Financial Accounting and Its Purpose - Doc
Added on 2020-10-05
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Financial accounting
TABLE OF CONTENTS...................................................................................................................1INTRODUCTION ..........................................................................................................................1TASK A...........................................................................................................................................1Financial accounting and its purpose ..........................................................................................1Regulation related with the financial accounting ........................................................................1Accounting principles .................................................................................................................2The conventions and concepts relating to consistency and material disclosure..........................3B. CLIENT 1....................................................................................................................................31. What is sole trader, what is capital with its advantage and disadvantage................................3CLIENT 2........................................................................................................................................52: Purpose of statement as per IAS 1 and difference between sole trader financial statementsand financial statements of a company........................................................................................53: The inventory valuation according to IAS 2............................................................................6CLIENT 3........................................................................................................................................6C. Consistency and Prudence concept of accounting..................................................................6D. The purpose of depreciation and the methods of computing depreciation.............................7CLIENT 4........................................................................................................................................9A. The purpose of making bank-reconciliation-statement...........................................................9B. The reason which may cause difference in cash balance vary from bank statements............9CLIENT 5......................................................................................................................................10B. What are the need to prepare control account.......................................................................10CLIENT 6......................................................................................................................................10A. The different purpose of preparing suspense accounts.........................................................10D. The difference between suspense account and clearing account..........................................11CONCLUSION................................................................................................................................1REFERENCES................................................................................................................................2
INTRODUCTION Financial accounting plays an important role to analyse the financial position of thecompany. Present report will provide the deeper insight of the financial accounting with itsterminologies. This assignment is consisted of brief synopsis of the sole trader-ship and itsadvantages. The report also provides the different types of inventory valuation methods. Itcriticizes the purpose of depreciation, bank reconciliation statements, suspense account. Thereport will give the information about the differences between clearing and suspense account.TASK AFinancial accounting and its purpose It is a field of accounting that focuses on the analysis of the financial transaction of thebusiness organization. Financial accounting includes the preparation of the financial statementsavailable for the public consumption. Financial accounting is that field of accounting which dealswith the business tracks of monetary transaction (Ali and Ahmed, 2017 ). Branch of accountingwhich examines all the operations of financial transactions in the organization. It is that branchwhich concern with the analysis, summary and reporting of financial statements. A financialstatement on a routine schedule are issued by the company. Every enterprise has the financialdepartment, and that part of the business is not for everyone. Finance department of theorganization is only handle by the finance manager or the finance executives The purpose of the financial accounting is to provide the data that is necessary for thesound decision making. The important purpose of the financial accounting is to make the reportand analyse it so that the organization's financial health can be determined (Bragg, 2017). Regulation related with the financial accounting There are number of regulatory bodies that guides the accounting. The regulatory bodiesof accounting includes the certain norms which organization is bound to be follow. There aresome predefined set standard, which decides the working of an organisation. These predefinednorms helps organization to perform better analysis of the financials of the organization. Theregulatory bodies include association, commission, boards etc. they are consisted the specificworking which need to be follow. Some governing bodies of accounting are discussed under- Security and exchange commissionUS. Securities and the exchange commission focuses the objectives to save the investors,to maintain the fair market working and also ease the formation of the capital (Clarke, Dean and1
Graves, 2017). The main motto of security and exchange commission is that to adopt the law thatare passed for the relevant working and guide the enterprise to implement these laws. The financial accounting standard boardsThe financial accounting standard boards were formed in 1973 by the security exchangecommission. It is formed to incorporate the accounting practices by improving the guidelinesmade for the accounting reports, finding and resolving the areas in timely manner. International finance reporting systemInternational financial reporting system was formed for providing a common businesslanguage which could be understand across the world (Ali and Ahmed, 2017). Accounting principles 1. Separate legal entity An enterprise is different from its owner in the eye of accounting law. This principle ofaccounting says that the identity of the business is separate from its owner. All the work of theorganization is undertaken individually from that of its owner.2. Ongoing process It identifies that organization keeps on working until it does not wind up by theaccounting provisions. More specifically, one cannot close the business with mutual discussion.Any death or accident cannot stop the working of business or close the business. 3.The specific time period principlesThe accounting is always concern with the specific time that is the beginning and theclosing date for the financial statement. It helps reader to identify at what time the particulartransaction has taken place (Bragg, 2017). 4.The historical cost principlesThe historical cost is used for the valuation of the items. These are not taken for thereporting purposes but value of price due change due to recession , inflation. 5.The full disclosure principles For a business, the full disclosure principle needs a company to give the essentialinformation so that people who are conventional in reading the financial information can makethe decision.6. The recognition principles 2
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