Financial Accounting Report

This report provides a comprehensive overview of financial accounting, covering key principles, rules, and practices. It includes examples of journal entries, ledger accounts, trial balance, profit and loss statements, balance sheets, bank reconciliation, and suspense accounts. The report aims to provide a clear understanding of financial accounting concepts and their practical applications.

Financial Accounting

Table of Contents
INTRODUCION..............................................................................................................................4
BUSINESS REPORT ....................................................................................................................4
1. Financial accounting and its purposes................................................................................4
3. Accounting rules and principles.........................................................................................6
4. The conventions and the concepts relating to consistency and the material disclosure.....7
CLIENT 1........................................................................................................................................7
(a) Journal Entry in the books of David Study......................................................................7
(b) Ledger Accounts.............................................................................................................11
(c) Trial Balance as at 31st January, 2018............................................................................18
CLIENT 2......................................................................................................................................19
(a) Statement of profit and loss for Peter Hampau for the year ended 31st July 2018 ........19
(b) Statement of financial position for Peter Hampau as at ended 31st July 2018 ..............20
CLIENT 3......................................................................................................................................21
(a) Profit and loss account of Bowling Limited for the year ended 31st July, 2018............21
(b) Balance Sheet of Bowling Limited as at 31st July, 2018...............................................22
(c) Accounts concepts such as consistency and prudency....................................................22
(d) Depreciation and its methods .........................................................................................23
CLIENT 4......................................................................................................................................23
(i) Bank reconciliation statement at 1st December, 2017.....................................................23
(ii) Durrell Ltd's updated cash book for December 2017.....................................................23
(iii) Bank Reconciliation Statement as at 31"t December 2017...........................................24
CLIENT 5......................................................................................................................................25
(a) Books of Henderson........................................................................................................25
(b) Control Account..............................................................................................................26
CLIENT 6......................................................................................................................................26
(a) Suspense Account...........................................................................................................26
(b) Drafting of Trial Balance:...............................................................................................27
(c) Trial balance have credit balance of £ 330 as suspense account....................................27
Suspense A/c.................................................28
(d) Difference between a Suspense A/c and Clearing A/c...................................................28

CONCLUSION..............................................................................................................................28
REFERENCES .............................................................................................................................30

INTRODUCION
Financial Accounting is an accounting branch which contains the track of records for all
financial transaction of an entity. Financial transactions are recorded and presented as per
standardized guidelines in a financial report or statements like statement of income and financial
position. This report is divided in two parts such as business report for Zync Solutions limited
which is small accounting firm and the second part consider the practical scenarios based upon
accounting principles and concepts (Edwards, 2013). For a junior accountant, it is necessary to
prepare financial reports by applying the guidelines of accounting principles so that true and fair
view of financial statements can be presented. This report aims to follow rules and principles of
accountancy. This report covers regulations of financial accounting and purpose of it, book
keeping system, trial balance, profit and loss account and balance sheet of sole traders,
partnership firm and a company according to the relevant principles, convention and the
standards. This report also contains the bank reconciliation, its process of reconciliation and the
suspense account along with example containing the process of clearing the suspense account.
BUSINESS REPORT
1. Financial accounting and its purposes
Accounting means the way transactions are recorded, analysed and summarised in the
business. Financial accounting contains all financial information which is recoded in such a
manner that helps in preparation and presentation of financial information of the business by
presenting true and fair view of it (Agasisti and Catalano, 2013). Financial accounting is a way
of reporting business activities and financial information to investors, creditors, suppliers and
other persons outside the business organisation. The accountant of business is responsible to
follow all the rules and regulations and the policies relating to financial accounting so that
accurate information can be analysed.
Purposes of financial accounting: The main purpose of financial accounting is to
summarise
 To provide true and fair view of financial transactions of organisation (Holthausen and
Watts, 2001).
 To understand and analyse financial statement and fundamentals used in the preparation
of financial statements (Bushman and Smith, 2001).

 With the help of financial accounting, management of organisation can know the profits
and losses of its business in current financial year and through this manager can make
future plans and strategies for future growth of organisation (Peterson, 2005).
 The financial accounting can use in production of financial information in such a manner
that make it easy to interpret performance of company using ratio analysis (White, Sondh
and Fried, 2000).
The financial accounting contains various regulations that are needed to be follow by an
accountant of business organisation so that true and fair view of the financial statements can be
produced and analysed. As a result, company can know its financial growth and on the basis of it
investors and creditors can take their decisions. Regulations relating to financial accounting are
as follows:
 In financial accounting, Generally Accepted Accounting Principle's rules, standards and
procedures of can be applied by an organisation so that financial statements of
organisation can be prepare correctly. There are various principles of GAAP which are to
be followed by the organisation in order to comply with regulations relating to financial
accounting such as: principle of consistency, precedence, regularity, periodicity etc
(Khan and Mayes, 2009)
 The International Financial Reporting Standards framed regulations which is to be
followed by accountant of organisation because it focuses that how a particular type of
transactions or an events can be reported in financial statements of entity (Saunders,
Cornett and McGraw, 2006).
 Regulations related to financial accounting such as debit and credit and their treatment in
accounts can be follow by the accountant of organisation so that relevant information and
data can be reported in financial statements of the organisation (Barth, 2015).
 As per companies act, it is compulsory to put financial statements and other necessary
documents of company in front of general public so that they can know the financial
position of company for given reporting year (Libby, Bloomfield and Nelson, 2002).
3. Accounting rules and principles
Rules for accounting
 Personal Account: The rule relating to personal account state that Debit the
receiver, credit the giver. This principle has been used in case of personal accounts.

Examples of personal account are creditors, debtors, banks, capital account etc. As
well as if a person’s receive something from organisation than amount must be debit
on name of person in books of businesses
 Nominal Account: The rule relating to nominal account state that Debit all expenses
and losses, credit all incomes and gains. In this account, capital account is considered
as liability for the business (DRURY, 2013). Thus it has a default credit balance.
 Real Account: The rule relating to the nominal account state that Debit what comes
in, credit what goes out. The real account includes land and buildings, machineries,
plant and equipment etc. For example, if a person purchases furniture of $ 20000 in
cash, then the furniture account in business would be debit by $ 20000 and cash
account would be credit by $ 20000 in books of accounts of business.
Principles:
Dual aspect concept: Dual aspect concept refers that business entity are liable to record
all transaction on both debit and credit side of books of accounts. Whereas, single entry system
records only one aspect of business transaction which leads recording of some irrelevant
information also in books of accounts. Therefore, to avoid this problem, dual aspect principle is
introduced to assure that every business transaction needs to be recorded on both debit and credit
side of accounts (Edwards, 2013).
Cost principle: This principle assists that assets should be record in the books of accounts
at its acquiring cost. The business entity can't record the assets on revalued amount and therefore
they are obliged to record an asset on their balance sheet at cost only.
Matching principle: According to this principle, all expenses of business should be
matched with the revenues which are related to the same accounting period. The business entity
records the revenues that is, along with the expenses that brought them (Fourie and et. al., 2015).
4. The conventions and concepts relating to consistency and material disclosure
The guidelines of the accounting convention consist of practical applications of principles
of accounting. This is not a legally binding practices rather, it is a convention which is generally
accepted and based upon customs and it also provide help to accountant to resolve practical
issues which are arise in preparation and presentation of financial statements of the organisation.
Some of conventions of accounting are as follows:

Convention of consistency: In accounts it is very important to compare results of different years
so that organisation can know growth of business in each year(s). Therefore, it is essential to
follow accounting principles and rules for similar transactions consistently and continuously. If
accounting policies are followed consistency then reliability of financial statements increased
and if accounting policies are continuously changes than reliability of financial statements can be
lost (Hale, Hale and Held, 2012). For example, if an organisation follows, cost or market price
method for valuation of stock and written down method for depreciation of fixed assets,
therefore it is necessary for company that it should follow these methods consistently and
continuously as per convention of consistency. As a result, comparison between financial
statement can be easy between different accounting years.
Convention of material disclosure: As per this convention, it is essential to disclose all
the significant financial information in the financial statements of the business entity, so that
accounts can prepare in such a manner that all material financial information has clearly disclose
to the reader. It is important for an organisation to provide all information in financial statements
so that investors, creditors and owners can know the true picture of the organisation and its
financial statements (Hall, 2012).
CLIENT 1
(a) Journal Entry in books of David Study
Date Particulars Debit Credit
01/01/
18
Premises A/c Dr. 440000
Motor Van A/c Dr. 45250
fixtures A/c Dr. 10100
Inventory A/c Dr. 40900
P Mole A/c Dr. 2200
F Lane A/c Dr. 2100
Bank A/c Dr. 42400
Cash A/c Dr. 10600
To S Hamid A/c 10150

To J. Brown A/c 9600
To Capital A/c (B/f) 573800
(Being Owner's Capital is calculated )
David Study's opening capital as at 1st January, 2018 is
£ 573800.
Date Particulars Debit Credit
01/01/
18
Storage cost A/c Dr. 800
To bank A/c 800
(Being storage cost is paid)
02/01/
18
Purchases A/c Dr. 7680
To S Hamid A/c 2450
To D Main A/c 2560
To W Tag A/c 1060
To R Foot A/c 1610
(Being goods purchases from various parties on credit)
03/01/
18
J Wilson A/c Dr. 2020
T Cole A/c Dr. 1840
F Seema A/c Dr. 2380
J Allen A/c Dr. 990
P White A/c Dr. 2820
F Lane A/c Dr. 1170
To Sales A/c 11220

(Being goods sold to various parties on credit)
04/01/
18
Motor Expenses A/c Dr. 670
To Cash A/c 670
(Being motor expense is paid)
07/01/
18
Capital A/c Dr. 2000
To Cash A/c 2000
(Being cash withdrawal by owner himself)
09/01/
18
T Cole A/c Dr. 1280
J fox A/c Dr. 2310
To Sales A/c
(Being goods purchase on credit with various parties)
11/01/
18
Sale Return A/c Dr. 680
To J Wilson A/c 370
To F Seema A/c 310
(Being goods is returned back by parties
16/01/
18
Bank A/c Dr. 7150
Discount Allowed A/c Dr. 461
To P Mole A/c 1710
To F Lane A/c 3364
To J Wilson A/c 963

To F Seema A/c 1574
(Being Payment received from parties after allowing
discount @ 5%)
19/01/
18
R Foot A/c Dr. 110
To Purchases Return A/c 110
(Being Goods is returned to creditor)
22/01/
18
Purchases A/c Dr. 3140
To L Mole A/c 1330
To W Wright A/c 1810
(Being goods purchased on credit)
24/01/
18
S Hamid A/c Dr. 3860
J Brown A/c Dr. 4260
R Foot A/c Dr. 1750
To Bank A/c 7500
To Discount Recieved A/c 2370
(Being payment is made to creditors after receiving 10%
discount)
27/01/
18
Salaries A/c Dr. 14500
To Bank A/c 14500
(Being salaries are paid through cheque)

30/01/
18
Business Rates A/c Dr. 2220
To Bank A/c 2220
(Being business rates are paid through cheque)

(b) Ledger Accounts

(c) Trial Balance as at 31st January, 2018

CLIENT 2
(a) Statement of profit and loss for Peter Hampau for year ended 31st July 2018

(b) Statement of financial position for Peter Hampau as at ended 31st July 2018

CLIENT 3
(a) Profit and loss account of Bowling Limited for year ended 31st July, 2018

(b) Balance Sheet of Bowling Limited as at 31st July, 2018
(c) Accounts concepts such as consistency and prudency
There are various number of conceptual issues that must be undertaken by business in
order to develop accounting work (Jönsson, 2013). Accounts has various concepts which helps
in making financial statements true and fair. There are various accounting concepts such as:
Consistency: This accounting concept means that same accounting policy and principles
must be followed continuously which is being using from last few years in order to maintain
books of accounts in current year also (Mullinova, 2016). If business organisation wants to
change accounting policies, then they must change only in exceptional circumstances only and
mention it on notes to accounts prepared by organisation.

Prudence: In this the expenses amount are underestimated. The accountant must be
conservative in recording amount of assets, and not in recording underestimated liabilities
(Oulasvirta, 2014). Result should be conservatively-stated financial statements.
(d) Depreciation and its methods
Depreciation means monetary value of an asset which decreases over time due to use,
wear and tear or obsolescence. So it helps to ascertain the monetary value of an assets at present
time period. The methods of depreciation are as follows:
Straight line method: Straight line method is the method in which value of an asset is
depreciated with the fixed rate and value every year over the full life of asset. Formula of straight
line method of depreciation:
Annual depreciation amount = [ Cost of assets- residual value] / Useful life of the asset
Written down value method: It is also known as diminishing balance method. In this
technique, value of asset is reduced with fixed percentage on written down value of each year. It
can be calculated by subtracting accumulated depreciation form original value of assets and
thereafter applying the percentage of depreciation. This method is used when company does not
know the estimated value of salvage (Stice and Stice, 2013).
CLIENT 4
(i) Bank reconciliation statement at 1st December, 2017
Its purpose to reconcile the balance of bank of books of accounts with the pass book.
Bank reconciliation statement at 1st December 2017
Particulars Amount
Bank Balance as per pass book 17478
Less: Suspense due to wrong carry forward 987
Actual balance as per cash book after reconciliation 16491

(ii) Durrell Ltd's updated cash book for December 2017
Updated Cash Book for December Month
Particulars Amount Particulars Amount
Balance B/d 16491 Alexander 857
Suspense A/c 987 Bank Charges 47
Able 962 Burgess 221
Baker 1103 Barry 511
Direct deposit by
customer
176 Cook 97
Charlie 2312 Payment 120
Delta 419 Hay 343
Instrument No. 785 106 Rent 260
Echo 327 Instrument No. 780 426
Cash Sales 529 Instrument No. 781 737
Fred 119 Instrument No. 310923 297
Instrument No. 787 260 Standing order rates 137
Balance c/f 19738
Total 23791 Total 23791
(iii) Bank Reconciliation Statement as at 31"t December 2017
Bank Reconciliation Statement

Particulars Amount
Bank Balance as per pass
book
19738
Add: Items having effects of higher balance in cash book
Cheque deposited but not yet cleared 120
Bank charges not recorded in cash book 47
Payment by bank not recorded in cash book
 Instrument No.780 426
 Instrument No.781 737
 Instrument No.310923 297
Adjustment for standing order rates 137
Less: Items having effects of lower balance in cash book
Cheque issued but not yet presented for payment
Instrument No. 785 106
Instrument No.787 260 366
Direct deposit by customer 176
Bank balance as per cash book (Should be) 20960
Less: Opening Balance difference
(17478-16491)
987
Actual balance as per cash book after reconciliation 19973
CLIENT 5
In books of Henderson for January, 2018
(a) Books of Henderson
(i) Purchase Ledger Control A/c
Purchase Ledger Control A/c

Particulars Amount
(£)
Particulars Amount
(£)
Discount Received 550 Balance b/d 10160
Purchase Return 2110 Credit Purchase 106500
Bank/ Cash (Payment to
suppliers)
111010 Bank/ Cash (Refund from supplier) 400
Set-off (Transfer from sales
ledger)
540
Balance c/d 2850
Total 117060 Total 117060
Balance b/d 2850
(ii) Sales Ledger Control A/c
Sales Ledger Control A/c
Particulars Amount
(£)
Particulars Amount
(£)
Balance b/d 9600 Sales Return 5320
Credit Sales 142350 Bad Debts 1200
Discount Allowed 960
Bank/ Cash (Receipt from credit
customers)
150610
Balance c/d 6680 Set-off (Transfer to purchase ledger) 540
Total 158630 Total 158630
Balance b/d 6680
(b) Control Account
It is a summary account in general ledger. In this account, entries are made at the
end of the each accounting period once in relation to subsidiary ledgers and books which is based
on the periodical total of transactions (Tschopp, and Nastanski, 2014). The balance of control

account at any time should be equal to sum of balances of all individual accounts in subsidiary
ledger. The following are need for preparing control account are:
 Control account is very useful for management since it provides all summary of
transactions recorded in various subsidiary ledgers.
 The basis for reconciliation of cost and financial statements is also provided.
 It provides internal check for leading to accuracy of records.
 Accounting work's division among various ledger keepers are also possible.
CLIENT 6
(a) Suspense Account
It is a general ledger account in which amounts are temporarily recorded because correct
account was not determined at time when transaction was recorded in books of accounts
(Baldwin, Ingram and Albright, 2007). After determination of account, an amount is removed
from suspense account and transferred to relevant account.
Example:
Received an advance payment of $500 from the customer. Credit $500 to suspense
account by opening a suspense account and debiting cash account with $500. When full payment
is received from the customer, suspense account will be debited with $500 and accounts
receivable will be credited with $500. This will close suspense account and payment will be
moved to the correct account in books of accounts of business entity (Zeff, 2016).
Main features of suspense account are: Helps in preparation of Trail Balance: When debit side and credit side of trail balance is
not in agreement, then suspense account is created with difference between debit and
credit amount on side of trail balance which is short in balance (Horngren, Datar and
Foster, 2003). Helps in judging the nature of errors: The balance of suspense account helps the
accountant in the locating the errors since accountant will determine possible head which
have an error through the trial balance (Stolowy and Lebas, 2006).
 Helps in rectifying one-sided errors entirely: The amount is transferred to the respective
account from the suspense account after detection of errors. Through this, there will be

automatic closer of suspense account, after rectifying one sided errors completely (Porter
and Norton, 2012).
(b) Drafting of Trial Balance:
Particulars Debit(in £) Credit (in £)
Purchase Account 700
Sales Account 1100
Rent Paid 250
Cash in bank 840
Travel expense 160
Receivables 320
Payables 350
Opening Inventory 220
Capital Account 710
Control Account 330
Total 2490 2490
(c) Trial balance have credit balance of £ 330 as suspense account
(in £) (in £)
Simon A/c Dr
To Smith A/c
(being sale was debited to smith instead of Simon)
220
220
Jones A/c Dr
To Suspense A/c
(being sale of £420 not entered in Jones account, now entered)
420
420
Suspense A/c Dr
To White A/c
750
750

(being purchase of £750 not entered in White account, now
entered)
Suspense A/c
Particulars Amount Particulars Amount
To White A/c 750 By opening balance 330
By Jones A/c 420
Total 750 Total 750
(d) Difference between a Suspense A/c and Clearing A/c
Suspense account in some ways may be known as clearing accounts or interoffice
account. Transactions added are transferred to their appropriate accounts like income or expense
in suspense account and clearing account since both are temporary account. The balance sheet
and book keeping affairs of business entity will be affected by both of these accounts. The
clearing account is zeroed out; this is basic difference between them. In suspense account,
accounting is carried out until the proper account is identified. The purpose of clearing account is
to review and ensure that all the remaining balances are either explained or zeroed out (Agasisti
and Catalano, 2013).
CONCLUSION
In the above report, it has been concluded that by following adequate and appropriate
accounting principle and rules an organisation can achieve its financial accounting principles
since viewers of financial statement will get true and fair view of organisational financial
position with help of trading and profit and loss account, balance sheet, cash flow statement,
notes to accounts and statement of equity (Bodnar and Hopwood, 2012). In this report, journal
entries through double entry system and trail balance are recorded and financial accounts are
prepared which includes sole traders and partnership. Bank reconciliation statement also
prepared and suspense account is also cleared. This report also contains control account of sales
and purchase account ledger.