Financial Accounting: A Comprehensive Guide to Bookkeeping, Financial Statements, and Bank Reconciliation

Financial Accounting
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Table of Contents
Task 1:.............................................................................................................................................3
P1: Apply the double entry book-keeping system of debits and credits. Record sales and
purchases transactions in a general ledger...................................................................................3
P2: Produce a trial balance applying the use of the balance of rule to complete the ledger........6
Task 2:.............................................................................................................................................7
P3: Prepare final accounts from given trial balance figures adjusting for accruals, depreciation
and prepayments..........................................................................................................................7
P4 Produce final accounts for a range of example that include sole-traders, partnerships or
limited companies......................................................................................................................10
Task 3:...........................................................................................................................................14
P5: Apply the bank reconciliation process to prepare a number of bank reconciliations..........14
Task 4.............................................................................................................................................16
P6 Explain the process taken to reconcile control accounts and clear suspense account using
account examples.......................................................................................................................16
References:....................................................................................................................................18
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Task 1:
P1: Apply the double entry book-keeping system of debits and credits. Record sales and
purchases transactions in a general ledger
Business transaction: Any transactions in the business which is related to the accounting terms
such as income, expense, assets and capital. An event or an activity which is measured in
monetary terms and performs the functions and operates the business entity is known as a
business transaction. The business transaction shows the financial position of the company.
Types of a business transaction
Each transaction of a company is recorded in a journal entry by a source document.
Sales transaction: The transactions related to sales can be based on the cash, credit and advance
payment sale. It is an agreement between the two party’s buyer and seller, where the buyer
receives the goods and services on the security of a price. The sales transaction is credited in the
business while the cash is debited.
Purchase transaction: Purchase transactions are those transactions in which the cash is paid for
taking an acquisition of the asset. Purchase transactions include both cash and credit purchases.
Purchase transactions are debited in the business while the cash is credited.
Receipts transaction: This transaction is recorded in the business when the items are received
from the suppliers against our purchase order. The accounting of cash receipts is done as by
debiting the cash or the asset which is increasing.
Payment transaction: In this type of transaction the payment is made to customers, clients and
consumer in monetary terms. In payment account, the cash is credited. A payment is a
transaction in which the consumer pays the bills or deposits the money.
Regulations apply to financial accounting
The GAAP is followed for the accounting rules and regulation for financial reporting. GAAP is
used by the organisation to record the accounting information. It summarises the accounting
records into the financial statement. GAAP also helps in business by comparing the different
financial records such as assets, liabilities, equity, revenues, expenses, etc. Different accounting
standards have been adopted by the company for the proper recording of the financial records.
IFRS is also an accounting standard which helps the companies in disclosing the financial
statements.
Double entry and book keeping:
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Double entry or book keeping is the transaction which involves two accounts. It generally means
the transaction is recorded two of its general ledger accounts. Debit side of the general leger
account should be equal to the credit side in double entry system.
Double entry recording in purchase: The transaction of purchase in double entry system affects
both buyer and seller. The cash balance of the buyer would decrease and the cash balance of
seller would increase.
Double entry recording in sales: Every transaction affects the two accounts and the financial
statement. Sales transaction also affects the two systems of buyer and seller. Firstly the company
will record the data in sales account and then enter in the customer’s account if the sales are done
on credit basis.
Double entry recording in cash disbursement: It records all the transactions which are related to
the cash payment and cash outflows. These transactions are recorded in the cash payment journal
and update the subsidiary ledgers also.
Double entry recording in cash receipts: Cash is coming in the business from customers so it will
also affect the two transactions. The one account will affect the cash account and other will
affect the accounts receivable.
Manual and electronic systems:
The manual accounting system is a system in which the company records the data manually by
hand or paper work. The electronic system is a system in which all the transactions of the
company are recorded by the computer in software. Manual recording is less expensive as a
comparison to electronic accounting. Electronic accounting records all the transactions in detail
such as expenses, payment, assets, etc. Electronic accounting has more security for the data and
also requires less storage. Less calculation is incurred as compare to manual accounting. There
are the chances of error in manual accounting but in the electronic system, the chances of fraud
and error are less (Amahalu, et.al, 2017).
Books of Accounts of Kristine
Capital Account
To Balance b/d 5000 By cash 5000
5000 5000
Car Account
To Cash 1000 By Balance b/d 1000
1000 1000
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