(solved) Financial Accounting PDF
Added on 2020-10-04
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FINANCIALACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................1(a) 1. Examining the Financial Accounting and it's purposes......................................................1(a) 2. Examining the regulations relating to financial accounting ..............................................2(a) 3. Describing the Accounting rules and principles.................................................................3(a) 4. Explaining the conventions and concepts relating to the consistency and materialdisclosure.....................................................................................................................................4CLIENT1.........................................................................................................................................5(a) Journal Entry in the books of David Study...........................................................................5(b) LEDGER ACCOUNTS .........................................................................................................8(c) Trial Balance as at 31st January, 2018................................................................................14CLIENT 2......................................................................................................................................16(a) Statement of profit and loss for Peter Hampau for the year ended 31st July 2018 .............16(b) Statement of financial position for Peter Hampau as at ended 31st July 2018 ...................17CLIENT 3......................................................................................................................................17....................................................................................................................................................18(b) Balance Sheet of Bowling Limited......................................................................................19(c) Accounts concepts such as consistency and prudency.........................................................19Client 4...........................................................................................................................................21(i) Purpose of bank reconciliation statement ............................................................................21CLIENT 5......................................................................................................................................22(a) Books of Henderson.............................................................................................................22CLIENT 6......................................................................................................................................23(a) Suspense Account.................................................................................................................23(b) Drafting of Trail Balance:....................................................................................................24(c) Trial balance have credit balance of £ 330 as suspense account..........................................24(d) Difference between a Suspense A/c and Clearing A/c.........................................................25CONCLUSION..............................................................................................................................25REFERENCES..............................................................................................................................27
INTRODUCTIONIn modern times the financial accounting plays an integral part in managing andascertaining the operational activities of the business entity also ascertain it's performance.Financial accounting refers to the process of preparation of annual or financial statements thatare used to record and depicts the financial performance as well as the operational experiences ofthe organisation(Weil, Schipper and Francis, 2013). These statements forms a financial orannual report of the organisation of the organisation which are mainly useful for the internal aswell as the external parties of the business entity. Besides this, the report pertain the knowledgeand evaluation regarding the financial statements of the small accountancy organisation like TajAccountants (UK).(a) 1. Examining the Financial Accounting and it's purposesFinancial Accounting refers to the process of recording, summarising and reporting themyriad of business operational activities over an accounting era(Schaltegger and Burritt, 2017).These operational transactions are summarized in the preparation of the financial statements,involves balance sheet, income statements and cash flow statement that depicts the operating aswell as the financial performance of the business organisation like Taj Accountancy over aspecific accounting era. There are some purposes of the financial accounting for the business organisation, which arementioned underneath. Financial Accounting used for maintaining the systematic records: The financialaccounting refers to the systematic record of the systematic record of the financialtransactions of the organisation. The financial accounting helps in maintaining thesystematic record of the business transactions by recording them on the accrual basis. It is used for the purpose of protecting the business properties: The accounting alsoused for the purpose of protecting the properties or assets of the business organisation forunreasonable or unwarrantable use(Zeff, 2016). Financial accounting is specialized for completing the purpose of ascertainment ofoperational profit or loss: Among all the purpose the main purpose of adapting the1
financial is to find out or quantify the accurate values of the profits or losses incurredfrom the business operational activities of the organisation(Edwards, 2013). It is used for the purpose of ascertaining the financial performance of the business:The accounting also used for the purpose of ascertaining the the financial performance ofthe business organisations. As accounting helps in keeping the systematic record of thepast accounting years that renders a base or the comparative basis that is utilised by theorganisation to compare and ascertain the profit margin as well as the probability(Khan,2015). It is used to ensure effective decision making within the organisation: The financialreporting helps the managers to make further futuristic decision regarding the businessoperational activities of the organisations. With the help of accurate financial recordsregarding the business activities it helps the managers to quantify the actual output fromthe business activities and take further actions for ensuring more betterment and attainingthe more favourable outcomes(May, 2013). (a) 2. Examining the regulations relating to financial accounting There are some regulations for guiding the process of accounting in order to perform itprominently and effectively. Some regulations are mentioned below.The procedure pertains some rules, standards and procedures of Generally AcceptedAccounting Principles (GAAP) which are designed as regulatory body for the prominentand accurate preparation financial statement. The GAAP pertains several regulations likePrinciple of Regularity, Consistency, Precedence and Periodicity etc. Regulations regarding the International Financial reporting Standards are also required tobe follow by the accountants of the organisations like Taj accountancy firm (UK) as dueto it depicts the appropriate manner for reporting of particular transactions and events infinancial statements(Broadbent and Cullen, 2012). Regulations regarding Financial Accounting like debit and credit rules of accounts andtheir treatment in accounting are required to be follow by the accountant of organisationlike Taj accountancy firm (UK). So appropriate and accurate information reported infinancial statements. Accordance with the Companies Act it becomes compulsory to produce the Books ofaccounts for developing the knowledge of general public for enhancing their observations2
and knowledge regarding the financial statements of any organisation and make their ownregarding the investment or disinvestment(Beatty and Liao, 2014). (a) 3. Describing the Accounting rules and principlesFinancial Accounting requires and pertain assorted set of rules and principles which arerequired to be follow by each accountant of organisations like Taj Accountancy Firm (UK) whilethe preparation of the financial statements which are mentioned underneath: Debit the receiver, credit the giver: This principle mainly applied for the treatment ofPersonal accounts. Some examples of personal account are debtors, banks, creditors, capitalaccount etc. when the organisation received something in form of cash raw material or anythingfrom other organisation or individual then in case of personal account the it must be crucial todebit the account of that organisation or individual and if the organisation gives some cash oranything to other organisation or person then it the account of that individual or organisationmust be credit(Edwards, 2013). Debit all expenses and losses, credit all incomes and gains: This rule is applicablewhile the treatment of Nominal accounts. Under the treatment of nominal account, all theexpenses and losses of the organisation are to be debited in the books of accounts and all theincomes or gains of the organisations are to be credited(Needles, Powers and Crosson, 2013). Debit what comes in, credit what goes out: This principle is mainly applicable while thetreatment of the real accounts. The real account pertain the machineries, land and buildings etc.For example, an organisation acquire furniture of $ 30000 by cash, then the furniture comesunder the real account and furniture account is required to be debited by $ 30000 and cashaccount must be credited by $ 30000. Some principles of the Financial accounting are mentioned underneath:Dual aspect concept:Dual aspect concept defines that the organisations are required torecord their business transactions accordance with the dual reporting concepts, it statesthat every transaction has its double effects or must be recorded twice in the books ofaccounts as double on both debit and credit side of books. As in case of Single entrysystem every transactions are to be recorded once and it has only one aspect of thetransaction which leads to recording of relevant informational data in books of accountsan inappropriate manner. That is why, in order to prevent such kind of problem the dual3
aspect principle requires that every and each transaction is required to be recorded onboth debit and credit side of accounts.Cost principle:This principles examines that costs of business assets are required to berecorded at accurate acquiring cost (costs price+installation charges). It means thatbusiness assets must be recorded by the organisation at their costs of acquisition, as theyare obliged to evaluate the assets balances while preparing the several accounts and finalaccounts such as depreciation accounting and balance sheet(Taipaleenmäki andIkäheimo, 2013). Matching principle:This principle examines that the all the relevant expenses incurredby the organisations are required to be charged to the income statement in an accountingera in which revenues are earned. Furthermore, the expenses are required to be record inthe same period as the income to which it is associated(Parker and Fleischman, 2017). (a) 4. Explaining the conventions and concepts relating to the consistency and material disclosureFinancial accounting framework comprises with the conventions which acts as theguidelines that are required to follow while applying the principles of accounting practically.The mandatory accepted conventions depends on practical facts and it renders the prominentmethod or techniques to accountant for solving practical issues which are faced while preparingthe financial statements of business entity. Some conventions of Financial accounting arementioned underneath: Convention of consistency: It is mandatory for the organisation to follow the conceptsand conventions continuously and on consistent basis. As it is crucial for the finalaccounts, it is essential for ascertainment of the organisation to analyse the performanceson the basis of comparative analysis. Besides this, it is also essential for the comparativeof different organisation of different countries, if all organisations follows the sameconventions an d concepts. As from the point of view of investors it is also beneficiaryfor the investors to make comparative analysis of the organisation which follows sameaccounting methodology and concepts(Collier, 2015). So it can be termed asindispensable to precede accounting principles and rules in a familiar manner and onconsistently and continuously basis. As it ensure the reliability to the financial report. Forexample, if an organisation adapted the method of Straight line method for depreciatingthe fixed assets but after some years the organisation changes the method and follows the4
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