Financial Accounting Report
Added on 2020-12-09
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Financial Accounting
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1REPORT TO LINE MANAGERS..................................................................................................11. Financial accounting and its purpose......................................................................................12. Internal and external stockholders of the company.................................................................3CLIENT 1........................................................................................................................................6Recording transactions in the books of Alexender.....................................................................6CLIENT 2........................................................................................................................................6A) preparation of profit and loss statement of Munteanu Ltd.....................................................6B) statement of financial position of the Manuteanu Ltd...........................................................8C) Explanation of the accounting concepts ................................................................................8D) Purpose of depreciation and its methods in formulation of accounting statements...............9E) Difference between financial statements prepared by Sole trader and a limited company..11CLIENT 3......................................................................................................................................11A) Purpose of bank reconciliation statements...........................................................................11B) Areas that may cause he variation in bank records and company's records.........................12C) Imprest system.....................................................................................................................12D) Preparation of Bank reconciliation statement of Burcu Ltd................................................12CLIENT 4.....................................................................................................................................13A) Preparation of Sales and purchase ledger control account of Hilly.....................................13B) Control account....................................................................................................................14CLIENT 5......................................................................................................................................14A) Suspense accounts and its main features.............................................................................14B) preparation of Trail balance.................................................................................................15C) Preparation of trial balance from suspense account.............................................................15CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17
INTRODUCTIONFinancial accounting is a system of accounting that includes all the financial informationsof the a company. It a process of recording all the financial transactions and preparing financialreports by summarizing all the financial details for the purpose of showing financial condition ofthe company during a specific time period. PH Accountancy company is professional serviceprovider company that was establisheds in the year 1987. Ttoday the company is ranked as thebig four service provider company in the world. The present study shows a report of junioraccountant of the PH Accountancy company to be submitted to its line manager. The reportincludes a brief introduction about the meaning and purpose of the financial accounting. It alsoshows a detailed discussion about internal and external stakeholder of the company that haveinterest in the financial informations of the company. The assignment shows preparation offinancial statements of the sole trader, partnership and limited companies. Further, the presentreport also shows preparation of bank reconciliation statement for the purpose of ensuring bothbank and company's records are providing same and accurate results. REPORT TO LINE MANAGERSPH Accountancy LTD.To, The Line manager,From, Junior accountantSubject: for showing principles, roles and conventions of accountnacyaccountancy1. Financial accounting and its purpose“Financial accounting system is a branch of accounting system which concerns withrecording and summarizing each financial transaction made by a company during the financialperiod or during a specific time.”Financial accounting includes preparation of income statement, balance sheet and bankreconciliation statements, etc. that helps the business in showing its actual financial position(Henderson, 2015). While preparing these statements, the accountant uses specific guidelines,methods and process of the financial accounting system.PH Accountancy needs to prepare the financial statements of the company so that it canprovide all the relevant informations to the interested parties of the company. Further,preparation of financial reports can also help its managers and board members in determining1
the actual position and performance of the company so that they can easily make the appropriatepolicies and strategies for its betterment.Purpose of financial accountingThe main purpose of the whole financial accounting system in PH Accountancy is toshow the actual financial position of it. Further, other objectives of the financial accountingsystems are as follows:Summarize the financial informations: It is also one of the major objective of thefinancial accounting system. In financial accounting system, all the transactions made bythe company during specific time are summarized so that they could be available in asingle set of reports (Macve, 2015). It helps the managers, board of directors and otherinterested parties in collecting all the relevant informations of the business that canaffect their interest.Investment decisions: Shareholders and other investors of the company wants to knowthe actual position of the company for the sake of estimating their returns from theinvestment made in the company and risk involved with the investment. Financialaccounting reports provides all the relevant informations to the investors to help them intheir decision making.Existing shareholders: As, the existing shareholders are the real owners of thecompany, they need to know each information about the company (Narayanaswamy,2017). Therefore, providing relevant information to the existing shareholders of thecompany is also a main purpose of preparation of financial statements of the company.Taxation decisions: Financial accounting reports also provides all information to theGovernment agencies for the purpose of calculating the amount of taxation tpto beimposed of the company. They can determine the income earned by the company, assetsand liabilities held by the company, all the investments made by it, etc.Keeping records: The financial accounting reports are also prepared for the purpose ofrecording all the incomes and expenditure of the business. It helps the organisation intracking each area where the company is spending its funds. It also provides help to themanagers in observing the financial behaviour of the company.Ensuring earning: Further, financial reports of the company also helps in determiningthe actual income earned by the firm. It shows each income and expenditure made by2
the firm. With the help of these informations, managers and directors can ensure theactual earning of the firm. In this regard, the financial reports of the firm are alsoprepared for the purpose of ensuring the earnings of the business organisation.Credit decisions: Preparation of financial statements also have a purpose of takingdecision regarding providing credit to the company (Nudurupati, 2015). It helps indetermining the condition of the company for repaying the debts of the company byobserving its balance sheet.Determination of actual debts and assets: PH accountancy also should prepare eachstatements of the financial accounting system as it can help the company in determiningthe actual amount of assets and debts held by the company as to determine the actualposition of the business organisation.Determination of liquidity: It is also a major purpose of the preparation of financialstatements as to determine the liquidity of the firm. It shows the amount of assets heldby the company over the debts. In this regard, there are several purposes and objectives of preparing financialaccounting reports by a business organisation. 2. Internal and external stockholders of the companyStakeholders can be defined as the individuals or group of individuals that have interestin the company. Each action of the company may affect the interest of the stakeholders. Fromthe above analysis it can be evaluated that there are many individuals and firms that haveinterest in the business of PH accountancywhich can be termed as the stakeholders of company(Kieso, Weygandt and Warfield, 2016). The stakeholders can be divided into two parts i.e.internal stakeholders and external stakeholders. List of internal and external stakeholders is asunder:Internal stakeholders:Internal stakeholders can be defined as the group of individuals that serves the company.They performs several activities for the company as board members. For example:Owner: Owners are those individuals that have invested the capital amount in thebusiness. They are the internal stakeholders of the company. In terms of a limitedcompany, the shareholders can be defined as the true owners of it. They have interest inthe financial informations of the company as they have invested a sum of amount in the3
company (Barker, 2015). They can also take decision regarding making the furtherinvestment in the : PH accountancy. They takes the decision about investing their fundin the company by analysing its financial position and evaluating the chances of growthin the future. Further, the profitability of the company affects their return on theinvestment and risk of investment as well.Management: Management can be defined as a group of professionals appointed by thePH Accountancy in the firm for making strategies and plans and help the company inattaining rapid growth in the near future. Managers perform their task in the business toenhance the efficiency of its operations. The performance of the business shows theefficiency of overall business in performing the business operations. Therefore,management also have interest in the financial statements of the company as with thehelp of it managers can determine the efficiency and effectiveness of working of thebusiness organisation.External shareholders:External stakeholders are those individuals that have not invested their money inthe company, but they have some sort of interest in the business. For example:Customers: Customers do not invest their money into the business. But, their interest inthe product of a specific brand get affected by the financial performance of thecompany (Oulasvirta, 2016). if a company is suffering loss frequently, it may loose itscustomers due it.Suppliers: Suppliers are those individuals or organisations who supplies raw material tothe company. A business organisation purchases a large amount of raw materials orgoods for the purpose of further sale. Suppliers needs financial records of the companyas to determine the risk involved in providing further credits to the company.Creditors: Creditors can be bank, individuals, financial institutions which have providedcredit to the firm. Creditors needs to determine the actual financial position of thecompany for the purpose of taking decisions regarding providing credit to the companyby evaluating the risk involved in the decision and condition of the company for therepayment.Government:Government agencies are also interested in the financial informations ofthe company for many reasons. For example, for the purpose of determining the amount4
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