Managing and Using Finance
Assignment Brief
The Finance Director of your company has suggested that you arrange a series of three visits to the local college to explain to students how finance is managed within a business. Prior to the visit, you decide it would be helpful to provide some introductory reading in the form of a handout outlining the principles of accounting and the basic concepts used.
You will need to carry out the following tasks:
Task 1
Prepare your preliminary handout for the students. Ensure that it contains sufficient detail to cover the following material.
a) An outline of the fundamental principles of accounting.
b) A summary of basic accounting rules and standards.
(AC 1.1, 1.2)
Task 2
For the first visit, you are going to conduct a workshop that deals with financial statements. This should help them understand the principle financial statements and the main financial terms used within them. To do this you must prepare a set of notes that include the following:
a) Details of the purpose and contents of each of the key financial statements.
b) Explain in detail the concept of the accounting equation.
(AC 2.1, 2.2)
Task 3
In the second session, you are going to explain the principles of costing. This is to be a practical session and you will need to prepare some worksheets that contain appropriate notes and some simple exercise for the students to try. Your notes should address the following.
a) The purpose of management accounting.
b) The nature of a range of different costs and how these are calculated.
(AC 3.1, 3.2)
Task 4
The final session will be a presentation that is designed to help the students understand the principles of budgeting. For this you will need to provide a set of slides and supporting notes to explain the following:
a) The purpose of budgeting in financial control.
b) The principles involved in effective budgeting.
(AC 4.1, 4.2)
Guidelines for assessors
The assignments submitted by students must achieve the learning outcomes and meet the standards specified by the assessment criteria for the unit. The suggested evidence listed below is how students can demonstrate that they have met the required standards.
Task
LO
Assessment criteria
Suggested evidence
1
LO1
1.1 Explain the fundamental principles of accounting.
1.2 Analyse basic accounting rules and standards.
The handout should consider the basic principles of accounting and outline the differences between financial and management accounting. Details of different business ownership structure are required.
Learners should explain basic accounting riles and conventions, including SSAP and FRS.
2
LO2
2.1 Discuss the purpose and contents of financial statements.
2.2 Interpret the concept of the accounting equation.
Detail notes should be provided to describe the profit and loss account (statement of financial performance), Balance sheet (statement of financial position) and cash flow statement.
Learners should define depreciation and illustrate how it is calculated, using simple examples.
3
LO3
3.1 Explain the purpose of management accounting.
3.2 Identify the nature of a range of different costs.
Detailed notes should consider the role and uses of management accounting.
Learners should discuss a range of costing methods and discuss the significance of breakeven analysis.
4
LO4
4.1 Explain the purpose of budgeting in financial control.
4.2 Discuss the principles of effective budgeting.
A presentation with supporting notes is required that considers the role of budgeting in organisations.
Learners should include descriptions of common budgeting techniques and their behavioural consequences.
Example Answer to this Question
Warning Plagiarised Content – Do Not Copy
1.1 Explain the fundamental principles of accounting.
1. Fundamental Principles of Accounting
Accounting is the process of recording, summarising, and analysing financial transactions to provide information that helps in decision-making. The fundamental principles of accounting ensure consistency and reliability in financial reporting. Here’s an overview:
1.1 The Entity Concept
Definition: The business is considered a separate entity from its owners or other businesses.Implication: Personal transactions of the owners are not mixed with business transactions.
1.2 The Going Concern Principle
Definition: Assumes that the business will continue to operate indefinitely unless there is evidence to the contrary.Implication: Financial statements are prepared with the expectation that the business will not liquidate in the foreseeable future.
1.3 The Accruals Principle
Definition: Revenues and expenses should be recorded in the period they occur, not when cash is received or paid.Implication: This principle ensures that financial statements reflect all financial activities of a period, providing a more accurate picture of financial performance.
1.4 The Consistency Principle
Definition: Once an accounting method is adopted, it should be used consistently from one period to the next.Implication: Changes in accounting methods should be disclosed, ensuring comparability of financial statements over time.
1.5 The Prudence Principle
Definition: Revenues and profits are recorded only when they are certain, while expenses and losses are recognised as soon as they are anticipated.Implication: This principle helps to avoid overstating financial health and ensures that potential losses are accounted for.
1.6 The Matching Principle
Definition: Expenses should be matched with the revenues they help to generate within the same accounting period.Implication: This ensures that financial statements reflect the true cost of generating revenue.
2. Basic Accounting Rules and Standards
Accounting rules and standards guide how financial transactions and statements should be prepared and presented. Here are some of the basic rules:
2.1 Double-Entry Bookkeeping
Definition: Every financial transaction affects at least two accounts. For every debit entry, there must be an equal credit entry.Implication: This system helps to maintain the accounting equation: Assets = Liabilities + Equity.
