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FINANCIAL ACCOUNTING

   

Added on  2020-06-04

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Financial Accounting

Table of ContentsINTRODUCTION...........................................................................................................................1MEANING OF FINANCIAL ACCOUNTING...............................................................................1REGULATIONS RELATED TO FINANCIAL ACCOUNTING..................................................2ACCOUNTING RULES AND PRINCIPLES................................................................................2CONVENTIONS & CONCEPTS RELATED TO CONSISTENCY & MATERIALDISCLOSURE ................................................................................................................................3CLIENT 1........................................................................................................................................4CLIENT 2......................................................................................................................................13CLIENT 3......................................................................................................................................15CLIENT 4 ...................................................................................................................................16CLIENT 5......................................................................................................................................17CLIENT 6......................................................................................................................................17CONCLUSION..............................................................................................................................18REFERENCES..............................................................................................................................19

INTRODUCTIONFinancial accounting is a process which is used to disc the financial and accountinginformation of an organisation in a specified structure. Financial accounting is a procedure ofrecording, summarising and transcript the information as per accounting principles andstandards. Business operations contains various type of activities and financial transactions.These transactions are required to be recorded in a specific format and structure (Ball, 2013).Financial standards and accounting principles provide a structure to record these transactions in aspecific format. Financial position statement, cash flow and fund flow statement, balance sheetas well as income statements are the formats which are followed in general business. MEANING OF FINANCIAL ACCOUNTINGFinancial accounting is considered as a series of set of rules, standards, regulations andprinciples. Financial accounting standards are given by Financial Standards Boards and GAAP(Generally Accepted Accounting Principles). It is one of the branches of evaluation and reportingof financial statements and reports. Recording the monetary and non-monetary transactions inbooks, preparing financial statements and cost accounting are the main areas considered infinancial accounting (Ball, Kothari and Nikolaev, 2013)Financial reporting is one of the key criteria which help in managerial accounting.Financial reporting helps in summarising the records and information to finalise the conclusion.These information are also used in decision making strategies (Radebaugh, 2014). It is a style ofpresenting financial information in the form of financial statements. These information are usefulfor stakeholders, investors, financiers and for public. Basically, Historical Cost Accounting(HCA) or Constant Purchasing Power Accounting (CPPA) are used while preparing financialaccounts. Cash flow statement, profit and loss account or income and expenditure statement aswell as financial position statement are considered in the financial statements.Systematic recording and storing of information, determine the results as per thetransactions, define the financial position of business, providing required information tomanagers for making strategies and plans, find out solvency position of organisation are the mainobjective of financial accounting (Brown and et. al., 2015). There are five main bifurcationsmade subject to financial transactions like revenues, expenses, assets, liabilities and equity,revenue and expenditures. There are two type of transactions are fund such as capital nature1

transaction and revenue nature transaction. As per rules, principles provided by GAAP, capitalexpenditures and incomes must be presented in the balance sheet and financial positionstatements and revenue nature income and expenditures must be shown in profit and lossstatements or income statements. All the current and non current liabilities and assets are shownin balance sheet(Francis, Hasan and Wu, 2013). REGULATIONS RELATED TO FINANCIAL ACCOUNTINGFinancial accounting rules and principles are controlled and sans action by both generaland international accounting standard boards (DRURY, 2013). GAAP (Generally AcceptedAccounting Principles) is one of the authorised bodies which provide standards and principlesregarding financial and accounting (Nilsson and Stockenstrand, 2015). It provides guidelineswhich are used in the organisational context. International Financial Reporting Standards (IFRS)is one of the governed authorities which issued rules and standards subjected to financial andaccounting reporting. It is a set of passionate accounting standards which help to bifurcate thenature of transactions in different sections. International Accounting Standards Board (IASB)issue the IFRS rules and regulations. ACCOUNTING RULES AND PRINCIPLESAccounting rules and principles are also known as GAAP.(a) Boundary rulesEntity rules: This rule tells the definition of an entity and separates the existence oforganisation from the owner. It indicates towards the ownership and responsibilities of entity andbifurcate the owner’s role in organisation.Periodicity rule: As per this rule, all the transactions and records must be maintained forannual basis. Period of maintaining records is 12 months (Gaffikin, 2014). Going concern: It is an assumption subjected to existence of organisation. As per thisassumption, it is estimated that organisation will exist forever and all the transactions will bemade for the future growth.Quantitative rules: There must be countable information recorded in books no any kindof assumptions and perspective to be used in while preparing financial statements (Vogel, 2014). (b) Measurement rules 2

Monetary measurement: Every transaction must keep the details and information in aspecific manner and the details (Goh and et. al., 2015). There must be single currency opted as ameasurement tool. Historic costs: This rule indicates towards valuation of assets in the books on theirhistorical cost when they were occupied. Records must not be changed as per the changes inrates of asset values.Realisation rule: It is considered as an important rule subjected to revaluation of assetsafter a specified period (M Ancini, Vaassen and Ameri, 2014). As the cost of machinery was £20000 but after revaluation, the cost of asset at present is £ 19800. Matching Rules: As per this rule, the balance of assets and liabilities must be equal at theend of year. Dual Aspects: It is considered that there are two accounts get effected by everytransaction. As one account is debited and second account is credited (Gray, Coenenberg andGordon eds., 2013). Material Rule:This rule says that there is no any need to open a separate account forevery insignificant thing. There should be a separate group to be assigned to record significanttransactions. (c) Ethical RulesObjectivity rule : Every transaction and events contains objective for specific period.That objective must be cleared in reports as well as in books too (Hope, Thomas and Vyas,2013). Relevance rule : informations and records must be subject to the point in books. No anykind of irrelevant informations published in reports or recorded in books of accounts. CONVENTIONS & CONCEPTS RELATED TO CONSISTENCY &MATERIAL DISCLOSURE Convention of materiality : Accounting informations and details must be cleared andrelevant to the subject. No any kind of extra information, significant and insignificant details tobe considered in financial records. This convention points towards making accounting recordssimple and understandable. Only relevant and subject to the point informations are used help3

managers to make strategies and plans. It helps to able provide fair judgement and makedecisions (Kuper, 2013).Convention of Consistency : This accounting rule signify the scope of accountingpolicies in organisation. This convention says that the policies and regulations regardingaccounting policies and financial standards must be remain unchanged for specific duration andperiod (Convention related to consistency and materiality, 2018). As if an organisation usesFIFO method to calculate the cost of closing inventory then this method must be followed atleast for 12 months (Lawrence, 2013). CLIENT 1(a) Books of prime entries Journal entries (Figures in £)DateParticularL/FDebitCredit01/05/162/05/20163/05/2016Storage a/cTo Bank a/c (Being storage paid)Purchase a/cTo D. MainTo S. HoodTo R. FootTo W. Tone (Being purchase made)P. White a/cT. Wilson a/cF. Allen a/cT. Cole a/cF. Lane a/cF. Syme a/cTo Sales a/c4006080242011209101640770208040020601450161096089404

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