not to accept or mark the assignment in case you failed to inform it in time.Financial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsAssignment front sheetQualification Unit number and titlePearson BTEC Level 5 HND Diploma in BusinessStudent nameUnit 10: Financial Accounting and Reporting (Ref: F/601/0864)Assessor nameMd Shahidul IslamDate issued Completion date Submitted on03 February 201411 April 2014Assignment titleFAR: Financial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsLearning OutcomeLearning outcomeAssessment CriteriaIn this assessment you will have the opportunity to present evidence that shows you are able to:Task no.Evidence (Page no)Understand the regulatory framework for financial reporting LO11.1 1.2 1.3 1.4Describe the different users of financial statements and their needs Explain the legal and regulatory influences on financial statements Assess the implications for users1A 1B 1AExplain how different laws/regulations are dealt with by accounting and reporting standards Be able to prepare financial statements from complete or incomplete records 2.1 Prepare financial statements for a variety of businesses from a trial balance, making appropriate adjustments Prepare financial statements from incomplete records Prepare a consolidated balance sheet and profit and loss account for a simple group of11B2ALO22.2 2.32B 2CLO3Be able to present financial information in accepted formats for publication Be able to interpret financial statements3.1 3.2companies 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 Calculate accounting ratios to assess the performance and position of a business Prepare a report incorporating and interpreting accounting ratios, including suitable comparisons3A3B4.1 4.24A 4BLO4Learner declaration I certify that the work submitted for this assignment is my own and research sources are fully acknowledged.Student signature:Date:2In 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 M1 Identify and apply strategies to find appropriate solutions Indicative characteristic/s Contextualisation To achieve M1, you will make effective judgements about information needs of different stakeholders of financial reporting for a range of business organizations, their implications for the users and their further use in interpreting the results and performance of the relevant companies. You are strongly advised to take the example of a UK organization/company to illustrate your analysis. (All tasks) To achieve M2, you will need to use suitable techniques to explore the external influence on business reporting from a range of stakeholders while you need to demonstrate the differential contents and information released by those organizations through their financial statements. You also need to explain critically how the financial reporting process works in particular context and its influence over the wider community of investors throughout the world. Again you are strongly advised to take one or more (where appropriate) UK based company(s) to show the impact of these factors on rational decision making by stakeholders. (All tasks) To achieve M3 the work you present will need to be in an acceptable format and will use business terminology accurately. (All tasks)Effective judgements have been made.An effective approach to study and research has been applied.M2 Select / design and apply appropriate methods / techniquesAppropriate learning methods/techniques have been applied.M3 Present and communicate appropriate findingsCommunication is appropriate for familiar and unfamiliar audiences and appropriate media have been used.3D1 Use critical reflection to evaluate own work and justify valid conclusions Conclusions have been arrived at through synthesis of ideas and have been justified.Realistic improvements have been proposed against defined characteristics for success.To achieve D1 you will need to draw conclusions that links between the factors influencing the financial reporting for a number of different business organizations in a global setting such as a UK organization trading with a foreign company and how it caters to the information needs of all stakeholders. You also need to demonstrate the influence of regulators and other players in the design of accounting standards. You will provide an evaluation, which will suggest how this knowledge might be of value to senior staff to help improve the financial reporting at your selected company. (All tasks) To achieve D2 you will have demonstrated an effective approach to independent research and study and will have met the deadline to submit the tasks and achieve the unit assessment criteria. (All tasks)D2 Take responsibility for managing and organising activities D3 Demonstrate convergent /lateral / creative thinkingActivities have been managed.4Assignment briefUnit number and title Qualification Start date Deadline/Hand-in date AssessorUnit 10: Financial Accounting and Reporting Pearson BTEC Level 5 HND Diploma in Business03 February 2014Assignment title Purpose of this assignmentFinancial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsIn this unit learners will prepare financial statements for different types of business, complying with relevant legal and regulatory provisions and the basic principles of group accounts. Learners will also develop tools for the interpretation of financial statements. It is essential for the success of any business that it has good financial control and record keeping. Lack of effective control, planning and recording can ultimately lead to poor financial results. Owners and managers need to be able to recognize the indications of potential difficulties and take remedial action when required. The unit considers the current regulations governing financial reporting, the formats of financial statements and the purpose of these statements for different users. Learners will use records to complete financial statements. They will consider various categories of business income and expenditure and use cash flow forecasts, monitoring and adjusting for the effective management of cash flow. They will measure financial performance using a profit and loss account and balance sheet and analyse the profitability, liquidity and efficiency of a business through the application of ratio analysis.Scenario You have recently assumed the position of a junior reporting accountant at a UK based company that grows locally and with this performance and incentive the company aspires to expand in the international markets. You are aware that there are a number of regulations that you have to comply while different stakeholders demand the financial information in a way to help them make efficient and rational decisions. Depending on the organization (where) you are positioned, the company management needs to comply with the Companies Act 2006, the UK Corporate Governance Code 2010 and other rules pronounced by the Department of Trade and Industry (DTI) and relevant government agencies. You are one of the team members responsible to deliver the financial results and therefore you are exposed to the following set of problems: Depending on the organization you have assumed the position of a junior reporting accountant, as stated in the scenario, attempt the following questions: Task 1A (LO1: 1.1, 1.3, and M1, M2, D1)5Q1.1: Why do the stakeholders of your organization need different range of information through financial reporting? Identify the stakeholders and explain what types of financial and non-financial information each of them are interested in? [AC1.1] Q1.2: How do the regulatory agencies try to address the needs of different users of financial statements? Discuss the implications of different regulatory agencies regarding the corporate financial reporting towards the users of financial statements. [AC1.3] Task 1B (LO1: 1.2, 1.4, and M2, D2) Q1.3: Explain why financial reporting as a discipline needs to be regulated? Discuss major regulatory bodies and their influence on the UK, European and global financial reporting. [AC1.2] Q1.4: (a) What are the provisions of financial reporting for the companies incorporated in the UK as per Companies Act 2006? (b) Discuss the main provisions of Companies Act 2006 pertaining to the profit and loss (Income statement) account, balance sheet and disclosures. (c) The 8th European Directives prescribe for regulations of the financial reporting in the EU region including UK. Discuss some provisions of the Directives relating to the financial accounting and reporting. [AC1.4] Task 2A (LO2: 2.1 and M2, D2) Q2.1: The trial balance of one of the sister concerns of your organization contains the following accounts at December 31, 2013, at the end of the company’s fiscal year covering the last 12 months. Trial Balance December 31, 2013 Debit(£) 300,000 59,000 120,000 416,000 50,000 50,000 Credit(£)Cash Accounts Receivable Store Supplies Merchandise Inventory Land Store Equipment Accumulated Depreciation-Store Eq. Accounts Payable Notes Payable Capital Drawings Sales Interest Revenue Sales Returns Sales Discounts Cost of Goods Sold Store Salaries Expense Advertisement Expense Freight out Utilities Expense68,000 50,000 60,000 800,000 10,000 480,000 3,000 12,000 8,000 300,000 25,000 16,000 7,000 17,000Insurance Expense Salaries Expense Total2,000 9,000 1,401,0001,401,000Adjustment data: Depreciation is £8,000 on store equipment (consider it as a selling expense). Store supplies on hand totalled £100,000. Salaries are paid only for 9 months. Assume the salaries incurred are equal for each month. Utilities are £1,500 per month. Advertisement expenses are paid for 2 years where the agency has signed to promote the next year as well. 6. The annual interest revenue for the company is £5,000. 7. Management has recently decided to keep a bad debt provision for 5% on the final balance of accounts receivables. Other data: 1. Salaries expense, utilities expense, and insurance expense are 100% administrative. 2. Store supplies expense and freight out are considered as selling expense. 1. 2. 3. 4. 5. Instructions Prepare an income statement for the year and a balance sheet at December 31, 20013. [AC2.1] Q2.2: The following information is available about the transactions of your company, a limited liability enterprise, for the year ended 31 December 2013. [Figures in £000] Depreciation 880Cash paid for expenses 2270 Increase in inventories? 370 Cash paid to employees 2820 Decrease in receivables 280 ? ? Cash paid to suppliers 4940 Decrease in payables 390 Cash received from customers 12800 Net profit before taxation* 2370 *Your company has no interest payable or investment income. Required: Compute the net cash flow from operating activities for the company’s cash flow statement for the year ended 31 December 2013 using the indirect method. [AC2.1]Task 2B (LO2: 2.2 and M3, D3) Q2.3: Your company has been running a sole distributorship of Ikea Tiles in East London area. Under an agreement with the manufacturers, your company purchases the Ikea tiles at a trade discount of 20% off list price and annually in May receives an agency commission of 1% of all the purchases for the year ended on the previous 31 March. For several years, your company has obtained a gross profit of 40% on all sales. In a burglary in January 2011, your company lost inventory costing £4,000 as well as many of its accounting7records. However, after careful investigations, the following information has been obtained covering the year-ended ? 31 March 2011. (a) Assets and liabilities at 31 March 2010 were as follows: Buildings At cost? Accumulated depreciation At cost? Accumulated depreciation £ 10,000 6,000 5,000 2,000 3,200 6,300 300 120 4,310 4,200 230Motor vehicleInventory: at cost Trade accounts receivable (for sales) Agency commission due Prepayments (trade expenses) Balance at bank Trade accounts payable Accrued vehicle expenses(b) Your company has been notified that it will receive an agency commission of £440 on 1 May 2011. (c) Inventory, at cost, at 31 March 2011 was valued at an amount £3,000 more than a year previously. (d) In October 2010 inventory costing £1,000 was damaged by dampness and had to be scrapped as worthless. (e) Trade accounts payable at 31 March 2011 related entirely to goods received whose list prices totaled £9,500. (f) Discounts allowed amounted to £1,620 whilst discounts received were £1,200. (g) Trade expenses prepaid at 31 March 2011 totaled £80. (h) Vehicle expenses for the year ended 31 March 2011 amounted to £7,020. (i) Trade accounts receivable (for sales) at 31 March 2011 were £6,700. (j) All receipts are passed through the bank account. (k) Depreciation is charged annually at the following rates.8Buildings Motor vehicle5% on cost20% on cost (l) Commissions received are paid directly to the bank account. (m) In addition to the payments for purchases, the bank payments were: Vehicle expenses Drawings? Trade expenses £6,720 4,300 7,360Unfortunately your company was not insured against loss of inventory owing to burglary or damage to inventory caused by damp. Required Prepare the income statement for the year ended 31 March 2011 and a statement of financial position on that date. [AC2.2] Task 2C (LO2: 2.3 and M3, D3) Q2.4: On 1 April 2010, Your Company acquired 75% of the ordinary share capital of Orset Limited for £180,000. At that date the balance sheet of Orset Limited was as follows: Sundry net assets £160,000 Share capital [100,000 Ordinary shares of £1 each] Accumulated profit £100,00060,000 £160,000At 31 March 2013, the balance sheets of the two companies were as follows Your Company Sundry net assets Investment in Orset £560,000 180,000 £740,000 Share capital [Shares of £1 each] Accumulated profit 500,000 240,000 Orset Limited £230,000 £230,000 100,000 130,000 £230,000£740,000 Goodwill arising on consolidation is to be amortized over five years.Required: Prepare the consolidated balance sheet of Your Company and its subsidiary as at 319March 2013 [AC2.3]Task 3A (LO3: 3.1 and M1, D1) Q3.1: Assuming that your company being one of the prestigious FTSE100 members on the London Stock Exchange requires to cater financial information to a wide range of users (stakeholders) including the owners (share holders), lenders (debenture holders and bankers), suppliers, employees, customers, government and the society as a whole. Explain how the information needs of different user groups vary. [AC3.1] Task 3B (LO3: 3.2 and M2, D2) Q3.2: What procedures should a listed company follow for publishing its financial statements in the annual report? Referring to the International Financial Reporting Standards (IFRS), discuss the steps of publishing the financials for your company. [AC3.2] Q3.3: Assume that your company plans to enter the US market at the start of 2015. Discuss the differential accounting standards and reporting regulations that your company would require to comply with. [AC3.2] Q3.4: You and your friend, Brador, have been in partnership for several years, compiling your financial statements for the year ending 31 March and sharing profits in the ratio 60:40 after allowing for interest on capital account balances at 5% per year. Extracts from their trial balance at 31 March 2013 are given below: Extracts Capital accounts: You Brador Current accounts: You Brador Drawings: You Brador Office equipment: Cost Accumulated depreciation, 1 April 2012 Notes £ 50,000 50,000 3800 2600 48400 36900 1 48300 12800 Debit Credit10Inventory, 1 April 2012 Trade receivables Allowance for doubtful debts, 1 April 2012 Sales revenue Purchases Rent paid Salaries Insurance Sundry expenses Notes:2 3 315600 68400 3800 448700 184600 30000 88000 4000 394004 5(1) Office equipment should be depreciated at 20% per year on the reducing balance basis. (2) Closing inventory amounted to £21,400. (3) Debts of £2,400 are to be written off, and the allowance for doubtful debts is to be adjusted to 5% of trade receivables. (4) Rent paid £30,000 is the amount for the nine months to 31 December 2012. From that date the rent was increased by 10%. (5) Insurance paid in advance amounted to £1,500. Required: (a) Prepare the partnership’s income statement and a statement showing the division of profit among the ? partners for the year ended 31 March 2013. (b) Write up the partners’ current accounts for the year ended 31 March 2013. [AC3.2] Task 4A (LO4: 4.1 and M2, D2) The extracts from actual financial statements of your company for the year 2012 and 2013 are presented below. The budget committee has also forecasted the 2014 financial statement. Find out company position using the ratios suggested and compare against the industry average and finally put your remarks on your company’s performance and suggest whe re there is a potential to improve on the current position. Balance Sheets as of 31st December 2012, 2013 and forecasted 2014 Balance Sheet: Assets: Cash and equivalents Short-term investments Account receivable Inventories Total current assets Gross Fixed Assets Less Accumulated Dep. Net Fixed Assets 2012 Actual £90000 486000 3512000 7152000 £11240000 4910000 1462000 3448000112013 Actual £72820 450000 6321600 12873600 £19268020 12029500 2631600 93979002014 Forecast £140000 716320 8780000 17164800 £26801120 11971600 3801200 8170400Total Assets Liabilities and Equity: Account payable Notes payable Accruals Total current liabilities Long term bonds Total debt Common Stock Retained earnings Total common Equity Total liabilities and equity£14688000 1456000 2000000 1360000 4816000 3234320 8050320 4600000 2037680 6637680 £14688000£28665920 5241600 7200000 4896000 17337600 10000000 27337600 4600000 (3271680) 1328320 £28665920£34971520 4368000 6000000 4080000 14448000 5000000 19448000 16809360 (1285840) 15523520 £34971520Income Statements for the years ended 31st December 2012, 2013 and forecasted 2014 Income Statement: Net sale Cost of goods sold Other expenses Depreciation Total operating Cost EBIT Less interest Earnings before taxes (EBT) Taxes 40% Net Income EPS DPS Book Value per share Market price per share 2012 £34320000 28640000 3400000 $189000 32229000 2091000 625000 1466000 586400 879600 0.88 0.22 60.638 80.210 2013 £58344000 57280000 6800000 1169600 65249600 (6905600) 1760000 (8665600) (53466240) (5199360) (5.199) 0.11 61.328 75.259 2014 £70356000 61000000 3129600 1200000 65329600 5026400 800000 4226400 1690560 2535840 1.014 0.22 60.209 84.652Using the financial information given and your own calculations incorporated into the following template, write a report to the CEO interpreting the company’s position to the industry average: Management of liquidity or short term solvency: 201 201 Ind Required Ratio: 0 2011 2 Avg Remarks Current Ratio 2.7 Quick Ratio 1.0 (Current ratio = Total current assets ÷ Total current liability) [Quick ratio = (Total current assets – inventory) ÷ (Total current liability – bank overdraft)] Required time ratio: 1. Average collection period 2. Account 201 0 201 2 Ind Avg 32 day 11.4122011Remarksreceivable ratio [Average collection period = (receivable × 365) ÷ sales] [Account receivable turnover = Annual sales ÷ A/C receivable] Assets management ratio : Required ratio : 2010 Remarks 1. Total assets turnover ratio 2.5 2. Fixed assets turnover ratio 2.5 3. Inventory turnover ratio 6.1 [Total assets turnover ratio = Annual sales ÷ Total assets] [Fixed assets turnover ratio = annual sales ÷ fixed assets] [Inventory turnover = (Cost of good sold ÷ inventory)] Assessment of profitability or activities ratio : Ind Required ratio: 2010 2011 2012 Avg Remarks 1. Gross profit margin ratio 15% 2. Net profit margin ratio 5% Gross profit margin = (Gross profit ÷ Total sales) × 100 Net profit margin = (Net profit ÷ Total sales) × 100 Ind Avg 201 1 201 2 Ind Avg201020112012Remarks3. Return on assets ratio 9% 4. Return on equity ratio 18% Return on assets = (Net profit ÷ Total Assets) × 100 Or return on assets = Net profit margin ratio × Assets turnover ratio. Return on equity = (Net profit ÷ Total Equity) × 100 [ Equity multiplier = Assets ÷ equity] Or return on equity = Net profit margin ratio × Assets turnover ratio × (assets ÷ equity) Debt Management Ratio: Required ratio: 2010 2011 2012 Ind Avg13Remarks1. Debt ratio 50% [Debt ratio = (Total liabilities ÷ Total assets) × 100] Ind 2010 2011 2012 Avg 2. Debt-Equity ratio 1.00 Debt-equity ratio = Total debt ÷ Total equity Ind Required ratio : 2010 2011 2012 Avg 3. Time interest earned ratio 6 [Time interest earned ratio = EBIT ÷ Annual interest expense] Assessment of Market Value Ind Required ratio: 2010 2011 2012 Avg 1. Price to earning ratio 14.2 2. Market to book value ratio 2.9 Price earning ratio = Price of stock ÷ earning per share. Market to book value ratio = Market price of stock ÷ book valueRemarksRemarksRemarksTask 4B (LO4: 4.2 and M3, D3) Scenario: You have been asked by your CFO to assess the performance of two companies listed on the London Stock Exchange (LSE) within a particular industry to examine which one of them would be the most suitable for investment in coming years. After an informal technical analysis, you decided to assess Next Plc and Burberry Plc as your future investment potentials. The 2013 annual reports of the companies can be downloaded from the links below: http://www.nextplc.co.uk/~/media/Files/N/Next-PLC/pdfs/latest-news/2013/ar2013.pdf http://www.burberryplc.com/investor_relations/annual_reports/financial_review?WT.ac=Annu al+Reports However, you can choose your pair of companies but make sure they are from the same industry and for the same financial year so that you can have a more insightful comparative analysis once you complete your ratio analysis with all the ratios listed above for 2012 and 2013. Please note that it is essential to interpret the results of each ratio highlighting the change in direction between the two years and which company is better or worse when considering a future investment.Materials for reading and consulting: a. Resources: 1. MS Powerpoint slides handed in during the sessions. 2. Other problem sheets and hard copy documents distributed in the class. b. Books:14Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2011). Principles of Accounting. 11th Ed. New York: Wiley. Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2011). Intermediate Accounting. 13th Ed. New York: Wiley. CIMA. Financial Accounting and Performance Evaluation. 2004 Word Count Learners must state the exact number of words they have used on the assignment submission form and comply with the word count of 3,500 with a margin of +/- 10%. However, please note that the calculations, tables, bibliography and appendices are excluded from word counts. Plagiarism and collusion Any act of plagiarism and collusion will be seriously dealt with according to the Edexcel plagiarism policy. Basically, plagiarism occurs when excerpts, ideas, passages taken from other sources are not properly acknowledged and referenced both in the body of the text and in reference. It is the learner’s responsibility to ensure that they understand all Edexcel guidelines with regards to plagiarism and what Edexcel considers to be an academic offence. Collusion can be understood as the submission of works produced in collaboration for an assignment based on the assessment of individual work. It is a severe academic offence to share a learner’s work with others who submit a part or the whole of it as their own work. The College has mechanisms in place to detect plagiarism and collusion. Learners must sign the declaration on the front of the assignment submission form.Submission Guidance and Policies for Edexcel Students This is an individual assignment. All parts of the assignment are required to be presented in a professional format, MS Word processed with full citation and references following Harvard system. Brit College strongly advises the learners to follow the guidance below: ? Brit College prefers Times New Roman 12 or Arial 11 in the body of the text. ? An assignment cover sheet and a receipt must be attached along with each submitted assignment. ? All assignments must have clear headings and sub-headings where necessary. ? Make sure you state the word count on the title page. ? Assignments must be printed in black and white. Late Submission and Resubmission ? Assignments will not be accepted for assessment by lecturers unless an extenuating circumstances form has been filled in and duly authorized by a member of staff. ? Students will receive the feedback form and guidance from the lecturer to improve in the areas of their weaknesses on their first submission. Please note that assignments can be resubmitted only once. A resubmitted assignment will be awarded a failed grade should it not meet the required pass grade marks and results in retaking the module. ? Please note that a resubmitted assignment will earn a maximum pass grade should it sufficiently meet the required criteria. ? A fine may also apply in case of resubmission.15Extensions and Extra-ordinary Circumstances ? Extensions are only granted for documented medical reasons and/or other documented serious interruptions relevant to your ability to study. ? Please note that extensions are not allowed due to your inability to organize your work. ? Should there be any extra-ordinary circumstances, the College should be made aware of this in writing. ? The college preserves the right not to accept or mark the assignment in case you failed to inform it in time.Financial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsAssignment front sheetQualification Unit number and titlePearson BTEC Level 5 HND Diploma in BusinessStudent nameUnit 10: Financial Accounting and Reporting (Ref: F/601/0864)Assessor nameMd Shahidul IslamDate issued Completion date Submitted on03 February 201411 April 2014Assignment titleFAR: Financial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsLearning OutcomeLearning outcomeAssessment CriteriaIn this assessment you will have the opportunity to present evidence that shows you are able to:Task no.Evidence (Page no)Understand the regulatory framework for financial reporting LO11.1 1.2 1.3 1.4Describe the different users of financial statements and their needs Explain the legal and regulatory influences on financial statements Assess the implications for users1A 1B 1AExplain how different laws/regulations are dealt with by accounting and reporting standards Be able to prepare financial statements from complete or incomplete records 2.1 Prepare financial statements for a variety of businesses from a trial balance, making appropriate adjustments Prepare financial statements from incomplete records Prepare a consolidated balance sheet and profit and loss account for a simple group of11B2ALO22.2 2.32B 2CLO3Be able to present financial information in accepted formats for publication Be able to interpret financial statements3.1 3.2companies 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 Calculate accounting ratios to assess the performance and position of a business Prepare a report incorporating and interpreting accounting ratios, including suitable comparisons3A3B4.1 4.24A 4BLO4Learner declaration I certify that the work submitted for this assignment is my own and research sources are fully acknowledged.Student signature:Date:2In 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 M1 Identify and apply strategies to find appropriate solutions Indicative characteristic/s Contextualisation To achieve M1, you will make effective judgements about information needs of different stakeholders of financial reporting for a range of business organizations, their implications for the users and their further use in interpreting the results and performance of the relevant companies. You are strongly advised to take the example of a UK organization/company to illustrate your analysis. (All tasks) To achieve M2, you will need to use suitable techniques to explore the external influence on business reporting from a range of stakeholders while you need to demonstrate the differential contents and information released by those organizations through their financial statements. You also need to explain critically how the financial reporting process works in particular context and its influence over the wider community of investors throughout the world. Again you are strongly advised to take one or more (where appropriate) UK based company(s) to show the impact of these factors on rational decision making by stakeholders. (All tasks) To achieve M3 the work you present will need to be in an acceptable format and will use business terminology accurately. (All tasks)Effective judgements have been made.An effective approach to study and research has been applied.M2 Select / design and apply appropriate methods / techniquesAppropriate learning methods/techniques have been applied.M3 Present and communicate appropriate findingsCommunication is appropriate for familiar and unfamiliar audiences and appropriate media have been used.3D1 Use critical reflection to evaluate own work and justify valid conclusions Conclusions have been arrived at through synthesis of ideas and have been justified.Realistic improvements have been proposed against defined characteristics for success.To achieve D1 you will need to draw conclusions that links between the factors influencing the financial reporting for a number of different business organizations in a global setting such as a UK organization trading with a foreign company and how it caters to the information needs of all stakeholders. You also need to demonstrate the influence of regulators and other players in the design of accounting standards. You will provide an evaluation, which will suggest how this knowledge might be of value to senior staff to help improve the financial reporting at your selected company. (All tasks) To achieve D2 you will have demonstrated an effective approach to independent research and study and will have met the deadline to submit the tasks and achieve the unit assessment criteria. (All tasks)D2 Take responsibility for managing and organising activities D3 Demonstrate convergent /lateral / creative thinkingActivities have been managed.4Assignment briefUnit number and title Qualification Start date Deadline/Hand-in date AssessorUnit 10: Financial Accounting and Reporting Pearson BTEC Level 5 HND Diploma in Business03 February 2014Assignment title Purpose of this assignmentFinancial Reporting at a UK based Company: Compliance with Accounting Regulations while Satisfying Stakeholders’ Information NeedsIn this unit learners will prepare financial statements for different types of business, complying with relevant legal and regulatory provisions and the basic principles of group accounts. Learners will also develop tools for the interpretation of financial statements. It is essential for the success of any business that it has good financial control and record keeping. Lack of effective control, planning and recording can ultimately lead to poor financial results. Owners and managers need to be able to recognize the indications of potential difficulties and take remedial action when required. The unit considers the current regulations governing financial reporting, the formats of financial statements and the purpose of these statements for different users. Learners will use records to complete financial statements. They will consider various categories of business income and expenditure and use cash flow forecasts, monitoring and adjusting for the effective management of cash flow. They will measure financial performance using a profit and loss account and balance sheet and analyse the profitability, liquidity and efficiency of a business through the application of ratio analysis.Scenario You have recently assumed the position of a junior reporting accountant at a UK based company that grows locally and with this performance and incentive the company aspires to expand in the international markets. You are aware that there are a number of regulations that you have to comply while different stakeholders demand the financial information in a way to help them make efficient and rational decisions. Depending on the organization (where) you are positioned, the company management needs to comply with the Companies Act 2006, the UK Corporate Governance Code 2010 and other rules pronounced by the Department of Trade and Industry (DTI) and relevant government agencies. You are one of the team members responsible to deliver the financial results and therefore you are exposed to the following set of problems: Depending on the organization you have assumed the position of a junior reporting accountant, as stated in the scenario, attempt the following questions: Task 1A (LO1: 1.1, 1.3, and M1, M2, D1)5Q1.1: Why do the stakeholders of your organization need different range of information through financial reporting? Identify the stakeholders and explain what types of financial and non-financial information each of them are interested in? [AC1.1] Q1.2: How do the regulatory agencies try to address the needs of different users of financial statements? Discuss the implications of different regulatory agencies regarding the corporate financial reporting towards the users of financial statements. [AC1.3] Task 1B (LO1: 1.2, 1.4, and M2, D2) Q1.3: Explain why financial reporting as a discipline needs to be regulated? Discuss major regulatory bodies and their influence on the UK, European and global financial reporting. [AC1.2] Q1.4: (a) What are the provisions of financial reporting for the companies incorporated in the UK as per Companies Act 2006? (b) Discuss the main provisions of Companies Act 2006 pertaining to the profit and loss (Income statement) account, balance sheet and disclosures. (c) The 8th European Directives prescribe for regulations of the financial reporting in the EU region including UK. Discuss some provisions of the Directives relating to the financial accounting and reporting. [AC1.4] Task 2A (LO2: 2.1 and M2, D2) Q2.1: The trial balance of one of the sister concerns of your organization contains the following accounts at December 31, 2013, at the end of the company’s fiscal year covering the last 12 months. Trial Balance December 31, 2013 Debit(£) 300,000 59,000 120,000 416,000 50,000 50,000 Credit(£)Cash Accounts Receivable Store Supplies Merchandise Inventory Land Store Equipment Accumulated Depreciation-Store Eq. Accounts Payable Notes Payable Capital Drawings Sales Interest Revenue Sales Returns Sales Discounts Cost of Goods Sold Store Salaries Expense Advertisement Expense Freight out Utilities Expense68,000 50,000 60,000 800,000 10,000 480,000 3,000 12,000 8,000 300,000 25,000 16,000 7,000 17,000Insurance Expense Salaries Expense Total2,000 9,000 1,401,0001,401,000Adjustment data: Depreciation is £8,000 on store equipment (consider it as a selling expense). Store supplies on hand totalled £100,000. Salaries are paid only for 9 months. Assume the salaries incurred are equal for each month. Utilities are £1,500 per month. Advertisement expenses are paid for 2 years where the agency has signed to promote the next year as well. 6. The annual interest revenue for the company is £5,000. 7. Management has recently decided to keep a bad debt provision for 5% on the final balance of accounts receivables. Other data: 1. Salaries expense, utilities expense, and insurance expense are 100% administrative. 2. Store supplies expense and freight out are considered as selling expense. 1. 2. 3. 4. 5. Instructions Prepare an income statement for the year and a balance sheet at December 31, 20013. [AC2.1] Q2.2: The following information is available about the transactions of your company, a limited liability enterprise, for the year ended 31 December 2013. [Figures in £000] Depreciation 880Cash paid for expenses 2270 Increase in inventories? 370 Cash paid to employees 2820 Decrease in receivables 280 ? ? Cash paid to suppliers 4940 Decrease in payables 390 Cash received from customers 12800 Net profit before taxation* 2370 *Your company has no interest payable or investment income. Required: Compute the net cash flow from operating activities for the company’s cash flow statement for the year ended 31 December 2013 using the indirect method. [AC2.1]Task 2B (LO2: 2.2 and M3, D3) Q2.3: Your company has been running a sole distributorship of Ikea Tiles in East London area. Under an agreement with the manufacturers, your company purchases the Ikea tiles at a trade discount of 20% off list price and annually in May receives an agency commission of 1% of all the purchases for the year ended on the previous 31 March. For several years, your company has obtained a gross profit of 40% on all sales. In a burglary in January 2011, your company lost inventory costing £4,000 as well as many of its accounting7records. However, after careful investigations, the following information has been obtained covering the year-ended ? 31 March 2011. (a) Assets and liabilities at 31 March 2010 were as follows: Buildings At cost? Accumulated depreciation At cost? Accumulated depreciation £ 10,000 6,000 5,000 2,000 3,200 6,300 300 120 4,310 4,200 230Motor vehicleInventory: at cost Trade accounts receivable (for sales) Agency commission due Prepayments (trade expenses) Balance at bank Trade accounts payable Accrued vehicle expenses(b) Your company has been notified that it will receive an agency commission of £440 on 1 May 2011. (c) Inventory, at cost, at 31 March 2011 was valued at an amount £3,000 more than a year previously. (d) In October 2010 inventory costing £1,000 was damaged by dampness and had to be scrapped as worthless. (e) Trade accounts payable at 31 March 2011 related entirely to goods received whose list prices totaled £9,500. (f) Discounts allowed amounted to £1,620 whilst discounts received were £1,200. (g) Trade expenses prepaid at 31 March 2011 totaled £80. (h) Vehicle expenses for the year ended 31 March 2011 amounted to £7,020. (i) Trade accounts receivable (for sales) at 31 March 2011 were £6,700. (j) All receipts are passed through the bank account. (k) Depreciation is charged annually at the following rates.8Buildings Motor vehicle5% on cost20% on cost (l) Commissions received are paid directly to the bank account. (m) In addition to the payments for purchases, the bank payments were: Vehicle expenses Drawings? Trade expenses £6,720 4,300 7,360Unfortunately your company was not insured against loss of inventory owing to burglary or damage to inventory caused by damp. Required Prepare the income statement for the year ended 31 March 2011 and a statement of financial position on that date. [AC2.2] Task 2C (LO2: 2.3 and M3, D3) Q2.4: On 1 April 2010, Your Company acquired 75% of the ordinary share capital of Orset Limited for £180,000. At that date the balance sheet of Orset Limited was as follows: Sundry net assets £160,000 Share capital [100,000 Ordinary shares of £1 each] Accumulated profit £100,00060,000 £160,000At 31 March 2013, the balance sheets of the two companies were as follows Your Company Sundry net assets Investment in Orset £560,000 180,000 £740,000 Share capital [Shares of £1 each] Accumulated profit 500,000 240,000 Orset Limited £230,000 £230,000 100,000 130,000 £230,000£740,000 Goodwill arising on consolidation is to be amortized over five years.Required: Prepare the consolidated balance sheet of Your Company and its subsidiary as at 319March 2013 [AC2.3]Task 3A (LO3: 3.1 and M1, D1) Q3.1: Assuming that your company being one of the prestigious FTSE100 members on the London Stock Exchange requires to cater financial information to a wide range of users (stakeholders) including the owners (share holders), lenders (debenture holders and bankers), suppliers, employees, customers, government and the society as a whole. Explain how the information needs of different user groups vary. [AC3.1] Task 3B (LO3: 3.2 and M2, D2) Q3.2: What procedures should a listed company follow for publishing its financial statements in the annual report? Referring to the International Financial Reporting Standards (IFRS), discuss the steps of publishing the financials for your company. [AC3.2] Q3.3: Assume that your company plans to enter the US market at the start of 2015. Discuss the differential accounting standards and reporting regulations that your company would require to comply with. [AC3.2] Q3.4: You and your friend, Brador, have been in partnership for several years, compiling your financial statements for the year ending 31 March and sharing profits in the ratio 60:40 after allowing for interest on capital account balances at 5% per year. Extracts from their trial balance at 31 March 2013 are given below: Extracts Capital accounts: You Brador Current accounts: You Brador Drawings: You Brador Office equipment: Cost Accumulated depreciation, 1 April 2012 Notes £ 50,000 50,000 3800 2600 48400 36900 1 48300 12800 Debit Credit10Inventory, 1 April 2012 Trade receivables Allowance for doubtful debts, 1 April 2012 Sales revenue Purchases Rent paid Salaries Insurance Sundry expenses Notes:2 3 315600 68400 3800 448700 184600 30000 88000 4000 394004 5(1) Office equipment should be depreciated at 20% per year on the reducing balance basis. (2) Closing inventory amounted to £21,400. (3) Debts of £2,400 are to be written off, and the allowance for doubtful debts is to be adjusted to 5% of trade receivables. (4) Rent paid £30,000 is the amount for the nine months to 31 December 2012. From that date the rent was increased by 10%. (5) Insurance paid in advance amounted to £1,500. Required: (a) Prepare the partnership’s income statement and a statement showing the division of profit among the ? partners for the year ended 31 March 2013. (b) Write up the partners’ current accounts for the year ended 31 March 2013. [AC3.2] Task 4A (LO4: 4.1 and M2, D2) The extracts from actual financial statements of your company for the year 2012 and 2013 are presented below. The budget committee has also forecasted the 2014 financial statement. Find out company position using the ratios suggested and compare against the industry average and finally put your remarks on your company’s performance and suggest whe re there is a potential to improve on the current position. Balance Sheets as of 31st December 2012, 2013 and forecasted 2014 Balance Sheet: Assets: Cash and equivalents Short-term investments Account receivable Inventories Total current assets Gross Fixed Assets Less Accumulated Dep. Net Fixed Assets 2012 Actual £90000 486000 3512000 7152000 £11240000 4910000 1462000 3448000112013 Actual £72820 450000 6321600 12873600 £19268020 12029500 2631600 93979002014 Forecast £140000 716320 8780000 17164800 £26801120 11971600 3801200 8170400Total Assets Liabilities and Equity: Account payable Notes payable Accruals Total current liabilities Long term bonds Total debt Common Stock Retained earnings Total common Equity Total liabilities and equity£14688000 1456000 2000000 1360000 4816000 3234320 8050320 4600000 2037680 6637680 £14688000£28665920 5241600 7200000 4896000 17337600 10000000 27337600 4600000 (3271680) 1328320 £28665920£34971520 4368000 6000000 4080000 14448000 5000000 19448000 16809360 (1285840) 15523520 £34971520Income Statements for the years ended 31st December 2012, 2013 and forecasted 2014 Income Statement: Net sale Cost of goods sold Other expenses Depreciation Total operating Cost EBIT Less interest Earnings before taxes (EBT) Taxes 40% Net Income EPS DPS Book Value per share Market price per share 2012 £34320000 28640000 3400000 $189000 32229000 2091000 625000 1466000 586400 879600 0.88 0.22 60.638 80.210 2013 £58344000 57280000 6800000 1169600 65249600 (6905600) 1760000 (8665600) (53466240) (5199360) (5.199) 0.11 61.328 75.259 2014 £70356000 61000000 3129600 1200000 65329600 5026400 800000 4226400 1690560 2535840 1.014 0.22 60.209 84.652Using the financial information given and your own calculations incorporated into the following template, write a report to the CEO interpreting the company’s position to the industry average: Management of liquidity or short term solvency: 201 201 Ind Required Ratio: 0 2011 2 Avg Remarks Current Ratio 2.7 Quick Ratio 1.0 (Current ratio = Total current assets ÷ Total current liability) [Quick ratio = (Total current assets – inventory) ÷ (Total current liability – bank overdraft)] Required time ratio: 1. Average collection period 2. Account 201 0 201 2 Ind Avg 32 day 11.4122011Remarksreceivable ratio [Average collection period = (receivable × 365) ÷ sales] [Account receivable turnover = Annual sales ÷ A/C receivable] Assets management ratio : Required ratio : 2010 Remarks 1. Total assets turnover ratio 2.5 2. Fixed assets turnover ratio 2.5 3. Inventory turnover ratio 6.1 [Total assets turnover ratio = Annual sales ÷ Total assets] [Fixed assets turnover ratio = annual sales ÷ fixed assets] [Inventory turnover = (Cost of good sold ÷ inventory)] Assessment of profitability or activities ratio : Ind Required ratio: 2010 2011 2012 Avg Remarks 1. Gross profit margin ratio 15% 2. Net profit margin ratio 5% Gross profit margin = (Gross profit ÷ Total sales) × 100 Net profit margin = (Net profit ÷ Total sales) × 100 Ind Avg 201 1 201 2 Ind Avg201020112012Remarks3. Return on assets ratio 9% 4. Return on equity ratio 18% Return on assets = (Net profit ÷ Total Assets) × 100 Or return on assets = Net profit margin ratio × Assets turnover ratio. Return on equity = (Net profit ÷ Total Equity) × 100 [ Equity multiplier = Assets ÷ equity] Or return on equity = Net profit margin ratio × Assets turnover ratio × (assets ÷ equity) Debt Management Ratio: Required ratio: 2010 2011 2012 Ind Avg13Remarks1. Debt ratio 50% [Debt ratio = (Total liabilities ÷ Total assets) × 100] Ind 2010 2011 2012 Avg 2. Debt-Equity ratio 1.00 Debt-equity ratio = Total debt ÷ Total equity Ind Required ratio : 2010 2011 2012 Avg 3. Time interest earned ratio 6 [Time interest earned ratio = EBIT ÷ Annual interest expense] Assessment of Market Value Ind Required ratio: 2010 2011 2012 Avg 1. Price to earning ratio 14.2 2. Market to book value ratio 2.9 Price earning ratio = Price of stock ÷ earning per share. Market to book value ratio = Market price of stock ÷ book valueRemarksRemarksRemarksTask 4B (LO4: 4.2 and M3, D3) Scenario: You have been asked by your CFO to assess the performance of two companies listed on the London Stock Exchange (LSE) within a particular industry to examine which one of them would be the most suitable for investment in coming years. After an informal technical analysis, you decided to assess Next Plc and Burberry Plc as your future investment potentials. The 2013 annual reports of the companies can be downloaded from the links below: http://www.nextplc.co.uk/~/media/Files/N/Next-PLC/pdfs/latest-news/2013/ar2013.pdf http://www.burberryplc.com/investor_relations/annual_reports/financial_review?WT.ac=Annu al+Reports However, you can choose your pair of companies but make sure they are from the same industry and for the same financial year so that you can have a more insightful comparative analysis once you complete your ratio analysis with all the ratios listed above for 2012 and 2013. Please note that it is essential to interpret the results of each ratio highlighting the change in direction between the two years and which company is better or worse when considering a future investment.Materials for reading and consulting: a. Resources: 1. MS Powerpoint slides handed in during the sessions. 2. Other problem sheets and hard copy documents distributed in the class. b. Books:14Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2011). Principles of Accounting. 11th Ed. New York: Wiley. Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2011). Intermediate Accounting. 13th Ed. New York: Wiley. CIMA. Financial Accounting and Performance Evaluation. 2004 Word Count Learners must state the exact number of words they have used on the assignment submission form and comply with the word count of 3,500 with a margin of +/- 10%. However, please note that the calculations, tables, bibliography and appendices are excluded from word counts. Plagiarism and collusion Any act of plagiarism and collusion will be seriously dealt with according to the Edexcel plagiarism policy. Basically, plagiarism occurs when excerpts, ideas, passages taken from other sources are not properly acknowledged and referenced both in the body of the text and in reference. It is the learner’s responsibility to ensure that they understand all Edexcel guidelines with regards to plagiarism and what Edexcel considers to be an academic offence. Collusion can be understood as the submission of works produced in collaboration for an assignment based on the assessment of individual work. It is a severe academic offence to share a learner’s work with others who submit a part or the whole of it as their own work. The College has mechanisms in place to detect plagiarism and collusion. Learners must sign the declaration on the front of the assignment submission form.Submission Guidance and Policies for Edexcel Students This is an individual assignment. All parts of the assignment are required to be presented in a professional format, MS Word processed with full citation and references following Harvard system. Brit College strongly advises the learners to follow the guidance below: ? Brit College prefers Times New Roman 12 or Arial 11 in the body of the text. ? An assignment cover sheet and a receipt must be attached along with each submitted assignment. ? All assignments must have clear headings and sub-headings where necessary. ? Make sure you state the word count on the title page. ? Assignments must be printed in black and white. Late Submission and Resubmission ? Assignments will not be accepted for assessment by lecturers unless an extenuating circumstances form has been filled in and duly authorized by a member of staff. ? Students will receive the feedback form and guidance from the lecturer to improve in the areas of their weaknesses on their first submission. Please note that assignments can be resubmitted only once. A resubmitted assignment will be awarded a failed grade should it not meet the required pass grade marks and results in retaking the module. ? Please note that a resubmitted assignment will earn a maximum pass grade should it sufficiently meet the required criteria. ? A fine may also apply in case of resubmission.15Extensions and Extra-ordinary Circumstances ? Extensions are only granted for documented medical reasons and/or other documented serious interruptions relevant to your ability to study. ? Please note that extensions are not allowed due to your inability to organize your work. ? Should there be any extra-ordinary circumstances, the College should be made aware of this in writing. ? The college preserves the right not to accept or mark the assignment in case you failed to inform it in time.

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