Business Report Financial Accounting Assignment

Added on - 21 Jul 2020

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Financial Accounting
Table of ContentsINTRODUCTION...........................................................................................................................1BUSINESS REPORT......................................................................................................................1TASK 1............................................................................................................................................4P1 Apply book keeping system...................................................................................................4P2 Use of trial balance................................................................................................................7M1 Analysation of sales and purchase transaction.....................................................................8D1 Recording structure of transaction accurately.......................................................................8TASK 2............................................................................................................................................8P3 Preparation of Final accounts from trial balance...................................................................8P4 Final accounts subject to sole traders, partnerships or limited companies............................9M2 Analysation of profit and loss account, balance sheet and cash flow statement................11D2 Calculation for constructing final accounts.........................................................................11TASK 3..........................................................................................................................................11P5 Application of bank reconciliation process..........................................................................11M3 Reconciliation process subject to deposits in transit, cheques and insufficient funds........12D3 Bank reconciliation statement.............................................................................................12TASK 4..........................................................................................................................................13P6 Process to reconcile control accounts..................................................................................13M4 Different type of accounts and there consolidation............................................................14D4 Application of appropriate method.....................................................................................14CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................15
INTRODUCTIONStructure of business and has been altered as per the changing environment of business.Same as per the accounting procedures and concept get moulded with the dynamic environmentof business (Francis and et. al., 2013). Multinational organisations adopt advanced tools andmethod of financial to keep the financial and accounting reports in adequate manner. Financialaccounting is a branch which help to retain these accounts in designed formats and structures.To achieve core competence and efficiency in financial management concepts and methods areused. Financial accounting helps accountants and managers to prepare financial reports toidentify the financial strength of company. Accurate financial reports are helpful to financialinstitutions, accountants, investors, shareholders and stakeholders of an organisation.BUSINESS REPORTFinancial AccountingFinancial accounting is system used to record and present the financial position oforganisation. These system contains various rules, standards, concepts, principles. Financialaccounting helps to bifurcate the transaction as per their nature and type. Below are some basicaccounting formats are defined which are used to record the transaction and help in financialreporting.Cash flow statementThis statement is prepared to record cash and monetary transaction to analyse net inflowand outflow of cash in the organisation. Three major activities are considered in this statement.Cash inflow from operating activities, financing activities and investing activities. Dailyexpenses and income which are happened on regular basis considered in operating expenses,office expenses, payment of salaries, collections from debtors, payment to creditors are commontransactions which are happen on regular basis (Edwards and et. al., 2013). Issue of share capital,redemption of debentures, interest on investments are the transactions considered in financingactivity and the transactions remain associated with sale of machinery, purchase of building,installation of new plan and machinery are considered in investing activity.Income statementBasically two type of income and expenditure are found in normal business such asrevenue nature and capital nature. All the revenue nature income and expenditure are consideredin profit and loss accounts. Expenditures and income like operating expenses, electricity, daily1
expenses, office and administration expenses, interest on investments, discount received,dividend received are the type of revenue nature. Capital nature of expenditures contains thetransactions and events like purchase of new plant and machinery, acquisition of new buildingand land, purchase of new fixtures and furnitures. Maintenance and repair cost is considered asrevenue nature of expenditure and records in income statement.Financial position statementThis statement remain useful to managers, auditors and accountants of company. It showsthe payment coverage and financial strength of organisation. All the assets are measures inrespect of liabilities. It provides figures related to finance requirement for upcoming years.Majorly this statement is useful to stakeholder, brokers, bankers and financiers to analyse thefinancial position of company.Regulations related to financial accountingFinancial Reporting Council (FRC) regulatory authority in the UK which operates all therule and regulations subject to financial reporting and management (Horngren and et. al., 2012).This provides a sources, methods, principles and rules subject to framing and preparing financialstatements for corporates and governance. This is one of the authority organised and managed bychairman appointed by Bank of England.The Accounting Standard Board (ASB) provides accounting rules to frame the accounts.It helps to record different type of transactions in a managed structure. Rules remain focusedaround treatment of deferred revenue expenditures and contingency reserves.IASB is of the regulatory which issues guidelines, policies and standards subject tofinancial accounting and accounting disclosure. IFRS which is known as International FinancialReporting Standards are the rules issues by IASB. GAAP (Generally Accepted AccountingPrinciple) are followed at international level. Global organisation which operates businessoperations in various countries adopt the principles and standards of ISA and GAAP.Accounting rules and principlesBelow are some rule and principles defined subject to keep accounting records andfinancial accountingAccounting rulesBoundary rules –These rules indicates towards the existence and future stability of acompany. As per these structure of a business is bifurcated as per the vision and mission2
statement of company. Basically these rules defines the legal structure and compliance structureof company. Guidelines are made in respect of preparing financial accounts with prudence andmateriality. Principles are made for specific pervasive boundaries in respect of behaviour.Measurement rules-These rules are made to determine the value of assets and liabilitiesof company. Value and price of assets are recognise at their historical coat rather then therepreset value. Securities, value of goods and services, insurance, valuation of land and building,promises, patent value are the factors which are required to evaluate properly.Ethical rules –to define the main objective and motive of an organisation these rules areadopted by organisations. As per these rules objectives must be clearly defined in exurban andprospectus of company. It helps investees and stakeholders to analyse the objective oforganisation. It also beneficial fro managers of organisation to understand the role anddimensions.Accounting PrinciplesCost-Basically there are two methods used to record the value of assets in books such ashistorical cost and net realisable cost. Historical cost indicates towards the cost which wasincurred in the beginning of year (Warren and et. al., 2018). Another rule which is considered incost principle is net realisable value. Assets are records in books after deducting depreciation andas per net realisable value.Full disclosure-This is one of the principle which tells about fair and cleanrepresentation of accounting policies and financial rules using by organisation. In final reportingit is important for a company to describe the rules and policies of company that whichaccounting standards and rules are followed by company.Going concern-This rule says that organisation is established to operate the businessoperations and functions forever. These rules remain specified subject to long term objectivesand sustainability.Matching principles-The balance of expenditures is m measured in respect of incomesgenerated by an organisation. This principle also define the concept of matching the balance ofassets and liabilities in balance sheet.Revenue recognition-this principle provides a path to accountants that how when theincome and expenditures must be considered in financial accounts and books.Conventions and concepts relation to consistency and material disclosure3
Convention consistencyIt is estimated that the policies and rules which are adopted by organisation should beconsistent for a specific duration and time. It is required to observe and analyse the consistencyof methods and principles (May, 2013.). It must be analysed whether organisation would remainconsistent with the rules and standards in future. Consistency of accounting policies and methodshelps accountants to prepare the reports in simple way. Variations in accounting and financialprocedures increase complexity and reduce the credibility of organisation in market. It not onlyaffect the decision making process but also affect the reliability of financial and accountingrecords. This is the reason organisation should analyse the effectiveness of method beforeimplement in operations.Convention of materialityAs per American Accounting Association materiality is defined as a reason behindbusiness activities. Objectives must be cleared in prospectus and report that helps investors andfinanciers to understand the nature of business. It affect the decisions and strategies which aremade around investors. Importance of events and transactions should be described clearly inaccounts. Materiality depends on amount of risk and nature of business (Skogstad and et. al.,2011). It implies that the economic nature of an event or item contains specific treatment.Information should be subject to the point, no any kind of irrelevant informations should beconsidered as per this convention.TASK 1P1 Apply book keeping systemJournal entriesDateParticularDebitCredit01/05/16Storage cost A/c............... DrTo Bank A/c......................CR(Being paid made through cheque)40040002/05/16Purchase A/c ........................DrTo Creditor(S. Hood, D. Main, W. Tone and R.foot).........................Cr(Good purchase on credit)60801450+2060+960+1610= 60804
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