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FINANCIAL ACCOUNTINGMODULE HANDBOOKBTEC Higher Nationals in Business (RQF)Module: Unit 10: Financial AccountingProgramme Name: BTEC HNC Level 4Unit Code: A/508/0496Lecturer: ShivaLecture Duration: 3 Hours (Per Session)Assignment Handout Date: 10/02/2021Assignment Deadline Date: 20/05/2021Unit Aim:Balancing the books is at the heart of all business management. The overall aim of this unit is to introducestudents to essential financial accounting principles and techniques which will enable them to recordand prepare basic final accounts. Students will learn how to prepare accounts for sole traders andpartnerships as well as limited companies.LBBA Version 5 -15/01/2020Unit 10: Financial AccountingUnit code: A/508/0496RQF level: 4Credit value: 15 creditsAim:Balancing the books is at the heart of all business management. The overall aim of this unit is to introducestudents to essential financial accounting principles and techniques which will enable them to recordand prepare basic final accounts. Students will learn how to prepare accounts for sole traders andpartnerships as well as limited companies.Unit abstract:On successful completion of this unit students will be able to contribute effectively to the accountingfunction of an organisation, or to understand how to record and prepare basic financial accounts for theirown business. They will have the knowledge and skills required to progress to a higher level of study.Learning Outcomes:By the end of this unit a student will be able to:Record business transactions using double entry book-keeping, and be able to extract a trialbalance.Prepare final accounts for sole-traders, partnerships and limited companies in accordance withappropriate principles, conventions and standards.Perform bank reconciliations to ensure company and bank records are correct.Reconcile control accounts and shift recorded transactions from the suspense accounts to theright accounts.LBBA Version 5 -15/01/2020 10 SessionsTopicTeachingTechnologySession 1LO1 Record business transactions using doublePower Pointentry book-keeping, and be able to extract a trialPresentationbalanceGroup DiscussionClass activityIntroduction to Financial Accounting.QuestionsNeed for Accounting. Development of Accounting as aprofession.Contribution of Accounting to the development ofbusinesses in the last century.Differences in national accounting systems.Efforts to harmonize the diverse practices.Session 2Recap last week notes and check with new students onPower Pointconcerns.PresentationGroup DiscussionBook-Keeping principles, Books of Prime EntryClass activityPrinciple of Double entryQuestionRecording of simple transactions.Session 3Recap last week notes. Books of Double Entry.Power PointPresentationDivision of LedgerGroup DiscussionClass activityTrial BalanceQuestionPreparation of Trial BalanceSession 4LO2 Prepare final accounts for sole-traders,Power Pointpartnerships and limited companies in accordancePresentationwith appropriate principles, conventions andGroup DiscussionstandardsClass activityQuestionFinal Accounts adjustments.Preparation of Statement of Profit or Loss for a SoleTraderPracticing questionsFeedback on Task 1. Lecture SequenceLBBA Version 5 -15/01/2020 11 Session 5Recap last week notes.Power PointPresentationPreparation of Statement of Financial Position for a SoleGroup DiscussionTrader.Class activityPracticing Questions.QuestionSession 6Introduction to limited company accountsPower PointPresentationAccounting Standards – Purpose and advantages of usingGroup DiscussionthemClass activityIntroduction to new terminology.QuestionPreparation of Statement of Profit or Loss for a limitedliability company.Practicing questionsSession 7Recap of last week lecture.Power PointPresentationPreparation of Statement of Financial Position for aGroup Discussionlimited company.Class activityIntroduction to Ratio AnalysisQuestionSession 8LO3 Perform bank reconciliations toPower Pointensure company and bank records arePresentationcorrectGroup DiscussionClass activityIntroduction to Bank ReconciliationQuestionExplaining the need for bank reconciliation.Discussing the parties interested in the bankreconciliation.Learning the process of reconciling the cashbook (bank A/c) balance with the balance inthe bank statement.Feedback on Task 2Session 9LO4 Reconcile control accounts and shiftIndividualrecorded transactions from the suspenseDiscussionaccounts to the right accounts.QuestionIntroducing control accounts.Debtors Control account andCreditors Control account.Using Control accounts as part of the Double EntrySystem and outside the Double Entry system. LBBA Version 5 -15/01/2020 12 Feedback on Task 3Session 10Recap of last week topic.IndividualDiscussionSuspense AccountQuestionPracticing questions on Control accounts and SuspenseaccountsShifting recorded balances from the suspense account tothe right accounts.Helping students who joined late on assignment tasks 1and 2. LBBA Version 5 -15/01/2020 13 ASSIGNMENT BRIEFAssessors NameInternal VerifierSHIVAProgram TitleUnit No & TitleUnit CodeEdexcel BTEC Level 5HND BM (RQF)Unit 10: FinancialAccountingA/508/0496Assignment TitleFinancial AccountingHand Out DateSubmission Deadline10/02/202120/05/2021 LBBA Version 5 -15/01/2020 14 Essential Content (Key Words)EvidenceLO1 Record business transactions using double entry bookkeeping, and be able to extract a trial balanceBusiness transactions:Giving consideration to the types of business transactions (sales,purchases, receipts and payments) and the regulations which apply tofinancial accounting.Produce Report(recommendedDouble entry book-keeping:Double entry recording in sales, purchases and cash book beforeposting to the ledger accounts.Manual and electronic systems will be introduced and how, why andwhen these are used.Effectively recording debits and credits; regulations that apply tofinancial accounting.word limit is750 -1000words)Trial balance:Understanding how the trial balance is produced and its role in theidentification and rectification of errors; the components of a trialbalance and their importance will be considered.LO2 Prepare final accounts for sole-traders, partnerships andlimited companies in accordance with appropriate principles,conventions and standardsFinancial reports and financial statements:What is the difference between the two?ProduceHow, why and when are each one produced?Different types of financial statements and what they cover.Adjustments required for accruals, prepayments, bad debts, etc.CALCULATIONSTypes of accounts:Preparing final accounts e.g. for sole-traders, partnerships or limitedcompanies.Principles and conventions:Understanding accounting rules and principles.Understanding the concepts and conventions of consistency,materiality and full disclosure.LO3 Perform bank reconciliations to ensure company andbank records are correct LBBA Version 5 -15/01/2020 15LBBA Version 5 -15/01/2020 16 Bank reconciliation:What is meant by bank reconciliation and why is it required? How isthis achieved? Why is this necessary?Who would be interested in the outcome of a reconciliation?The process of reconciliation:Ensuring that all entries relating to a particular period are correctlyentered in the ledger system to support the preparation of the profitand loss account and balance sheet.Using tools and techniques to check the general ledger accounts andbalances against liquid holdings and cash reserves.Differences:Identify differences between the balance in the accounting book andin the bank statement.Identifying variances through a bank reconciliation.Ensuring the same entry for every debit and credit entry, and that thebalance for each account is calculated and entered correctly.Produce Report(400-500words)CALCULATIONSLO4 Reconcile control accounts and shift recordedtransactions from the suspense accounts to the rightaccountsControl accounts:What are they?ProduceHow and why are they used?How do they support effective financial management?CALCULATIONSSuspense accounts:How do they differ from control accounts?Why are they required?Reconciling these accounts:Why is reconciliation required?How is this conducted?The role of debtors and creditors accounts. The recommended word limit and evidence required for each task is found in the evidence box, youwill not be penalized for exceeding the total word count.All written presentations must be included with reader notes for power point slides and leaflets/brochures.All reports must be written in a formal business style. You are required to make use of headings,paragraphs and subsections as appropriate and all work must be supported with research andreferenced using Harvard referencing system.LBBA Version 5 -15/01/2020 17TASKSTASK 1 (LO1): Record business transactions using double entry book-keeping, and be ableto extract a trial balanceScenario 1:Catherine Horton is trading as a sole trader.You are required to record the accounting information and the business transactions in her book usingdouble-entry principles in the books of Catherine.At 31st of March 2020, the following balances were provided: ASSETS£Premises340000Van51250Fixtures8100Inventory63900RECEIVABLESP Mullen1400F Lane3100Cash at bank (favorable)62400Cash in hand5600LIABILITIESPayablesS. Hood2150J. Brown4600 Task 1.1:You are required to prepare a trial balance at 31st March 2020 and calculate the Owner’s Capital at31st March 2020 using the balancing figure.Task 1.2:Continuing from information provided in the Trial Balance, you should record the following businesstransactions for April 2020 given below in Catherine’s books: I.Apply the double entry system recording the transactions in the accounts within the relevantledgers.Use the balance off rule to close each account and produce the trial balance at 30th April 2020to check the arithmetical accuracy of the double entry system.Analyse the transactions before recording them in the accounts to show the progression fromthe trial balance at 31st March 2020 to the trial balance at 30th April 2020.II.III. Task 1.3:Apply the trial balance figures and show in which statement of financial accounts they will end up.Transactions for the month of April 2020 are given below.LBBA Version 5 -15/01/2020 18 1Paid storage costs by cheque4002Goods Bought on credit from:S. Hood1400D. Main2000R. Foot16003Goods sold on credit:T. Cole1650F. Syme2000J. Allen900F. Lane7504Paid motor expenses in cash4707Cash Drawings by the owner for her personal use15009Goods sold on credit:T. Cole650J. Allen130014Bought another Van on credit from Abel Motors2850016The following receivables paid their balances by chequesP. Mullen1400F. Lane3100F. Syme200022Goods Bought on credit from:D. Main180024Catherine paid the balances owed to following payableS. Hood2150J. Brown4600R. Foot140027Salaries paid by cheque480030Paid Business rates by cheque132031Paid Abel Motors ltd by cheque28500 Produce Report (Recommended word limit is 750 -1000 words)TASK 2 (LO2): Prepare final accounts for sole-traders, partnerships and limited companiesin accordance with appropriate principles, conventions and standardsTask 2.1:Describe the financial accounting statements prepared by a business entity. Discuss the type ofinformation presented through each statement. (In this part compare the essential features of eachstatement, to analyse the differences between them in terms of purpose, structure and content).Task 2.2: use the information given below in the Trial Balance and notes to answer thistask.Prepare the Statement of Profit or Loss in accordance with International Accounting Standards (IAS)for Italian Wines Ltd for year ended 31 March 2020.LBBA Version 5 -15/01/2020 19Task 2.3: use the information given below in the Trial Balance and notes to answer thistask.Prepare the Statement of Financial Position in accordance with International Accounting Standards(IAS) for Italian Wines Ltd at 31 March 2020.Task 2.4:Calculate the following ratios from your answers in tasks 2.2 and 2.3 above.a) Return on Capital Employedb) Gross Profit Marginc) Net Profit Margind) Debtors (receivables) Turnover periode) Gearing RatioUse the following information to answer tasks 2.2 and 2.3.The trial balance of Italian Wines Ltd at 31 March 2020 is given below. DR£CR£Sales Revenue198000Purchases102000Inventory 1 April 201912000Salaries and wages5500Administrative expenses24500Distribution expenses14000Property at valuation300000Property accumulated depreciation 1 April 20193000Motor Vehicles at cost10800Motor Vehicles depreciation 1 April 2019800Trade receivables24000Trade payables21000Bank and Cash22500 LBBA Version 5 -15/01/2020 20 Ordinary share Capital @£1.00 each100000Dividends paid1000Revaluation reserves as at 1 April 201950000Retained earnings as at 1 April 201978500Share Premium5000010% Loan Redeemable 202515000516300516300 The followingnotes are applicable:1. Inventory as at 31 March 2020 was valued at £14000.2. Accrued salaries at 31 March 2020 were £2000.3. Taxation for the year has been estimated as £9000.4. Loan interest has not been paid for the year ended 31 March 2020 has not been paid. A wholeyear’s interest has to be accrued.5. Depreciation is to be calculated for the year ended 31 March 2020 as follows:Property: 2% per annum on valuationProduce CALCULATIONSMotor Vehicles: 10% per annum on a reducing balance basis.TASK 3 (LO3): Perform bank reconciliations to ensure company and bank records arecorrect.Task 3.1: Bank reconciliation:Explain what is meant by bank reconciliation and why it is required.Describe how this is achieved.Who would be interested in the outcome of a bank reconciliation?Report (400 words)Task 3.2:The Bank column in the cash book of Texas Traders for the month of April 2020 is given below. Texas Traders – April 2020:DateDrCr1Bal b/d50002Green5500Rent – Mrs. Miller5000 5Spencer Ltd25008Interest ondebentures25009Cash150014Capital introduced by owner(Mr. Jack White)500015PC World (purchase of newcomputer system)600020Insurance Claim15000Electricity180021Repayment of Loan920023Legal Fees410025Cash800028North Wings Ltd500029Salary: Amber2000Oshun2500Baker280030Bal c/d116004750047500 Bank Statement for April 2020:DateDetailsDrCrBalance£££1Bal b/f5000 Cr8Spenser25007500 Cr9Deposit15009000 Cr11Mrs. Miller50004000 Cr14Gas (Direct Debit)2503750 Cr17White50008750 CrPC World60002750 Cr23Loan Repayment92006450 Dr25Guardian Royal150008550 CrInterest25006050 CrElectricity18004250 Cr26Deposit800012250 Cr28Legal Fee40008250 Cr30Bank charges1008150 CrOshun 2500 5650 CrThe legal fee was £4000 and the cheque was issued for this amount. The bookkeeper hasposted the amount wrongly as £4100 in the cashbook.On 7th April 2020 the bank had returned the cheque of Green with a note ‘refer to thedrawer’. Green has agreed to pay the amount in cash in the following month. No entrywas made of the returned cheque in the bank a/c maintained by the company in April2020. LBBA Version 5 -15/01/2020 21Task 3.2: Update the Cash book to show the corrected balance.Task 3.3: Prepare a bank reconciliation statement applying the bank reconciliation process for TexasTraders at 30th April 2020 using the information in Task 3.2. Apply appropriate tools and techniquesto check general accounts and statement of financial position.Task 3.4: Demonstrate the use of:a) Deposit in Transitb) Outstanding Chequesc) Not Sufficient Funds check when applying the reconciliation process.Produce Report (400-500 words)Produce CALCULATIONSLBBA Version 5 -15/01/2020 22LBBA Version 5 -15/01/2020TASK 4 (LO4): Reconcile control accounts and shift recorded transactions fromthe suspense accounts to the right accountsUse the following information for Tasks 4.1 and 4.2.Super Chem Industries maintain a debtor’s control account outside their double entrysystem for control purposes only. On 31 March 2020, the Debtors control Account of thecompany showed a debit balance of £276,800. The totals in the Sales Ledger differ fromthese balances. Further inquiries produced the following information.i. A sale £22,400 has been posted as £31,400 in the customer’s account in the SalesLedger. ii.A delivery payment of £260 to the delivery service has been posted erroneously inthe customer’s accountOn 6 Mar 2020 total of the Sales Day Book has been added as £116,400 instead of114,800.A cheque from a customer for £6800 was dishonored by the bank. While thetransaction has been correctly posted in the Debtors Account, it had been completelyomitted in the debtors control account.£8200 has been set off in the customer’s account in the Sales Ledger as contraiii.iv.v. against the same customer’s account (who is also a supplier to Super Chem) in thePurchase Ledger. No entry has been posted in either of the two Control Accounts.Task 4.1: Using the information above in LO 4, Calculate the Total of the Debtors’balances at 31 March 2020 as it was extracted from the Sales Ledger. (Note: Complete thisbefore attempting any reconciliation).Task 4.2: Prepare a Statement of Reconciliation of the Totals of the customers’ balances inthe Sales Ledger with the balances in the Debtors Control Account.Task 4.3:An inexperienced book keeper has prepared the Trial Balance below at 31.3.2020 Trial Balance at 31.3.2020Dr£Cr£Capital6000Sales25300 LBBA Version 5 -15/01/2020 Salaries3500Purchases12500Discount received250Discount allowed700Computer (office)3000Return inwards300Rent and rates900Stock at 1.4.20194000Bank overdraft1600General expenses1500Fittings2500Provision for bad debts200Accumulated depreciation on fittings250Debtors (receivables)2500Creditors (payables)15003120035300 Task 4.3:As the Trial Balance does not tally, the book keeper has sought your help. Redraft theTrial Balance properly and tally it by creating a Suspense Account with the balancingfigure.Task 4.4:Using the information given below show the journal entries to correct the errors and clearthe Suspense Account balance. Demonstrate your understanding of the different typesof accounts and how and why are they reconciled. Produce accurate accounts that havebeen reconciled applying the appropriate methods.1. Discount allowed has been under cast by £200.2. A credit sale to James Owen on 10 March 2020 for £1500 has been correctly postedto Sales A/c but has been completely omitted in the customer’s account.3. Goods purchased from John Steel on 20 March 2020 for £1000 on credit have beenerroneously posted as £2000. The entry in the Purchase A/c was for the correctamount.4. The Capital account balance has been incorrectly brought forward as £6000 on theledger folio. The correct figure was £5000.Produce CALCULATIONSLBBA Version 5 -15/01/2020 PassMeritDistinctionLO1 Record business transactions using double entry bookkeeping, and be able to extract a trial balanceD1 Apply trial balancefigures to show whichstatement of financialaccounts they will end up in.P1 Apply the double entrybook-keeping system ofdebits and credits. Recordsales and purchasestransactions in a generalledger.P2 Produce a trial balanceapplying the use of thebalance off rule to completethe ledger.M1 Analyse transactions toshow the progression from aprevious trial balance to thenext one using double entrybookkeeping.LO2 Prepare final accounts for sole-traders, partnershipsand limited companies in accordance with appropriateprinciples, conventions and standardsD2 Compare the essentialfeatures of each financialaccount statement to analysethe differences betweenthem in terms purpose,structure and content.P3 Prepare final accountsfrom given trial balance.P4 Produce final accountsfor a range of examples thatinclude sole-traders,partnerships and limitedcompanies.M2 Make adjustments tobalances of sum accounts forexample, accruals,depreciation andprepayments beforepreparing the final accounts.LO3 Perform bank reconciliations to ensure company andbank records are correctD3 Prepare accurate bankreconciliations that applyappropriate tools andtechniques to check generalaccounts and balance sheets.P5 Apply the bankreconciliation process toprepare a number of bankreconciliations.M3 Apply the reconciliationprocess demonstrating theuse of deposit in transit,outstanding checks and NotSufficient Funds (NSF)check.LO4 Reconcile control accounts and shift recordedtransactions from the suspense accounts to the rightaccountsD4 Produce accurateaccounts that have beenreconciled applying theappropriate methods.P6 Explain the process takento reconcile control accountsand clear suspense accountsusing given accountexamples.M4 Demonstrateunderstanding of thedifferent types of accountsand how and why they arereconciled. GRADING CRITERIAGrading criteria must be used in conjunction with the tasks given in scenariosUnit 10: Financial AccountingUnit code: A/508/0496RQF level: 4Credit value: 15 creditsLBBA Version 5 -15/01/2020 GENERAL GUIDANCEThere are no essential or unique resources required for the delivery of this unit.Many learners are, or have been, employed and will be able to draw on their experience ofemployment and will have had experience of the nature of the business environment andthe ways in which organisations respond to and determine the nature of that environment.PREPERATION STAGE▪ Read all Core Material.▪ Read all the Supplementary Articles.▪ Consider the range of issues/problems/difficulties/threats that your organization iscurrently facing.▪ Understand the questions and expectations of the assignments.▪ Ideally, discuss them with your personal tutor and present work for feedback (Dates forfeedbacks are found in the assessment plan and notice board).▪ After feedback improve your work and refer to the marking guide for any improvements.▪ When you have the final feedback from your Personal Tutor and you have made changesto your work checked the work for plagiarism before submitting the final assignment.▪ Ensure you are aware of the rules on how and when to submit the work.RECOMMENDED RESOURCES TextbooksATRILL, P. and McLane, E. (2012) Accounting and Finance for Non-Accounting Specialists.8th Ed. Harlow: Pearson.DYSON, J. R, (2010) Accounting for Non-Accounting Students. 8th Ed. London: PrenticeHall.GLAUTIER, M. (2010) Accounting Theory and Practice, Harlow: Prentice HallLOUGHRAN, M. (2011) Financial Accounting for Dummies. New Jersey: Wiley Publishing.LBBA Version 5 -15/01/2020MCLANEY, E. and ATRILL, P. (2012) Accounting: An introduction, 6th Ed Harlow: PearsonJournalsJournal of Accounting, Auditing and FinanceJournal of Business Finance and AccountingInternational Journal of Managerial and Financial Accounting


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