Role of Accounting in Managing Market Complexities

This project report is all about recording all transactions in order to prepare journal entries, ledgers, trial balance and preparation of variety of financial statements. It also stresses on rectification of errors in order to rectify all the mistakes incurred in the transactions.

FINANCIAL
ACCOUNTING
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INTRODUCTION
Role of accounting gets increases with the passage of time as increasing market
complexities needs to be manged with the time. This project report is all about recording all
transactions in order to prepare journal entries, ledgers, rial balance and preparation of variety of
financial statements. This is also stresses on rectification of errors in order to rectify all the
mistakes incurred in the transactions.
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CLIENT 1
a) Prime Book entry
TASK 1
1. Prepare journal entries and calculation of owners capital
A. Preparing the books of Prime Entry in entity
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b) Complete double entry system recording
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Prepare trial balance
TASK 2
a. Preparing statement of profit and loss of an entity
P&L of Peter Pipe for the year ended at 31st December 2016 is as follows:
Income statement
Particulars Amount (in £)
Sales 1215000
Closing stock 101640
1316640
Less:
Opening stock 82200
Purchase 778800
Wages and salaries 177500
Add: Outstanding salaries and 1220 178720
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wages
1039720
Gross profit 276920
Less: Indirect expenses
Motor expenses 87400
Administration expenses 17650
Heating and lighting 4950
Advertising expenses 13280
Less: prepaid 8470 4810
Depreciation on premises 5400
Depreciation on equipment 17250
Depreciation on motor vehicle 2800
Total indirect expenses 140260
Net profit 136660
b. Preparation of Positional statements
Statement of financial position of Sole trader Peter Pipe
for the year ended at 31st December, 2016
Particulars Amount (in £)
Current assets
Closing stock 101640
Prepaid advertising 8470
Receivables 106960
cash in hand 2440
Total current assets 219510
Fixed assets
Freehold premises 270000
Less depreciation: 42900 227100
Equipment 172500
Less: Depreciation 114750 57750
Motor Vehicles 28000
Less: Depreciation 16800 11200
Total fixed assets 296050
Total assets 515560
Liabilities
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Current liabilities
Payables 76910
Outstanding salaries 1220
Bank overdraft 11290
Total current liabilities 89420
Capital 332120
Add: net profit 136660
Less: Drawing 42640 426140
Total liabilities 515560
TASK 3
a. Preparing profit and loss a/c for Raintree Ltd.
Profit and loss account of Rain tree Ltd.
For the financial year ended at 30th September 2016
Particulars he Amount (in £)
Sales 107000
Less: Sales return 2000 105000
Closing stock 18000
123000
Opening stock 17000
Purchases 32000
49000
Gross profit 74000
Depreciation on building 1000
Depreciation on plant and machinery 10000
Administration cost 28000
Distribution cost he 22000
Less: Prepaid rent 3000
Add: Outstanding salaries 2000 21000
Corporation tax 4000
64000
Net profit 10000
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b. Statement of financial position of Raintree Ltd
Balance sheets of Rain tree Ltd
for the year ended at 30th September 2016
Particulars Amount (in £)
Current assets
Trade receivables 24000
Prepaid rent 3000
Closing stock 18000
45000
Fixed assets
Land and building 60000
Less: Depreciation on building 8000 52000
Plant and machinery 65000
Less: Depreciation @ 20% 25000 40000
92000
Total assets
137000
Liabilities
Current liabilities
Trade payables 14000
Outstanding salaries 2000
bank overdraft 15000
Corporation tax 4000
Total current liabilities 35000
Shareholders’ equity 50000
share premium 20000
Retained earnings 22000
Net profit 10000
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Total shareholders’ equity 102000
137000
c. Describing the accounting concept of consistency and prudence
Consistency- Accounting principle adopted by an enterprise owner in improving the existing
performance of an entity in satisfying all the needs and the expectations of all the external market
users located in the external business environment. Every accounting policy adopt by an entity
such as depreciation will be followed by an entity throughout the financial year within a
particular year. Consistency need to be maintained by an entity in creating stability in the
financial performance of the business in order to beat external competitors. Change of
accounting policies in the business will be recorded using disclosures to accounts at the end of
the financial statements.
Prudence- It is regarded as another important accounting concepts used by an entity in which
current business performance of an entity will be analyzed in order to predict their future
performance. The prediction will be made using provisions that safeguards an entity's future by
charging specific percentage of provision on the trade receivables of an entity.
d. Defining two methods of depreciation along with their appropriateness
SLM- It is one of the important technique of depreciation used by an entity which is an acronym
that stands for straight line method of depreciation. In this particular method, the amount of
depreciation remains the same for all the years for which a particular asset held in an entity. This
approach is less used by an individual as in this manner the amount of deprecation remains the
same for al of the years which is suitable for an entity in order to survive in the business for long
period.
WDV- Written down value method is another method of depreciation which on other hand is
regarded as haughtily used method in which the amount of deprecation gets decreases with the
passage of time as this method can be also be renamed as diminishing value method under which
value of asset gets decreases which in turn may increases or decreases the overall deprecation
amount.
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TASK 4
a. Purpose of preparing bank reconciliation statement
Bank reconciliation statements prepared by an entity is that statements which is regarded
as the comparison statements of the balance of cash book and passbook of an entity. This can be
treated as important tool of checking any kind of frauds in the business transactions of the
business. All errors will be identified by an entity in order to remove all the errors takes paces in
the balances in order to improve the overall performance.
b. Reasons due to which bank records vary from cash book
There are various reasons held responsible for arising differences in the balance of cash
book and bank pass book which needs to be ascertained by an entity in order to fill the gaps.
Differences arises in the balance of cash book of an entity in relation to the pass book balance of
the bank is due to cheque deposited but doesn't credit in the bank account of an individual will
create changes in the balance of cash book with the balance of pass book. Bank charges show in
the pass book will be considered by an entity needs to be evaluated in order to match the
balances of both cash book and pass book of an individual in order to achieve all he desired aims
and targets.
c.
BRS as at 1 December 2016
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Prepare updated cash book
Bank reconciliation statements as at 31st December
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CLIENT 5
A) prepare and balance books of Henderson for May 2016
Sales ledger control account
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Purchase ledger control account
b) Explain the term control account and needs to prepare control account
Control account created by an entity is to regulate overall performance of an entity with
the passage of time in order to accomplish all the desired aims and targets of the business
(Agoglia, CDoupnik and Tsakumis, 2011). In the given case, control accounts will be prepared
by an entity which will cover all kinds of subsidiary ledgers such as purchases ad sales ledger
included in the business that involves essential component of the business such as sale and
purchase of a product in the business. All subsidiary ledger will be managed by an entity using
important control accounts which will included the balances of all the control accounts.
TASK 6
a. Suspense account along with its main features
Suspense account is regarded as one of the important account highly used by an
individual in the better presentation of all the transactions takes places in an entity. This kind of
account is temporarily created by an individual as this will consider doubtful amount of
transactions incurred in the business (Bamber, Jiang and Wang, 2010). All kinds of
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disbursements or discrepancies will be consider by an entity in order to analyses the overall
business transactions in the books of accounts in an enterprise for the betterment of the business
concern.
Suspense account is created by an individual in order to identify all kinds of errors in the
financial statements as this will enhance the overall condition of an entity with the passage of
time in order to grab higher market advantage in the external business market. The essential
features of this particular account includes temporary nature, handling different complexities
found by an entity in the external business environment in order to grab higher market
advantages by considering various facts and figures. Hidden transactions will be ascertained by
an entity will be considered in the existing business.
b. Trial balance by using control account as balancing figure
c.
S. No. Particulars Debit (in £) Credit (in £)
1 Wrong entry
Smith a/c Dr.
To Sales a/c
Right entry
Simon a/c Dr.
To Sales a/c
Rectified entry
Simon a/c Dr.
To Smith a/c
220
220
220
220
220
220
2 Jones a/c Dr 420
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To Suspense a/c 420
3 Whites personal a/c Dr.
To suspense a/c
750
750
d. Differentiating suspense and clearing account
Criteria Suspense account Clearing Account
Temporary Nature of suspense account is
for temporary purpose as this
account come into existence in
order to consider all omitted
transactions in the business
will be considered by an entity
using suspense account.
Clearing account is one of the
important terminology
generally used by bank which
is usually used in clearing all
the business transactions.
Amount deposited by
customers in the entity's bank
account ad further bank will
verify the payment process and
clear the transactions into the
account of an entity. This
clearing account is used by an
entity is only for temporary
purpose which is used rarely in
a day just to process all the
accounts.
Future Complexities In terms of facing external
market complexities suspense
account is used by an entity in
order to consider omitted
business transactions in the
existing business of an entity.
The clearing account used by
an entity is regarded as one of
the important account which
come into existence in order to
eliminate the complexities
faced by an entity.
Example Invoice of 1000 not shown in
the books of accounts
Bank process transactions of
customers
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CONCLUSION
It can be summarized from the above study assignment that accounting of all the business
transactions is important for the business which is important in order to ascertain the financial
performance of an entity in order to extend the current market share o the business in the external
business environment. This report stresses on common business aspects of an entity that needs to
be managed properly by an entity by removing all deficiency lies in the system using
rectification of errors. Major aim of the business is to improve current skill and the capabilities
of the firm in relation to several parameters defined by the corporation to consider various aims
and targets. This report focuses on basic concepts of accounting of recording all the business
transactions in order to ascertain the financial performance of an entity by preparing different
financial statements such as income statements and balance sheet in determining the overall
market status of an entity.
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