FNSACC601_AE_Sk2of4

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TAFE NSW - Sydney Institute *

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FNSACC601

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Accounting

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Apr 3, 2024

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docx

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Assessment Event 2 of 4: Skills Unit code and name FNSACC601 I Prepare and administer tax documentation for legal entities Qualification code and name Select your Qualification/Course code and name from the dropdown . Student name Student number Document title: FNSACC601_AE_Sk2of4 Page 1 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Version: 20230125 Date created: 25 January 2023 © 2023 TAFE NSW RTO Provider Number 90003 | CRICOS Provider Code: 00591E This assessment can be found in the: Learning Bank The content in this document is copyright © TAFE NSW 2023 and should not be reproduced without the permission of TAFE NSW. Information contained in this document is correct at the time of printing: 1 April 2024. For current information please refer to our website or your Teacher/Assessor as appropriate. Document title: FNSACC601_AE_Sk2of4 Page 2 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Assessment information Table 1 – Assessment information Information Details Assessment event overview The aim of this assessment event is to assess your knowledge and performance in identifying taxation requirements for complex lodgements and returns for legal entities. It involves gathering, analysing and processing taxation-related data to prepare tax documentation and to review and apply compliance requirements. It applies to individuals who use specialised knowledge and systematic approaches and who follow specific guidelines to ensure compliance requirements are met. Work functions in the occupational areas where this unit may be used are subject to regulatory requirements. This unit is designed to meet the educational requirements of the Tax Practitioner Board (TPB). Refer to the FNS Implementation Guide Companion Volume or the relevant regulator for specific guidance on requirements. This assessment is in 4 parts: Part 1: Partnership Case Study Scenario Part 2: Short answer questions Part 3: Structure of Legal Entities Part 4: Prepare Franking Account And is supported by: FNSACC601_AE_SK2of4_Appx_Workbook.xlsx . Note : This unit includes activities and/or templates that include images, graphics and other visual components. If you are unable to complete any activity with the visual resources provided, please contact your Teacher/Assessor for additional support. Unit assessment guide (UAG) Refer to the Unit assessment guide (UAG) before attempting this assessment event. The UAG contains information including assessment requirements and how to achieve a satisfactory result. Document title: FNSACC601_AE_Sk2of4 Page 3 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Information Details Submission instructions When you complete this assessment, submit it for marking as directed by the assessor. Refer to the Submission Checklist at the end of the assessment to ensure you have submitted all requirements. It’s important to keep a copy of all the electronic and hardcopy assessments you submit to TAFE NSW and complete the assessment declaration when submitting the assessment. Document title: FNSACC601_AE_Sk2of4 Page 4 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Task instructions The assessor will use the criteria in the tasks to determine if you have satisfactorily completed this assessment event. Follow these instructions to ensure you demonstrate the required knowledge and skills. Submission points This assessment event includes different submission points. To effectively complete this assessment, you will need to individually submit evidence for each submission point and then await assessor feedback before moving onto the next section. The assessment instructions identify where these submission points are. Document title: FNSACC601_AE_Sk2of4 Page 5 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
SUBMISSION 1 Scenario for Part 1 You work at Azure Beach Accountants and Financial Services (ABAFS) as a Senior Tax Accountant. In your role, you are supervised by the Chief Financial Officer (CFO) in the firm, Cris Rhanda. Cris has assigned you a range of tasks to assist clients with advice as well as in the preparation of their taxes. You should ensure that you comply with Azure Beach Accountants and Financial Services Client Tax Policy (pdf) for all of Parts 2 to 4. Part 1: Partnership Your firm has obtained a new client, Jo and Morgan Rabble, trading as J&M Consulting. Jo and Morgan require their 2023 partnership income tax return and their individual tax returns to be prepared. (Note: You will need to calculate the individual taxable incomes of the partners in this Case study but not the complete actual income tax return). You have been assigned to this task by your task partner. Following an initial meeting with Jo and Morgan, you have been sent an email and source documents containing the information required to complete the tax returns and working papers. You will be required to review the documentation to determine what is relevant for the preparation of the final tax returns. In line with the guidelines provided by the ATO’s lodgement program, you are required to complete the preparation to lodge partnership tax returns. Part 1 Task 1: Prepare a work plan In this task, you are required to establish a work plan to complete the work papers and Income tax return (in a timely manner) while complying with ABAFS’ organisational policy and procedures. Complete the table below for this purpose. You can assume that to comply with the ATO lodgement program, the income tax returns must be lodged by 15 December and your initial meeting with the taxpayer took place on 28 October. Document title: FNSACC601_AE_Sk2of4 Page 6 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Work Plan Table 2 – Plan workload Date Task Expected completion Document title: FNSACC601_AE_Sk2of4 Page 7 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Part 1 Task 2: Review source documentation to establish recording and reporting requirements Analyse data received from the client and identify any discrepancies. Conduct research to identify any updates to compliance requirements and prepare client working papers in accordance with accounting principles and practices. The source documentation received from Jo and Morgan can be found in Information for Part 1: Email and source documents on page 11 . Complete the working papers: in accordance with the compliance requirements relevant to the client’s circumstances adhering to the organisational policy and procedures contained in Azure Beach Accountants and Financial Services Client Tax Policy (pdf) using the organisational spreadsheet and working papers contained in FNSACC601_AE_Sk2of4_Appx_Workbook.xlsx The working papers consist of 4 worksheets: - Worksheet 1: Partnership Net Income - Worksheet 2: Distribution Statement - Worksheet 3: Individual Tax Calculations - Worksheet 4: Further Advice Each worksheet must be completed, and the data entered in the source worksheet must be integrated across Worksheets 1, 2 and 3. When entering data, formulas should be created for worksheet cells to allow calculation of the partners’ individual taxable income. The client’s working papers should include the following tax documentation: calculation of partnership net income - When completing the partnership net income, assume that for tax purposes SBE concessions have been applied in the previous 2 years and the cost of new assets have been fully expensed and that a private ruling has been obtained in respect of the salary to Milo and the commissioner of taxation will allow the amount in full. partnership distribution statement taxable income and tax payable for Jo and Morgan - Note individual tax returns are not required to be prepared. the sources from which the information to prepare the above was gathered issues in which you require further advice or guidance to moderate the decision processes. Document title: FNSACC601_AE_Sk2of4 Page 8 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Part 1 Task 3: Preparation of Partnership tax return Task instructions: Prepare the partnership’s 2023 tax return in accordance with ABAFS’ organisational policy and procedures. You will need to download a pdf version of the return from the ATO website. Assume that SBE Decline in value provisions will be applied in calculating partnership net income. You have also ascertained from the client’s Business Activity statements that $45,000 PAYG instalments have to be remitted in respect of the 2022 year of Jo and $30,000 in respect of Morgan. To prepare the partnership income tax return, use the data from the Excel worksheets you prepared in FNSACC601_AE_Sk2of4_Appx_Workbook.xlsx . The partnership return for the financial year ending 2023 can be downloaded from the ATO’s website. Once completed, the return should be saved as an electronic file in PDF format and named FNSACC601_Family name_First name_Tax return.pdf and submitted to your assessor for marking. Document title: FNSACC601_AE_Sk2of4 Page 9 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Part 1 Task 4: Letter to client Prepare a letter to Jo and Morgan to present them with their tax returns. Prepare the letter using the Azure Beach Accountants and Financial Services Letterhead Template (docx) . Include in the letter the following: a request for authorisation and endorsement for lodgement via declaration statements, which meets legislative requirements for the client(s) to sign instructions for review and lodgement date ensuring ATO timelines are met information about any tax payment/obligations required to be made and applicable dates instructions about the steps required to lodge the income tax return responses to questions presented in the client’s letter additional expenses that have been claimed. Make sure that you include: 1. a reference and the date 2. the recipients’ address 3. a greeting line and a subject line 4. a closing line. Document title: FNSACC601_AE_Sk2of4 Page 10 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Information for Part 1: Email and source documents 1. Email from Jo and Morgan Rabble Dear Tax Agent, It was great meeting you last week. Please find enclosed the partnership profit and loss statement, balance sheet and other information you requested relating to our 2022 partnership and individual income tax returns. Partnership We do not use small business concessions but would like to minimise our tax liability. Our home address is a 221 Bedrock Street Northbridge 2063. Jo's TFN is 666 555 000. Morgan's TFN is 777 666 222. In addition to income from our regular clients, we also held shares in other companies as part of an investment portfolio. Total loan repayments made to Jo were $75,000 including $58,000 interest. The opening balance of accounts receivable was $40,000. We would also like you to consider the following as we believe they may affect our tax returns. Included in the salary and wages is $20,000 paid to our daughter Milo (age 17), Milo works on reception for us 3 afternoons a week after school. She worked for 48 weeks of the year. Can we claim all of this? As discussed with you we sold the 4,000 shares, which were held in the partnership. You mentioned that we might have to pay capital gains tax on this. How do we do that? We received $4,850 from the disposal on 20/06/2022 after $160 agent fees. The shares were acquired on 1 July 2019 at $1 per share. During the year, we spent $20,000 on new office furniture. We have included these in our plant and equipment in our balance sheet. We regularly meet with clients over coffee or lunch, which the partnership pays for. Jo estimates we spent $450 throughout the income year on entertainment expenses. During the year, we took out the following amounts for personal expenses: Jo – 85,000. Morgan – 105,000. A receipt has also been obtained for a donation of $1,500 made by Jo to the RSPCA. Document title: FNSACC601_AE_Sk2of4 Page 11 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Together, we have previously worked with another accountant in managing our personal tax returns for the 2022 income year. The invoice included $500 in professional services relating to tax advisory, which is split between us. We both had private hospital cover for the full year. As discussed, we authorise you to prepare our 2023 partnership and individual tax returns. Please let us know if you have any further questions. Kind regards, Jo and Morgan. Document title: FNSACC601_AE_Sk2of4 Page 12 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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2. Profit and Loss Statement Table 3 – J&M Consulting P&L J&M Consulting Profit and loss statement for the year ending 30 June 2023 $ $ Income Cash sales 680,000 Fully franked dividends 21,000 Bank interest 3,500 Proceeds from sale of 1000 shares (Sold 20 June 2022) 5,000 Interest on drawings – Jo 7,650 Interest on drawings – Morgan 9,450 726,550 Less Expenses Bank charges 250 Entertainment expenses 450 Rent of office premises 225,000 Salary to Jo 90,000 Salary to Morgan 60,000 Other wages 40,000 Superannuation contributions on behalf of Jo 20,000 Superannuation contributions on behalf of Morgan 15,000 Bad debts 2,200 Office overhead expenses 32,000 Document title: FNSACC601_AE_Sk2of4 Page 13 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Depreciation 25,000 Interest on Capital – Jo 21,000 Interest on Capital – Morgan 15,000 Interest on Loans – ABC Finance 17,000 Interest on Loans – Jo 58,000 620,900 Net profit $105,650 Document title: FNSACC601_AE_Sk2of4 Page 14 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
3. Balance Sheet Table 4 – J&M Consulting balance sheet J&M Consulting Balance sheet as at 30 June 2023 $ $ Current assets 214,000 Cash at bank 154,000 Deposits at call 25,000 Debtors 35,000 Non-current assets 179,000 Plant and equipment 254,000 Less accumulated depreciation 75,000 Total assets 393,000 Current liabilities 45,000 Loan – Jo 30,000 Creditors 15,000 Total liabilities 45,000 NET ASSETS 348,000 Partners equity 348,000 Capital – Jo 203,000 Capital—Morgan 145,000 Document title: FNSACC601_AE_Sk2of4 Page 15 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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4. Notes from Partnership Agreement You have previously reviewed the partnership agreement that you have received at the initial meeting and extracted the following: All profit and losses are to be distributed equally after allowing for interest on capital at 6% and interest on drawings at 9%. It also states that Partnership income is equally spilt after considering salaries. Partnership TFN 123 123 123. Partnership ABN 84765555. Post address PO BOX 444 Northbridge NSW 2063. Main business is managerial consulting. The consulting partnership has been operating since 1 July 2009. The business does not sell on the internet. Main business address 13 Cobblestone Lane Northbridge NSW 2063. End of Submission 1 You have now completed this submission point. Submit the evidence for this submission point and then await assessor feedback. Document title: FNSACC601_AE_Sk2of4 Page 16 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
SUBMISSION 2 Part 2: Short Answer Questions Part 2: Task 1: Written questions Read each question carefully. Follow the suggested word count when you answer each question. 1. Key aspects: Preparation of tax documentation Explain key aspects of income tax law relevant to the preparation of tax documentation for a company covering concepts of residence and source related elements of international tax assessable income deductions, tax rebates, and offsets tax accounting. Your answer should be between 250-300 words and include an evaluation of each concept. Document title: FNSACC601_AE_Sk2of4 Page 17 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Document title: FNSACC601_AE_Sk2of4 Page 18 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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2. Administrative aspects of operating a franking account Explain the requirement for a corporate tax entity to keep a franking account and the consequences for an entity if its franking account is in deficit at the end of its income year. Your answer should be between 100 to 150 words . Document title: FNSACC601_AE_Sk2of4 Page 19 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
3. Explain the key steps and processes that a business should take to ensure effective tax governance. Your answer should be between 150-200 words. 4. Briefly list and explain the government tax policy documents issued by Reviews, Treasury and Board of Taxation. Your answer should be 50-100 words. Document title: FNSACC601_AE_Sk2of4 Page 20 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
Part 3: Structure of Legal Entities You work at Azure Beach Accountants and Financial Services (ABAFS) as a Senior Tax Accountant and in your role, you are supervised by the Chief Financial Officer (CFO) in the firm, Cris Rhanda. Cris has assigned you a range of tasks to assist clients with advice as well as in the preparation of their tax. You should ensure that you comply with Azure Beach Accountants and Financial Services Client Tax Policy (pdf). Azure Beach Accountants and Financial Services (ABAFS) have recently acquired a new client, Mark Smith, who owns a business with an income of $200,000. Mark is married to Zoe, and they have 2 children aged 13 and 15 years old. They own their own home and have approximately $60,000 in share investments. Both Mark and Zoe are new to business ownership, as both have only ever been employees and are not clear on the legal and tax aspects of operating a business through various business structures. They need your advice on the different business structures, the advantages, disadvantages, risks and your recommendation on the best option from a taxation viewpoint. Document title: FNSACC601_AE_Sk2of4 Page 21 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Part 3 Task 1: Analysis of the impact of taxation and legal issues on different types of business structures and legal entities Task instructions: Using the template below present an analysis of the impact of taxation and legal issues on different types of business structures and legal entities including showing legal requirements, advantages disadvantages. An analysis of a sole trader is provided as a guide. Table 5 – Analysis of legal entities Structure Legal requirements Advantages Disadvantages Sole Trader: An individual operating as the sole person legally responsible for all aspects of the business. Registration of business name, application for ABN, Registration for GST. Control of assets and operation of a business. Salaries/operating expenses of business allowable deductions. Cannot split the income of the business with others. Personally liable for debts of the business. Partnership: Trust: Document title: FNSACC601_AE_Sk2of4 Page 22 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Company: Document title: FNSACC601_AE_Sk2of4 Page 23 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Part 3 Task 2: Calculation of tax across different types of business structures and legal entities Task instructions: Based on profits of the business being $200,000, calculate the tax payable in each of these 4 different business structures – if the business is operated as: i. As a sole trader. ii. As a partnership between a married couple. iii. As a private company where salaries of $80,000 each are paid to both spouses and the balance is taxed in the company. iv. As a family trust where the beneficiaries of the trust are Mark, Mark’s spouse Zoe and their 2 children. The children will be distributed $416 each, with the balance distributed evenly between Mark and Zoe. Complete your answers in the worksheet document FNSACC601_AE_SK2of4_Appx_Workbook.xlsx . Part 3 Task 3: Recommend a business structure Task instructions: Present a recommendation on suitable business structures to the client after considering the client’s circumstances. Recommendation: Your answer should be 30-50 words. Document title: FNSACC601_AE_Sk2of4 Page 24 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Part 4: Prepare Franking Account For your next task you have been asked to prepare a Franking account for one of ABAFS’ company clients, Congee Pty Ltd. Part 4 Task 1: Prepare franking account for a resident company Task instructions: Prepare the franking account for Congee Pty Ltd for the year ended 30 June 2023 using the information provided below. Congee Pty Ltd is a resident company, which has recorded the following transactions: Table 6 – Transactions $ 12/08/2022 70% franked dividend received 32,000 28/09/2022 Partly franked dividend paid (85% franked) 52,290 20/10/2022 PAYG instalment paid 16,000 1/02/2023 Income Tax refund received 22,500 15/02/2023 PAYG instalment paid 16,000 16/03/2023 Foreign dividend received (no tax was withheld) 7,650 21/04/2023 PAYG instalment paid 10,000 9/06/2023 Partly franked dividend paid (45% franked) 43,155 21/06/2023 Fully franked dividend received 24,045 Congee is not a small business entity. The entity had an opening franking account deficit of $16,400. The relevant franking account deficit tax was duly paid on 19 July 2022. The entity was not granted any variations to its benchmark franking percentage. Document title: FNSACC601_AE_Sk2of4 Page 25 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Table 7 – Franking account Date Particulars Debit Credit Balance End of Submission 2 You have now completed this submission point. Submit the evidence for this submission point and then await assessor feedback. Document title: FNSACC601_AE_Sk2of4 Page 26 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Appendix: Links Below is a list of all URLs linked in this assessment. Table 8 - Links Link title URL FNSACC601_AE_SK2of4_Appx_Workbook https://share.tafensw.edu.au/share/items/38e4a1a3- 38db-4d36-8a33-fdd40d6c3108/0/? attachment.uuid=b52334cd-1c80-42b4-baeb- d7313d6995a4 Azure Beach Accountants and Financial Services Client Tax Policy (pdf) Simulated Organisation permalink https://share.tafensw.edu.au/share/items/b581f384- 532f-47f4-9803-a95c223fc9bb/0/? attachment.uuid=7cda9de7-a3e2-44f3-8c41- 9d38d16ae696 Document title: FNSACC601_AE_Sk2of4 Page 27 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Assessment checklist The Assessment checklist lists the requirements for each task in this assessment as outlined in the student assessment instructions. The assessor will use this checklist to ensure all required tasks have been completed and submitted and provide feedback for each task. Note that S = Satisfactory and U/S = Unsatisfactory. Table 9 – Assessment feedback Did the student S or U/S Feedback Part 1 – Advice to partnership Assessment event Sk2of4: Part 2 completed Student has prepared a work plan to complete the work papers and income tax returns in a timely manner. Student has prepared information based on a scenario for 2 clients who are in a partnership business entity. Student has successfully calculated the taxable income and completed the tax return for the partnership. Student has successfully calculated the taxable income and the respective income tax payable for each of the 2 individuals. Student has prepared a letter to the 2 partners in the partnership to present them with their tax returns S U/S Part 2 – Short answer questions Assessment event Sk2of4: Part 1 completed Successfully provided answers to all short answer questions. S U/S Part 3 – Structure of legal entities Assessment event Sk2of4: Part 3 S Document title: FNSACC601_AE_Sk2of4 Page 28 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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Did the student S or U/S Feedback completed Student address provided scenario: presents an analysis of the impact of taxation and legal issues on different types of business structures and legal entities analyses the revenue and expenses of a business and calculates its taxable income as a sole trader, partnership, company and family trust student recommends most suitable business type based on the taxable income calculated for each of the 4 business structures. U/S Part 4 – Prepare franking account: Assessment event Sk2of4: Part 4 completed Based on provided information, student prepares a franking account for the scenario company Congee Pty Ltd S U/S Submission checklist Submit the following for marking: Assessment 2 of 4 Skills Submission Point 1 Part 1 completed Assessment 2 of 4 Skills Submission Point 2 Parts 2, 3 and 4 completed Document title: FNSACC601_AE_Sk2of4 Page 29 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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This page is not required for online assessment submissions Student assessment declaration This assessment is my original work and has not been: copied from any source without proper referencing written for me by any other person except where such collaboration has been approved by a teacher or assessor. Student signature and date Assessment feedback Reasonable adjustment was in place for this assessment event. If so, please provide details of any reasonable adjustment strategies that were implemented: Reasonable adjustment strategies : Assessment outcome Satisfactory Unsatisfactory Comments : Assessor name, signature and date Student acknowledgement of assessment outcome Would you like to make any comments about this assessment? Student name, signature and date Document title: FNSACC601_AE_Sk2of4 Page 30 of 30 Resource ID: SEMX_22_003_FNSACC601_AE_Sk2of4 Version: 20230124
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