ASSIGNMENT 2 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 5: Accounting Principles (5038)

Submission date Date received (1st submission)

Re-submission date Date received (2nd submission)

Student name Nguyen Thi Huyen Trang Student ID BH01145

Class BA0602 Assessor name Hoang My Linh

Student declaration

I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism. I understand
that making a false declaration is a form of malpractice.

Student’s signature: Trang

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Table of content

Task 1 ……………………………………………………………………………………………………………………………………….…………6

Task 2: Analysing and Interpreting Financial Statements…………………………………………………..…………..11

1. About Kido Corporation………………………………………………………………………………………………..………….11

2. Financial performance of Kido Corporation…………………………………………………………………..…………..15
3. Profitability………………………………………………………………………………………………………………………………16
4. Efficiency ratio……………………………………………………………………………………………………………….…………17
5. Liquidty ratio……………………………………………………………………………………………………………….……………17
6. Solvency ratio……………………………………………………………………………………………………………..……………18
7. Conclusion……………………………………………………………………………………………………………….……………….19

Task 3…………………………………………………………………………………………………………………………………………….19

1. Budget definition……………………………………………………………………………………………………………………….22

2. Benefit of budgeting……………………………………………………………………………………………………….………….22

3. limitation of budgeting………………………………………………………………………………………………….…………..23

4. how does the budgeting help the company to solve the problem………………………….…………………..24

Reference……………………………………………………………………………………………………………………………………….25

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Task 1

I’m to be provided the raw data for adjusted or unadjusted trial balances in the spreadsheet 15/12/2020,
ABC owes its employees unpaid wages for the two weeks: 10 days @$700

Employees a day was $700, so employees 10 days is $7000

Debit Credit

Salaries expense 7000

Salaries payable 7000

15/12/2020, ABC agrees to provide training services to a client for a fixed fee of $6,000 for 30 days. All
services are to be completed by 15/1/2021, and the client will pay in full at that time.

From 15th to 31st of December, the unearned training fees from customers is (6,000/30)*17 days is
3,400

Training service customers will be put on account receivable

Debit Credit

Training fee earned 3,400

Accounts receivable 3,400

On December 1st, 2020, ABC purchased equipment for $16,900, by cash. the equipment has an
estimated useful life of three years ( 36 months) and ABC expects to sell the equipment at the end of its
life for $7,00 cash. Let’s record depreciation expense for the month ended December 31st, 2020.

The depreciation expense is ( $16,900 - $7,000)/36 months is $275. Accumulated depreciation is a

contra-asset account

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 Debit Credit
Depreciation expense 275
Accumulated depreciation- 275
equipment

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According to all of this information, I have the ABC institution on December 31st below.

Figure 1: ABC institution

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With the above-adjusted trial balance, we can prepare the income statement and balance sheet
for company ABC( for the month ended on 31st December 2020) as below:

Figure 2: ABC income statement

Figure 3: ABC balance sheet

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Task 2: Analysing and Interpreting Financial Statements

1. About Kido corporation

KIDO Corporation was founded in 1993 and has since grown to become one of Vietnam's leading Food &
Flavor Enterprises. KIDO Group has been the market leader in confectionery across a wide range of items
such as candy, biscuits, and ice cream under the KIDO brand name during its 22-year existence.

KIDO Group was formally created in 2015 to expand and develop into necessary food. By promoting
existing platforms, KIDO maintains and develops its leading position in the frozen industry with Ice-
Cream, Milk & Dairy products, and expands its product portfolio to the food and beverage industry,
primarily with cooking oil, instant noodles, seasoning seeds, sauces, coffee, convenient packaged foods,
and so on, to take care of Vietnamese family kitchens and meet customers' needs throughout the day.

Main business: Production and sales of food and beverage products such as ice cream, milk, dairy
products, non-alcoholic beverages, and mineral water.

Kido's total assets by the end of December 2021 reached more than VND 30,487 billion, an increase of
more than VND 3,112 billion compared to the beginning of the year. Accounting for the largest
proportion in the asset structure is a short-term financial investment with a total value of VND 16,991
billion. Inventories increased sharply, and by the end of the period more than 1,668 billion VND, an
increase of 15% compared to the same period in 2020.
Kido's total assets by the end of December 2021 reached more than VND 30,487 billion, an increase of
more than VND 3,112 billion compared to the beginning of the year. Accounting for the largest
proportion in the asset structure is a short-term financial investment with a total value of VND 16,991
billion. Inventories increased sharply, and by the end of the period more than 1,668 billion VND, an
increase of 15% compared to the same period in 2020.
Kido's total assets by the end of December 2021 reached more than VND 30,487 billion, an increase of
more than VND 3,112 billion compared to the beginning of the year. Accounting for the largest
proportion in the asset structure is a short-term financial investment with a total value of VND 16,991

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billion. Inventories increased sharply, and by the end of the period more than 1,668 billion VND, an
increase of 15% compared to the same period in 2020.
Kido's total assets by the end of December 2021 reached more than VND 30,487 billion, an increase of
more than VND 3,112 billion compared to the beginning of the year. Accounting for the largest
proportion in the asset structure is a short-term financial investment with a total value of VND 16,991
billion. Inventories increased sharply, and by the end of the period more than 1,668 billion VND, an
increase of 15% compared to the same period in 2020.
Kido's total assets by the end of December 2022 reached more than VND 14,004 billion, a decrease of
more than 67 million compared to the beginning of the year. Accounting for the largest proportion in the
asset structure is a short-term financial investment with a total value of VND 522 billion. Inventories
decreased sharply, and by the end of the period more than 2,282 billion VND

2. Financial performance of Kido corporation

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Figure 4: Table comparing indicators in Kido Corproration’s financial statements for the period of 2021-2022

Source: author
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 3. Profitability

  Profitability    
  2022 2021 change
Gross profit margin 18.14% 19.54% -1%
Operating profit margin 3.98% 6.56% -3%
Net profit margin 2.99% 6.22% -3%
ROA 5% 10% -5%
ROE 5% 9% -4%

Gross profit margin: This indicator shows how much gross profit the enterprise earns for each dollar of
revenue generated, after deducting the cost of goods sold. Thus, Kido's gross profit at the end of 2022 is
18.14% and the end of 2021 is 19.54%. which means that in 2022 for every 100 dong of revenue, Kido's
gross profit is 18.14 dong and in 2021 gross profit is 19.54 dong. in 2022 compared to 2021, decreasing
by 0.01 times ensures competitiveness in the market and is still higher than other companies in the same
industry.

Net profit margin is the profit after tax that the company earns from each dollar of revenue and
Operating profit shows how much operating profit the business earns, after deducting all costs for
production activities, profit after tax in 2022 is 2,99% down 3% compared to 2021 is 6.22% and operating
profit at the end of 2022 is 3.98%, down 3% compared to 2021 is 6.56%.

Return on asset ( ROA) is an indicator of return on wealth/assets. In 2022, ROA is 5% down 5% compared
to 2021 is 10%. Based on ROA index, Kido knows exactly how much capital to invest as well as how much
net profit it brings. But the above indicator shows a decrease in ROA, which shows that Kido is using
assets less efficiently than in the past.

Return on equity ( ROE) is the return on equity capital. In 2022, ROE reached 5%, down 4% compared to
9% in 2021. This signifies that the company's earnings are lower than in the past. It is vital to analyze the

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amount of capital that the firm has fully used market prospects to determine whether the RIE of this
enterprise is likely to expand or decrease in the coming years.

4. Efficiency ratios

Efficiency 2022 2021 change

Inventory Turnover Ratio 436% 456% -20%
Accounts Receivable Turnover
Ratio 456% 430% 26%
Accounts Payable Turnover
Ratio 141% 1283% -1142%
Assets Turnover Ratio 179% 168% 11%
Day's Sales in Inventory 78.69079305 107.8102983 -2912%

Asset turnover ratio: it’s 168% in 2021 and increase by 11% in 2022. The reason for the increase in asset
turnover is that Kido has rationally used asset capital in the business.

With the inventory turnover, Kido has a low turnover as trouble in the management of raw materials.
Lower inventory turnover also indicates that Kido's Day's Sales in Inventory will be reduced from 107.81
days in 2021 to 78.69 days in 2022. From 2021 to 2022, the inventory turnover ratio decreased by 20%,
from 456% to 436%. Thus, Kido needs to develop the management of raw materials.

Accounts receivable turnover: In terms of receivables, Kido appeared to make a lot of credit sales.
Looking at this company's receivables turnover, this is outstanding. In the future, Kido should have a
more flexible policy on loan sales, or else it risks losing clients to rival suppliers.

Accounts payable turnover: Kido's payable turnover has fallen by 11142% in 2022, however, this may not
be a concern if we combine this rate with the liquidity ratio discussed in the next section. This drop might
be explained by the corporation negotiating alternative payment arrangements with its suppliers.

5. Liquidity ratios

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 Liquidity 2022 2021 change
Current Ratio 129% 130% -1%
Quick Ratio 87% 83% 4%

Current ratio: This ratio reflects the number of times short-term assets cover short-term liabilities and is
a fairly accurate indication of a company’s ability to service its current obligation. In the case of Kido, we
can see that the current ratio decreased by 1% from 2021 to 2022.

Quick ratio: current ratio can reflect the company’s ability to service its current obligations. From 2021 to
2022, the quick ratio increased by 4%, from 83% to 87%.

6. Solvency ratios

Solvency 2022 2021 change

Solvency Ratio 29% 31% -2%
Interest Coverage Ratio 1169% 1789% -620%
Debt-to-Equity Ratio 101% 104% -3%
Debt-to-Capital Ratio 100% 102% -3%

The solvency Ratio is the debt solvency ratio, this ratio measures and evaluates the ability of a business
to pay its
long-term debt or not
Solvency ratios are the debt solvency ratios, These ratios measure and evaluate the ability of a business
to pay its long-term debt or not. From 2021 to 2022, these solvency ratios decreased by 2%, from 2021
to 2022.

Interest coverage ratio: this ratio illustrates that in the case a company can not make any profit in the
future then how many times the company can pay its current interest expense through its current EBIT.

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As for Kido, it’s 1789% and 1169% in 2021 and 2022, which is a fantastic sign when examining the
solvency ratio of this company.

Debt to Capital and Debt to Equity. All ratios indicate the proportion of debt and the corresponding
balance. The higher these ratios are, the weaker solvency of the company is. The debt-to-equity ratio
decreased from 104% to 101%, which decreased by 3%. The debt-to-capital ratio decreased too, from
102% to 100%, that decreased by 3%.

7. Conclusion

In conclusion, Kido is producing great results and pointing to a bright future for investors. With
remarkable financial success, it has established its position as a top corporation in its area. The
company's financial structure is much beyond the safe point, with significant liquidity, sufficient ability to
pay debt, and a well-structured supply of capital. 2020 will also be a watershed moment for Kido, as the
divestiture of the state capital will be finished, attracting additional investors and offering up new
opportunities. However, the advent of newcomers, the passage of Decree 100, and the onset of the
COVID-19 pandemic are among the concerns that might stymie Kido's progress. If the firm can overcome
all of these challenges, Kido will be more than just a corporation.

Task 3:

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Figure 5: Debt repayment plan

Figure 6: Cash budget

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Figure 7: budgeted income statement

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 1. Budget definition

A budget is an estimate of revenue and costs for a given period that is generally created and re-
evaluated regularly. Budgets may be created for an individual, a group of individuals, a company, a
government, or almost anything else that generates and spends money.

2. Benefits of budgeting

A budget allows organizations to estimate income and spending and identify possible cash flow issues. A
budget should also be revised weekly or quarterly to assist businesses in identifying possible
opportunities and challenges and responding to them promptly.

Income and Expense Budgeting When management prepares for a time of business, he may examine
how much money is required to cover expenditures such as material or employees. When a budget
displays predicted sales for the same period, the management can use the estimated sales expenses to
work backward to establish raw material requirements or labor hours needed. Budgets assist managers
in creating financial controls by informing them when they must limit spending and when they have
additional cash to spend on debt reduction or inventory expansion.

Prioritizing Spending Objectives A Management may be able to select how to address an issue or
challenge by comparing year-to-date performance against the budget. When an account item exceeds its
budget, controlling cash withdrawals becomes a manager's top concern. Budgets also assist businesses in
projecting cash flow. This assists managers in reducing expenditure during specific times or warns
businesses that they need to improve their access to capital sources such as lines of credit or loans.

Processes of Continuous Improvement An successful manager looks for methods to enhance as well as
ways to fulfill budget. A manager is a first-level systems analyst for operations who compares weekly or
monthly performance figures against the budget.

Revenue and profit forecasting The budget for one year is frequently used as the basis for the budget for
the next year, and when managers are involved in the budgeting process, each of the previous processes
can be implemented in the future. Managers may be in a unique position to see the impact of enhanced
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employee training as a contributor to improved performance, for example. Forecasting provides an
opportunity for a good manager to look beyond the confines of his department and make improvements
that may improve the circumstances for financial success the next year.

3. Limitations of budgeting

Inaccuracy Budgeting is dependent on several assumptions when it comes to calculating costs and
earnings. These are typically based on trends and the market condition that exists at the time the budget
is created. Budgets can also be based on forecasts for the following year based on the facts available at
the time of budgeting.

Time-consuming and expensive Budgeting may be a very time-consuming practice at times. It needs
additional labor to ensure that the estimations are as precise as feasible. Budgeting requires a lot of time
and work, especially in a large organization with several divisions. When a firm employs budgeting
software and its personnel are well-trained, the time spent may be minimal. If the organization employs
a zero-based budgeting method, the time, money, and effort needed might be significant.

Rigidity Budgeted figures are held in high regard by all departments. And, after the budgeting process is
completed, there is generally very little leeway. Senior management's entire attention is on the budget
and all tactics center around the budgeted numbers. Due to budget limits, any change in the market
scenario often does not elicit the management's attention to make any radical changes in the strategy.
Instead of sticking to the budget, the corporation could adjust to the market and make extra money.

Spending Excess Some managers think that all monies allotted to their department must be spent. It is
expected that if they do not spend as much as they are permitted to in the current budget, the amounts
allocated to them in the following budget would be decreased. This results in wasteful waste of dollars
and is detrimental to the company's earnings.

Budgeting for Expenses The decision to allocate money amongst departments is usually made by top
management. Managers in various departments may express concerns about the technique utilized to
allocate these expenditures, which may lead to a squabble. It is not practicable to evaluate budgeting
strategies and expenditure allocation ideas from all departments.

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Financially Motivated The budgeting process is said to be data-driven. It focuses on the quantitative side
of the business or on increasing the profitability of the firm. And does not take into account the
subjective or qualitative aspects. The fact that the stakeholders, including the company's clients, care
about the quality of services as well as their costs is completely ignored. These are assumed to be part of
the budget but are rarely visible in it.

Organizational Conflicts When one department is unable to fulfill its budgeted objectives, it often blames
the other department that provides services to it for failing to offer the required assistance. They even
disagree on the transfer fee, which is agreed between departments. This causes unneeded tensions, and
the organization as a whole may be unable to function effectively.

4. How does budgeting help the company to solve the problem

In this situation, the corporation should create a financial budget to address capital-related difficulties,
such as anticipated financial statements and a capital budget, as well as a money budget. A cash budget
is especially crucial to a company's financial management since it accounts for money shortages and
surpluses. Here are some stages to creating a budget:

Step 1: Increase income Determine the anticipated revenues, or receivables from customers and other
sources, that will be deposited into the cash account each period. Accounts receivable might change
throughout the course of a budget cycle.

Step 2: Subtract costs Calculate how much money will be required to meet costs, or cash payments,
during the period based on projected activities. Payments for supplies, labor, taxes, and so forth are
examples of expenses. Some of these expenses may be spread out evenly during the budget period,
while others, such as labor and material costs, may fluctuate during production.

Step 3: Determine whether there is a financial surplus or deficit. Subtract costs from the total opening
cash balance and estimated receipts for the period to compute a cash surplus or shortfall.

Step 4: Increase the cash balance at the start of the term. The cash balance at the start of this period is
the same as the cash amount at the end of the preceding period. You acquire a balance after the month
by adding up the cash excess or deficiency.

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Step 5: Determine the necessary funding. The final balance will be either positive or negative. A positive
balance shows that you have sufficient operational cash; a negative balance suggests that the
organization must create a plan to fund the shortfall through other means.

8. References

Anon (n.d.) TẬP ĐOÀN KIDO, TẬP ĐOÀN KIDO, [online] Available at:
https://www.kdc.vn/nha-dau-tu/bao-cao-tai-chinh/2021.

Anon (n.d.) TẬP ĐOÀN KIDO, TẬP ĐOÀN KIDO, [online] Available at:
https://www.kdc.vn/nha-dau-tu/bao-cao-tai-chinh/2022.

Chron Contributor, 2021. Budget. [online] Investopedia. Available at:

https://www.investopedia.com/terms/b/budget.asp
Sanjay Borad, S., 2022. Limitations of Budgeting. [online] eFinanceManagement. Available at:
https://efinancemanagement.com/budgeting/limitations-of-budgeting
taca.edu.vn. 2018. lap ke hoach ngan sach. [online] Available at: https://taca.edu.vn/lap-ke-hoach-ngan-
sach/#:~:text=B%C6%B0%E1%BB%9Bc%201%3A%20T%C3%ADnh%20to%C3%A1n%20doanh%20thu
%20mong%20%C4%91%E1%BB%A3i,NG%C3%82N%20S%C3%81CH%20NH%C6%AF%20SAU%3A%
20B%C6%B0%E1%BB%9Bc%201%3A%20C%E1%BB%99ng%20thu

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