Financial Accounting

Financial Accounting

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Formulation of trial balance as on 31st March 2020..............................................................1
1.2 Recording business transactions in the books of Catherine...................................................3
1.3 Applying the trial balance figures and showing the statement in which, they will be shows
.....................................................................................................................................................7
TASK 2............................................................................................................................................8
2.1 Description of the financial accounting statements prepared by business entities and
discussion of the type of information presented through each....................................................8
2.2 Preparation of statement of profit and loss in accordance with International Accounting
Standards for Italian Wines Ltd. As on 31st March 2020..........................................................10
2.3 Preparation of statement of financial position in accordance with International Accounting
Standards for Italian Wines Ltd. As on 31st March 2020..........................................................11
2.4 Calculation of different ratios..............................................................................................11
TASK 3..........................................................................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Financial accounting can be defined as the process of formulating final accounts in
appropriate manner so that actual position of the company could be determined. The accounts
that are generated with the help of it are profit and loss account, balance sheet and cash flow
statement (Biddle, Ma and Song, 2019). It is very important for all the organisation to make sure
that they are able to conduct financial accounting every year as it leaves impact upon
stakeholders. On the other hand, all the results that are created with the help of it, are assessed by
shareholders and investors so that they can determine that entity will be able to provide them
good returns or not. If an enterprise will not be able to deliver appropriate information of
position and performance of business to the external as well as internal parties then it may lead
the business towards failure. It can also affect the market image as well as the long-term
objectives such as higher profits, revenues etc. Main aim of this assignment is to understand the
way in which financial accounting should be conducted and the key factors which should be
focused to generate final accounts. For this purpose, different topics are covered in this report.
These are formulation of trial balance, application of double entry system and generation of
ledgers, creating financial statements on the basis of trial balance and the notes that are shows
below it. Apart from this, bank reconciliation statement and key elements that are related to it are
also discussed in this project.
TASK 1
1.1 Formulation of trial balance as on 31st March 2020
Trial balance is a statement which is generated after the formulation of different types of
ledger accounts. While creating it, it is very important or the accounting professionals to make
sure that they are able to understand all the business transactions properly. If they are not aware
of their nature then it may result in wrong formulation of trial balance (Dauderies and Annand,
2019). There are several types of business transactions which are as follows:
Sales: When an entity or individual sale the goods which are used for carrying out
operations then it is known as sales. The balance of it is considered as credit as all the receipts
are recorded in credit side. It is shown in the profit and loss account of the financial statements.
Purchase: When an enterprise buys material or goods to perform the operations then it is
known as purchase. The balance of it is debit as it results in outflow of monetary resources and
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every thing which goes out of the business or the expenses have debit balance. It is reflected in
the profit and loss account of final accounts (Flesher, Flesher and Previts, 2018).
Receipts: When a business entity sale its goods on credit then the amount of it will be
recovered after a few days or months on a due date. The amount which is related to the credit
sales then it will be considered as receipts for the business. If the amount of it is not received by
the organisation then it will be treated as bad debts.
Payments: When an organisation purchases stock on credit then the amount which will
be required to be paid by the business after the due date will be considered as the payment. It is
reflected in the liabilities side of balance sheet which is a financial statement (Hanif and
Mukherjee, 2018).
There are various types of regulations which are applied to the financial accounting. All
of them are as follows:
Accounting standards: These are the main regulations that are required to be followed
by all the organisations in order to generate financial statements in proper manner. There are
various types of IAS and IFRS which are required to be complied in order to reduce possibility
of legal actions.
Accounting principles: While conducting financial accounting it is very important for
all the accounting professionals to make sure that they are following all the principles as it is
essential to generate the records (Kimmel, Weygandt and Kieso, 2018).
Accounting concepts: For all the business entities IAS have developed different types of
accounting concepts, such as going concern, separate business entity etc. In order to formulate
final accounts properly all of them are required to be followed properly.
There are various types of manual and electronic systems to formulate trial balance. In
earlier years manual systems were used by the companies but in modern era different types of
software are used to generate the trial balance. One of them is Tally.
Trial balance helps to understand the concept of errors. When it is generated and the total
of debit and credit side is not matched then the balanced amount shows that the accounting
professionals have made mistakes to generate the accounts (Maynard, 2017). If the total of both
the sides is matched then it is considered that no error was made while formulating it. Trial
balance is very important for all the organisations as it helps to analyse the errors which were
made while generating journals or ledgers.
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