Accounting Fundamentals: Financial Statements and Principles Analysis

Essay on Accounting
Fundamentals

Contents
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
1.Financial Statements of General Supplies Ltd for the Year ended 31/12/2021:......................2
A. Adjusted Trial Balance:..........................................................................................................3
B Statement Showing Financial Performance:............................................................................4
C Statement Showing Financial Position:...................................................................................5
2.Critically analysis the accounting principle with relevance to the presentation of the final
accounts:......................................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Accounting fundamentals is the basic function of maintaining the standard which include
keeping of records of the monetary information. For this, every organisation has to use standard
forms to store the data so that it can be retrieved easily when needs (AGĂNENCEI, GHERMAN, and
Sîrbulescu, 2021). These transactions which recorded should be accurate because it helps to take
decisions for the growth of the business. Some of the basic principle are mandatory for every
business entity to follow as it helps in gaining the information about the costs and incomes that
the business incur by ensuring the statutory compliance report. In the below report, trial balance
is adjusted of the General Supplies Ltd. and further for this income statement and balance sheet
is made. In the second part the principle of accounting fundamentals is explained with respective
to the preparation and representation of the financial documents.
TASK
1.Financial Statements of General Supplies Ltd for the Year ended 31/12/2021:
Financial Statement highlight the financial performance of the organisation during the
accounting period. These statement are thee written records that explains the activity of business
and performance of the entity. It is necessary to obtain certificate from the accountants that these
statements are audited completely. Financial Statements are divided into following categories
such as: -
 Income Statement: Income statements represents the profit earned by the entity during the
year. These statements reflect the operating performance of the entity in accounting
period (Bergmann, Fuchs, and Schuler, 2019).
 Statement of financial Performance: This statement is also known as Balance Sheet.
Balance shows the position of Assets and liabilities as on the particular data. These are
the reports which shows the company assets, liabilities and shareholders equity. It is one
of the important aspects of financial statement and the users evaluate balance sheet
properly in order to determine that whether to make investments in company or not.
 Statement of Changes in Equity: This statement includes total comprehensive income of
the entity, which includes annul profit, the effect of changes in equity, and correction of
any errors that the entity made during the accounting year

 Notes to Accounts: Notes to account are the supporting information which is annexed in
the bottom of financial statements which shows the details of adjustments made in the
balance sheet with respect to assets, liabilities, income and expenses (Blakey, 2021).
A. Adjusted Trial Balance:
Adjusted trial balance list the balance of various accounts after meeting all the adjustments
related to outstanding or prepaid expenses, unearned or accrued income etc. The total of adjusted
trial balance must be tallied before preparation of financial statements. The purpose of adjusted
trial balance is to ensure that all debits and credits in general ledger accounts are properly
transferred to financial statements (Breton, 2018.)
Adjusted Trial Balance For the
year ended 31/12/2021
Particular Debit Credit
Finance Income 4000
Finance Expense 16000
Share Capital 347900
Outstanding Rent and Rates 3220
Bank 2000
Opening Inventory 90000
Machinery at cost 120000
Buildings at cost 750000
Provision for Depreciation –
Buildings 137500
Depreciation on Building 37500
Prepaid Insurance 1520
Provision for Depreciation on
Machinery 55000
Depreciation on Machine 30000
Legal expenses 7000
Heating and Lighting 10000
Long Term Loans 200000