Financial Accounting Project

This project delves into the core principles of financial accounting, covering the double-entry bookkeeping system, trial balance formulation, and the preparation of financial statements. It provides practical examples and explanations to illustrate the application of these concepts in real-world scenarios.

Financial accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
PROJECT 1......................................................................................................................................1
P1: Double entry bookkeeping system........................................................................................1
P2: Formulation of trail balance..................................................................................................6
P3: Preparation of financial statements.......................................................................................7
P4: Preparation of financial statements for sole trader and limited companies..........................8
CONCLUSION..............................................................................................................................11
REFERENCES .............................................................................................................................12

INTRODUCTION
Financial accounting is the process of preparing financial accounts and reports which
summarises and analyses financial performance of an organisation. The main aim of this concept
is to serve manager and related parties true and fair image of the company. In this project report
Double entry book keeping system is followed, in order to develop journal entries along with
ledger accounts. Final accounts of sole proprietorship and company are also prepared in this
project report to better understand difference between the type of organisations. This report
provides valuable information about various stages of financial analyses along with proper
allocation of total assets and debts.
PROJECT 1
P1: Double entry bookkeeping system
Double entry book keeping is a system of keeping accounting records so that it
recognises the dual nature of every monetary transaction. Every financial transaction always has
impact on two accounts due to this book keeping system is considered as the most accurate and
reliable method (Lima Crisóstomo, 2011). The primary objective of this system is to balance the
both debit and credit sides. This double entry system is universally followed which brings
simplicity in the activities. This system is followed by various companies in order to develop a
build in error checking system which can determine several errors by matching debit and credit
sides of the trial balance. Another reason of following this system is to develop a tracking system
which maintains all the accounting equations (Edwards, 2013).
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2

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P2: Formulation of trail balance
Trial balance is a statement which lists all the ending balances of several accounts of
general ledger. It is considered as internal financial report which helps in preparing final
accounts such as profit & loss account and balance sheet. The main purpose of this statement is
ensure that total of both sides that is debit and credit side is equal. The deviations between the
sides of trial balance result into mismanagement due to which intense investigation process is
being done in order to balance the trial balance (Glover, 2014).
Trail Balance
Particulars
Debit
amount
Credit
Amount
Cash in hand 11070
Cash at bank 60675
Net Capital 65000
Purchases expenses 18000
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Bills payable 14000
Bills receivable 12000
Sales expenses 26000
Equipment account 3000
Prepaid Insurance account expenditure 75
Prepaid Rent expenses 150
Stationary account expenses 30
Total 105000 105000
P3: Preparation of financial statements
Financial statements are the formal record of financial operations of an organisation.
These statements includes profit & loss account and balance sheet. Profit and loss account
includes all incomes and expenditures of the organisation. Whereas balance sheet includes all
current and fixed assets as well as liabilities of a company. The main aim of these statements is
to reflect true and accurate position and performance of an organisation (Gordon, 2011).
Profit and loss statement for the year ended 31st December, 2017
Particular Amount
Revenue 125000
less: sales returns 1500
Total Revenue 123500
Less: Cost of goods sold 83500
Discount received 1000
Rent received in advance 4850
Gross profit 45850
Expenses:
Rent & rates expenditure 1500
Telephone expenses 900
Insurance expenses 7500
Bad debts 1200
Depreciation 5000
Wages and salaries 13200
Provision for bad-debts (934)
Less: Bad debts written off (650) 284
Outstanding expenditure 340
Net profit 15926
Balance sheet as at 31st December, 2017
Liabilities Amount Assets Amount
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Capital 120800 Bank balance 10594
Less: Drawings 5150 115650 Cash in hand 340
Creditors 3900 Debtors 12500
Rent received 490 Motor expenses 25000
Reserves balance 15926 less: Depreciation 5400 19600
Suspense account 7489 Prepaid insurance 411
Loan provided 100000
143455 143445
P4: Preparation of financial statements for sole trader and limited companies
Profit and loss statement for the sole trader:
Balance sheet of sole trader:
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Income statement of a company:
9

Balance sheet of a company:
10

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CONCLUSION
From the above project report, it can concluded that finance is the integral part of a
business enterprise. Financial analyses manage and arrange all the funds which are procured or
earned by the organisation. In this report various statements and accounts are analysed and
interpreted along with book keeping system which helped in developing journal entries, general
ledger and trial balance.
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REFERENCES
Books and Journals:
Edwards, J. R., 2013. A History of Financial Accounting (RLE Accounting). Routledge.
Glover, J., 2014. Have academic accountants and financial accounting standard setters traded
places?. Accounting, Economics and Law Account. Econ. Law, 4(1). pp.17-26.
Gordon, I. M., 2011. Lessons to be learned: An examination of Canadian and US financial
accounting and auditing textbooks for ethics/governance coverage. Journal of Business
Ethics, 101(1). pp.29-47.
Lima Crisóstomo, V., de Souza Freire, F. and Cortes de Vasconcellos, F., 2011. Corporate social
responsibility, firm value and financial performance in Brazil. Social Responsibility
Journal, 7(2). pp.295-309.
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