Financial Accounting and Principles Assignment (Doc)
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Added on 2020-10-05
Financial Accounting and Principles Assignment (Doc)
Added on 2020-10-05
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Financial Accounting andprinciples
Table of ContentsINTRODUCTION...........................................................................................................................31.Define Financial accounting................................................................................................32. Regulations relating to financial accounting......................................................................43. Various accounting rules and principles applicable in the organisation............................44. Conventions and concepts related to the material disclosure and consistency:.................5PART B............................................................................................................................................6CLIENT 1........................................................................................................................................6P1: Double entry recording with concerned ledger:...............................................................6P2: Produce a trial balance applied the use of the balance off rule to complete the ledger.16M1:.......................................................................................................................................17D1:........................................................................................................................................17CLIENT 2......................................................................................................................................17P3: Financial accounts form given trial balance figures adjusting, depreciation and prep. .17P4: Final accounts subject to sole traders, partnerships or limited companies....................18M2:.......................................................................................................................................19D2:........................................................................................................................................19CLIENT 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........................22CLIENT 4......................................................................................................................................23P5: Apply the bank reconciliation process to make a number of a reconciliation...............23CLIENT 5......................................................................................................................................24Ledger control accounts.......................................................................................................24CLIENT 6......................................................................................................................................24P6: Process to be taken to reconcile control accounts and clear suspense account..............24M4: Understanding of the type of accounts.........................................................................25CONCLUSION..............................................................................................................................25REFERENCES..............................................................................................................................26
INTRODUCTIONFinancial accounting is the process of accounting which deals with recording andsummarising of financial transactions which helps in the formulating the financial strategies andplans. The finance related accounting is the process of recording the transactions in such amanner that is understandable for the managers and other users of the organisations. The mainpurpose is to bring the financial stability in the business. The information’s related to financialaccounting is presented in financial statements such as profit and loss account, balance sheet andcash flow statement which are prepared in this report ( Motherly and Burney, 2013.) This reportincludes two broad parts, one consists of business report that includes rules and principles andanother one includes statements of financial position such as profit and loss statement, balancesheet, bank reconciliation statement etc.PART ABUSINESS REPORT1.Define Financial accountingFinance accounting is the most common form of accounting that deals with thepreparation of financial statements of the company such as balance sheet, profit and lossstatement and cash flow statement. The financial accounting process starts with the recording,classifying and summarising the financial transactions of the business. These transactions arerecorded in the journal of the companies, then they are posted into ledger and then trial balance isformulated. After the proper recording of all the transactions the financial managers prepare thefinancials of the company. The duty of the financial managers is to prepare these financialstatements with reliable and accurate information so that the users of the financial statements canentrust on the statements in taking important decisions regarding the investing in company'sprojects. And therefore it is the responsibility of the financial managers of the company toprepare the financials using information which is reliable such that the statements reflect the trueand fair view of the company (Rankin, and et. al. 2012)Financial accounting in the companies uses certain pre-determined standards that areformulated by the regulatory bodies such as IASB and FASB. Various companies use differentaccounting 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 IFRSfinancial reporting standards are also recognized in the companies all over the world and areadopted by many big companies. The main purpose behind the adoption of these standards arethat these standards ensure that the prepared financial statements of the company are reliable andthat it shows the true and fair view of the companies because of certain regulations of doingaccounting imposed by the bodies.2. Regulations relating to financial accountingFinancial accounting deals with the preparations of financial statements and its mostimportant objective is to prepare those financial with utmost care and using reliable informationsuch that it shows the correct financial position and health of the company. For solving thepurpose, there are various regulations that are imposed by the regulatory bodies that are createdfor this purpose only. The most famous regulatory bodies in the world are FASB and IASB, mostof the companies uses the financial reporting standards that are offered by these bodies. Thename 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 thatthey should keep a record of the financial transactions of the company. Using reporting standardsprovided by regulatory bodies declines the chances of abuse and discrepancies in the recordingof the financial transactions. Every user of financial statements require that the statements arereliable, accurate, fair, true, understandable and comparable information about the financialposition and health of the companies. The principles and accounting standards are different inevery country but the source of regulation is same in every country (Norton, 2012)3. Various accounting rules and principles applicable in the organisationAccounting rules: Debit the receiver and credit the giver: This rule of accounting is applicable in all thepersonal accounts that are dealing with the business directly or indirectly. The personalaccounts of the company include individuals that can be natural or legal body. If theperson receives anything from the organisation, then his account is debited in thecompany's account. And if the person provides anything to the company then his accountis credited in the company's account. Credit what goes out and debit what comes in: This accounting rule is applicable onthe 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 debitedin the company account and when the company discards the asset, that account is creditedin the company's books according to the rule.Credit all incomes and gains and debit all losses and expenses: this accounting rule isapplicable on all the nominal accounts of the company. Nominal accounts include theexpenses, losses, income and gains of the company. Let’s take an example of salariesaccount, when the company pays salaries to its employees the salaries account is debitedand 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 willcontinue to do its operation for the coming future period and attain the objectives with theview that company will continue to exist and it will not shut down in near future. In caseswhen the accountant of company feels that it will not exist in future then he has to informto all the stakeholders of the company.Matching Principle: This accounting principle needs organisation to follow accrualaccounting system, as per accounting principles, accountant must try to match revenuesaccording to its expenses.Revenue recognition principles: This kind of accounting principle simply said that theorganisation must need to implement accrual basis of accounting instead of cash basisaccounting that simply means that the organisation must need to identify the incomewhen product is sold and not if the amount is achieved from consumers and within thesame 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 simplysuggest that the accounting must concentrates on the recording of transactions that are importantand 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-determinedformula for opting material transactions or events, this decision is entirely relied upon skills andknowledge of the accountant to judge about the transactions are crucial to be recorded in booksof 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 inexisting year could be immaterial for the another one, and items that are material in the existingyear could be immaterial in the next year.Consistency: This consistency convention of accounts implies that the accounting practicesthat are applicable in the existing yeas which must remain unchanged for diverse periods. Thissimply says that the rules and policies which considered by the business must remain stable forthe organisation for the longer period and must also varied in case of changes the policies as theurgent 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 couldbe convenient in working with the organisation (Balakrishnan and Cohen, 2011). PART BCLIENT 1P1: Double entry recording with concerned ledger:
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