Financial Accounting Project

This financial accounting project provides a detailed examination of the role of financial reporting in business. It covers the preparation of journal entries, trial balance, and the creation of financial statements such as profit and loss statement and balance sheet. The project also discusses the importance of bank reconciliation statements and why they are necessary to be reconciled. The project is based on real-world examples and provides a comprehensive understanding of financial reporting in business.

Financial Accounting and
principles

Table of Contents
INTRODUCTION...........................................................................................................................3
1.Define Financial accounting................................................................................................3
2. Regulations relating to financial accounting......................................................................4
3. Various accounting rules and principles applicable in the organisation............................4
4. Conventions and concepts related to the material disclosure and consistency:.................5
PART B............................................................................................................................................6
CLIENT 1........................................................................................................................................6
P1: Double entry recording with concerned ledger:...............................................................6
P2: Produce a trial balance applied the use of the balance off rule to complete the ledger. 16
M1:.......................................................................................................................................17
D1:........................................................................................................................................17
CLIENT 2......................................................................................................................................17
P3: Financial accounts form given trial balance figures adjusting, depreciation and prep. .17
P4: Final accounts subject to sole traders, partnerships or limited companies....................18
M2:.......................................................................................................................................19
D2:........................................................................................................................................19
CLIENT 3......................................................................................................................................19
(a) Profit and loss statement of Raintree Ltd. For the year ended 30th September 2017......19
(b) Statement of financial statement of Braintree Ltd..........................................................20
(c) Accounting Concepts:.....................................................................................................21
(d) Requirement of depreciation in the preparation of financial statements........................22
CLIENT 4......................................................................................................................................23
P5: Apply the bank reconciliation process to make a number of a reconciliation...............23
CLIENT 5......................................................................................................................................24
Ledger control accounts.......................................................................................................24
CLIENT 6......................................................................................................................................24
P6: Process to be taken to reconcile control accounts and clear suspense account..............24
M4: Understanding of the type of accounts.........................................................................25
CONCLUSION..............................................................................................................................25
REFERENCES..............................................................................................................................26

INTRODUCTION
Financial accounting is the process of accounting which deals with recording and
summarising of financial transactions which helps in the formulating the financial strategies and
plans. The finance related accounting is the process of recording the transactions in such a
manner that is understandable for the managers and other users of the organisations. The main
purpose is to bring the financial stability in the business. The information’s related to financial
accounting is presented in financial statements such as profit and loss account, balance sheet and
cash flow statement which are prepared in this report ( Motherly and Burney, 2013.) This report
includes two broad parts, one consists of business report that includes rules and principles and
another one includes statements of financial position such as profit and loss statement, balance
sheet, bank reconciliation statement etc.
PART A
BUSINESS REPORT
1.Define Financial accounting
Finance accounting is the most common form of accounting that deals with the
preparation of financial statements of the company such as balance sheet, profit and loss
statement and cash flow statement. The financial accounting process starts with the recording,
classifying and summarising the financial transactions of the business. These transactions are
recorded in the journal of the companies, then they are posted into ledger and then trial balance is
formulated. After the proper recording of all the transactions the financial managers prepare the
financials of the company. The duty of the financial managers is to prepare these financial
statements with reliable and accurate information so that the users of the financial statements can
entrust on the statements in taking important decisions regarding the investing in company's
projects. And therefore it is the responsibility of the financial managers of the company to
prepare the financials using information which is reliable such that the statements reflect the true
and fair view of the company (Rankin, and et. al. 2012)
Financial accounting in the companies uses certain pre-determined standards that are
formulated by the regulatory bodies such as IASB and FASB. Various companies use different
accounting standards as suitable to the accountants and owners of the companies. The companies

in US generally uses US-GAAP standards in preparing their financial statements, the IFRS
financial reporting standards are also recognized in the companies all over the world and are
adopted by many big companies. The main purpose behind the adoption of these standards are
that these standards ensure that the prepared financial statements of the company are reliable and
that it shows the true and fair view of the companies because of certain regulations of doing
accounting imposed by the bodies.
2. Regulations relating to financial accounting
Financial accounting deals with the preparations of financial statements and its most
important objective is to prepare those financial with utmost care and using reliable information
such that it shows the correct financial position and health of the company. For solving the
purpose, there are various regulations that are imposed by the regulatory bodies that are created
for this purpose only. The most famous regulatory bodies in the world are FASB and IASB, most
of the companies uses the financial reporting standards that are offered by these bodies. The
name of accounting standards that are prepared by these bodies are US-GAAP (FASB) and IFRS
(by IASB). The reporting standards provided by these informs the managers and accountants that
they should keep a record of the financial transactions of the company. Using reporting standards
provided by regulatory bodies declines the chances of abuse and discrepancies in the recording
of the financial transactions. Every user of financial statements require that the statements are
reliable, accurate, fair, true, understandable and comparable information about the financial
position and health of the companies. The principles and accounting standards are different in
every country but the source of regulation is same in every country (Norton, 2012)
3. Various accounting rules and principles applicable in the organisation
Accounting rules:
 Debit the receiver and credit the giver: This rule of accounting is applicable in all the
personal accounts that are dealing with the business directly or indirectly. The personal
accounts of the company include individuals that can be natural or legal body. If the
person receives anything from the organisation, then his account is debited in the
company's account. And if the person provides anything to the company then his account
is credited in the company's account.
 Credit what goes out and debit what comes in: This accounting rule is applicable on
the real accounts of the company, the real accounts of company includes fixed assets of

the company. When the company purchases the assets the real account of asset is debited
in the company account and when the company discards the asset, that account is credited
in the company's books according to the rule.
 Credit all incomes and gains and debit all losses and expenses: this accounting rule is
applicable on all the nominal accounts of the company. Nominal accounts include the
expenses, losses, income and gains of the company. Let’s take an example of salaries
account, when the company pays salaries to its employees the salaries account is debited
and the bank account is credited according to the rule of debit all expense and losses.
( Chea, 2011)
Accounting principle:
 Going concern principle: this principle states and assumes that the company will
continue to do its operation for the coming future period and attain the objectives with the
view that company will continue to exist and it will not shut down in near future. In cases
when the accountant of company feels that it will not exist in future then he has to inform
to all the stakeholders of the company.
 Matching Principle: This accounting principle needs organisation to follow accrual
accounting system, as per accounting principles, accountant must try to match revenues
according to its expenses.
 Revenue recognition principles: This kind of accounting principle simply said that the
organisation must need to implement accrual basis of accounting instead of cash basis
accounting that simply means that the organisation must need to identify the income
when product is sold and not if the amount is achieved from consumers and within the
same time goes with the expenditure (Wilson, and et. al. 2010)
4. Conventions and concepts related to the material disclosure and consistency:
Material Disclosure: This can be rightly said that the accounting conventions simply
suggest that the accounting must concentrates on the recording of transactions that are important
and whole of the abnormal things is ignored. However, this is crucial as normal minutes’
transactions overburden the accounts of the organisation. There is various pre-determined
formula for opting material transactions or events, this decision is entirely relied upon skills and
knowledge of the accountant to judge about the transactions are crucial to be recorded in books
of accounts and which are not. (Brown, 2011). This must be adopted that transactions which is

material for one organisation might be immaterial for other one, and items that are material in
existing year could be immaterial for the another one, and items that are material in the existing
year could be immaterial in the next year.
Consistency: This consistency convention of accounts implies that the accounting practices
that are applicable in the existing yeas which must remain unchanged for diverse periods. This
simply says that the rules and policies which considered by the business must remain stable for
the organisation for the longer period and must also varied in case of changes the policies as the
urgent needs, organisation must need to have adequate steps in using of those changes.
Stakeholders and various employees who needs consistency in the policies henceforth they could
be convenient in working with the organisation (Balakrishnan and Cohen, 2011).
PART B
CLIENT 1
P1: Double entry recording with concerned ledger:

Ledger posting

Sales ledger account:

Nominal Ledger:

Real ledger account:
Journal entries
Assets Debit credit
Premises 340000
Van 51250
Fixtures 8100
Investment 63900
Receivables
P.Mullen 1400
F.Lane 3100
Cash at bank 62400
Cash in Hand 5600
Liabilities

Payable
S.Hood 2150
Brown 4600
Capital balance 529000
Total 535750 535750
P2: Produce a trial balance applied the use of the balance off rule to complete the ledger
Trail Balance in the books of Alexandra from the 01 may 2017 (Figures in £)
Particulars Debit Balance Credit Balance
W. Wright Nil 1910
W. Tone Nil 960
Van account a/c 51250 Nil
T. Cole 2320 Nil
Suspense a/c Nil 2300
Storage cost 400 Nil
Sales Return 680 Nil
Sales a/c Nil 14670
Salaries 4800 Nil
S. Hood Nil 2150
R. Foot Nil 1560
Purchase Return Nil 50
Purchase a/c 9820 Nil
Premises a/c 340000 Nil
P. White 2420 Nil
P. Mullen 1400 Nil
Owner's Capital Nil 520500
Motor expenses 470 Nil
L. Mole Nil 1830
J. Fox 1310 Nil
J. Brown Nil 4600
J. Allen 910 Nil
Inventory a/c 63900 Nil

Fixtures a/c 8100 Nil
F. Lane 3100 Nil
Drawing account 1500 Nil
Discount Received Nil 960
Discount Allowed 352 Nil
D. Main Nil 2060
Cash in hand 5600 Nil
Cash at bank 62400 Nil
Business rates 1320 Nil
Abel motors a/c Nil 8500
562052 562052
M1:
This is needed to assess an important requirement of the adjustment of sales and buying
transactions by implementing of double entry system. Whole of the transactions which are
connected to the sales are recorded in the credit side of the trial balance and buying transactions
are recorded in the debit side. Return outward is credited and sales return are debited that are
likewise demonstrated in the trial balance in the similar way (Heaton, Lucas, and McDonald
2010).
D1:
This is needed to record whole of the concerned information in an effective manner
henceforth incorporations of the balance could become an efficient manner. According to the
above mentioned report, this can be rightly observed that the there are few transactions that are
few of the transactions which stay avoided in order to record and handle accounts in an effective
way.
CLIENT 2
P3: Financial accounts form given trial balance figures adjusting, depreciation and prep
(a) Profit and loss statement for Peter piper
Profit and loss statement of Peter Piper for the year ended 31st December 2017
Particulars Amount Particulars Amount
To Opening stock 82200 By sales a/c 1215000

To wages and salaries (177500+1220) 178720
To Purchase a/c 778800
To Gross Profit 276920 By closing Stock 101640
1316640 1316640
To motor expenses 87400 By Net Profit 276920
To Heating and lighting 4950
To Depreciation
on freehold primes 4650
on equipment’s 7500
on Vehicle 2800 14950
To Advertisement expenses 4810
To administration expenses 17650
To net profit 147160
276920 276920
P4: Final accounts subject to sole traders, partnerships or limited companies
(b) Financial Position Statements
Particulars Amount
(figures in £)
Current assets
Cash in hand 2440
Inventory 101640
Prepaid advertisement expense 8470
Trade receivables 106960
Total current assets 219510
Free Hold Premises 270000
Equipment’s 172500
Vehicle 28000
Total non-current assets 470500
Total assets 690010

Liabilities and equities:
Current liabilities
Trade payable 76910
Outstanding salary 1220
Bank overdraft 11290
Accumulated
depreciation(42150+105000+16800)
163950
Total current liabilities 253370
Capital 332120
Add: profit 147160
Less :- drawings (42640) 436640
Total equities and liabilities 690010
M2:
Profits and loss accounts elaborates profitability of the company which comprises whole
of the expenses and revenues. According to the assessment of profits and loss account this is
rightly said that Peter Piper company’s profits which is 147160 and sum of the balance sheet
were likewise measured as 690010 (Gupta, 2011).
D2:
According to assessment of the financial information this is assessed that there are few of
the adjustment which is completed in related to the advanced payments of salaries and prepaid
expenses. there are various components which were assessed in terms of depreciation and
interest earnings. This simply observed that the adjustment of the sales return is likewise adopted
at the time of making the financial accountants.
CLIENT 3
(a) Profit and loss statement of Raintree Ltd. For the year ended 30th September 2017
Particulars Amount Particulars
Amount
(Figures in £)
To Opening inventory 17000 By revenues a/c 107000

To Purchases a/c 32000
To return Inwards 2000
To Gross Earnings c/d 74000 By closing Inventory 18000
125000 125000
To administration expenses 30000 By Gross Earnings c/f 74000
To Corporate Expenses 4000
To Depreciation charged 15000
To Distribution expenses 19000
To Net Earnings 6000
74000 74000
(b) Statement of financial statement of Braintree Ltd.
Particulars
Amount
(Figures in
£)
ASSETS:
Current Assets
Bills receivables 24000
Cash at bank -15000
Rent paid in advance 3000
Stock 18000
Total current assets 30000
Non-Current Assets:
Machineries and plant 65000
Building and Land 60000

Total non-current assets 125000
Total assets 155000
Shareholder's equity and Liabilities:
Current liabilities
Tax provision 37000
Outstanding administration cost 2000
Corporate
Tax 4000
Bills payables 14000
Total liabilities 57000
Shareholder's Equity
Equity share premium 20000
Equity stock @ £1 each 50000
Earnings 6000
Retained earnings 22000
Total equity 98000
Total equities and liabilities 155000
(c) Accounting Concepts:
Consistency: The consistency accounting concept suggests that the accounting policies
and regulations adopted by the company should be consistent in the companies for a longer
period of time after it is adopted by the companies. The consistency principle of accounting helps
the managers and other users of the financial statements in comparing the performances with
other companies and also the industry average. This concept of accounts sates that whenever the
companies adopt a certain reporting standard then it should encourage its implementation over a
longer period of time. And the organisation should only consider change when the management
has certain reasonable grounds that requires the changes in the policies and if in any condition

the changes are made, then the managers should take proper action in the implementation of
those policies such that it does not hinder the operations of the company. Consistency in the
policies of the companies also indicates that the company is stable and is able to survive in the
market for the longer time (Caliban, 2017)
Prudence: This concept of accounting suggests that the accountants and financial
managers of the company should not overestimate the revenues, profits and gains of the
company until and unless it has realised it. And the liabilities, losses and expenses of the
company should not be underestimated by the company, they should be recorded as soon as the
company incurs the expenses does not matter whether they are paid are not. The prudence
concept of accounting provides guidelines on being conservative in determining the gains and
income of the company and must not be conservative in recording losses. (Tyron Tudor, and
Mutiu, 2012)
(d) Requirement of depreciation in the preparation of financial statements
Depreciation plays a significant role in the preparation of financial statements as the
company decreases the book value of the assets by depreciating the assets. The depreciation of
assets initiates as soon as the company purchases the assets. For depreciation purpose the
company decides the estimated life of the machinery, then determines the amount of salvage
value that will be recovered when the asset will be discarded and then by using various methods
such as straight line method, written down value or diminishing value method the depreciation of
the machinery is done. The depreciation process helps the company in decreasing the profits of
the company by increasing the expenditures by including depreciation (McEnroe, and Sullivan,
2013) Depreciation is a non cash expenditure but it has an important role in the financial
statements of the company. The methods of calculating depreciation are discussed under:
Straight Line Method: This depreciation method is adopted by the majority of the
company as depreciation under this method is easy to calculate and understandable by the users.
According to this depreciation method, original cost of the asset is taken and the estimated
salvage value of that asset is deducted from the cost of the asset, after that it is divided by the
total life of the asset which was estimated by the managers of the company. And then the amount
that is calculated is deducted from the cost of asset every year till the life of the asset.
(Verbruggen, Christiaens, and Milis, 2011)

Written down value method: This method of depreciating the asset is also
named as diminishing value method as it is calculated by taking the opening balance of each year
and dividing it by the remaining life of the asset. The depreciation of every year is deducted from
the opening balance of the asset and it continues till the asset value becomes zero.
CLIENT 4
P5: Apply the bank reconciliation process to make a number of a reconciliation
Bank Reconciliation Statement as on 1 December 2017
Date Particulars Details Amount
31/12/17
Bank Balance as per cash book (B/d.
Balance) 19973
01/12/17 Add: opening adjusting figure 987
02/12/17 Add: deposits 176
06/12/17 Add: Distinction between adjust of 783 9
17/12/17 Add: instalment to Cook 97
29/12/17 Add: Finding of lease 260 1529
Total 21502
02/12/17 Less: 780 426
02/12/17 Less:781 737
05/12/17 Less: bank charges 47
10/12/17 Less: standing orders 137
11/12/17 Less: 310923 297
24/12/17 Less: difference of cash deposit (sales) 1
30/12/17 Less: Payment received from Fred 119 1764
Balance as per passbook (Cr. Balance) 19738
Cash book of Kendal Ltd. (Bank only)
Date particular amount Date particular amount

01/12/17
To balance b/d(Balancing
figure) 20208 02/12/17 By 780 426
01/12/17 To balance adjustment 987 02/12/17 By 781 737
02/12/17 To Deposits 176 05/12/17 By bank charges 47
06/12/17 To difference of balance 9 10/12/17 By standing orders 137
17/12/17 To cook 97 11/12/17 By 310923 297
29/12/17 To rent 260 24/12/17 By cash deposit 1
30/12/17 By Fred a/c 119
By balance c/d 19973
21737 21737
CLIENT 5
Ledger control accounts
CLIENT 6
P6: Process to be taken to reconcile control accounts and clear suspense account

Trial balance (£)
Particular Debit amount Credit amount
Travel Expenses 160
Suspense a/c 110
Sales 1100
Rent paid 250
Receivables 320
Purchase 700
Payables 350
Cash at bank 840
Capital 710
Total 2270 2270
M4: Understanding of the type of accounts
(c) suspense account
Suspense account
Particulars Amount Particulars Amount
To White's personal account 750 By balance b/d 330
By John's personal account 420
750 750
CONCLUSION
It has been concluded form the above research that the financial accounting plays a
significant role in formulating financial statements with the use of reporting standards. The
accounting rules and concepts are very vital in the preparation of financial statements. The
journal entries and trial balance is also prepared under this project. The financial statements such
as profit and loss and balance sheet are formed using the rules and principles. The bank
reconciliation statements are also created and it has also discussed why these are necessary to be
reconciled.

REFERENCES
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Chea, A. C. , 2011. Fair value accounting: its impacts on financial reporting and how it can be
enhanced to provide more clarity and reliability of information for users of financial
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Cañibano, L., 2017. Accounting and intangibles.
Tiron Tudor, A. and Mutiu, A., 2012. Cash versus accrual accounting in public sector.
Verbruggen, S., Christiaens, J. and Milis, K. , 2011. Can resource dependence and coercive
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Brown, P. , 2011. International Financial Reporting Standards: what are the benefits?.
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