Reference no: EM132681304 , Length: word count:2400
Unit 6 Financial Accounting - BTEC Level 3 National Extended Diploma in Business
Assignment : Financial Regulations and Legislation, Adjustments to Final Accounts and Cash Flow
Learning aim
Purpose of this assignment is to know the impact of accounting legislation and concepts on organizations' accounting policies and procedures, understand the impact of the regulatory framework on a limited company's accounting policies and procedures, be able to make appropriate adjustments to accounting information and to understand a cash flow statement for a limited company.
Vocational Scenario or Context As a graduating student in business, you were asked to do the following activities to complete the final requirement in Financial accounting subject, as follows;
(1st scenario)
Mornin' Joe is planning to expand operation to various places around the world. Financing for this expansion will come from foreign banks. While financial statements prepared under U.S. GAAP may be appropriate for U.S. preparations, financial statements prepared for foreign bankers should be prepared using international accounting standards.
The financial statement of Mornin' Joe International is illustrated using IFRS and U.S. GAAP. (Illustrated in Exhibit A - separate sheets)
The financial statements are presented in euros (€) for demonstration purposes only. The euro is the standard currency of the European Union. The euro is translated at a 1:1 ratio from the dollar to simplify comparisons. Throughout the comparisons, callouts and end notes to each statement are used to highlight the differences between financial statements prepared under IFRS and under U.S. GAAP
(2nd scenario)
The Unadjusted Trial Balance of Davao Laundry Services is prepared for the month ended 31st March 2019. (Illustrated in Exhibit D). You are asked to do the adjustments as follows;
(General Journal on the following)
Davao Laundry Services
1. 2% of the outstanding receivable account is estimated to be doubtful of collection.
Outstanding Accounts Receivable per Ledger balance is OMR 800.
2. OMR200 cost of supplies inventory was actually consumed.
3. The Laundry Machine of OMR1,500 has estimated life of 5 years without salvage value.
4. Advertising Expense of OMR 300 has been incurred but still unpaid.
(3rd scenario)
You are presented the Statement of Cash Flows for Davao Laundry Services. (Illustrated in Exhibit E)
Task 1
• Describe the Business Entity Concept, Going Concern, Time Period and Monetary Unit and the implication of these to Mornin' Joe.
• Describe the characteristics of a proprietorship, partnership, corporation and limited liability company and which business type does Mornin' Joe belong?
• Explain what is meant by generally accepted accounting principles and describe how GAAP is developed?
• Explain what is meant by international financial reporting standards and describe how IFRS is developed? (P2)
• Explain the implication on IFRS and GAAP presentation of Mornin' Joe's financial statements.
• Compare the similarities and differences on the presentation of financial statements for Mornin' Joe and/or; (Choose only one)
(a) Unilever Group (Illustrated in Exhibit B - separate sheet)
o What do you think is meant by "turnover"?
o How does Unilever's income statement presentation differ significantly from that of Mornin' Joe?
o How is the total for net finance cost presented differently that would be typically found under GAAP?
(b) LVMH (Illustrated in Exhibit C - separate sheet)
o Identify the differences between the balance sheet of LVMH and a balance sheet prepared under GAAP.
o Compare the terms used in this balance sheet with the terms used by Mornin' Joe using the provided table in Exhibit C.
o What does the "Revaluation reserves" in the Equity section of the balance sheet represent?
• Justify by describing the main users of accounting, their interests and requirements.
(consider how the accounting regulations impacts on financial statements)
• Describe the Business Entity Concept, Going Concern, Time Period and Monetary Unit and the implication of these to Mornin' Joe.
• Describe the characteristics of a proprietorship, partnership, corporation and limited liability company and which business type does Mornin' Joe belong?
• Explain what is meant by generally accepted accounting principles and describe how GAAP is developed?
• Explain what is meant by international financial reporting standards and describe how IFRS is developed? (P2)
• Explain the implication on IFRS and GAAP presentation of Mornin' Joe's financial statements.
• Compare the similarities and differences on the presentation of financial statements for Mornin' Joe and/or; (Choose only one)
(a) Unilever Group (Illustrated in Exhibit B - separate sheet)
o What do you think is meant by "turnover"?
o How does Unilever's income statement presentation differ significantly from that of Mornin' Joe?
o How is the total for net finance cost presented differently that would be typically found under GAAP?
(b) LVMH (Illustrated in Exhibit C - separate sheet)
o Identify the differences between the balance sheet of LVMH and a balance sheet prepared under GAAP.
o Compare the terms used in this balance sheet with the terms used by Mornin' Joe using the provided table in Exhibit C.
o What does the "Revaluation reserves" in the Equity section of the balance sheet represent?
• Justify by describing the main users of accounting, their interests and requirements.
(consider how the accounting regulations impacts on financial statements)
P1 Describe how legislation and accounting concepts affect an organization's accounting policies.
P2 Explain how a limited company's financial statements are influenced by the legal and regulatory framework.
M1 Compare the final accounts of two organizations explaining the similarities and differences.
D1 Justify the application of accounting conventions and regulations to ensure that the financial statements meet their users' needs.
Task 2
• Requirements
o prepare the necessary Adjusting Entries.
o prepare an 8-column worksheet showing the Trial Balance, Adjusted Trial Balance, Income Statement and Balance Sheet.
• Write a brief report assessing the impact of each amendment on profit and loss, assets and liabilities.
P3 Make adjustments to a limited company's financial statements.
M2 Assess the impact of adjustments to profit and loss account and balance sheet items for a limited company.
Task 3
• Prepare a written report explanation of the role of the cash flow statement in linking profit made with changes in assets and liabilities.
• Prepare a written report on the importance of operating cash flows, investing cash flows and financial cash flows and the role in an organization's liquidity, given the link between liquidity and survival.
• Evaluate the changes in the financial position of Davao Laundry Services by drafting a report to review its financial performance and position. Highlight the negative cash flows for any element, comment on the appropriate use of cash funds and whether an organization is generating sufficient reserves of cash to allow for future spending or expansion.
P4 Explain the purpose of a limited company's cash flow statement.
M3 Assess the importance of the different elements of a cash flow statement.
D2 Evaluate the changes in the financial position of a limited company using a cash flow statement.
Attachment:- Financial Accounting.rar