Accounting & Purposes of Public Limited Companies

Qualitative characteristic of financial reporting impactonthe financial information published by public limited companies3 CLIENT 1 3 Journal Entry in the books of Alexandra Study4 (b) LEDGER ACCOUNTS 7 c. In this report there are following topics are covered such as: financial accounting & its purposes, internal and external stakeholders of a large organisation. MAIN BODY 1 1 Define financial accounting & purposes Financial accounting is the process of recording, summarising and reporting and analysing the information at every financial year.

Finance

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1 Define financial accounting & purposes...................................................................................1
2. Accounting rules & principles.................................................................................................1
3. Internal & External stakeholders of business organisation......................................................2
4. Qualitative characteristic of financial reporting impact on the financial information
published by public limited companies.......................................................................................3
CLIENT 1........................................................................................................................................3
Journal Entry in the books of Alexandra Study...........................................................................4
(b) LEDGER ACCOUNTS.........................................................................................................7
c. Trial balance at 31st January 2019.........................................................................................15
CLIENT 2......................................................................................................................................16
(a) Profit and loss account of Munteanu Limited......................................................................16
(b) Balance Sheet of Munteanu Limited....................................................................................17
C. Accounts concepts such as consistency & prudency............................................................18
D. Meaning of depreciation & its methods................................................................................18
e. Evaluate the difference between financial statements prepared by the sole trader & the
limited companies......................................................................................................................19
CLIENT 3......................................................................................................................................19
1 . Purpose of BRS & why the business is facing difficulties...................................................19
2 . Areas where bank records vary from personal records........................................................20
Bank reconciliation statement....................................................................................................20
CLIENT 4......................................................................................................................................20
(a) Books of Hilly......................................................................................................................21
B .Control account.....................................................................................................................22
Client 5...........................................................................................................................................22
a. suspense account and its features...........................................................................................22
(b) Drafting of Trail Balance:....................................................................................................22
(c) Trial balance have credit balance of £ 3300 as suspense account........................................23

CONCLUSION..............................................................................................................................23
REFERENCES..............................................................................................................................25

INTRODUCTION
Finance is a term describing the various elements of an business such as investments,
money and other financial instruments. It is the backbone of the corporation and without it
company can not start its business activities. To be successful it is necessary to manage financial
sources so that more profits can be generated (Hong and Kostovetsky, 2012). To better
understand this concept, Corporate financial solutions is selected, which is London based
company. In this report there are following topics are covered such as: financial accounting & its
purposes, internal and external stakeholders of a large organisation. Apart from this, report
discuss about journal, ledger, trial balance, sole trader and Bank reconciliation statement.
MAIN BODY
1 Define financial accounting & purposes
Financial accounting is the process of recording transaction, summarising and reporting
and analysing the information at every financial year. In Corporate financial solutions the
financial statements are prepared by the accountant (Huang and Kisgen, 2013). It involves
balance sheet, income statement etc. It help the organisation to prepare their financial statement
as per the accounting regulations. Importance of financial accounting is describe as below :
 Financial accounting is important because it helpful to record the transactions.
 Business organisation use financial accounting to communicate information & data to
external parties which is helpful to take important decisions (Jordà and Taylor, 2016).
 Small business owners use financial accounting information to analyse competitors &
identify investment opportunities.
2. Accounting rules & principles
There are various accounting rules which are helpful to make financial statements which
are as:
Type of account Golden rules
Real account Debit what comes into the business
Credit what goes out from the business
Personal account Debit the receiver (Kaczynski and Smith,
2014).
1

Credit the giver
Nominal account Debit all the expenses and loss
Credit all the incomes and gain (Law and
Singh 2014).
Accounting principle :
Dual aspect concept : As per this principle it is necessary for the organisation to record
the transactions on both sides which are debit as well as credit. If company follows the single
entry system than irreverent information can be produced. With the help of this concept this
problem can be solved because every transaction has recorded both side with same amount (Lee,
and Cowling, 2015).
Cost principles : As per this principle it is required for the company to record the assets
in books at its acquiring cost. So it can be said that corporation can record an asset on balance
sheet for the amount paid while purchasing it.
Matching principles : As per this concept, all expenditures of business should be match
with revenues which belongs to same accounting period (McLean and Zhao, 2014).
3. Internal & External stakeholders of business organisation
In a large business organisation there are two types of stakeholders which are as internal
& external stakeholders. Internal stakeholders are those persons who have direct interest in
making plans, policies, strategies, project, process and product. It involves :
Board of directors: The BOD are directly related to the business of organisation and
they have power to make plans for future growth and take important decisions for benefit of
corporation (Midrigan and Xu, 2014).
Employees : These are the internal stakeholders and they work for the corporation so that
it can achieve its goals and get success. They are also interested in financial information because
if company is financially strong and it is earning profits than salaries of employees can be
increased (Okawa and Van Wincoop, 2012).
External stakeholders are as follows :
Customers : These are those persons who purchase the products and services of
organisation and in return it charge consideration which is in the form of money. The primary
2

focus of company is to satisfy the needs of consumers (Philippon and Reshef, 2012). They are
interested in financial information because if it financially strong than it can produce quality
products because it can use quality resources in manufacturing as a result persons get superior
products.
Suppliers : The person who provide raw material to the organisation is known as
supplier so that company can produce final products and sell it to the market. They are interested
in financial information because if corporation is financially strong than it can pay money on
time to the suppliers (Loughran and McDonald, 2016).
Government : It collect the tax form the profits which is earned by organisation and it
makes rules & regulations which are needed to be follow. They are interested in financial
information of the business as they can ascertain whether or not company is paying its all due
taxes (Guiso and Sodini, 2013).
Creditors : The person from which company can borrow money so that it can expand its
business and make future plans for expansion. In return it have to pay interest. On the basis of
financial information creditors can analyse the capability of organisation to pay the borrowed
money (Greenwood and Scharfstein, 2013).
4. Qualitative characteristic of financial reporting impact on the financial information published
by public limited companies
There are various qualitative characteristics of financial reporting which are beneficial for
the company to take important decisions. It involves: understandability, relevance, reliability and
comparability. It is necessary for the public limited companies to publish its financial statements
and it provide various information which useful in decision making process. Organisation is
impacted as they require to publish financial information in such a way that it can fulfil
relevancy & reliability feature. If these information will be reliable than important decision can
be taken for the benefit & growth of organisation (Gallagher and Koleski, 2012).
CLIENT 1
3

Journal Entry in the books of Alexandra Study
Date Particulars Dr Cr
01/01/
19
Premises A/c Dr. 240000
Motor Van A/c Dr. 51250
fixtures A/c Dr. 8100
Inventory A/c Dr. 23900
P Mole A/c Dr. 4400
F Lane A/c Dr. 6100
Bank A/c Dr. 68400
Cash A/c Dr. 15600
To S Hood A/c 12150
To J. Brown A/c 16600
To Capital A/c (Balancing Figure) 389000
(Being Owner's Capital is calculated )
Therefore, Alexandra Study's Capital at 1st January = £
389000
Date Particulars Dr Cr
01/01/
19
Storage cost A/c Dr. 450
To bank A/c 450
(Being storage cost is paid)
02/01/
19
Purchases A/c Dr. 7680
To S Hood A/c 1450
To D Main A/c 2060
4

To W Tone A/c 960
To R Foot A/c 1610
(Being goods purchases on credit from various parties)
03/01/
19
J Wilson A/c Dr. 1200
T. Cole A/c Dr. 1650
F. Syme A/c Dr. 2100
J. Allen A/c Dr. 1020
P. White A/c Dr. 2520
F Lane A/c Dr. 980
To Sales A/c 9470
(Being goods sold on credit to various parties)
04/01/
19
Motor Expenses A/c Dr. 470
To Cash A/c 470
(Being motor expense is paid)
07/01/
19
Capital A/c Dr. 1500
To Cash A/c 1500
(Being cash withdrawal by owner himself)
09/01/
19
T. Cole A/c Dr. 680
J. fox A/c Dr. 1310
To Sales A/c 1990
(Being goods purchase on credit with various parties)
5

11/01/
19
Sale Return A/c Dr. 680
To J. Wilson A/c 270
To F. Syme A/c 410
(Being goods is returned back by the parties
16/01/
19
Bank A/c Dr. 7020
To P. Mullen A/c 1400
To F. Lane A/c 3100
To J. Wilson A/c 850
To F. Syme A/c 1670
(Being Payment received from various parties)
19/01/
19
R Foot A/c Dr. 50
To Purchases Return A/c 50
(Being Goods is returned to creditor)
22/01/
19
Purchases A/c Dr. 3740
To L Mole A/c 1830
To W Wright A/c 1910
(Being goods purchased on credit)
24/01/
19
S Hood A/c Dr. 3600
J Brown A/c Dr. 4600
R Foot A/c Dr. 1400
6

To Bank A/c 6000
(Being payment is made to creditors)
27/01/
19
Salaries A/c Dr. 4800
To Bank A/c 4800
(Being salaries are paid through cheque)
30/01/
19
Business Rates A/c Dr. 1320
To Bank A/c 1320
(Being business rates are paid through cheque)
(b) LEDGER ACCOUNTS
Storage Cost A/c
Date Particulars Amount Date Particulars Amount
01/07/
19
To Bank A/c 450 31/07/1
9
By Profit & Loss A/c 450
Total 450 Total 450
Sales A/c
Date Particulars Amount Date Particulars Amount
31/01/
19
To Trading and P&L
A/c
11460 03/01/1
9
By J Wilson A/c 1200
By T. Cole A/c 1650
By F. Syme A/c 2100
By J .Allen A/c 1020
By P .White A/c 2520
By F .Lane A/c 980
09/01/1 By T .Cole A/c 680
7

9
By J fox A/c 1310
Total 11460 Total 11460
S Hood A/c
Date Particulars Amount Date Particulars Amount
24/01/
19
To Bank A/c 3600 01/01/1
9
By Opening Balance
(B/f)
12150
02/01/1
9
By purchases A/c 1450
31/01/
19
To Closing Balance
C/d
10000
Total 13600 Total 13600
W Tone A/c
Date Particulars Amount Date Particulars Amount
31/01/
19
To Closing Balance
C/d
960 02/01/1
9
By purchases A/c 960
Total 960 Total 960
J Wilson A/c
Date Particulars Amount Date Particulars Amount
03/01/
19
To Sales A/c 1200 11/01/1
9
By Sales Return A/c 270
16/01/1
9
By Bank A/c 850
31/01/1
9
By Closing Balance c/d 80
Total 1200 Total 1200
8

F Syme A/c
Date Particulars Amount Date Particulars Amount
03/01/
18
To Sales A/c 2100 11/01/1
9
By Sales Return A/c 410
16/01/1
9
By Bank A/c 1670
31/01/1
9
By Closing Balance c/d 20
Total 2100 Total 2100
P White A/c
Date Particulars Amount Date Particulars Amount
03/01/
19
To Sales A/c 2520 31/01/1
9
By Closing Balance c/d 2520
Total 2520 Total 2520
P Mullen A/c
Date Particulars Amount Date Particulars Amount
01/01/
19
To Opening Balance
(B/f)
4400 16/01/1
9
By Bank A/c 1600
31/01/1
9
By Closing Balance c/d 2800
Total 4400 Total 4400
Capital A/c
Date Particulars Amount Date Particulars Amount
9

07/01/
18
To Cash A/c 1500 01/01/1
8
By Opening Balance b/f 389000
31/01/
18
To Closing Balance
C/d
387500
Total 389000 Total 389000
J Allen A/c
Date Particulars Amount Date Particulars Amount
09/01/
18
To Sales A/c 1310 31/01/1
8
By Closing Balance c/d 1310
Total 1310 Total 1310
Motor Van A/c
Date Particulars Amount Date Particulars Amount
01/01/
19
To Opening Balance
(B/f)
51250 31/01/1
9
By Closing Balance c/d 51250
Total 51250 Total 51250
Salaries A/c
Date Particulars Amount Date Particulars Amount
27/01/
19
To Bank A/c 4800 31/01/1
9
By Trading and P&L
A/c
4800
Total 4800 Total 4800
Motor Expenses A/c
Date Particulars Amount Date Particulars Amount
04/01/
19
To Cash A/c 70 31/01/1
9
By Trading and P&L
A/c
470
Total 470 Total 470
10

Purchases A/c
Date Particulars Amoun
t
Date Particulars Amount
02/01/
19
To S Hood A/c 1450 31/01/1
9
By Trading and P&L A/c 9820
To D Main A/c 2060
To W Tone A/c 960
To R Foot A/c 1610
22/01/
19
To L Mole A/c 1830
To W Wright A/c 1910
Total 9820 Total 9820
Bank A/c
Date Particulars Amoun
t
Date Particulars Amount
01/01/
19
To Opening Balance
(B/f)
68400 01/01/1
9
By Storage cost A/c 450
16/01/
19
To P Mullen A/c 1400 24/01/1
9
By S Hood A/c 3600
To F Lane A/c 3100 By J Brown A/c 4600
To J Wilson A/c 850 By R Foot A/c 1400
To F Syme A/c 1670 27/01/1
9
By Salaries A/c 4800
30/01/1
9
By Business Rates A/c 1320
31/01/1
9
By Closing Balance C/d 59250
Total 75420 Total 75420
D Main A/c
11

Date Particulars Amoun
t
Date Particulars Amount
31/01/
19
To Closing Balance
A/c
2060 02/01/1
9
By purchases A/c 2060
Total 2060 Total 2060
By Purchases Return A/c
Date Particulars Amoun
t
Date Particulars Amount
31/01/
18
To Trading and P&L
A/c
50 19/01/1
8
By R foot A/c 50
50 50
R Foot A/c
Date Particulars Amoun
t
Date Particulars Amount
19/01/
18
To Purchase Return
A/c
50 02/01/1
9
By purchases A/c 1610
24/01/
19
To Bank A/c 1400
31/01/
19
By Closing Balance
C/d
160
Total 1450 Total 1610
T Cole A/c
Date Particulars Amoun
t
Date Particulars Amount
03/01/
19
To Sales A/c 1650 31/01/1
9
By Closing Balance C/d 2330
09/01/
19
To Sales A/c 680
12

Total 2330 Total 2330
J Allen A/c
Date Particulars Amoun
t
Date Particulars Amount
03/01/
19
To Sales A/c 1020 31/01/1
9
By Closing Balance C/d 1020
Total 1020 Total 1020
F Lane A/c
Date Particulars Amoun
t
Date Particulars Amount
01/01/
18
To Opening Balance
(B/f)
6100 16/01/1
9
By Bank A/c 3100
03/01/
18
To Sales A/c 980 31/01/1
8
To Closing Balance C/d 3980
Total 7080 Total 7080
Cash A/c
Date Particulars Amoun
t
Date Particulars Amount
01/01/
19
To Opening Balance
(B/f)
15600 04/01/1
8
By Motor Expenses A/c 470
07/01/1
9
By Capital A/c 1500
31/01/1
9
By Closing Balance C/d 13630
Total 15600 Total 15600
13

Sales Return A/c
Date Particulars Amoun
t
Date Particulars Amount
11/01/
19
To J Wilson A/c 270 31/01/1
9
By Trading and P&L A/c 680
To F Syme A/c 410
Total 680 Total 680
L Mole A/c
Date Particulars Amoun
t
Date Particulars Amount
31/01/
19
To Closing Balance
C/d
1830 22/01/1
9
By Purchases A/c 1830
Total 1830 Total 1830
W Wright A/c
Date Particulars Amoun
t
Date Particulars Amount
31/01/
19
To Closing Balance
C/d
1910 22/01/1
9
By Purchases A/c 1910
Total 1910 Total 1910
J Brown A/c
Date Particulars Amoun
t
Date Particulars Amount
01/01/1
9
By Opening Balance b/f 16600
24/01/
19
To Bank A/c 4600 31/01/1
9
By Closing Balance C/d
14

31/01/
19
To Closing Balance
C/d
12000
Total 16600 Total 16600
Business Rates A/c
Date Particulars Amoun
t
Date Particulars Amount
30/01/
19
To Bank A/c 1320 31/01/1
9
By Trading and P&L A/c 1320
Total 1320 Total 1320
15

c. Trial balance at 31st January 2019
16

CLIENT 2
(a) Profit and loss account of Munteanu Limited
17

(b) Balance Sheet of Munteanu Limited
C. Accounts concepts such as consistency & prudency
There are different concepts which are used in accounts which is helpful to prepare the
financial reports effectively.
Consistency : This accounting concept is emphasis to follow the same accounting policy
which is being used form last few years in order to access to finance for innovative SMEs since
the financial crisis. So that books of accounts can be prepare in effective manner (Gabaix, 2012).
18

Prudence : This specific concept states that company should record those transactions
which are actually occurred. Those transactions which are not actually occurred they are not
recorded by preparing books of accounts.
D. Meaning of depreciation & its methods
This concept is levied on the assets because due to normal wear & tear the value of assets
has become down as compare to its original value (Flannery and Hankins, 2013). There are
various purposes of deprecation such as: to show the asset at its appropriate value, that is at cost
less depreciation loss, & to retain, out of profits, funds for the replacement of assets at the end of
its working life. Organisation use this so that it can identify the actual value of an asset at
present. It has two methods which are as follows :
Written down value method : According to this method written down value is the
value of an asset after accounting for amortisation or depreciation. Present value of assets can be
calculated by subtracting accumulated depreciation form actual value of assets. WDV is used
when value of an assets are more (Finance, 2017).
Straight line method : This method states that simple allocation of an even rate of
depreciation every year over the life of an assets .This method is used when the value of an asset
is less. .It is calculated as:
Annual depreciation expenses= [Cost of assets- residual value]/ useful life of asset
e. Evaluate the difference between financial statements prepared by the sole trader & the limited
companies
There are various differences between sole trader & the limited companies while
preparing the financial statements.
Sole trader Limited companies
The owner's equity has only one item which is
owner's equity account
Shareholders finds involves share capital,
retained earnings, capital reserves and other
revenues (Fairbairn, 2014).
Tax on the income of the sole proprietor A limited corporation is imposed tax as it is a
separate legal entity.
19

CLIENT 3
1 . Purpose of BRS & why the business is facing difficulties
BRS is a report which compares the bank balance as per corporation accounting record
with the balance sheet stated in the bank statement. The main purpose is to identified any
discrepancies between accounting records of the entity & the bank besides those due to normal
timing differences. The business of company is facing difficulties because of data entry errors in
cash book and bank errors which is made by bank personnel (Creal, 2012).
2 . Areas where bank records vary from personal records
Bank record can be vary from personal records in many circumstances which are as : if
an item is on the books but has not yet appeared on the bank statement, the items are entered as
an adjustment to the balance per bank statement. If an item is on the bank statement but has not
been entered on the books, the items are entered are as adjustment to the balance per books
(Cheng and Serafeim, 2014).
Bank reconciliation statement
Particulars Amount
Bank Balance as per pass book 398
Add: Items having effects of higher balance in cash book
Bank charges not recorded in cash book 36
Adjustment for direct debit rates 105
Less: Items having effects of lower balance in cash book
Payments to:
C David 122
S Leeming 116
C Lyons 87
Bank balance as per cash book 214
20

Imprest refers to the self checking account where a fixed balance is maintained by regular
replenishment & used for paying small, routine operating expenditures (Zingales, 2015). Petty
cash can be used for transactions for which it doesn't make sense to go through the hassle of
writing a check (Cecchetti and Kharroubi, 2012).
CLIENT 4
In the books of Hilly for January, 2019
(a) Books of Hilly
Purchase Ledger Control A/c
21

B .Control account
Control account is that which is a type of summary account in the general ledger. The
entries are made at the end of financial year. It facilitates the preparation of P&L account as well
as balance sheet (Wilson, 2012). It is useful to provide basis for reconciliation of cost & financial
statements. The balance of control account should be equal to the sum of the balances of all
individuals accounts in subsidiary ledger (Baker and Wurgler, 2013).
Client 5
a. suspense account and its features
It is that account in which amount is temporarily recorded in general ledger because
actual account does not identified while recording the transactions. When relevant account has
find than amount has transfer from the suspense account to the appropriate account (Antras,
and Foley, 2015).
Features :
 It is help to prepare trial balance.
 Errors can be identify with the help of suspense account.
 It is helpful to rectifying one sided errors.
 With the help of this final accounts can be prepare effectively (Amato and Fantacci,
2013).
22