Student Name/ID Number

Unit Number and Title Unit 5: Accounting Principles

Academic Year Semester 1, Academic year 2023 – 2024

Unit Tutor Dr.Nguyen Thi Thanh Mai, Dr.Le Thi Thu Ha and Ms.Nguyen Thi Kieu Trang

Assignment Title A2: Production and Interpretation of Financial Statements (2 of 2)

Issue Date 19th September 2023

Submission Date 22nd December 2023

Submission Format
The submission is in the form of a portfolio of evidence compiled using the evidence produced for two
assignments, it will also include the following.

A detailed letter to a named client. The letter must be clear worded, well-structured and should make use
of appropriate business language and terminology. The letter can also include clearly-labelled tables and
charts. It will accompany and support the appropriately constructed financial statements (income statement
and statement of financial position) for the business.

The word count is 2,000–2,500 words, although you will not be penalised for going under or exceeding the
total word limit. A bibliography should be provided using the Harvard referencing system. Inaccurate use of
referencing may lead to issues of plagiarism if not applied correctly.
Unit Learning Outcomes
LO2 Prepare basic financial statements for unincorporated and small business organisations in accordance
with accounting principles, conventions and standards.
LO3 Interpret financial statements.
Transferable skills and competencies developed
● Managing financial data
● Written communication using a range of media
● Manipulating and interpreting data using spreadsheets
● Effective communication of relevant information across the organisation and to appropriate stakeholders
● Creation and interpretation of information and showing how that information can be used most effectively
to add value to the organisation
● Ability to use quantitative skills to manipulate data, evaluate, estimate and model business problems
● Application of accounting knowledge to consistently deliver high-quality, accurate data and information
in a timely fashion.
Vocational scenario
Having successfully completed your six-month probation as a Graduate Trainee at the accounting firm, you
have now been attached to a unit in the firm that deals with the provision of accountancy and consultancy
services to small businesses that are typically set up as sole traders, not for profit and partnerships. The firm
is careful about which small and emerging businesses it works with as it seeks to spot growth potential and
identify and work with clients that have scalable business models.
Assignment activity and guidance
You are initially working with a selection of small businesses that have been trading for three years and
which now need annual trading statements to be compiled and submitted in line with government
requirements. You have been given a trial balance for the business, including accruals, prepayments and
figures for bad debts and depreciation.
The following extended trial balance was extracted from the books of Sun’s Hotel at the close of business
on 31 December 2023:

Sun's Hotel
The initial trial balance
as at 31 December 2023
Initial trial balance
Accounts
Debit Credit
£'000 £'000
Capital (opening) 689,000
Trade payables 23,000
Land and buildings – cost 600,000
Land and buildings – accumulated depreciation 45,000
Plant and equipment – cost 120,000
Plant and equipment – accumulated depreciation 20,000
Trade receivables 40,000
Accruals 550
9% bank loan repayable 130,000
Cash at bank 68,200
Short-term investment 105,000
Financial Expense 5,850
Financial Income 9,500
Revenue 245,000
Cost of Sales 150,000
Distribution expenses 30,000
Administrative expenses 21,000
Inventories 10,000
Drawings 12,000
Prepayment
Interest payable
1,162,050 1,162,050

Additional notes were not included in the above initial trial balance:

HNC/HND Business
(a) Depreciation for Buildings £20,000 is allocated 40% to Administrative expense and 60% to Distribution
expense. Depreciation for Plant & Equipment £950 is allocated two equal halves to Administrative and
Distribution expenses.
(b) A credit customer is considered to be not able to collect £5,500.
(c) A distribution expense is necessary to be accrued £10,500.
(d) Interest expense is necessary to be accrued for the last 6 months.
(e) A prepayment of £8,000 is determined at the closing date, which is included in the distribution expense.

The following information of Sun’s Hotel is relevant:

Statement of profit or loss for the year ended 31
December
2021 2022
£'000 £'000
Revenue 189,000 210,000
Cost of Sales 118,500 135,000
Gross profit 70,500 75,000
Administrative expenses 28,000 32,000
Distribution costs 35,000 31,000
Financial Income 6,000 6,500
Finance costs 6,900 8,100
Profit for the period 6,600 10,400

Statement of financial position as at 31 December

2021 2022

£'000 £'000
Non-current assets 590,000 655,000
Land and buildings 505,000 555,000
Plant and equipment 85,000 100,000
Current assets 112,900 130,100
Inventories 7,500 10,900
Investments 50,000 80,000
Trade receivables 8,900 13,200
Prepayments 1,500 2,000
Cash at bank 45,000 24,000
Total assets 702,900 785,100
Capital 606,200 624,600
Total equity 606,200 624,600
Non-current liabilities 80,000 110,000
Borrowings 80,000 110,000
Current liabilities 16,700 50,500
Trade payables 8,200 29,000
Accruals 6,000 15,500
Interest payable 2,500 6,000
Total liabilities 96,700 160,500
702,900 785,100

The businesses do not make use of contemporary software to support book-keeping and local accounting
function. This is something which concerns you as you feel that it represents an opportunity for the business
to save time and resource.
4

HNC/HND Business
Your supervisor, one of the firm’s Key Account Managers, has asked you to compile the year-end financial
statements ready for submission and provide, for each client, some detailed analysis of the figures produced,
which will be presented in the form of an accompanying letter. Specifically, you will undertake the
following:

1. From the data provided, you are required to complete the final trial balance as at 31 December 2023 and
prepare the year-end financial statements, taking into consideration accounting principles, conventions and
standards. You will need to make and show appropriate adjustments to both the income statement and the
balance sheet.

In addition, your client Sun’s Hotel is considering whether invest his money to acquire a share of a public
company coded HPG. Because you regularly perform analysis of reports from the information of a number
of public companies, your manager requires you to perform an interpretation of the financial statements of
Hoa Phat Group for the recent five years to 2023.

2. Write an accompanying letter to the client that will be sent with the completed financial statements. The
letter needs to include:
• Calculation of relevant profitably, liquidity, asset usage and investment ratios.
• Critical evaluation of the performance to the business year on year (making reference to data you have
calculated and data provided from the previous year), with reference to relevant benchmarks (if any) as well
as any limitations of using financial ratios as performance measures.
• An outline of the benefits of contemporary accounting software packages, with examples
of products on the market
• Justified your conclusions and recommendations for Sun’s Hotel.

Recommended Resources
Please note that the resources listed are examples for you to use as a starting point in your research –
the list is not definitive
Weblinks
The balance careers. Business letter format with examples. Available at:
https://www.thebalancecareers.com/how-to-format-a-business-letter-2062540
Xerox. Writing an effective business letter. Available at:
https://www.xerox.com/en-us/small-business/tips/business-letter

HN Global
HN Global (2021) Reading Lists. Available at: https://hnglobal.highernationals.com/learningzone/reading-
lists
HN Global (2021) Student Resource Library. Available at:
https://hnglobal.highernationals.com/subjects/resource-libraries
HN Global (2021) Textbooks. Available at: https://hnglobal.highernationals.com/textbooks

HNC/HND Business
 Learning Outcomes and Assessment Criteria
Pass Merit Distinction
LO2 Prepare basic financial statements for unincorporated and
small business organisations in accordance with accounting
principles, conventions and standards LO2 and LO3
P3 Prepare financial statements M2 Produce financial statements D2 Critically evaluate financial
from a given trial balance for sole from a given trial balance, making statements to assess organisational
traders, partnerships and not-for- appropriate adjustments. performance using a range of
profit organisations, to meet measures and benchmarks to make
accounting principles, justified conclusions
conventions and standards.
LO3 Interpret financial statements
P4 Calculate and present financial M3 Evaluate the performance of
ratios from a set of final accounts. an organisation over time, using
financial ratios with reference to
P5 Compare the performance of relevant benchmarks.
an organisation over time using
financial ratios.

HNC/HND Business