Financial Accounting Concepts and Principles

This report provides an in-depth analysis of financial accounting concepts and principles. It covers topics such as bookkeeping systems, ledger control accounts, and suspense accounts. The assignment includes a trial balance, journal entries, and practical examples to illustrate key concepts. It also compares suspense accounts with clearing accounts and highlights the importance of accurate record-keeping in financial accounting.

Financial Accounting

Table of Contents
INTRODUCTION...........................................................................................................................4
Client 1.............................................................................................................................................4
(a) Books of prime entries ..........................................................................................................4
(b) Ledger posting.......................................................................................................................7
Trial balance..............................................................................................................................13
Client 2...........................................................................................................................................14
(a) Profit and loss statement for Peter piper..............................................................................14
(b) Financial Position Statements..............................................................................................14
Client 3...........................................................................................................................................15
(a) Profit and loss statement of Raintree Ltd. For the year ended 30th September 2017.........15
(b) Statement of financial statement of Braintree Ltd...............................................................15
(c) Accounting concepts............................................................................................................16
(c) Purpose of depreciation.......................................................................................................16
Client 4 ........................................................................................................................................17
(a) Purpose of bank reconciliation statement............................................................................17
(b) Factors affect the balance of bank statement and cash account..........................................17
Client 5...........................................................................................................................................17
(a) sales ledger control account and purchase ledger control account......................................17
(b) Importance of Ledger control account................................................................................18
Client 6...........................................................................................................................................18
(a) Meaning of suspense accountant.........................................................................................18
(b) Trial balance........................................................................................................................18
(c) Journal entries regarding suspense account.........................................................................19
(d) Difference between suspense and clearing accounts ..........................................................19
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Financial accounting is one of the important parts of accounting system. All transactions
and records are kept in the form of sections, formats and schedules under the same (Chen and et.
al., 2011). Financial accounting provides a path to track the records and information in a proper
manner. Financial accounting is a concept which is made up of multiple rules and principles
around which information and records are maintained. This report defines the implementation of
book keeping method in general accounting. Financial records and accounts are prepared in
certain formats as double entry systems, ledger and trail balance (Weil, Schipper and Francis,
2013 ). Bank reconciliation statements, control and suspense accounts are prepared subject to
case requirement.
Client 1
(a) Books of prime entries
Journal entries (Figures in £)
Date Particular L/F Debit Credit
01/05/16
2/05/2016
3/05/2016
Storage a/c
To Bank a/c
(Being storage paid)
Purchase a/c
To S. Hood
To D. Main
To W. Tone
To R. Foot
(Being purchase made)
J. Wilson a/c
T. Cole a/c
F. Syme a/c
J. Allen a/c
400
6080
1120
1640
2080
910
400
1450
2060
960
1610

4/05/2017
7/05/2016
9/05/2016
11/05/2016
14/05/2016
16/05/2016
P. White a/c
F. Lane a/c
To Sales a/c
(Being sales made)
Motor a/c
To Cash a/c
(Being motor purchased)
Drawing a/c
To Cash a/c
(Cash withdrawal for personal use)
T. Cole a/c
J. Fox a/c
To Sales a/c
(being sales made)
Sales return a/c
To J. Wilson a/c
To F. Syme a/c
(Being Goods returned)
Van a/c
To Abel Motors Ltd
(Being Van purchased )
Bank a/c
To P. Mullen
To F. Lane
To J. Wilson
2420
770
470
1500
680
1310
680
28500
6668
8490
470
1500
1990
270
410
28500
1330
2945
807

19/05/2016
22/05/2016
24/05/2016
27/05/2016
To F. Syme
(being payment maid)
Discount allowed a/c (70+155+43+84)
To P. Mullen
To F. Lane
To J. Wilson
To F. Syme
(Being Discount Allowed)
R. Foot account a/c
To Purchase return a/c
(Being Purchase return)
Purchase a/c
To L. Mole
To W. Wright
(Purchase made)
S. Hood a/c
J. Brown a/c
R. Foot a/c
To Bank a/c
S. Hood a/c
J. Brown a/c
R. Foot a/c
To Discount received
(360+460+140)
(Payment made and discount received)
Salaries a/c
To Bank a/c
352
50
3740
3240
4140
1260
360
460
140
4800
1586
70
155
43
84
50
1830
1910
8640
960
4800

30/05/2016
31/05/2016
(Being salaries paid)
Business rates a/c
To Bank
(Being rates paid)
Abel Motors Ltd a/c
To Bank a/c
1320
20500
1320
20500
Working note
1. Payment Received from
P. Mullen {1400- (1400*5%)} = 1330
F. Lane {3100- (3100*5%)} = 2945
Net goods sold and payment received from
J. Wilson (1120-270) = (850-850*5%) = 808
F. Syme (2080-410) = (1670-(1670*5%)) = 1587
2. Discount Received from
S. Hood (3600*10%) = 360
J. Brown (4600*10%) = 460
R. Foot (1400*10%) = 140
(b) Ledger posting
Bank
account
Date Particulars Amount Date Particular Amount
01/05/16 To balance B/d 91392 01/05/16
By Storage
expensed 400
16/05/16 To P. Mullen 1330 24/05/16 By S. Hood 3240
To F. Lane 2945 By J. Brown 4140

To J. Wilson 807 By R. Foot 1260
To F. Syme 1586 27/05/16 By Salary a/c 4800
30/05/16 By Business rates 1320
31/05/16 By Able motors 20500
01/05/17 By balance c/d 62400
98060 98060
Premises a/c
Date Particulars Amount Date Particular Amount
01/05/16 To balance B/d 340000
01/05/17 by balance 340000
Total 340000 340000
Van
account a/c
Date Particulars Amount Date Particular Amount
01/05/16
To opening
balance 22750
14/05/16 To abel Motors 28500
01/05/17 by balance 51250
51250 51250
P. Mullen a/c
Date Particulars Amount Date Particular Amount
01/05/16 balance B/d 2800 16/05/16 By bank 1330
By Discount
allowed 70
01/05/17 by balance 1400
2800 2800

S. Hood
Date Particulars Amount Date Particular Amount
01/05/16 By balance b/d 1600
01/05/17 To Balance C/d 2150 02/05/16 By purchase 1450
2150 2150
S. Hood
Date Particulars Amount Date Particular Amount
01/05/16 By balance b/d 1600
01/05/17 To Balance C/d 2150 02/05/16 By purchase 1450
2150 2150
Storage
cost
Date Particulars Amount Date Particular Amount
01/05/16 To bank 400 01/05/17 By balance c/d 400
400 400
Sales a/c
Date Particulars Amount Date Particular Amount
03/05/16 By J. wilson 1120
By T. Cole 1640
By F. Syme 2080
By J. Allen 910
By P. White 2420
By F. Lane 770
09/05/16 By T. Cole 680
By J. Fox 1310
22/05/16 By L. mole 1830
01/05/17 To Balance C/d 14670 by W. Wright 1910

14670 14670
Purchase a/c
Date Particulars Amount Date Particular Amount
02/05/16 To S. hood 1450
To D. main 2060
To W. Tone 960
To R. Foot 1610
22/05/16 To L. Mole 1830
W. Wright 1910 01/05/17 By balance c/d 9820
9820 9820
Fixtures a/c
Date Particulars Amount Date Particular Amount
01/05/16 To balance b/d 8100
01/05/17 By balance 8100
8100 8100
Inventory a/c
Date Particulars Amount Date Particular Amount
01/05/16 To balance b/d 63900
01/05/17 By balance 63900
63900 63900
F. Lane a/c
Date Particulars Amount Date Particular Amount
01/05/16 To balance c/d 5430 16/05/16 By bank 2945
by Discount
Allowed 155

03/05/16 To sales 770
01/05/17 By balance 3100
6200 6200
J. Brown
Date Particulars Amount Date Particular Amount
01/05/16
by balance
B/d 4600
01/05/17 To balance 4600
4600 4600
R. Foot
Date Particulars Amount Date Particular Amount
19/05/16 To Purchase Return 50 02/05/16 by purchase 1610
01/05/17 To balance c/d 1560
1610 1610
J. Wilson
Date Particulars Amount Date Particular Amount
03/05/16 To sales 1120 11/05/16 By Sales return 270
01/05/17 By Balance C/d 850
1120 1120
T. Cole
Date Particulars Amount Date Particular Amount
03/05/16 To sales 1640 01/05/17 By Balance C/d 2320
09/05/16 To sales 680
2320 2320

F. Syme
Date Particulars Amount Date Particular Amount
03/05/16 To sales 2080
11/05/2016
By Sales return 410
By bank 1586
by Discount Allowed 84
2080 2080
J. Allen
Date Particulars Amount Date Particular Amount
03/05/16 To sales 910 01/05/17 By Balance C/d 910
910 910
P. White
Date Particulars Amount Date Particular Amount
03/05/16 To sales 2420 01/05/17 By Balance C/d 2420
2420 2420
D. Main
Date Particulars Amount Date Particular Amount
01/05/17 To balance c/d 2060 02/05/16 by purchase 2060
2060 2060
W. Tone
Date Particulars Amount Date Particular Amount
01/05/17 To balance c/d 960 02/05/16 by purchase 960
960 960
J. Fox

Date Particulars Amount Date Particular Amount
09/05/16 To balance c/d 1310 01/05/17 By Balance C/d 1310
1310 1310
Salaries A/c
Date Particulars Amount Date Particular Amount
27/05/16 To bank 4800 01/05/17 By Balance C/d 4800
4800 4800
Discount
allowed a/c
Date Particulars Amount Date Particular Amount
16/05/16 To P. Mullen 70 01/05/17 By Balance C/d 352
To F. Lane 155
To J. Wilson 43
To F. Syme 84
352 352
Discount
received a/c
Date Particulars Amount Date Particular Amount
01/05/17 960 24/05/16 By S. Hood a/c 360
By J. Brown a/c 460
By R. Foot a/c 140
960 960
Purchase
Return a/c
Date Particulars Amount Date Particular Amount
01/05/17 To Balance C/d 50 22/05/16 by R. Foot 50
50 50

Sales return a/c
Date Particulars Amount Date Particular Amount
11/05/16 To J. Wilson 270 01/05/17 By balance b/d 680
To F. Syme 410
680 680
Abel motors a/c
Date Particulars Amount Date Particular Amount
31/05/16 To bank 20500 14/05/16 By van 28500
01/05/17 To Balance C/d 8500
28500 28500
Cash in hand
Date Particulars Amount Date Particular Amount
01/05/16 To Balance b/d 7570 04/05/16
By motor
expenses 470
07/05/16 By Drawing 1500
01/05/17 by balance 5600
7570 7570
Motor expenses
Date Particulars Amount Date Particular Amount
04/05/16 To motor expenses 470 01/05/17 By balance c/d 470
470 470
Drawing account
Date Particulars Amount Date Particular Amount
07/05/16 To cash 1500 01/05/17
By balance
c/d 1500

1500 1500
Trial balance
Trail Balance in the books of Alexandra fro the 01 may 2017 (Figures in £)
Particulars Debit Balance
Credit
Balance
Owner's Capital Nil 520500
Premises a/c 340000 Nil
Van account a/c 51250 Nil
Fixtures a/c 8100 Nil
Inventory a/c 63900 Nil
P. Mullen 1400 Nil
F. Lane 3100 Nil
Cash at bank 62400 Nil
Cash in hand 5600 Nil
S. Hood Nil 2150
J. Brown Nil 4600
Abel motors a/c Nil 8500
Sales a/c Nil 14670
Purchase a/c 9820 Nil
Storage cost 400 Nil
D. Main Nil 2060
W. Tone Nil 960
R. Foot Nil 1560
T. Cole 2320 Nil
J. Allen 910 Nil
P. White 2420 Nil
Purchase Return Nil 50
Sales Return 680 Nil
L. Mole Nil 1830
W. Wright Nil 1910

Suspense a/c Nil 2300
Business rates 1320 Nil
Drawing account 1500 Nil
J. Fox 1310 Nil
Discount
Allowed 352 Nil
Discount
Received Nil 960
Motor expenses 470 Nil
Salaries 4800 Nil
562052 562052
Client 2
(a) Profit and loss statement for Peter piper
Profit and loss statement of Peter Piper for the year ended 31st December 2017
Particulars
Amount
(£) Particulars
Amount(
£)
To Opening stock 82200 By sales a/c 1215000
To Purchase a/c 778800
To wages and salaries 178720
To Gross Profit 276920 By closing Stock 101640
1316640 1316640
To motor expenses 87400 By Net Profit 276920
To administration expenses 17650
To Heating and lighting 4950
To Advertisement expenses 4810
To Depreciation 17750
To net profit 144360
276920 276920

(b) Financial Position Statements
Statement of changes in financial position
Particulars
Amount
(Figures in
£)
Current Assets
Inventory 101640
Prepaid advertisement expense 8470
Trade receivables 106960
Cash in hand 2440
Total current assets 219510
Free Hold Premises 270000
Equipments 172500
Vehicle 28000
Total non current assets 470500
Total assets 690010
Liabilities and equities:
Current liabilities
Trade payables 76910
Bank overdraft 11290
Out standing salary 1220
Provision fro depreciation 166750
Total current liabilities 256170
Capital 332120
Add :- Profit 144360
Less :- drawings (42640) 433840
Total equities and liabilities 690010

Client 3
(a) Profit and loss statement of Raintree Ltd. For the year ended 30th September 2017
Particulars Amount Particulars Amount (Figures in £)
To Opening stock 17000 By sales a/c 105000
To Purchase a/c 32000
To Gross Profit 74000 By closing Stock 18000
123000 123000
To Distribution cost 19000 By Net Profit 74000
To administration expenses 30000
To Corporate Charges 4000
To Depreciation 15000
To net profit 6000
74000 74000
(b) Statement of financial statement of Braintree Ltd.
Particulars
Amount
(Figures in
£)
Current Assets
Inventory 18000
Trade receivables 24000
Prepaid warehouse rent 3000
Bank -15000
Total current assets 30000
Non Current Assets
Land and building 60000
Plant and equipment 65000

Total non current assets 125000
Total assets 155000
Liabilities and equities:
Current liabilities
Trade payables 14000
Outstanding administration cost 2000
Provision for tax 37000
Corporate Tax 4000
Total liabilities 57000
Equity
Share capital @ £1 each 50000
Share premium 20000
Retained earnings 22000
Profit 6000
Total equity 98000
Total equities and liabilities 155000
(c) Accounting concepts
Consistency – this indicates towards the state which shows the stability towards
management and control (Deegan, 2013). This concept shows that if the organisation adopted the
principle then it should be adopt same accounting principles and procedures for further.
Prudence – It indicates towards representing the statements and accounts on their real
cost (Doupnik and Perera, 2011). Estimated incomes and expenditures should not be considered
as per this concept.
(c) Purpose of depreciation
Depreciation is a charge which accumulated in respect of fixed assets. It is a method used
to balance the cost of asset subject to productivity (Drexler, Fischer and Schoar, 2014). Some
assumptions define depreciation as an investment for replacing the plant and assets after a
specific time period (Weißenberger and Angelkort, 2011).

Client 4
(a) Purpose of bank reconciliation statement
Bank Reconciliation Statement As on 1december December 2017
Date Particulars Details Amount
01/12/17 Bank balance as per bank statement 17478
02/12/17
Add cheque paid into bank but not credited
in the bank statement 426
02/12/17
Add cheque unpaid ,being paid in and
credited by bank but later dishonoured 737
05/12/17
Add bank charges debited in the bank
statement but not in the bank ledger 47
06/12/17
Add: Deposited in bank not recorded in
cash book 2065
10/12/17 Add: Standing orders 137
30/12/17 Add: Transaction not recorded of 310923 297
Add: payment to Cook 97
Add: Rent received 260 4066
21544
02/12/17 Less Deposited 72
11/12/17 Less amount less credited in cash book 9
24/12/17 Less deposit not recorded 528
Less Payment to Able 962 1571
Bank Balance as per cash book 19973
(b) Factors affect the balance of bank statement and cash account
There are various type of transaction remain avoided from recording in books from clien
and bank perspectives (Horngren and et. al., 2012). These create differences in closing balances.