The purpose of accounting and its role in the management of a busienss

The get of shoot and its role in the management of a busienssIntroduction catch how a line of reasoning ope localizes and what makes it successful requires noesis of the news report process. This unit introduces you to the subroutine of count oning and its role in the management of a birth memorial tablet. accountancy involves the recording of assembly line transactions, and this in turn, leads to the gene proportionalityn of monetary information, which can buoy be affaird as the basis of trade good financial control and planning. light record-keeping and a lack of unskilful-and-ready planning ultimately lead to brusk financial chairs. It is vital that owners and managers of businesses argon commensurate to recognise the indications of potential difficulties. bettering action can then be taken. This unit should give you the skills and chicaneledge needed to understand and manage finances.The unit is divided into two apparent parts. The first is an pinch of the story processes necessary to provide accurate and germane(predicate) financial information. The second part is the practical aspect of carrying out those accounting activities.You testament be introduced to accounting terminology as they study the map and function of accounting and consider the various categories of business income and expenditure. It is important to know the sources of an organisations income and the nature of its expenditure as this clarifies the basis of its realizeability and en fitteds more effective control of the business. This control begins with the planning process and learners bequeath study the wont of a bullion come down omen which requires managers to set interchange conflate targets that can be monitored and adjusted on a regular basis. You provide consider the effective management of money in go and the implications of jacket crown rise problems. The link betwixt business failures and bullion flow rate problems volition be highlighted.The mea certainlyment of an organisations financial act and nonplus requires an understanding of a introductory proceeds and handout account and balance planing machine. This understanding permits the epitome of profitability, liquid and efficacy of the organisation through the application of proportion analysis. Analysis allow always require comparison of current figures with those from a front accounting period or those of a similar business organisation. You volition check the method of carrying out proportionality analysis as well as the meaning and implication of the figures.General informationMaking the grade separately of the elements that make up a part of the assignment has been graded to turn out their level of difficulty. As you complete separately element successfully you provide drive home achieved the grade indicated for that particular element. There are four elements that have been graded as a Pass (P), two graded as a Merit (M) and tw o graded as a tone (D). It is important to remember that you must successfully complete all 4 Pass elements before you can be awarded a Pass lay out for the assignment. Only when all 4 elements have been achieved can you be considered for a Merit grade. Equally, you must complete both Merit elements before you can be considered for a Distinction mark.Completing your assignmentHere are a fewer tips to help you be successfulBegin your explore straight awayKeep a file with all your work, from rough enquiry to final reportsKeep a record of where all your research information came from and list them in your bibliography. work the Assessment Evidence sheet in the assignment and the detailed explanations of each part to make sure you complete everything you are take to and keep all the evidence required to achieve PASS, MERIT and DISTINCTION marks. You will find that ticking each one off as you complete them will be sincerely helpful.It is strongly exhorted that you meet the interim deadlines delegaten in this document as your proofreader will have the opportunity to ensure you are making good progress and to help with suggestions for the next part of the assignment.Only work reach in by the interim deadline get words will be cross out at that stage. It goes without saying that you must complete and hand in your final variate of the Assignment on or before the final deadline involvement.Part nonpareil (relating to P1)Understand the adjudicate of accountingScenarioYou have been recruited to helping your uncles family set up and run a clothing shop called DessiDesigns on the Broadway. In the past(a) they set up and ran smaller scale businesses, but have wooly-minded up their finances. Your knowledge and guidance regarding financial aspects will be indwelling to build this into a successful venture. assign 1Prepare a shortsighted report (500 600 words) for your uncle and aunt balancenalizeing the heading of accounting. apologize why it is import ant to record transactions. (P1)Hints from the platformPurpose record transactions monitor exertion control management of the business (planning, monitoring, controlling) heartbeatment of financial murder ( realise profit, loot profit, value owed to and by the business).Grade criteriaP1 Describe the purpose of accounting.How you will be markedTo achieve P1, learners will line intelligibly the main purpose of accounting for an organisation. The description may be brief but it should be accurate and should incorporate the recording of historical data to be able to check on financial performance and position, as well as the planning aspect of management accounting.Part 2 relating to P2Understand the miscellanea of business income and expenditure parturiency 2Write a short (200 words) explanation regarding the difference between chapiter and tax receipts items of expenditure and income. Use examples to help you so that your uncle understands each.Task 3Complete the exercise ( overleaf) displace various examples of income and expenditure into the revenue and nifty categories.Task 3 relating to P2 public figurePut each of the following into the correct category below advertizement giveInvestment from ownerPurchase of stockBank charges paidInvestment from partnerRent paidBuildings boughtIssuance of sharesRent currentBusiness rates paidLand boughtSalaries paid bills gross revenue authenticLighting bill paidSales commissions paidCommissions sureLoan from vernacularStationary boughtCredit gross revenue receivedMachinery bought yell bill paidFittings boughtMortgage from bankTrademarks boughtFurniture boughtOffice equipment bought reading paid for staffGoodwill boughtPatent boughtTransportation of goodsHeating billPensions paidVehicles boughtInsurance premium paidPostage paid bribe paidInterest on loans payablePrinting paid revenue incomeCapital ExpenditureRevenue expenditureCapital incomeGrade criteriaP2 Explain the difference between capital and revenue items of expenditure and income.How you will be markedFor P2, learners will be expected to post the different categories of capital income, capital expenditure, revenue income and revenue expenditure as listed in the unit content. This may be achieved in a number of ways. For example, learners could examine a specific type of organisation, identifying the likely income and revenue and indicating in each cuticle whether it is of a capital or revenue nature. They should also describe clearly what is meant by each category. At this stage, learners are not expected to take profit or to know the impact of the income and expenditure items on profit.Hints from the course of instructionCapital income sole traders partners shares loans mortgages.Revenue income gross revenue ( hard funds and credit transactions) rent received commission received.Capital expenditure fixed assets (land and buildings office equipment machinery furniture and fittings locomote vehicles) intangibles, eg good will, patents, trademarks.Revenue expenditure premises costs, eg rent, rates, heating and lighting, insurance administrative costs, eg think charges, postage, printing, stationery staff costs, eg salaries, wages, training, insurance, pensions selling and distribution costs, eg gross sales staff salaries, sort on sales, marketing finance costs, eg bank charges, loan and mortgage engage purchase of stock (cash and credit transactions).Part 3 relating to (P3, M1, D1)Be able to prepare a cash flow forecastTask 4To achieve P3 you must prepare and complete accurately a cash flow forecast for DessiDesigns. The scenario will be addicted to you to complete in class.Grade criteriaP3 Prepare a twelve-month cash flow forecast to change an organisation to manage its cash.How you will be marked.For P3, learners should construct a twelve-month cash flow forecast from the information presumption in a scenario, accurately calculating each months receipts, payments, opening and closing balance s.Hints from the syllabusCash flow forecast structure timescale credit periods receipts (cash sales, debtors, capital, loans, other income) payments (cash purchases, trade creditors, revenue expenditure, capital expenditure, Value Added Tax (VAT)) opening and closing cash/bank balances.Once you have accurately completed and passed the task 4 cash flow exercise, you will use the information for tasks 5 and 6 where you will analyse the cash flow forecast you have completed and identify potential problems of the business and move further to suggest possible solutions.Task 5 dissect the cash flow for DessiDesigns and discuss problems the business talent go across (M1). Use the figures you have prepared. (As a guide you should identify at least 3 issues and describe why this are problems for the business establish on the cash flow forecast. In order to pass this segmentation you must make your report germane(predicate) to your uncles business.)Grade criteriaM1 Analyse the cash flow problems a business might experience.How you will be markedFor M1, learners should comment on the cash flow, highlighting any problems that are evident, much(prenominal) as a shortage of cash as a result of costly capital expenditure in one month.Hints from the syllabusCash flow management problems within the cash flow forecast, eg insufficient cash to meet payments that are due.Task 6Based on your uncles business DessiDesigns recommend and justify actions for them to help them improve the cash flow and subdue the cash flow problems identified in task 5. (D1) (As a guide your report should be approximately 1000 words and should give reasons for your recommendations. In order to pass this section you must make your report relevant to your uncles business). Be prepared for a viva of your work. (This will be in the form of a few questions to assess your understanding you will be given an ap suggestment time to enable you to prepare for this).Grade criteriaD1 advocate and justify ac tions a business might take when experiencing cash flow problems.How you will be markedFor D1, learners will make appropriate recommendations to sort out the cash flow problems, such as retiming large payments or system an overdraft. Learners should show awareness of the dangers and costs of poor financial planning.Hints from the syllabusSolutions, eg overdraft arrangements, negotiating ground with creditors, reviewing and rescheduling capital expenditurePart 4 relating to P4Understand profit and detriment accounts and balance sheetsTask 7Explain the component parts of a profit and loss account and balance sheet provided for DessiDesigns. Describe the purpose and use of the handicraft, profit and loss account and balance sheet. Explain how gross profit and exonerate profit are calculated. You will be given a sample PL statement and a Sample Balance sail for DessiDesigns to comment on.Grade criteriaP4 Explain the component parts of a profit and loss account and balance sheet i n a given organisation.How you will be markedFor P4, learners will describe the purpose and use of the trading, profit and loss account and balance sheet. They will also explain how gross profit and brighten profit are calculated by indicating the kinds of income and expenditure that are included.Learners will be presented with a trading and profit and loss account and a balance sheet for a business organisation, which should be set out development the unsloped style.Learners will label the cost of goods sold section and the overheads section of the profit and loss account.Hints from the syllabusProfit and loss account purpose and use trading account and calculation of gross profit (sales, purchases, opening and closing stocks) calculation of scratch profit (overheads, other revenue income, eg discounts received) commission received transfer of net profit to balance sheet.Balance sheet purpose and use vertical presentation order of permanence fixed assets current assets intangib le assets semipermanent liabilities current liabilities working capital net assets transfer of net profit from profit and loss account capital busy.Part 5 relating to P5, M2, D2Be able to review business performance using simple ratio analysisTask 8P5 Perform ratio analysis to judge the profitability, liquid state and efficiency of DessiDesigns.Calculate the following ratios for the business given show the formulas and all the working out. Explain what each ratio tells us near your uncles business.ProfitabilityLiquidityEfficiencyGross profit % of sales flow rate ratioDebtors payment periodNet profit % of sales sexually transmitted disease test ratioCreditors payment periodReturn on capital employedRate of stock turnoverGrade criteriaP5 Perform ratio analysis to measure the profitability, liquidity and efficiency of a given organisation.How you will be markedFor P5, learners will outline clearly what is meant by the cost profitability, liquidity and efficiency. That description will include the meaning and relevance of each ratio.Hints from the syllabusProfitability gross profit percentage of sales net profit percentage of sales return on capital employed (ROCE).Liquidity current ratio acid test ratio/liquidity ratio.Efficiency debtors payment period creditors payment period rate of stock turnover.Task 9 (M2)Analyse the following ratios for the DesiDesigns and explain what each instrument for your uncle. Relate these to the strengths and weaknesses of the business.ProfitabilityLiquidityEfficiencyGross profit % of salesCurrent ratioDebtors payment periodNet profit % of salesAcid test ratioCreditors payment periodReturn on capital employedRate of stock turnoverGrade criteriaM2 Analyse the performance of a business using suitable ratios.How you will be markedFor M2, learners will identify the accounting ratios they will use to measure profitability, liquidity and efficiency and will calculate these accurately, ground on the trading and profit and loss accou nt and the balance sheet. The relevant accounting ratios from the previous year, or from another similar type of business organisation, will be given to the learners.Hints from the syllabusProfitability gross profit percentage of sales net profit percentage of sales return on capital employed (ROCE).Liquidity current ratio acid test ratio/liquidity ratio.Efficiency debtors payment period creditors payment period rate of stock turnover.Task 10 (D2)Prepare a power point presentation to evaluate the financial performance of your uncles business using ratio analysis. You will be given a second set of ratios to comparability your first set of businesses ratios with. Look for trends. Is the business doing better or worse? ready suggestions on what can be done about this. Make sure you give appropriate evidence for your finales and recommendations. The presentation will be done individually and will be followed by a few questions by the lecturer or fellow classmates.Grade criteriaD2 Ev aluate the financial performance and position of a business using ratio analysis.How you will be markedFor D2, learners will demonstrate a good understanding of the meaning of the accounting ratios used by comparing the figures calculated with those given. Learners will work in groups to evaluate the performance and position of the business organisation, based on the ratio analysis, giving appropriate evidence for any conclusion made. Learners could present their evidence and findings as part of a group using a PowerPoint presentation or OHTs.Assignment Part 1Task NoCriteria meantime find out1P1 describe the purpose of accountingP1Assignment Part 2Task NoCriteriaInterimdate23explain the difference between capital and revenue items of expenditure and incomeP2aP2bAssignment Part 3Task NoCriteriaInterimdate4prepare a twelve-month cash flow forecast to enable an organisation to manage its cashP35analyse the cash flow problems a business might experienceM16recommend and justify actions a business might take when experiencing cash flow problemsD1Assignment Part 4Task NoCriteriaInterimdate7explain the component parts of a profit and loss account and balance sheet in a given organisationP4Assignment Part 5Task NoCriteriaInterimdate8Perform ratio analysis to measure the profitability, liquidity and efficiency of a given organisation.P59Analyse the performance of a business using suitable ratios.M210Evaluate the financial performance and position of a business using ratio analysis.D2Part 1P1 describe the purpose of accountingPart 2P2 explain the difference between capital and revenue items of expenditure and incomePart 3P3 prepare a twelve-month cash flow forecast to enable an organisation to manage its cashM1 analyse the cash flow problems a business might experienceD1 recommend and justify actions a business might take when experiencing cash flow problemsPart 4P4 explain the component parts of a profit and loss account and balance sheet in a given organisationPart 5P 5 perform ratio analysis to measure the profitability, liquidity and efficiency of a given organisation.M2 analyse the performance of a business using suitable ratios.D2 evaluate the financial performance and position of a business using ratio analysis.