Lesson Element
Unit 13: Management accounting
Luke’s finances
Instructions and answers for tutors
These instructions cover the learner activity section which can be found on page 6. This Lesson Element supports Cambridge Technicals Level 3 in Business.
When distributing the activity section to the learners either as a printed copy or as a Word file you will need to remove the tutor instructions section.
The activity
In this lesson element learners are asked to apply their knowledge of both profit and cash flow to the scenario of a student going to university. By completing the activities learners should be able to understand that a business can be profitable over the long term but still suffer cash flow difficulties in the short term.
Suggested timings
- Activity 1: 20 minutes
- Activity 2: 20 minutes
- Activity 3: 45 minutes
Version 11© OCR 2016
Scenario
Luke has just started life as a student at the University of Nottingham. This is his first term and it will last for ten weeks.
Luke receives £70 each week from his parents and at the start of the term his grandparents gave him £200. He has arranged a student loan that will mean that £1000 will be credited to his account at the end of the fifth week of term and a further £1000 at the end of the eighth week.
Luke has to pay for his accommodation at the University (£1200) at the start of week four. He expects that he will pay £200 for books in week one and intends to allow himself £100 each week for food, bus fares, socialising, mobile phone charges and similar expenses.
Activity 1
Ask your learners to complete the first term income and expenditure table (answers given in red below):
Luke’s First Term: income and expenditure / £INCOME
Income: parents / 700
Income: other / 2200
Total income / 2900
EXPENDITURE
Accommodation / 1200
Weekly expenses / 1000
Books / 200
Total expenditure / 2600
Surplus or deficit? / 500
Activity 2
Ask your learners to complete the cash flow forecast (answers given in red below):
Term week / 1 / 2 / 3 / 4 / 5 / 6 / 7 / 8 / 9 / 10Opening Bank Balance* / 0 / (30) / (60) / (90) / (1320) / (350) / (380) / (410) / 560 / 530
Cash inflows
Income: parents / 70 / 70 / 70 / 70 / 70 / 70 / 70 / 70 / 70 / 70
Income: Other / 200 / 1000 / 1000
Total inflows / 270 / 70 / 70 / 70 / 1070 / 70 / 70 / 1070 / 70 / 70
Cash outflows
Accommodation / 1200
Weekly expenses / 100 / 100 / 100 / 100 / 100 / 100 / 100 / 100 / 100 / 100
Books / 200
Total outflows / 300 / 100 / 100 / 1300 / 100 / 100 / 100 / 100 / 100 / 100
Closing Bank Balance** / (30) / (60) / (90) / (1320) / (350) / (380) / (410) / 560 / 530 / 500
* opening bank balance = the previous month’s closing bank balance
** closing bank balance = opening bank balance + total inflows – total outflows
Activity 3
Ask your learners to answer questions 1 to 3 (suggested answers given in red below):
1.When will Luke need help with his finances? Why is this? What can he do?
2.How can Luke’s cash flow problems be related to business?
3.Can a profitable business have a negative cash flow?
Version 11© OCR 2016
Lesson Element
Unit 13: Management accounting
Learner Activity
Luke’s finances
In this lesson element, you will apply your knowledge of both profit and cash flow to the scenario of a student going to university.
Scenario
Luke has just started life as a student at the University of Nottingham. This is his first term and it will last for ten weeks.
Luke receives £70 each week from his parents and at the start of the term his grandparents gave him £200. He has arranged a student loan that will mean that £1000 will be credited to his account at the end of the fifth week of term and a further £1000 at the end of the eighth week.
Luke has to pay for his accommodation at the University (£1200) at the start of week four. He expects that he will pay £200 for books in week one and intends to allow himself £100 each week for food, bus fares, socialising, mobile phone charges and similar expenses.
Version 11© OCR 2016
Activity 1
Ask your learners to complete the first term income and expenditure table (answers given in red below):
Luke’s First Term: income and expenditure / £INCOME
Income: parents
Income: other
Total income
EXPENDITURE
Accommodation
Weekly expenses
Books
Total expenditure
Surplus or deficit?
Activity 2
Ask your learners to complete the cash flow forecast (answers given in red below):
Term week / 1 / 2 / 3 / 4 / 5 / 6 / 7 / 8 / 9 / 10Opening Bank Balance*
Cash inflows
Income: parents
Income: Other
Total inflows
Cash outflows
Accommodation
Weekly expenses
Books
Total outflows
Closing Bank Balance**
* opening bank balance = the previous month’s closing bank balance
** closing bank balance = opening bank balance + total inflows – total outflows
Activity 3
Ask your learners to answer questions 1 to 3 (suggested answers given in red below):
1.When will Luke need help with his finances? Why is this? What can he do?
2.How can Luke’s cash flow problems be related to business?
3.Can a profitable business have a negative cash flow?
Version 11© OCR 2016