Financial Accounting: Business Transactions, Single Entry and Double Entry System, Trial Balance

This document provides an introduction to financial bookkeeping and the concept of journal entries. It discusses the single entry and double entry system of bookkeeping, as well as the importance and maintenance of trial balance. The document also covers the identification of business transactions and their types, as well as the major differences between financial reports and statements and their importance for stakeholders. The subject is Financial Accounting.

Financial Accounting

Contents
INTRODUCTION...........................................................................................................................3
TASK1.............................................................................................................................................3
Question 1. Identification of business transaction and their type also discussion about the
single entry and double entry system of bookkeeping buy land in term of trial balance.......3
Question 3: Identify major differences in financial reports and statements and why these are
important for various stakeholders?.......................................................................................8
Question 4: explain different fundamental principles of accounting...................................10
Question 5:Prepare a profit and loss account for the year ended 31 December 2017 and
balance sheet at that date......................................................................................................10
TASK2...........................................................................................................................................12
Question1: What is meant by bank reconciliation and why is it required? How is this
achieved? Why is this necessary?.........................................................................................12
Question 2: what are control accounts? Explain the role of control accounts in financial
management..........................................................................................................................13
Question 3: what is suspense account? What are the reasons for drafting suspense accounts?
..............................................................................................................................................13
Question 3 prepare cash book...............................................................................................14
Question 4 Prepare a bank reconciliation statement.............................................................14
REFRENCES.................................................................................................................................16
Books and journal..........................................................................................................................16

INTRODUCTION
Financial bookkeeping can be defined as a combination of different account and financial
information which are related to development of a proper system by the organisation with the
help of tools and techniques related to accounting and business records for analysing and
interpreting information and using it for the further benefit. In this report which is an
organisation is Ray finance limited. Present report have been considered, the sense and concept
of journal entries, how they apply in the organization their use in formulating trial balance and
financial statements. This reports their discussion about the importance and maintenance of trial
balance and various accounts which are required to the organisation for controlling its cash flow
and bank reconciliation statement. is also discussion about how the bank reconciliation statement
are prepared by the organisation and how it can be used in day to day operations and activities of
the firm.
TASK1
Question 1. Identification of business transaction and their type also discussion about the single
entry and double entry system of bookkeeping buy land in term of trial balance.
Commercial transaction: It includes those activities or deals which measure in monetary
term and indirectly affect processes of business. There dealings direct affect on assets, liabilities,
expense and income of the business organization. Business transactions are the activity which is
related with business and record in periodicals of the organization. The transactions rare divided
into 2 parts which are Cash transactions and credit business transaction(Nicholls and Mastrolia,
2015).
Cash transaction: Activities which are related to flow of cash inward and outward. It
includes sales, purchase, purchase of investment etc.
Credit deal: It considered that kind of activities in which there is no need of cash at the
time when transaction incurred. Examples, goods purchase on credit, stock sold on credit,.
These transaction directly as credit purchase increase obligation of organization and affect on
asset and liability and decent sold on praise enhance the possessions of the organization
Internal and External deals: Theses deal has separate part. .
External deal: It is related with activities which are related with external parties. Business
dealings, purchase of assets, issuing shares, purchase raw material etc.

Internal transaction: Theses are non enhance transactions . In internal transactions only internal
parties of business are involved. It does not considered transactions which are related with
exchange of good. There are different Internal transaction considered, devaluation charge on
secure asset, repayment loss of asset as due to on fire.
Single entry book keeping: Under single entry accounting system organisation has to
record each and every transaction on the basis of proper record with the financial information.
this is the transaction is recorded from the one side which also generate the incomplete
transactions. System of accounting is used by sole proprietor firm where the organisation has no
legal authority apply this system. is completely different from double entry system where the
ride it of the transactions are recorded for each and every transaction. (Elefterie and Badea, ,
2016).
Double entry accounting system: In this system of accounting transaction or business
activities are record on 2 sided thus it is known as double entry book keeping system. According
to the rules, every business transaction have 2 sided effects, it affect asset and liabilities also.
Every transaction is recorded in debit or credit side. This is the official and authorise format of
recording entry which is applicable in the entire world as it precedes base for formulating
financial statement and the whole accounting system is based on book keeping it is the source of
staring of recording all the transaction of business (Mangala, and Kumari, 2017).
Trail balance: It is statement which show list of all account related wit business transactions
which contains in the books of ledger statements. In this all accounts with their balance have
been show in debit or credit side of the statement. In other words trial balance is the format
which is formulated at the end of the account years to identify the debit and credit balance of the
accounts with the help of leader Import in context of trial balance.
Manager of organization use trial balance to identify the debit and credit balance of accounts.
It is useful to organtional in finding out error during journal entry.
It is help in providing basic for formation of financial statement.
Auditors use it as base of recordings.
Trail balance help in deifying the end balance.
It is provides various mathematical impartialities which are associated with debit and credit side
of accounts.

It is used in finding out the absent quantity and also uses to reduce the different of asset and
accountabilities side.
Question 2
1. Journal entries
Date Particulars CR DR
01/06/16 Cash a/c DR
To capital a/c
65000
65000
02/06/16 Purchase a/c DR
To accounts payable a/c
8000
8000
07/06/201
6
Cash a/c DR
To sales a/c
4000
4000
08/06/16 Accounts payable a/c DR
To bank a/c
4000
4000
14/06/201
6
Insurance expense a/c DR
To bank a/c
75
75
15/06/16 Accounts receivable a/c DR
To sales a/c
12000
12000
16/06/16 Purchase a/c DR
To accounts payable a/c
10000
10000
18/06/16 Computer equipment a/c DR
To cash a/c
3000
3000
20/06/16 Rent a/c DR
To bank a/c
150
150
21/06/16 Cash a/c DR
To sales a/c
10000
10000
25/06/16 Cash in hand
To bank a/c
100
100

30/06/16 Stationary a/c DR
To cash in hand a/c
30
30
(2) Ledgers:
Cash a/c
Date Particulars J
F
Amount Date Particulars J
F
Amount
01/06/
16
To capital a/c 65000 18/06
/16
By Computer equipment
a/c
3000
07/06/
16
To sales a/c 4000 31/06
/16
By balance c/d 76000
21/06/
16
To sales a/c 10000
79000 79000
Capital a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
31/0
6/16
To balance c/d 65000 01/
06/
16
By cash 65000
65000 65000
Purchase a/c
Date Particulars J Amount Dat Particulars J Amount

F e F
02/0
6/16
To accounts payable a/c 8000 31/
06/
16
By balance c/d 18000
16/0
6/16
To accounts payable a/c 10000
18000 18000
Accounts payable a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
08/0
6/16
To bank a/c 4000 02/
06/
16
By purchase 8000
31/0
6/16
To balance c/d 14000 16/
06/
16
By Purchase a/c 10000
18000 1800
Sales a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
31/0
6/16
To balance c/d 26000 07/
06/
16
By Cash a/c 4000
15/ By Accounts receivable 12000

06/
16
a/c
21/
06/
16
By Cash a/c 10000
26000 26000
Bank a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
31/0
6/16
To balance c/d 4325 08/
06/
16
By Accounts payable a/c 4000
14/
06/
16
Insurance expense a/c 75
20/
06/
16
Rent a/c 150
25/
06/
16
Cash in hand 100
4325 4325
Insurance a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
14/0 To bank 75 31/ By balance c/d 75

6/16 06/
16
75 75
Account receivable a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
15/0
6/16
To sales a/c 12000 31/
06/
16
By balance c/d 12000
12000 12000
Computer a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
18/0
6/16
To cash a/c 3000 31/
06/
16
By balance c/d 3000
3000 3000
Rent a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
20/0
6/16
To bank a/c 150 31/
06/
16
By balance c/d 150
150 150

Cash in hand a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
25/0
6/16
To bank a/c 100 30/
06/
16
By stationary 30
31/
06/
16
By balance c/d 70
100 100
Stationary a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
30/0
6/16
To Cash in hand a/c 30 31/
06/
16
By balance c/d 30
30 30
(3) Trial balance:
Particulars DR CR
Cash a/c 76000
Capital a/c 65000
Purchase a/c 18000
Accounts payable a/c 14000
Sales a/c 26000

Bank a/c 4325
Insurance a/c 75
Account receivable a/c 12000
Computer a/c 3000
Rent a/c 150
Cash in hand a/c 70
stationary a/c 30
Total 109325 109325
Question 3: Identify major differences in financial reports and statements and why these are
important for various stakeholders?
It is important for Ray finance limited used tools of financial accounting in order to
identify performance in relation the business for this purpose they prepared financial report and
statement. Both are the part of financial accounting but there are difference which describe
below
Particular Financial report Financial statement
Definition Financial reports are the
reports which is formulated to
show the financial position of
the organization to its users.
Theses statement are
formulate to identify the value
of profit and strength and
obligations of the organization
Aim It is meant to help
stakeholders in getting
information about various
products
Us financial data to assess
prior performance ad probable
future presentation to make
decision
Tools It includes cash flow, fund
movement, and parts of
financial statements.
It considers profit and loss
explanation and balance sheet.
Range Financial report as wider area
and financial statement are
Financial statement has
narrow area as compare to

part of it financial reports.
Requirement of financial report: it can be define as that standard practices which organization
proved accurate information to the users of company . Following are the requirement of finance
report(Chhabra, and Pattanayak, 2014).
Financial reports are use to provide article as proof.
It is useful in analysing financial performance of the business organization.
It helps in tracking period ad managements of obligation
With use of financial report manager take decision regarding future business policies
Back and other financial institution give loan to organization on the basis of checking financial
reports of the organization
It is useful in identify real cash inflow and out flow activities.
With the use of financial report Ray finance limited will be able to compare their performance
with rival companies.
It helps in taking division regarding given incentive future business project.
There are two types of users of financial reports
Internal users: These includes member which are belongs with part of business
organization, which help in running business activities
Management department: They are help in formulating policies and taking decision
regarding business activities. They use financial reports for caging strategies and take decision
regarding expansion of business
Employees: They are parson which engaged in performing business activities. They are
directly interest in financial report as by analysis the report they make sure regarding their job
security, profit and incentive organization given to them.
External users: Those users which are not part of organization but indirectly internal to
the business are external users (Klein, 2015).
Investors: Define as those persons were directly related to the organisation and help firm
in fulfilling the financial requirement because these individuals invest in the different policies of
the organisation so that form can perform its various activities.

Public: public can define a journal people which are directly related to the organisation
help the organisation in fulfilling its different functional requirements related to employment
goodwill and performance of the fall within the market..
Government: They supervisors all organization and give permission of foreign trade and
expanding business in other countries or place on the basis of analysis the overall performance
and financial report of the organizations.
Competitors: Rival industries, compare them self by identifying the financial
performance and profit ratios of the organizations
Suppliers: it includes person who helps the organisation in identifying the requirements
related to raw materials as well as different working items which are required to perform the
functions related to selling of goods and services.
Financial institutions: Theses institution are proved loan to business organization. They
include, banks, mutual fund,, insurance companies etc. They proved loan on the basis of
reputation and financial perforce of the company.
Question 4: explain different fundamental principles of accounting.
Fundamental principles of accounting: These are general functions which rules and
benchmark in the field of accounting which is based on various kinds of principles of GAAP.
Economic entity: According to this principle organization and business are 2 different
things.
Conservatism: If a situation arises where there are 2 acceptable options for reporting an
item accounting goes for less favourable option.
Materiality: The information which will have a material effete should form a part in
foreseeable future (Baban and Sharma, 2015).
Reliability: Only those transactions should be recorded that can proven and has significant
evidence.
Revenue recoganization: Recognition of revenue should be o accrual basis of accounting
Consistency: It is usage of method, principles until another method comes proves to be
better.
Full disclosure: Employers should be disclosing all relevant information regarding
business.

Monetary unit: Transactions that carry monetary value and statement in terms of currency
should be recorded.
Time: There should be standardize time period of reporting the financial statements’
usually monthly quarterly and annually.
Question 5:Prepare a profit and loss account for the year ended 31 December 2017 and balance
sheet at that date.
Profit and loss statement: This statement is the part of financial report as well as financial
statement, this is prepared to identify the overall profit business organization able to generate
within the given time period which is generally considered as ear ended. With the help o this
financial statement manger of organization is able to identify the profit ratio and its relationship
and effect of various adjustment related to statement of profit and loss. In this case the
organization able to gerante 83000 is the gross profit and 17047 $ can be taken as net profit after
all those adjustment of bed debts, depreciation and unpaid or advance payment of inter and rent
liabilities. All these elements are dray affect and to perfectly adjust this element organization is
follow the rule related to GAAP (Lodhia, 2015).
Balance sheet: this act as the part of financial statement it play major function in every
business organization. A balance sheet is the format through which organization will be able to
identify the asset and liabilities value of the business at the ending of financial year. It shows the
asset and liabilities and effect of various element on this. In the given case, balance sheet always
value of asset and liabilities is 143845.If the value of asset and liabilities is show differ balance
this means that all the record and transaction are not record in systematic way. Balance sheet is
prepared to identify the balance as well as us in taking decision regarding future business
activities.
Question 5
Profit and Loss Account
Particulars £ £
Sales 125000
Less: Sales return 1000
Net sales 124000

Less: Cost of goods sold 82000
 Opening stock 9500
 Purchase (75000-1500) 73500
 Closing stock (1000)
Gross profit 42000
Add: Operating income 5850
 Interest received 1000
 Rent received 4850
Less: Operating expenses 28579
 Depreciation 5000
 Bad debts (1200 - 650) 550
 Insurance (7500 - 411) 7089
 Postage 900
 Rent and rates (1500 + 340) 1840
 Wages and Salaries 13200
Net profit 19271
Assets £ Liabilities £
Current assets: Equity and liabilities:
Bank 10594 Equity
Cash 340 Capital 120,800
Debtors (12500 - 1200) 11300 Less: Drawings 5,150
Provision for bad debts (934-650) 284 Retained earnings 18,681
Prepaid insurance 411 Total equity 134331
Stock 1000
Total current assets 23929 Liabilities:
Creditors 3,900
Fixed assets: O/s Business rates 340
Motor Van: 25000 15132 Advance rent received 490
Less: Depreciation :5000 Total liabilities 4730

Less: Accumulated depreciation:
4868
Loan given 100000
Total fixed assets 115132
Total assets 139061 Total equity and liabilities 139061
TASK2
Question1: What is meant by bank reconciliation and why is it required? How is this achieved?
Why is this necessary?
Bank reconciliation: This can defined as the statement through where organization has to
match its cash account with different financial bank account information. In other words it is the
procedure in which bank balance as per business organization’s records are matched with
balance of the bank account. It is essential to check the balance of cash book and bank statement
with given time period other with differences amount is high .The main purpose of preparing ban
reconciliation statement is to identify the difference between cash book and bank passbook , in
order to reduce the difference. It will help in controlling illegal and fraudulent business activities
and managements department have reliable information regarding bank. Once the organization
repaired the statement they match every transaction though leader and identify entries and on the
basis of that they find out those entries which are the reason of arriving deviations between
actual cash book and bank statement (Kurosaki, and Usami, 2016).
It is essential for preparation of bank reconciliation statement, without in manger never able to
identify the reason of difference and also they don’t have any proof regarding how many time
transaction of bank is incurred the reason. It may increase fraudulent business activities in the
organization. To overcome this entire problem is require by organza to prepared in on annual
timely basis. For reducing gap manager need to prepare back reconciliation statement within
week of time. If they don’t create this statement then there will be multiple problems has been
arise in from of the organization. With the use of bank reconciliation Ray finance limited able
to reduce their errors and all the cash book transaction with their original bank statement.

Question 2: what are control accounts? Explain the role of control accounts in financial
management.
Control accounts: Theses are also define as adjustment account, they are call controlling
accrue because for these activity transaction, manger create a separate subsidiary leader account,
it will help in tracking all the business transactions in more detail form. Individual transaction of
these account are posted in correspondent and subsidiary account. For example, account revel,
accountant formulate it separate account and it will also be show in each debtors account. These
are the summery of all the individual transactions.
Controlling accounts play essential and major role in financial managements with the se of these
transactions mangers will be able to identify the summery of all the relevant business
transactions through which financial manger take decision regarding formulation of business
policies.
It helps in specialization of work by dividing and separating accounts. It useful in saving time
and reducing error.
Control account proved base to Ray finance limited for formulating profit and loss statements.
It helped in controlling internal check and is also proved greater accuracy of all the record of
accounts.
Control account is provides base to the preparation of reconciliation of finance and cost account
and statements.
Question 3: what is suspense account? What are the reasons for drafting suspense accounts?
Suspense account: These accounts are prepared to carry doubtful entire in record. These
entire are recorded on temporary basis. It is made because the ledger and journal entry not
recorded transaction at the time they arrived. These are types of unsure business accounts. It is
essential for accountant to prepare suspense account as it will help in maintaining the balance of
ledger, if accountant is not clear regarding any that where from cash has been receive then
suspense account is formulated by organization to create the suspense and fulfil the barriers of
the entry. Business account gave time place to that transaction until accountant found their real
place of which account can easily match back and complete their task at the time They required.
it is useful in fond out the reason of omission entry (Ushad, and Ramen, , 2017).

Question 3 prepare cash book
Cashbook: It is statements which show only cash transaction it also know as cash ledger
which only considered the cash inflows and cash out flow related business transaction. Business
organization prepared cash book to identify their cash activities balance these are properly
formulate to detect the error and control any illegally activities incurred during busies run their
cycle. It is useful in cutting time also usefully identify cost incurred in business activities and
those activities through which business able to generate more cash as compare to other business
activities (Agwu, 2014).
Question 4 Prepare a bank reconciliation statement
This statement shoes the difference between cash book and bank passbook. The main aim
of preparation of bank reconciliation statement to determine the record and reduce all these error
with given time period. It affect when, entries recorded in cash book but not record in bank state
or vice versa. In this case study the reason of differences areas between cash books and pas is
that organization not consider and recorded by bank directly and not record by the accounting
in the book if accounts Question 4
Updated bank reconciliation and cash book as on 28th February 2010
Question 5
Scenario 2:
Journal entries

Suspense account

CONCLUSION
From the above analysis’ it has been identifying that accounting play major role in
running business organization. Without accounting , business not able to run their activities as
they don’t have any idea regarding the profit, loss how to formulate policies and they don’t have
any report which they present to external world. Accounting is started with journal entries, these
provides base to prepare other ledger, trial balance and financial statement. Trial balance and
bank reconciliations are prepared to reduce errors of back and other accounts of leader with the
use of suspense and control accounts. Management department uses financial report to represent
it in form of internal and external users does them takes decision and recognize the performance
of the business organization. These are also useful in solving financial problems by using tools of
financial managements.

REFRENCES
Books and journal
Berry, L.E., 2018. Financial accounting demystified. McGraw-Hill,