Student Name/ID Number

Unit Number and Title Unit 5: Accounting Principles

Academic Year Semester 1, Academic year 2022 – 2023

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

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

Issue Date 26th September 2022

Written report Submission Date To be announced by office

IV Name Ms.Nguyen Kieu Trang (IV), Mr. Martin Ortega-Azurduy (Asst Lead IV), Dr
Doti Chee (Lead IV)

IV Date 22nd September 2022

Submission Format

The submission is in the form of an individual written report. You are required to make use of headings,
paragraphs, and subsections as appropriate. Your report should be written in a concise, formal business
style using 1.5 spacing, type face in Times new roman or Arial and font size 12.

A bibliography should be provided using the Harvard referencing system. Inaccurate use of referencing
may lead to issues of plagiarism if not applied correctly.

You are advised to write between 1,200 to 1,500 words and the word limit is 1,500 words. This word limit
does not include the contents page, the organization profile, tables, diagrams, appendices or references.

Your submission shall include: a portfolio of prepared financial accounts and interpretation of financial
ratios. These are to be produced for a range of different businesses e.g. sole traders, partnerships and not-
for-profit organisations.

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 RSM Vietnam, 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

Part A:
You are initially working with a small business that has been trading for many years and which now needs
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 GreenFlowers at the close of business
on 31 December 2022

GreenFlowers Ltd Company

The extended trial balance
as at 31 December 2022
Initial trial balance Adjustments
Accounts
Debit Credit Debit Credit
£'000 £'000 £'000 £'000
Ordinary share capital (£1 shares) 25,000 10,000
Share premium 12,800 10,000
Trade payables 5,900
Land and buildings – cost 30,000

HNC/HND Business 3
 Land and buildings – accumulated
5,800 1,450
depreciation
Plant and equipment – cost 13,500
Plant and equipment – accumulated
4,500 900
depreciation
Trade receivables 8,800 80
Accruals 375 60
6% bank loan repayable 10,000
Cash at bank 6,225 80
Short-term investment 6,000
Retained earnings 8,300
Financial Expense 250 350
Financial Income 300
Revenue 38,000
Cost of Sales 17,000
Distribution costs 10,200 1,090 80
Administrative expenses 5,500 1,320
Inventories 12,000
Dividends paid 1,500
Tax expense 500
Tax payable 500
Prepayment 80
Interest payable 350
110,975 110,975 13,420 13,420

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 2022 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.
2. Write an accompanying letter to the client that will be sent with the completed financial statements. The
letter needs to include:
• Explain whether you believe that the performance for the year ended 31 December 2022 and the financial
position at that date have improved. You should support your answer with appropriate ratios. (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.
• Justified your conclusions and recommendations for GreenFlowers.

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The following information of GreenFlowers Ltd is relevant:

Statement of profit or loss for the year ended 31 December

2020 2021
£'000 £'000
Revenue 26,000 24,000
Cost of Sales 10,800 10,500
Gross profit 15,200 13,500
Administrative expenses 4,600 4,550
Distribution costs 6,100 6,450
Financial Income 350 150
Finance costs 600 700
Profit before tax 4,250 1,950
Tax expense 900 300
Profit for the period 3,350 1,650

Statement of financial position as at 31 December

2020 2021
£'000 £'000
Asset
Non-current assets 39,000 33,200
Land and buildings 27,000 24,200
Plant and equipment 12,000 9,000
Current assets 24,600 29,365
Inventories 8,000 10,900
Investments 5,000 4,500
Trade receivables 7,000 10,000
Prepayments 100 150
Cash at bank 4,500 3,815
Total assets 63,600 62,565
Equity and liabilities
Equity
Ordinary share capital (£1 shares) 25,000 25,000
Share premium 12,800 12,800
Retained earnings 7,050 8,300
Total equity 44,850 46,100
Non-current liabilities 9,000 8,000
Borrowings 9,000 8,000
Current liabilities 9,750 8,465
Trade payables 8,200 7,080
Accruals 750 555
Tax payable 450 500
Interest payable 350 330
Total liabilities 18,750 16,465
Total equity and liabilities 63,600 62,565

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Part B:
In addition, you must regularly perform analysis of reports from the information of a number of listed
companies. Your manager requires you to perform an interpretation of financial statements of Duc Giang
Chemicals Group JSC for the recent five years from 2016 to 2021. In conjunction with the analysis report
up to 2021, you are required to make forecasts and propose judgments about the appropriateness
(incongruity) of those forecasts based on DucGiang’s interim financial statements for 2022 (combination of
financial and non-financial information available to the public related to DucGiang’s business activities).

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 6
 Learning Outcomes and Assessment Criteria

Pass Merit Distinction

LO2 Prepare basic financial statements for unincorporated and small LO2 and LO3
business organisations in accordance with accounting principles, D2 Critically evaluate financial
conventions and standards statements to assess organisational
P3 Prepare financial statements from M2 Produce financial statements performance using a range of
a given trial balance for sole traders, from a given trial balance, making measures and benchmarks to make
partnerships and not-for-profit appropriate adjustments. justified conclusions
organisations, to meet accounting
principles, conventions and
standards.

LO3 Interpret financial statements

P4 Calculate and present M3 Evaluate the performance of an
financial ratios from a set of organisation over time, using
final accounts. financial ratios with reference to
relevant benchmarks.
P5 Compare the performance of an
organisation over time using
financial ratios.

HNC/HND Business 7