FINANCIAL ACCOUNTING INTRODUCTION

FINANCIAL ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
QUESTION 1A)..............................................................................................................................3
a. Trading account for the year ended 30 April 2020..................................................................3
b. Profit and loss account for the year ended 30 April 2020.......................................................3
c. Statement of financial position as at 30 April 2020.................................................................4
QUESTION 1B)..............................................................................................................................4
Features of information with the context of financial statement:................................................4
QUESTION 2 A).............................................................................................................................7
Calculation of different types of the ratios..................................................................................7
QUESTION 2B)..............................................................................................................................8
a. Bank account at the end of every month..................................................................................8
b. Other accounts and balancing them.........................................................................................9
c. Extraction of the trial balance as at 30 April 2020................................................................12
QUESTION 2C)............................................................................................................................12
i) Straight line method @ 12.5% per annum.............................................................................12
ii) Reducing balance method @ 15% per annum......................................................................13
iii) Meaning and significance accounting concept....................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES................................................................................................................................1

INTRODUCTION
Financial accounting is one of the essential parts of accounting and accounting department.
As per this accounting financial statement with regard to the company’s financial position is
being prepared followed by its analysis so that the company and its concerned stakeholders can
take the adequate and appropriate decision (Warren, Jonick and Schneider, 2020). This report
will discuss about the various aspect of financial accounting and the preparation of financial
accounts. Here in this report a section of ratio analysis is also included along with the detailed
explanation of depreciation accounts and the concept of accounting concepts.
QUESTION 1A)
a. Trading account for the year ended 30 April 2020
Particular Amount Amount
Sales 30000
OP stock 4700
Add: Pur-
chases 15700
Less: CL
stock 4400
COGS 16000
Gross profit 14000
With the above calculation it is evaluated that the gross profit of the company is 14000.
The reason underlying this fact is that in trading account only the direct expenses are being
deducted from the total revenue (Garbowski and et.al., 2019). Hence, from the total sales the cost
of goods sold is being deducted. Thus, the total gross profit of the company is 14000.
b. Profit and loss account for the year ended 30 April 2020
Particular Amount
Gross profit as per trading ac-
count 14000
Less;
Expenses
shop wages 4420
light and heat 260
rent 4500
insurance 120 9300
Net profit 4700

Further after the calculation of the trading account the profit and loss is being made under
which all the other indirect expenses are being deducted from the gross profit. Hence, after this
deduction the total net profit which is attributable to the company is 4700.
c. Statement of financial position as at 30 April 2020
Balance sheet
Particular Amount
Assets
Shop fitting 13000
bank 610
cash 100
debtors 120
CL stock 4400
Total assets 18230
Liabilities
creditors 2030
Capital 15000
Less: Drawing 3500
Add: net profit 4700 16200
Total liabilities and eq-
uity 18230
Further after making the profit and loss account the statement of financial position is being made.
Under this all the asset and liabilities of the company are being listed and evaluated.
QUESTION 1B)
Features of information with the context of financial statement:
Reliability:
It is one of the main features associated with the financial statement. This is because as
the financial statements are the depiction of the company’s actual financial position and due to
that they are counted as most reliable source of information with respect to the company. As the
financial statements enable the reliable and valid information with regard to the company so the
users including the investors can make their investment decision in regard to the company
(Herath and Albarqi, 2017).