P1 describe the purpose of accounting for an organisation
Using the textbook you are to describe the purpose of accounting for an organisation. We will choose the organisation in the first lesson
Within your response you
P2 explain the difference between capital and revenue items of expenditure and income
P3 prepare a 12-month cash flow forecast to enable an organisation to manage its cash
M1 analyse the cash flow problems a business might experience
D1 justify actions a business might take when experiencing cash flow problems
Part A - P3
Your line manager shows you the accounting figures for the last six months, which are detailed in the attachment. Based on these figures, and the additional information below, prepare a 12 month cash flow forecast showing the following:
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Opening balance for each month
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Closing balance for each month
Part B - M1
Look closely at the results shown in your cash flow forecast for January to December. Analyse any problems that are evident in your figures and consider the actions that your company might take to resolve these problems.
Analyse each problem by explaining:
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Exactly what the problem is
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When the problem is going to occur
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What the cause of the problem is
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What impact the problem has on the monthly net cash flow and on the final closing balance.
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Write a report showing your analysis of the cash flow problems and on the action that might be taken.
You should include a copy of the cash flow forecast with your analysis
Part C - D1
Complete your report from Task 2 by recommending any action that needs to be taken to avoid cash flow problems in the first six months.
P4 prepare a profit and loss account and balance sheet for a given organisation
Download the Word document which provides you with the Gale and Routley Ltd cases study.
You are to complete BOTH a Profit and Loss Account AND a Balance Sheet
P5 perform ratio analysis to measure the profitability, liquidity and efficiency of a given organisation.
M2 analyse the performance of a business using suitable ratios.
D2 evaluate the financial performance and position of a business using ratio analysis.
Be able to prepare profit and loss accounts and balance sheets
Profit and loss account
: purpose and use; trading account and calculation of gross profit (sales, purchases,
opening and closing stocks); calculation of net profit (overheads, other revenue income eg discounts
received); commission received; transfer of net profit to balance sheet
Balance sheet
: purpose and use; vertical presentation; order of permanence; fixed assets; current assets;
intangible assets; long-term liabilities; current liabilities; working capital; net assets; transfer of net profit
from profit and loss account; capital employed
International Equivalents
: changes to reporting requirements under the International Accounting Standards
(IAS), eg statement of comprehensive income, statement of financial position.
4
Be able to review business performance using simple ratio analysis
Profitability
: gross profit percentage of sales; net profit percentage of sales; return on capital employed
(ROCE)
Liquidity
: current ratio; acid test ratio/liquidity ratio
Efficiency
: debtors’ payment period; creditors’ payment period; rate of stock turnover