Vocational scenario

Having successfully completed your six$-$month probation as a Graduate Trainee at the accountancy 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:

An extended trial balance for each business, including accruals, prepayments and figures for bad debts and depreciation

A range of comparative key performance ratios from the previous year.

Note: this data is to be given to students in spreadsheet format. Financial data must be realistic and in context to meet local needs.

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.

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 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:

$3.$ Calculation of relevant profitably, liquidity, asset usage and investment ratios

$4.$ 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 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 conclusions and recommendations for your client.