Financial Accounting: Concepts and Principles

FINANCIAL ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................3
SCENARIO 1..............................................................................................................................................3
Question 1...............................................................................................................................................3
Question 2...............................................................................................................................................4
Question 3.............................................................................................................................................11
Question 4.............................................................................................................................................13
Question 5.............................................................................................................................................14
Question 6.............................................................................................................................................15
Question 7.............................................................................................................................................17
SCENARIO 2............................................................................................................................................18
Question 1.............................................................................................................................................18
Question 2.............................................................................................................................................19
Question 3.............................................................................................................................................20
Question 4.............................................................................................................................................21
Question 5.............................................................................................................................................22
CONCLUSION.........................................................................................................................................25
REFERENCES..........................................................................................................................................26

INTRODUCTION
Financial accounting is the process of recording, analyzing and controlling monetary
information. In current scenario it is essential to implement financial accounting process to drive
important data for decision making. The present report will present various types of essential
concepts like accounting principles, bank reconciliation statement, financial statements, control
& suspense account, etc. It will comprises the calculations like journal entries, ledger account,
trial balance, suspense, bank reconciliation statement, etc to get deeper understanding of mention
concepts. Current case study will involve deep knowledge regarding financial accounting.
SCENARIO 1
Question 1
Business Transactions (BT) are those activities which affect financial position of
organization. There are various types of BT which play crucial role in influencing company
processes. It comprises cash, credit, internal, external which can broadly classified as purchasing
goods, material, services, noncurrent assets, raising funds and paying wages, taxes, interest &
salaries, etc. It becomes essential for company to pay attention on all types of transactions so that
estimation of accurate financial position can be exerted.
Single entry provides one sided view of organizational transaction. In double entry
booking both the aspects of transactions are recorded which provides ability to capture accurate
financial position (Pesci and Girardi, 2021). It makes possible to implement method for error
detection which is not offered by single entry booking. In double entry transaction are recorded
in form of debits and credits.
Trial Balance (TB) is accounting report formulated at the end of financial period so that other
statements can be prepared. Purpose behind creating TB is to permit organization to identify
errors & mistakes so that essential changes through making adjustments can be done. It is
important to prepare as it assist company in decision making regarding budgets, formulating
auditing reports, comparative analysis through identifying mistakes and making adjustments for
rectifying so that arithmetical accuracy can be obtained. Management of firm can balance debt &
credit item by referring the TB. It becomes possible to prepare financial statements by having air
information through trial balance in order to determine actual monetary condition of company.

Question 2
In the books of Kate:
1. Journal Entries for the month of June 2016
Date Particulars L.F Debit Credit
1-Jun Cash A/C Dr. 65000
To Capital A/C 65000
(Being capital invested for
starting company)
2-Jun Purchase A/C Dr. 8000
To Trade payables A/C 8000
(Being goods purchased on
credit)
7-Jun Cash A/C Dr. 4000
To Sales A/C 4000
(Being goods sold for cash)
8-Jun
Trade payables A/C
Dr. 4000
To Bank A/C 4000
(Being cheque issued to pay
creditors)
14-Jun
Prepaid Insurance A/C
Dr. 75
To Bank A/C 75
(Being prepaid insurance
expenses paid )

15-Jun
Trade receivables A/C
Dr. 12000
To Sales A/C 12000
(Being goods sold on credit)
16-Jun Purchase A/C Dr. 10000
To Trade payables A/C 10000
(Being goods purchased on
credit)
18-Jun
Computer Equipment A/C
Dr. 300
To Cash A/C 300
(Being computer equipment
purchased by paying in
cash)
20-Jun Prepaid rent A/C Dr. 150
To Bank A/C 150
(Being prepaid rent paid )
21-Jun Cash A/C Dr. 10000
To Sales A/C 10000
(Being goods sold for cash)
25-Jun Cash A/C Dr. 100
To Bank A/C 100
(Being amount withdrawn
from bank for keeping it into
petty cash)

30-Jun Stationary A/C Dr. 30
To Cash A/C 30
(Being stationary purchased
for taking money from petty
cash)
2. Ledger accounts
Capital A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
30-Jun To balance c/d 65000 1-Jun
By Cash
A/c 65000
65000 65000
Cash A/C
Date Particulars J.F. Amount Date Particulars J.F. Amount
1-Jun To Capital A/C 65000 18-Jun
By Computer
Equipment A/C
Dr. 300
7-Jun To Sales A/C 4000
21-Jun To Sales A/C 10000 30-Jun By Stationary A/C 30
25-Jun To Bank A/C 100 30-Jun By balance c/d 78770
79100 79100
Bank A/c