Accounting Fundamentals: Ledger Accounts, Trial Balance, Final Statements

This document covers the basics of accounting fundamentals, including ledger accounts, trial balance, and final statements. It provides examples and explanations for each concept. The document also mentions the tasks and their respective solutions. The subject is Accounting and the course code is not mentioned. The document type is an assignment.

ACCOUNTING
FUNDAMENTALS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(a) Ledger accounts.....................................................................................................................1
(b) Trial Balance.........................................................................................................................3
(c) Final Statements of maxim....................................................................................................3
TASK 2............................................................................................................................................4
(a) Ledgers accounts of Pendo....................................................................................................4
(b) Trial balance of Pendo...........................................................................................................5
(c) Income statement of Pendo....................................................................................................6
TASK 3............................................................................................................................................6
(a) Ledger accounts of Mafuta....................................................................................................6
(b) Trial balance of Mafuta.........................................................................................................8
TASK 4............................................................................................................................................9
(a) Ledger accounts of Ricardo...................................................................................................9
(b) Trial balance of Ricardo......................................................................................................11
TASK 5..........................................................................................................................................12
CONCLUSION .............................................................................................................................14
REFERENCES .............................................................................................................................15

INTRODUCTION
In present time, the elements and components that are used to record the entire
accounting information within accurate books is known as accounting fundamental (Mitra,
2016). This consists of accounting standards, definitions, dual abstractions, going concern, terms
of money, etc. specific accounting is assisted by accounting jargon to deal with complex
situation. The report covers the definition, action and intent of cost accounting which is used to
address different situation of business by implementing managerial accounting strategies.
Suitable software is used to address basic financial concepts and to compile financial statements
using regular and semi-routine activities. Review of the financial report is being performed after
the registration of these documents.
The report covers different task in which various particular accounts are being prepared
like Journal entries, ledger, trail balance, trading account, balance sheet which help to define the
financial position. These statements help to discuss the overall profitability of company by
evaluating the total liabilities and capital to generate income. In addition, last task covers the
revenue and capital expenditure and actual difference to determine the variance.
TASK 1
Journal entries
Date Particulars Debit (£) Credit (£)
April, 5 Cash A/c 300.00
To Capital a/c 300.00
April, 7 Purchase a/c 200.00
To cash a/c 200.00
April, 8 Cash a/c 250.00
To Loan from Tatiana 250.00
April, 15 Motor van a/c 150.00
To cash a/c 150.00
April, 20 Cash A/c 350.00
To sales a/c 350.00
April, 28 Rent a/c 50.00
To cash a/c 50.00
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April, 29 Loan a/c 200.00
To Cash A/c 200
April, 30 Drawings a/c 60.00
To cash a/c 60.00
(a) Ledger accounts
Cash a/c
Date Particular Amount Date Particular Amount
05/04/18 To capital a/c 300.00 07/04/18 By purchase 200.00
08/04/18
To loan form
Tatiana 250.00 15/04/18 By Motor van 150.00
20/04/18 To sales 350.00 28/04/18 By rent 50.00
29/04/18 By loan paid 200.00
30/04/18 by Drawing 60.00
30/04/18
By closing
balance 240.00
900.00 900.00
Capital a/c
Date Particular Amount Date Particular Amount
30/04/18 To drawing 60.00 05/04/18 By cash 300.00
30/04/18 To closing balance 240.00
300.00 300.00
Purchase a/c
Date Particular Amount Date Particular Amount
07/04/18 To cash 200.00 30/04/18 By trading a/c 200.00
200.00 200.00
Loan a/c
Date Particular Amount Date Particular Amount
29/04/18 To cash 200.00 08/04/18 By cash 250.00
30/04/18 To closing balance 50.00
250.00 250.00
Motor van
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Date Particular Amount Date Particular Amount
15/04/16 To cash 150.00 30/04/16
By closing
balance 150.00
150.00 150.00
Sales a/c
Date Particular Amount Date Particular Amount
30/04/16 To Trading a/c 350.00 20/04/18 By cash 350.00
350.00 350.00
Rent a/c
Date Particular Amount Date Particular Amount
28/04/18 To cash 50.00 20/04/18 By P&l ac 50.00
50.00 50.00
Drawing a/c
Date Particular Amount Date Particular Amount
30/04/18 To cash a/c 60.00 30/04/18 By capital a/c 60.00
60.00 60.00
(b) Trial Balance
Particulars Debit (£) Credit (£)
Cash A/c 240.00
Capital a/c 300.00
Purchase a/c 200.00
Loan a/c 50.00
Motor van a/c 150.00
Rent a/c 50.00
Sales a/c 350.00
Drawings a/c 60.00
700.00 700.00
(c) Final Statements of maxim
Statement of profit & loss a/c
Particulars Amount
Sales a/c 350.00
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Less – Cost of goods sold 100.00
Gross Profit 250.00
Less – Expenses
Rent a/c 50.00
Net Profit 200.00
Statement of Financial position as at April, 30
Amount
Non Current assets
Motor van 150.00
Current Assets
Cash A/c 240.00
Inventory 100.00 340.00
Total Assets 490.00
Capital a/c 300.00
Add – Net Profit 200.00
Less – Drawings 60.00 440.00
Current Liabilities
Short term loan 50.00
Total Liabilities 490.00
4

TASK 2
(a) Ledgers accounts of Pendo
Loan from Sergei a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 27 To cash a/c 350 Jan, 4 By cash a/c 1000
Jan, 31 To Balance c/d 650
1000 1000
Feb, 1 By Balance b/d 650
5

(b) Trial balance of Pendo
Trial Balance at 31 January
Particulars Debit (£) Credit (£)
Cash a/c 4025
Capital a/c 5000
Motor van a/c 600
Purchase a/c 1300
Loan from Sergei a/c 650
Motor van expenses a/c 200
Sales a/c 800
Storage expenses a/c 150
Drawings a/c 175
6450 6450
6

(c) Income statement of Pendo
TASK 3
(a) Ledger accounts of Mafuta
Cash a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 343 Jan, 5 By Wages a/c 12
Jan, 7 To Smith's a/c 18 Jan, 9 By Max's a/c 21
Jan, 11 To Sales a/c 64 Jan, 14 By Wages a/c 14
Jan, 21 To Sales a/c 110 Jan, 14 By Purchases a/c 75
Jan, 23 To Harvey's a/c 25 Jan, 15 By Rich's a/c 162
Jan, 28 To Sales a/c 84 Jan, 20 By Fixtures and 32
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fittings a/c
Jan, 31 To Sales a/c 31 Jan, 21 By Wages a/c 17
Jan, 23 By office expenses a/c 3
Jan, 28 By Wages a/c 15
Jan, 31 By Balance c/d 323
674 674
Feb, 1 To Balance b/d 323
Capital a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Payables 33 Jan, 1 By Cash in hand a/c 343
Jan, 31 To balance c/d 1049 By Inventory 458
By Furniture and
fittings 198
By Receivables 83
1082 1082
Fixtures and fittings a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 198 Jan, 31 By Balance c/d 230
Jan, 20 To cash a/c 32
230 230
Feb, 1 To Balance b/d 230
Sales a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 31 To Trading a/c 412 Jan, 2 By Harvey's a/c 124
Jan, 11 By Cash a/c 64
Jan, 21 By Cash a/c 110
Jan, 28 By Cash a/c 84
Jan, 31 By Cash a/c 30
412 412
Wages a/c
Date Particular Amount (£) Date Particular Amount (£)
8

Jan, 5 To cash a/c 12 Jan, 31 Profit and loss a/c 58
Jan, 14 To cash a/c 14
Jan, 21 To cash a/c 17
Jan, 28 To cash a/c 15
58 58
Purchase a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 5 To Rich's a/c 150 Jan, 31 By Trading a/c 225
Jan, 14 To cash a/c 75
225 225
Office Expenses a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 23 To cash a/c 3 Jan, 31 Profit and loss a/c 3
Receivables from Smith's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan,1 To Balance b/d 18 Jan, 7 By Cash a/c 18
Receivables from Harvey's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 39 Jan, 23 By Cash a/c 25
Jan, 2 To Sales a/c 124 Jan, 31 By Balance c/d 138
163 163
Feb, 1 To Balance b/d 138
Receivables from Moon's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 26 Jan, 31 By Balance c/d 26
Feb, 1 To Balance b/d 26
Payable to Rich's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 15 To cash a/c 162 Jan, 1 By Balance b/d 12
Jan, 5 By purchase a/c 150
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162 162
Payable to Max's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 9 To cash a/c 21 Jan, 1 By Balance b/d 21
Inventory a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 458 Jan, 31 By Trading a/c 458
Jan, 31 To Trading a/c 374 Jan, 31 By Balance c/d 374
Feb, 1 To Balance b/d 374
(b) Trial balance of Mafuta
Trial Balance at 31 January
Particulars Debit (£) Credit (£)
Cash in hand a/c 323
Capital a/c 1049
Fixtures and fittings a/c 230
Sales a/c 412
Wages a/c 58
Purchase a/c 225
Office expenses a/c 3
Receivables a/c
Harvey 138
Moon 26
Inventory a/c 458
1461 1461
(c) Financial position statement of Mafuta
Statement of Profit and Loss
For the month ended 31 January
Particulars Amount (£)
10

Sales 412
Less- Cost of goods sold 309
Gross profit 103
Less – Expenses
Wages 58
Office Expenses 3 61
Net Profit 42
Statement of Financial position at 31 January
Particulars Amount (£)
Non current assets
Fixtures and fittings 230
Current assets
Inventory 374
Trade receivables (138+26) 164
Cash 323 861
Total Assets 1091
Capital account 1049
Add – Net Profit 42 1091
Total Liabilities 1091
Working Note: Cost of goods sold = Opening inventories + Purchase – Closing stock
= 458 + 225 – 374 = 309
TASK 4
(a) Ledger accounts of Ricardo
Sales a/c
Date Particular Amount (£) Date Particular
Amount
(£)
Jun, 27 To Trading a/c 28500 Jun, 2 By Claire – Receivable a/c 8500
Jun, 14 By Hywel – Receivable 9000
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a/c
Jun, 20 By Cash a/c 6000
Jun, 24
By Mandy – Receivable
a/c 5000
28500 28500
Sales Returns a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 22
To Claire –
Receivables 1000 Jun, 27 By Trading a/c 1000
Purchase a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 13
To Georgina –
Payable a/c 12000 Jun, 27 By Trading a/c 16500
Jun, 21
To Andrew – Payable
a/c 4500
16500 16500
Cash a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 20 To Sales a/c 6000 Jun, 25
By Georgina – Payable
a/c 11160
Jun, 24
To Claire –
Receivable 7125 Jun, 27
By Andrew – Payable
a/c 4410
Jun, 25
To Hywel –
Receivables 9000 Jun, 27 By Balance c/d 6555
22125 22125
To Balance b/d 6555
12

Discount allowed a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun,24
To Claire –
Receivable 375 Jun, 27 By Profit and loss a/c 375
Discount received a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 27 To Profit & loss a/c 930 Jun, 25
By Georgina – Payable
a/c 840
Jun, 27
By Andrew – Payable
a/c 90
930 930
Claire – receivable a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 2 To Sales a/c 8500 Jun, 22 By Sales return a/c 1000
Jun, 24 By Cash a/c 7125
Jun, 24 By Discount allowed a/c 375
8500 8500
Hywel – receivable a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 14 To Sales a/c 9000 Jun, 25 By Cash a/c 9000
Mandy – receivables a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 24 To Sales a/c 5000 Jun, 27 By Balance c/d 5000
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To Balance b/d 5000
Georgina – payable a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 25 To Cash a/c 11160 Jun, 13 By Purchase a/c 12000
Jun, 25
To Discount received
a/c 840
12000 12000
Andrew – payable a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jun, 27 To Cash a/c 4410 Jun, 21 By Purchase a/c 4500
Jun, 27
To Discount received
a/c 90
4500 4500
(b) Trial balance of Ricardo
Trial balance at 27 June of Ricardo
Particulars Debit Credit
Sales a/c 28500
Purchase a/c 16500
Cash a/c 6555
Sales return a/c 1000
Mandy – Receivable 5000
Discount allowed a/c 930
Discount Received a/c 375
29430 29430
TASK 5
Capital Expenditure
Capital expenditure is money being used by company to develop and purchase fixed
assets like properties, plant, infrastructure, land and building. It is also observed that capital
14

spending is continuous expenditure which is spent on completing asset activities and expanding a
current underlying asset service life (Niroomandi and et. al, 2012). That is used by the business
to make capital investments and programs. Organizations often allow this kind of monetary
outlay to eventually increase the scale of existing activities. In financial terms, it is taken into
consideration whenever the asset is newly obtained and the expenditure increases the service life
of such an additional capital resource. It is crucial to understand that cash spent on the repairing
or replacement of buildings is not deemed capital investment and must be recorded on the
income statement when it is actually paid.
Revenue Expenditure
The expenses which are related to the day to day of operations and management of a
business to display impact on current reporting year (DeBerardinis and Chandel, 2016). Revenue
expenses are define by its design that are receive for fulfilling day to day needs of a corporation
with in the current accounting year. This expenditure consists of those products and services that
are useful for the company but that are used in less than a year and that offer market benefits in
order to maximize business-generating ability. In general, these spending are the extra expense
that occur due to an additional assets but at the same time it do not add value and useful life of
respective asset.
Basic difference between these revenue and capital expenses are discussed below:
Basis Revenue Expenses Capital Expenses
Meaning It is the actual spending of
company which is received
during daily activity.
Capital expenditure is the cost
of buying assets of the
company.
Earning Capacity It support to preserve the
actual ability of assets to
generate income during an
accounting year.
This investment helps in
growing the company's earning
capacity.
Benefits It provide benefit for shorter
time basically for one year
(Henderson and et. Al, 2015).
The capital expenditure gains
are spread over several years,
such as more than one fiscal
year.
15

Recording in accounts These are basically recorded in
annual income statements of
company.
All those spending which is
being made on capital items
are posted into balance sheet.
Time frame These are constant and
recurring in nature which is
mainly for shorter time frame.
Capital spending is one-time
and non-recurring in existence.
It has to do with long periods
of time as it will increase
efficiency (Kidwell and et. al,
2013).
Nature of expenditure All those expenses which are
spend on fixed assets after its
usage is known as revenue
expenses.
Whenever money is invested
on purchasing assets of the
company that are considered
as capital expenditure.
Assets The spending on income may
not consequence in the
acquisition of assets and is
considered expenditure on
everyday activities
The result of capital spending
in the purchase of properties
and used to make profits and
selling if they become useless
for the company.
International accounting
standard
These type of expenses are
recorded into IAS 16.
Mainly capital expenses are
posted in he accounting record
by considering international
accounting standard 18
(Drake, Guest and Twedt,
2014).
Capital and revenue spending are essential for the company's growth and the generation
of income. These both beneficial to the company in the current situation and benefit the economy
to gain income in the potential future. Each spending gives advantages to the businesses as they
manage their workflows with the aid of the income investment company. So capital expenditure
allows in the following years to generate income so buy an estate.
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CONCLUSION
In the end of the report, it is founded that accounting fundamental are regarded as the
components that support company in order to record, determine and summarise entire financial
information into meaningful financial statements. By analysing different annual reports exact
nature, scope and behaviour of cost accounting technique is determined. Each and every
financial document is prepared by implementing accurate accounting standard so that
information evaluated from these statements are beneficial for external and internal parties.
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REFERENCES
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Biomedicine. 105(1). pp.1-12.
Henderson, S. and et. Al, 2015. Issues in financial accounting. Pearson Higher Education AU.
DeBerardinis, R. J. and Chandel, N. S., 2016. Fundamentals of cancer metabolism. Science
advances. 2(5). p.e1600200.
Kidwell, L. A. and et. al, 2013. Developing learning objectives for accounting ethics using
Bloom's taxonomy. Accounting Education. 22(1). pp.44-65.
Drake, M. S., Guest, N. M. and Twedt, B. J., 2014. The media and mispricing: The role of the
business press in the pricing of accounting information. The Accounting Review. 89(5).
pp.1673-1701.
Rahman, M. A. and Hassan, M. K., 2013. Firm fundamentals and stock prices in emerging Asian
stock markets: some panel data evidence. Review of Quantitative Finance and
Accounting. 41(3). pp.463-487.
Hutton, A. P., 2017. Discussion of “Aggregate Margin Debt and the Divergence of Price from
Accounting Fundamentals”. Contemporary Accounting Research. 34(3). pp.1446-1452.
Monte‐Mor, D. S., Galdi, F. C. and Costa, C. M., 2018. The role of accounting fundamentals and
other information in analyst forecast errors. International Finance. 21(2). pp.175-194.
Penman, S. and Reggiani, F., 2018. Fundamentals of Value versus Growth Investing and an
Explanation for the Value Trap. Financial Analysts Journal. 74(4). pp.103-119.
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