Financial Accounting Assignment Details

The assignment provided is a comprehensive report on financial accounting principles, practices, and concepts. It covers the meaning, purpose, and principles of financial accounting, as well as journal entries, ledgers, trial balances, profit and loss statements, bank reconciliation statements, sales and purchase ledger accounts, and balance sheets. The report also discusses clearing and suspense accounts, their differences, and features of suspense accounts. The assignment is likely a student's report or a past paper on financial accounting.

Title

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
(1) Financial accounting and its purpose....................................................................................4
(2) Regulations relating to financial accounting........................................................................5
(3)Accounting rules and principles.............................................................................................6
Following are the accounting rules and principles-....................................................................6
(4)The conventions and concepts relating to consistency and material disclosure....................7
Client 1.............................................................................................................................................8
A Journal entries.........................................................................................................................8
...................................................................................................................................................11
...................................................................................................................................................12
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...................................................................................................................................................23
C trial balance ..........................................................................................................................23
CLIENT 2......................................................................................................................................24
A. Drafting an income statement..............................................................................................24
B. Preparing a statement of financial position..........................................................................25

...................................................................................................................................................26
CLIENT 3......................................................................................................................................26
A. Preparing and Income statement..........................................................................................26
B. Presenting a statement of financial position.........................................................................27
...................................................................................................................................................27
(c)Explain the following accounting concepts: ‘consistency’ and ‘Prudence’.........................27
(d)Purpose of depreciation in formulating accounting statements with the widely used
method. .....................................................................................................................................28
(a)purpose of preparing the Bank Reconciliation Statement ...................................................29
(b)Following are the areas where the difference between company accounts to bank accounts
occurs. ......................................................................................................................................30
C. Preparing the cash book (bank only) for Kedal Ltd.............................................................30
CLIENT 5......................................................................................................................................32
A. Drafting and balancing the accounts....................................................................................32
(b) Explain the term control account.........................................................................................34
CLIENT 6......................................................................................................................................35
(a)Explain the suspense account and its features with examples. ............................................35
B. & C. Drafting the trial balance with consideration of suspense accounts............................36
(d)Difference between suspense account and clearing account................................................36
CONCLUSION .............................................................................................................................37
REFERENCES..............................................................................................................................38

INTRODUCTION
Financial accounting is the field of accounting which deals with the financial information
of the company. This reports provide the information about the financial accounting , accounting
regulations, accounting principles and the convention concepts. This report consist of journal,
ledgers and trial balance of the given records. The report also provides the profit and loss
account and balance of ask data . The assignment has given the deeper insight of the consistency
, prudence concept and the purpose of depreciation, bank reconciliation statements suspense
account and its features, this assignment presents the bank reconciliation statements and the cash
books of Kendall ltd. The report provides the information about the sales ledger control account
and purchase ledger control account of the company. Report has discussed about the difference
between clearing and suspense account.
(1) Financial accounting and its purpose.
Financial accounting is the field of accounting which deals with the financial tracks of
monetary transaction. It is that field of accounting which examines all the working of financial
transactions in an accounting (Hatfield, 2014). The branch of accounting which concern with the

analysis , summary and reporting of financial statements . A financial statement on a routine
schedule are issued by the company. Every organization has a department named finance ,
which is critical part of the organization and every employee cannot handle it, only the finance
executives , or finance manager has right to take care of it , the working of these departments is
controlled and performed by the financial accounting.
The purpose of financial accounting is to give the data that is required for efficient
decision making. Another essential purpose of financial accounting is to prepare the report and
analyse it so that the position of the company can be determined. It also helps to identify the
firms' performance to outsiders such as creditors , tax authority and the investors(Macve, 2015. ).
The financial accounting emphasize all the cash flows in order check the stability of the
company . It accumulates and informs the financial information for the purpose to determine the
performance financial position of the business. This all information later, used to take the
decision about how to manage the working of the business or invest in it .
(2) Regulations relating to financial accounting.
The organizations' success is dependent upon the financial accounting. There are
numerous regulatory bodies that direct the accounting. They consist of certain norms which an
organization has to be follow. There are the set standards which need to be follow by the
organization at the time of decision making of financial activity. The regulatory bodies consist of
various association, commission, boards etc. they include the predefined working which need to
be follow. Some governing bodies of accounting are discussed under-
Security and exchange commission
The objective of the US. Securities and exchange commission is to save investors , and
maintain the fair market and ease the formation of capital. The main mission of SEC's is to
expound the law that are passes by the congress and guide the organization to implement these
laws.
The Financial Accounting Standards Boards (FASB)
The financial accounting standard boards were propounded on 1973 by the security
exchange commission. The main aim of the FASB is to create the financial accounting and
reporting standards for the public(Ruppel, , 2017.). FASB works on to modify the standards of
FA for the public. Another important mission of financial accounting standard accounting board
is that to protect the public from fraudulent and deceptive information from the organization.

International financial reporting system
International financial reporting system is taken out by IFRS foundation. Its main
objective is to provide the common language of accounting so it can be understand by the every
organisation across the country.
(3)Accounting rules and principles
Following are the accounting rules and principles-
(i) separate legal entity
An organization is separate from its owner in the eye of law. This accounting rule
signifies that the identity of the business is separate from its owner. All the workings are
undertaken separately from that of its owner.
(ii) Ongoing process
Ongoing process identifies that business keeps ongoing until it cannot be wind-up as per
accounting standards. In other words you cannot wind up or close the working with mutual
discussion. Any death of insolvency cannot stop the working of business or close the business.
(iii)The specific time period participles
Financial statements are always concern to a specific time. Accounting statement have
beginning date and closing date for the reporting of balance sheet. That helps the reader to
identify that when the transactions were conducted.
(iv) The Historical Cost Principle
For the valuation of the items historical cost is used. The amount at which item are
purchased and sale is use d for the valuation. The value of price due change due to recession ,
inflation, but these are not taken for the reporting purposes.
(v) The Full Disclosure Principle
These principles always signifies or keep strict focus on the scandals related to the
accounting in the news now a days (Maynard, 2017.). It needs all the information from the
company about their functioning in their financial statements.
(vi) The Recognition Principle
This principle of accounting states that company should recognize its income and expenses at the
time whey are accrued.
(vii) The Matching Principle

These principles work on the rule that for every transaction the accrual system of
accounting is used that means for every debit there should be the credit also and vice versa.
(viii )Money measurement principle
This accounting rules identifies that all the transactions , events and happenings are
recorded in terms of money.
(ix) The principles of materiality
The principle of materiality arises when the bookkeepers have to use their judgement.
This principle helps to correct the inaccuracies in all accounting records.
(x) The Principle of Conservative Accounting
The conservative accounting principles is adopted for the betterment for the company.
When the expenses takes place they are to be record immediately, but the income are to be
record when the cash is actually received.
(4)The conventions and concepts relating to consistency and material disclosure.
Convention of consistency
This convention of consistency focus that the accounting practices which are running
should remain same during over the year to year. The valuation methods were treated same as
period to period. For example , while the valuation of stock, it is taken that stock is valued at cost
or market price which ever is less , then this should be followed year after year. Consistency
doest not mean the inflexibility , if the necessity of change arises, it should be done and its effect
should be stated clearly.
Convention of material disclosure
The convention of material disclosure states that, at the time of disclosing the account all
the transaction recorded must have valid proof that from where they have arrived and recorded.

Client 1
A Journal entries

C trial balance

CLIENT 2
A. Drafting an income statement

B. Preparing a statement of financial position

CLIENT 3
A. Preparing and Income statement

B. Presenting a statement of financial position
(c)Explain the following accounting concepts: ‘consistency’ and ‘Prudence’
Prudence concept of accounting states that neither to overestimate the income nor to
underestimate the expenses. This concept focuses on that income should not recognize until it
should earned and that losses should be fully written off(Maynard, 2017.). The main concept of
this is that profits are not overstated in any accounting period. When the estimates and judgment
are involved, prudence concept is useful. For instance , in credit policy if it is mentioned that
customer should pay for the goods sold to him in 60 days and he has not done the payment in
120 days , it should be reasonable to make provision of entire, as bad debts and doubtful debt.
Therefore, prudence concept of accounting is the essential concept that ensures that assets and
income are not overstated and liabilities and expenses are not understated.

Consistency concept
The concept states that once the method of accounting is adopted it should be remain
apply in future constantly. It ensures that business must restricts the changes in their policies and
procedures. If in the future, the necessity to change the policies and procedures arises business
should discloses the cause of change. Once the procedure has adopted by the organization for the
treatment of items in financial statements , then it could not be change.
The importance of this principle is to build the ease for users of financial statements to
make out the comparison between the results from one period to another. For example , if the
business is applying LIFO method for the valuation of inventory then over the year for next
evaluation it should apply the same method.
(d)Purpose of depreciation in formulating accounting statements with the widely used method.
The use of depreciation is to match the cost of fixed assets, to the revenue received by
using the assets. It is useful to the matching principles , as it helps in matching the expenses. It
reports the company about the net book value of the asset(Schaltegger, and Burritt, 2017). The
purchase cost of assets recovers with the help of depreciation expenses. We have been forced to
charge all assets to expenses as soon as we buy them unless we will not use the depreciation.
This results in very huge loss at the time when the transaction arise, gave the unusual profit in
those time when the amount of revenue has been recognized. The variability in financial results
should experienced , with lots of loaded expenses, if the depreciation is not used.
Two widely use methods of depreciation are as under-
Straight line method- straight line method is the method of calculating the depreciation.
It is very simple method of calculating depreciation. In most of the organization , SLM method
is used to calculate the depreciation (Zeff,, 2018.). In this method the scrap value or salvage
value of the assets is estimated by the organization in every end of the year. This calculation of
the scrap value used to develop the income.
For calculating the deprecation with the straight line method, subtraction of value of asset
is done with the salvage value of the asset then after the value should be divided with the useful
life of the assets.
For instance - if the current value of the machine is $80000 and scrap value of machine is $2000
and life of machine is given 2 years, so depreciation can calculated by using straight line method
-

Depreciation = value of the assets – scrap value of the assets
life of the assets
Depreciation= 80000-2000
2
Depreciation = 39000
Double declining depreciation method: this double declining method of calculating the
depreciation is more difficult than the straight line method. This method is the form of the
accelerated method. Accelerated depreciation means that the value of the asset will be decease or
depreciated speedily than in straight line method. This method is just double of the straight-line-
method. This simply indicates that depreciation is more charged when calculated with Double
declining depreciation method comparing to the straight line method.
The formula used to calculate this method is -
Expenses = (100% / useful life of the assets)*2
(a)purpose of preparing the Bank Reconciliation Statement
To observe the difference between your account to the bank statements the bank
reconciliation statements are made. It shows variation between company,s account to the bank
account. Some times it is simple to reconcile the variation by observing at every recent
transaction in the bank statement than to you account( Taylor, 2015). The difference of
accounting records of company's bank from the balance as per bank statement is normal due to
the timing difference . The objective of preparing the bank reconciliation statements is to identify
any discrepancies between accounting records of the entity and the bank statements. It helps to
identify the errors in the accounting records of the company or the bank . The regular
monitoring of the cash flows of a business is done by preparing the bank reconciliation
statements.

(b)Following are the areas where the difference between company accounts to bank accounts
occurs.
After issuing the cheque to the party, investor overwrites his books of account
immediately , but that party might not presents the cheque for encashment. This will the
difference in the organization's account from the bank account.
The third party transfers the money to the investor and informs him, on getting the
information about the transfer of the money depositor maintains it books of account but actually
he did not receive the money due to server problem , this may cause variance between bank and
companies account.
Bank takes some commission for its services like collecting cheque, issuing cheque book,
bills etc. for not following the rules of the bank like dishonored cheque , maintaining insufficient
balance, bank charged for this as a punishment without informing him ( Taylor, 2015).
Therefore, depositor can't debit its account immediately , this may cause the variation in both the
accounts.
C. Preparing the cash book (bank only) for Kedal Ltd.
Cash book

BRS Statement
CLIENT 5
A. Drafting and balancing the accounts
Sales Ledger control account

Purchase ledger control account

(b) Explain the term control account
The control account is the account that summarizes and combines all the subsidiarity
account.
Therefore , the journal ledger are consisted of thousands of account from assets and liability
account to expenses and revenue account. Each type of account have hundreds of smaller
account named subsidiary account. If in journal, the every single account is added then it would
be very large, unstructured and different to see (Macve, 2015. ). That is why the control account
is prepared. It is often known as controlling account.
The objective of the control account is to keep the free the details of journal ledger
account. Yet have the right balance for the financial statements. Subsidiary level ledger account
are stored individually that the transaction aggregated account. For instance- all credits entered
during a day will be estimated to subsidiary ledger and posted as a single summary to the
payable control account.

CLIENT 6
(a)Explain the suspense account and its features with examples.
All the unclassified transaction is recorded in the suspense account. Suspense account
hold the discrepancies as the more data is gathered. Transaction is considered in suspense when
the suspense account is opened(Hatfield,2014.). All the small business have the suspense
account to be cleared out on a regular basis. It is a holding account found in journal ledger. In the
case of assets in question , the suspense account will be the current asset because, it holds
payments related to account receivables.
Features of the suspense account
1. If in trail balance as id debit side and credit side do not match with each other , to adjust
the balance suspense account is made(Renz, 2016). Therefore, its feature is to maintain
the trial balance.
2. Before invoice can be hold in suspense account, The partial money received from client
Example of suspense account-
You receive a partial payment from the client $800
now you need to open the suspense account, credit $800 to the suspense account and debit the
cash account by $800
Particular Debit Credit
Suspense a/c --- $800
Cash a/c $800 ---
Total $800 $800

B. & C. Drafting the trial balance with consideration of suspense accounts
(d)Difference between suspense account and clearing account
Both clearing and suspense account have little difference between each other . It is said
these both account favors each other a lot . Both the accounts are temporary accounts made to
adjust the balance (Zeff, 2016) . Following are the differences between suspense and clearing
account-
1. 1- Clearing account identifies that information is recorded is correct and it is used in later
posting while the suspense account is formed from where the transaction occurs. Records
are kept, until the problem is solved.
2. 2- In clearing and suspense account, after the balance is transferred to their appropriate
account by leaving there balance zero that means they both were zeroed out.
3. 3- To hold the transactions temporarily basis until the time arises to post them to
permanent account is the use of clearing account while suspense account is used for
holding the uncertainties where the problem is occurred.

4. 4- The utility expenses at the end of the month on daily basis is hold by the clearing
account while in suspense account are held until uncertainties are solved.
5. 5- There is no fix timing for the closing of suspense account while clearing account
closes after certain period.
CONCLUSION
From the above report it is concluded that financial accounting plays an important role in
an organization. This report covers all the journal, ledgers and balance sheet of the given
information. In beginning report has covered with the meaning, purpose, principles and concepts
of financial accounting. Present report provides the purpose of bank reconciliation statement,
difference between clearing and suspense account, meaning and features of suspense account.
Talking about the practicals report has come up with the journal entries, ledgers, trial balance,
profit and loss statement, bank reconciliation statements sales and purchase ledger account and
balance sheet.

REFERENCES
Books and Journals
Braun, G. P. and et.al., 2015. Principles-based vs. rules-based accounting standards: The effects
of auditee proposed accounting treatment and regulatory enforcement on auditor
judgments and confidence. Research in Accounting Regulation, 27(1), pp.45-50.
Hatfield, H.R., 2014. Accounting: Its Principles and Some ofits Problems. In The Development of
Accounting Theory (RLE Accounting) (pp. 21-29). Routledge.
Hermanson, R. H., Ivancevich, S. D. and Edwards, J. D., 2016. Accounting Principles: A
Business Perspective (Financial) Chapters 1-8.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Maynard, J., 2017. Financial accounting, reporting, and analysis. Oxford University Press.
Renz, D. O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Ruppel, W., 2017. Wiley GAAP for Governments 2017: Interpretation and Application of
Generally Accepted Accounting Principles for State and Local Governments. John Wiley &
Sons.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2015. Financial & managerial accounting.
John Wiley & Sons.
Zeff, S. A., 2016. Forging accounting principles in five countries: A history and an analysis of
trends. Routledge.
Zeff, S.A., 2018. The Early Years of the Financial Accounting Foundation and the Financial
Accounting Standards Board, 1972 to 1980: The ‘Special Relationship’with the AICPA.