HND LEARNER ASSESSMENT SUBMISSION AND DECLARATION

Learner Name: Muhammad Hamid Raza

Assessor Name: Miss Khiza Sohail

BTEC Programme Title:

Accounting Principles
Unit or Component Number and Title:
Unit 5 Accounting Principles
Assignment Title:
Accounting Principles
Date Assignment Submitted:
17-May-2025

Please list the evidence submitted for each task. Indicate the page numbers where the
evidence can be found or describe the nature of the evidence (e.g. video, illustration).

Assignment task reference Evidence submitted

Learner declaration

I certify that the work submitted for this assignment is my own. I have clearly
referenced any sources used in the work. I understand that false declaration is a form of
malpractice.

Learner signature: Malik Hamid Khokhar Date: 17-May-

2025
 MEMORANDUM

To: Founder, ABC Catering Services

From: Graduate Trainee, UK SME Unit, Company XYZ
Date: 21-26 April 2025

Subject: Cash Budget Analysis, Scenario Modeling, and Budgetary Control for
FY 2022

Executive Summary

This memorandum presents a detailed cash budget for ABC Catering Services for the financial
year 2022. It is based on initial data and assumptions provided. Additionally, four budget
scenarios have been modeled to analyze the impact of strategic decisions. The memorandum also
evaluates the role of budgeting in organizational planning and control, offering practical
recommendations for financial efficiency and resource deployment.

Base Case Cash Budget Summary

The base cash budget assumes:

 Sales revenue growth at 5% monthly

 Purchases and overheads at 30% and 15% of monthly sales revenue, respectively
 Fixed salaries and rent/property expenses
 Marketing expenses at 10% of sales revenue
 Van expense growth at 5% monthly
 Additional equipment purchase in August for £8,000
Key Results:

 Opening Balance: £8,000

 Closing Balance (Dec): £305,827.05
 Monthly positive net cash flow, with August reflecting a one-time dip due to equipment
purchase

This base case demonstrates strong liquidity and healthy revenue progression throughout the
year.

Scenario Analysis: Variance Modelling

1. Price Discount by 20% with 10% Sales Volume Increase

 Revenue decreases due to discount but slightly recovers from volume growth
 Overall monthly cash inflow declines
 Closing Balance is lower compared to base case (~15% drop)
 Strategic Insight: Risky unless increased volume significantly offsets discount

2. Marketing Budget Increase by 10% (20% Revenue Growth)

 Marketing expenses increase by 10% monthly

 Revenue rises by 20% monthly
 Net cash flow increases sharply
 Closing Balance significantly exceeds base case
 Strategic Insight: High ROI on marketing – recommend aggressive digital strategy

3. One-Month Trade Credit from Suppliers

 Purchases shifted to following month

 Initial month (Feb) shows surge in cash flow
 Balances normalize from March onwards
 Helps in short-term liquidity
 Strategic Insight: Favorable credit terms can optimize short-term working capital

4. 15% Reduction in Rent/Property Costs

 Monthly savings of £1,800

 Consistent improvement in net cash flow
 Closing balance improves modestly
 Strategic Insight: Cost negotiation can provide long-term cash buffer

Budgeting in Planning and Control

Benefits

 Forecasts financial health and ensures liquidity

 Supports strategic decision-making
 Identifies performance gaps early
 Enhances investor confidence

Limitations

 Relies on accurate forecasting; market changes can distort predictions

 Static budgets may not reflect real-time needs
 Can lead to rigid cost control, discouraging innovation

Recommended Budgetary Control Solutions

1. Flexible Budgeting
Allows adaptation of budgets to sales volume fluctuations, ensuring responsiveness.
2. Rolling Forecasts
Monthly revisions allow for real-time tracking and course correction.
3. Variance Reporting
Monthly variance analysis helps detect issues early (e.g., overspending on van expenses).
4. Cost-Benefit Justification
Every expense (like marketing or equipment) should undergo ROI analysis.
5. Use of Accounting Software
Implement cloud-based accounting systems like QuickBooks or Xero for budget tracking.
Conclusion

The cash budget for ABC Catering Services reveals a strong financial outlook
under the base case. However, strategic decision-making, especially regarding
marketing investment and supplier credit, can further enhance cash flow. Regular
budgeting and variance analysis should be institutionalized to maintain robust
financial control.
 Prepared by:
Muhammad Hamid Raza
Graduate Trainee, UK SME Unit
Company XYZ
Contents
The Accounting Function within an Organization........................................................................2
Introduction ................................................................................................................................2
The Purpose and Scope of Accounting in Complex Operating Environments ..............................2
The Accounting Function in Supporting Informed Decision-Making ...........................................3
Addressing Stakeholder and Social Requirements .......................................................................3
Accounting Departments and Core Skills All Accountants Need .................................................4
Financial Accounting ...............................................................................................................4
Managerial Accounting............................................................................................................4
Cost accounting .......................................................................................................................5
Assignment of Managing Accounting Systems and Technology ..................................................5
Professional Ethics, Regulation and Compliance in Accounting ..................................................6
Budgeting ...................................................................................................................................6
Cash Budget for 12 Months ........................................................................................................7
The 12-Month Cash Budget .....................................................................................................7
Variance Analysis .......................................................................................................................8
Scenario 1: Cutting the Price by 20% .........................................................................................8
scenario 2: 10% increase in Marketing Budget ............................................................................8
Scenario 3 Suppliers Gave Partner Companies One Month's Trade Credit ...................................8
Scenario 4 Reduce Rent(s)/House payments by 15,. ...................................................................9
Budgeting in the Organization .....................................................................................................9
Advantages of Budgets................................................................................................................9
Limitations of Budgets .............................................................................................................. 10
Fiscal Oversight Mechanisms .................................................................................................... 10
Conclusion ................................................................................................................................ 10
References ................................................................................................................................ 11

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The Accounting Function within an Organization

Introduction
Accounting is not numbers and balance sheets all you know. It's the lifeblood of any firm that
gives you financial visibility and enables you to do your work and make decisions. In
competitive marketplaces such as the one in the vocational situation, depending on the SME's
size, accounting remains more important, most of all for small and medium enterprises (SME's),
primarily because of resources management and business sustainability. This blog explains what
accounting is and does in companies, most of all so in SMEs, and what accounting does for
decision-making, control and stakeholders involvement.

The Purpose and Scope of Accounting in Complex Operating

Environments

Organizations are confronted with various challenges from regulatory reform to technological
progress, in today's tough business environment. Accounting, in such an instance, serves to bring
about clarity, transparency, and consistency, as well as assist the organization in making strategic
decisions.

Accounting plays a vital role in ensuring that the financial statements of an organization are
timely and properly prepared, brought up to date, grouped, done at regular intervals, reported in
an orderly manner and that everything is in order. It's the instrument that renders companies
financially sound by maintaining records of income, expenses, assets and liabilities. The role
becomes even more important in the scenario of SMEs expanding globally like the company in
the case study with the £200 million turn over and the regional presence in Southeastern Asia.

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In a globalized world where multi-national companies have to contend with the peculiar
idiosyncrasies of each jurisdiction, accounting is a map to navigate through these complexities. It
enables companies to be in compliance with local tax regulations,IFRS and international
accounting standards. For instance, accounting systems rooted in Britain ought to be able to
communicate with financial standards in Singapore and Southeast Asian countries, some of
which have their accounting practices and regulations.

The Accounting Function in Supporting Informed Decision-Making

Accounting is more than just a mere bookkeeping process; it is a basic management tool.
Management needs to make decisions that will determine the future of the firm, and therefore,
reliable information is needed. Accountants provide essential information that conveys to
management the company's financial position in financial reports such as the balance sheet,
profit and loss account, and cash flow statement.

For example, an income statement of revenue streams and expenses is a method of evaluating the
profitability of a business. Cash flow statements also give business owners information on the
flow of cash within the business, allowing them to better manage liquidity. Information on this is
vital in making major investment decisions, expansion, saving, and resource allocation.

And accounting allows the businesses to evaluate risk and opportunity. Investigating production
cost in deeper detail with the help of cost accounting and price derivation methods. This
capability means that if your business is operating in the red, the accounting system can lead you
to recognize production or sales issues which can make you profitable and minimize overhead.

Addressing Stakeholder and Social Requirements

The stakeholders of a firm are not only its investors and shareholders but also the customers,
employees, suppliers, and, more broadly, the community. Accounting [1] is an effective means
of promoting open communication among these different groups, especially given the growing
pressures from society for greater transparency and ethical behavior in organizational activities,
which in their turn affect the environment.

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For instance, investors put nearly total trust in financial reports to decide whether the financial
condition of a firm is good enough to invest. If a company cannot provide accurate financial
information or was found to have practiced fraudulent accounting, it will suffer from investors
kepticis, and finally, would lose the trust of the investors. Moreover, stakeholders such as
employees and suppliers are directly affected by the economic condition of a firm. The adequate
accounting system allows prompt payment of labor to employees and fulfillment of payment
terms to suppliers.

And, more and more, companies are being asked to be responsible corporate citizens in today’s
society. ESG (Environmental, Social, and Governance) as a Reporting Imperative ESG
sustainability reporting is emerging has an important part of contemporary accounting standards.
Businesses are empowered to evidence commitment to sustainable activities, like low carbon
emissions or community projects, by providing accurate financial data and this can help rebound
holders trust.

Accounting Departments and Core Skills All Accountants Need

Accounting is a diverse career with different fields that operate within the business environment.
The major categories of accounting include.

Financial Accounting
It is the practice of compiling financial reports that is in the service of external users that include
investors, creditors, and regulators. It is regulated by good accounting standards like IFRS or
GAAP.

Managerial Accounting
Also referred to as management accounting, the practice involves meeting the needs of internal
stakeholders, i.e., managers, through provision of decision-making information to facilitate
diverse operations and strategic initiatives. This entails budgeting, forecasting, and cost
accounting.

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Cost accounting
A specialized area of managerial accounting that concerns the cost of goods or services and their
impact on profitability.

In the area of skills, accountants should be financially literate and should be skilled to use
software like QuickBooks, SAP or Microsoft Excel. communication skills because as an FM
you need to communicate to non-financial managers and stakeholders on financial issues.
Accountants should apply critical thinking, be detail-oriented, and be knowledgeable in issues of
ethics in a bid to address complex financial issues and address regulatory needs.

Assignment of Managing Accounting Systems and Technology

Argument for or against There are a number of reasons why we need good systems technology in
the accounting system today.

The impact of technology on accounting has revolutionized the way business operations are
conducted. Today, we are in an age of automation where accounting software and cloud-based
platforms allow organizations to automate most of the accounting tasks, thus increasing their
efficiency and accuracy.

For instance, cloud accounting software such as Xero, QuickBooks Online, and Sage allow
businesses to organize their paperwork, process invoices and payments, and offer a simple
solution to generate financial reports in real-time. Not only do these applications make processes
more efficient but also reduce opportunities for errors related to conventional manual accounting
procedures.

In addition, new technologies like artificial intelligence, machine learning, and blockchain are
also being implemented in accounting systems. Artificial intelligence can be helpful to
accountants by assisting them in automating tasks like data entry, invoice processing, and
financial analysis. But blockchain provides a secure and efficient way of storing financial
transactions, which can be helpful in fraud protection as well as making auditing easier.

Having these technologies in place can be a game changer for the SME industry. SMEs are able
to grow rapidly and implement decisions based on data, fueled by precise and automated
accounting systems, and are not concerned with account reconciliation. and inefficiency.

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Professional Ethics, Regulation and Compliance in Accounting
Ethics, regulations, and compliance are mandatory elements in the field of accountancy, tending
to provide transparency and fairness in financial statements. Accountants are subject to a wide
ethics framework, ranging from integrity and objectivity, to confidentiality. These are of utmost
importance for the establishment of a relationship of trust between parties and for supporting the
credibility of financial data.

However, the accounting field also involves yet another set of issues relating to compliance and
ethics. A few of the various changing regulations which the company must understand include
legislative bills like the Sarbanes-Oxley Act, international accounting standards, and tax codes.
Failure to understand such intricacies can result in dire monetary penalties and lawsuits for a
company, along with possible damage to its reputation.

For instance, the UK's Financial Conduct Authority (FCA) has strict corporate governance and
financial reporting rules that the company has to follow. Likewise, foreign companies doing
business in South East Asia or Singapore, should be cognizant of the host country's tax
legislation and accounting standards.

In recent years, we have witnessed a focus on ethics and corporate social responsibility (CSR) in
addition to the financial regulation. Accountants are now asked not only to report on financial
performance but also on the impact that companies they audit have on society, the environment,
and governance.

Budgeting
An Essential Decision-Making Tool, Resource Manager, and Cost Controller

Budgeting is an important element of any business, particularly for new start-up companies in
the hospitality and catering industries because it allows planning from a financial point of view
and strategic allocation of resources. Budgets are not merely a matter of accounting for a firm's
financial position but also as goals to be met and as a guide to channel the business's operating
and strategic activities. Budgeting is important for a new venture such as your hospitality and
catering client as far as performance monitoring, cash flow management, and enabling
sustainable growth are concerned.

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The functions of accounting and finance within an organization are crucial for the effective
allocation of resources and the management of costs. By leveraging real-time budgetary data,
companies are able to pinpoint the sectors where resource allocation can be achieved in a cost-
effective and efficient manner, ultimately fostering profitability.

In the following sections, we will discuss the process of creating a total 12-month cash budget
for the new venture and then using variance analysis to report the impact of shifting financial
conditions.

Cash Budget for 12 Months

First, we will create a cash budget that has all the estimated cash receipts and payments over the
next 12 months. This is the lifeblood, if you will, of the financial planning of the company and
allows the business to know when they will have cash shortages or surpluses that will influence
other decisions.

The 12-Month Cash Budget

The cash budget will generally show

• Sales: Anticipated revenue from sales within the next 12 months.

• Cost of Goods Sold (COGS): This figure should include all the expenses of manufacturing and
rendering services.

• Expenses: This will include rent, advertising, utilities, wages and any other overhead.

Capex: A Huge purchase, like kitchen equipment or furniture.

• Loan Repayments: Any repayments of loans borrowed.

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Variance Analysis
After the accomplishment of the previous steps, it is pertinent to introduce the variance analysis
provided for the scenarios represented in the above analogy. Variance analysis makes it possible
to analyze differences between budgeted amounts and actual results, and through it, we can
identify places where the company is performing well and where corrections are to be made.

These are the various possibilities that we have to model

Scenario 1: Cutting the Price by 20%

The company takes a net discount of 20 on the product, resulting in an equal 10% increase in the
volume of sales per month.

• Cost reduction: A 20% price reduction is expected to lead to an increase in sales volume, which
can offset the decrease in price. This will identify whether the increased sales volume is enough
to offset the revenue loss due to the price decrease.

scenario 2: 10% increase in Marketing Budget

A 10% increase in the marketing budget is followed by an equivalent increase of 20% in the
sales revenue.

• Budget Adjustment: By raising the marketing budget, the company would be able to spend
more on advertisements, promotions, or social media. The variance will show how effective the
increase in the marketing budget was.

Scenario 3 Suppliers Gave Partner Companies One Month's Trade

Credit
• The company will negotiate with suppliers for a month's trade credit. The company therefore
does not have to pay for goods in advance, which could relieve cash flow.

• Budget Adjustment – It will be effective only as a temporary addition to the cash holding of the
organization and will be reflected in the variance analysis, where cash expenditure is affected.

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Scenario 4 Reduce Rent(s)/House payments by 15,.
• Corporate has obtained a discount on monthly rental by 15% when business premises/property
cost is negotiated;-

• Budget Impact: Reduced fixed costs will improve profitability. And variance analysis will
inform us how this does impact the company's bottom line.

Budgeting in the Organization

A Tool of Planning and Control

The budgeting process is a critical part of resource planning and control within a hospitality and
catering company. Companies can achieve the following goals through effective budgeting:

• Financial Goals Defined: Budget enables defining and quantifying financial goals for a given
time period to ensure available resources are utilized properly.

• Track Cash Flow: Forecasts of cash inflows and outflows on a monthly basis and resultant
planning will prevent a business owner from running short of cash.

• Performance Monitoring: Variance analysis, as illustrated by the above examples, allows

organizations to track actual performance against budgeted targets, thus highlighting areas of
excellence, as well as signaling areas of weakness that require remedial action.

Advantages of Budgets
• Resource Allocation: Budgets also ensure the proper allocation of resources by determining
expenditure limits that will not allow the company to go beyond its financial expenditure in
certain categories, such as marketing or payroll.

•Cost Management: With continuous monitoring, organizations can easily detect and correct
budget variances, thus keeping costs under control and within manageable levels.

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• Planning for the Future: Looking to the future, companies that budget can plan for growth,
investment, and other important decisions.

Limitations of Budgets
• Rigidness: Budgets are constructed on the basis of assumptions that are difficult to alter. The
budget cannot be adapted in the event of unforeseen circumstances, like an economic downturn
or supply chain disruptions.

• Time-Consuming: The development and revision of a detailed budget usually takes time, with
ongoing revision and updating after actual performance data become available.

• Excessive Emphasis on Short-Term Perspectives: Finance budgets are usually constructed with
the prime concern being short-term budgets and neglecting to incorporate long-term strategic
investment or market change as a consequence.

Fiscal Oversight Mechanisms

Organizations can improve these limitations by implementing the following budgetary control
measures:

• Zero Based Budgeting (ZBB): Here, no expenses are assumed to be funded by the budget,
hence the need for justification of every dollar for every budget cycle.

• Flexible Budgets: These may be adjusted with fluctuations in the business activity level so that
the reaction can be better to shifting conditions.

• Rolling Forecasts: Ongoing revisions are possible since forecasts are revised on a continuous
basis, using current performance information.

Conclusion
Accounting Importance of accounting (in particular budgeting) within an organization Few
would dispute the importance of accounting and budgeting within an organization. It promotes
effective allocation of resources, demands better decision-making, and enables organizations to
respond to change in a bid to stay abreast with changing business environments. For an

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expanding hospitality and catering company, preparation of a detailed 1-year cash budget with
variance analysis is helpful to drive the day-to-day operations, project cash flows and drive
expansion in a competitive business environment. By effectively responding to precise
information, one can foster long-term growth for their business while ensuring that the
organization possesses the necessary flexibility and agility to circumvent possible challenges.
The below details the steps in creating an Excel spreadsheet to compare Scenario 1, Scenario 2,
Scenario 3, and Scenario 4. For each scenario that will be compared in order to examine the
effects of different changes in finances (like discounting, increasing costs of marketing, adding
trade credit, or decreasing rental charges), there is a specific formula. Below are the
specifications for each scenario and the corresponding Excel formula to use.

References
1. Financial Accounting Standards Board (FASB)
FASB is the standard-setting organization for accounting principles in the United States.
https://www.fasb.org/
2. International Financial Reporting Standards (IFRS)
IFRS provides global accounting standards for financial reporting.
https://www.ifrs.org/
3. Accounting Tools - Budgeting in Business
A detailed guide on the importance of budgeting in business.
https://www.accountingtools.com/articles/2017/5/11/budgeting
4. Investopedia - The Role of Accounting in Business
Overview of accounting’s role in business operations.
https://www.investopedia.com/ask/answers/122314/what-role-does-accounting-play-
business-operations.asp
5. The Chartered Institute of Management Accountants (CIMA)
CIMA focuses on management accounting, including cost and managerial accounting.
https://www.cimaglobal.com/
6. National Federation of Independent Business (NFIB) - Financial Management for
Small Business
A guide for small businesses on financial management and budgeting.
https://www.nfib.com/
7. Harvard Business Review - Financial Decision-Making for Managers
HBR provides insights into the role of accounting in decision-making processes.
https://hbr.org/2018/02/financial-decision-making-for-managers
8. QuickBooks - How to Create a Budget for Your Business
QuickBooks offers tips for small businesses on budgeting and financial forecasting.
https://quickbooks.intuit.com/r/reports-and-accounting/how-to-create-a-budget-for-
your-business

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9. Sage - The Importance of Budgeting for Small Businesses
An article outlining why budgeting is essential for small business owners.
https://www.sage.com/en-gb/blog/the-importance-of-budgeting-for-small-businesses/
10. Small Business Administration (SBA) - Budgeting for Small Business
SBA offers resources on how small businesses should manage their budgets.
https://www.sba.gov/business-guide/manage-your-business/finances
11. Xero - Cash Flow Management for Small Business
A guide by Xero on how to manage cash flow and make informed financial decisions.
https://www.xero.com/us/resources/cash-flow-management-guide/
12. Business News Daily - Budgeting for Small Business Owners
A comprehensive overview of why budgeting is vital for small business owners.
https://www.businessnewsdaily.com/1607-budgeting-for-small-business.html
13. Khan Academy - Introduction to Budgeting
Khan Academy’s learning resource for understanding budgeting basics.
https://www.khanacademy.org/college-careers-more/personal-finance
14. Corporate Finance Institute (CFI) - Budgeting Basics
CFI provides an in-depth explanation of the importance of budgeting in financial
management.
https://corporatefinanceinstitute.com/resources/knowledge/other/budgeting/
15. Entrepreneur - Financial Planning for Startups
Entrepreneur.com offers resources on financial planning and budgeting for startups.
https://www.entrepreneur.com/article/281089

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