Financial Accounting: Evaluating financial accounting, regulations, accounting guidelines and principles

Financial Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
1) Evaluating financial accounting..............................................................................................3
2) Regulations regarding financial accounting............................................................................4
3 Accounting guideline and principles......................................................................................5
4 Convention and concepts w.r.t. consistency and material disclosure.......................................6
CLIENT 1........................................................................................................................................7
a. Journal entries..........................................................................................................................7
b. Ledger accounts.......................................................................................................................9
c. Trial balance...........................................................................................................................19
CLIENT 2......................................................................................................................................20
a. Preparing income statement...................................................................................................20
b. Framing statement of financial statement..............................................................................21
CLIENT 3......................................................................................................................................22
a. Profitability statement............................................................................................................22
b. balance sheet..........................................................................................................................23
c. Stating accounting principles and concepts...........................................................................24
d. Defining the concept of depreciation and related methods...................................................25
CLIENT 4......................................................................................................................................27
A. Explaining the purpose of preparing bank statement............................................................27
B. Listing the causes due to which record of bank and cash statement varies..........................27
c. Preparation of BRS................................................................................................................28
CLIENT 5......................................................................................................................................29
A) Prepare sales ledger control account and purchase ledger control account..........................29

B) Requirement to draw the control account. Explain the term 'control account'.....................29
CLIENT 6......................................................................................................................................30
A) Explain the term suspense account and its main features.....................................................30
B) Draft a Trial Balance............................................................................................................31
C) Prepare journal entries..........................................................................................................31
D) Differentiate between suspense account and Clearing Account...........................................31
CONCLUSION..............................................................................................................................31

INTRODUCTION
Financial accounting is highly concerned with the preparation of appropriate final
accounts which in turn presents the fair view of monetary information. In the business
organization, manager is highly concerned in relation to getting information about monetary
health and performance. In this regard, system of financial accounting enables manager to
record all the business transactions by following standardized rules or guidelines. Thus, by
following the concepts and rules of financial accounting business entity can prepare suitable
income and cash flow statement as well as balance sheet. This in turn helps business entity to
assess the extent to which financial performance is on right track or not. The present report is
based on different case situations which will provide deeper understanding about the manner in
which trial balance as well as adjusted balance sheet and income statement can be framed.
Further, report will also shed light on the concepts of suspense, clearing and control account. It
will also develop understanding about depreciation methods and its significance level.
PART A
1) Evaluating financial accounting
Financials accounting can be described as the records, reports and presentation of the data
in tabular form related to the finance performance of the organization. Such data occurs when
there is transaction related to the goods and services purchased, produced and sold. Making such
entities helps to understand the gain, expenses and revenue of the company during the period of
production and supply of the product. Such tasks are accomplished in the ledger which includes
the data related to the balance sheet, data related to collection of revenue, profit and loss
occurred in the company and income statements , asset accounts etc. Moreover, it may include
the data related to accounts, cash transaction, equipment cost, investment in capital, inventory
and other investment made by the organization. Obtained above data are used by the
organization in order to forecast the economic position of company in market and allows to make
further decision and strategies which are necessary and needs to be implemented for achieving
the goals and objectives of firm (Barth, 2015).
Furthermore, momentary performance details are prepared in the form of reports and
along with the data of previous years transaction. Various financial tools and optimum funds for
financial benefit can be achieved through the financial management. In order to complete the

above task various tools like accounting information system are used which are popularly used
by the manager, accountants, stakeholder and other accounts related persons. Various set of rules
and regulation are provided and needs to be followed in order to achieve accounting standards
and provide financials accountancy. Several calculation and transacting can be easily understood
through financial accounting. Actual business, financials and economical condition of the
organisation are mentioned through the report. Such values enhance and standards the
capabilities of the business orientation (Beatty and Liao, 2014).
2) Regulations regarding financial accounting
In UK financial accounting is governed through Financial Reporting Council (FRC)
which is developed by the Accounting Standards Board (ASB). Mainly there are various sets of
regulation which are needed to be followed in financial accounting such as Accounting Standard
Boards(ASB), Financial Conduct Authority (FCA). International Financial reporting Council
(IFRC) and International Accounting Standards Broad (IASB). These accounting standards
provide the set of rules, policies along with the obligations which are needed during time of
preparation and for maintenance of the financial records. Financial reporting Council board is
supported by the three committees which are codes and standards committee which provides the
advice to them for maintaining effective framework. Conduct committee which is needed to
support the high quality corporate reporting. In order to prepare the financial statements like
income statement, balance sheet and cash flow statement varied principles are followed like
GAAP general accepted accounting principles (Beaumont, 2015). The process includes the
discipline, overseeing the accountants, monitoring and checking of the quality.
 International Financial Reporting Standards (IFRS):- For the accountancy profession,
IFRS is the international representative body. The organisation supports, promotes and
encourage public to protect the level of accountancy in the global world. They issues
standards which are required for assurance along with auditing, education, public sector
accounting, accounting ethics together with instruction regarding accountants working in
the financial sector. The organization was founded and developed by independent
society. The set of regulation made are adopted and followed internationally for
preparing Financials accountant.

 Accounting Standard Board (ASB): The accounting standards set by ASB, various
enforcement and role about accounting are given for the financial details and provision.
Moreover, role of ASB can be understood through following:
1. Supports in preparing the financial standards (Bevis, 2013).
2. Various rules, laws and policies are recorded and mentioned regarding financial information.
3. For the own standard, related terms , guidelines and condition are mentioned. Financial Conduct Authority (FCA): Established in 2013 as UK conduct regulator for
organizational financial service by replacing Financial Services Authority.
 International Accounting Standards Broad (IASB): The organisation is independent
and non profit private sector which is employed for the public interest in order to
develop high standards of accounting which can be globally accepted.
All the above mentioned accounting standards are required for establishing the rules and
regulation related to the financial accountancy. Such sets of rules are made through journals,
ledger, balance sheet, profit and loss of accounts. This sets and standards are made to prepare
statements and monetary performance of firm.
3 Accounting guideline and principles
FSAB in required for providing the provision related to guidelines and principle which
are related to mentioning the information and for making the future strategies regarding business
operation. Mentioned below are some of the guidelines and principles which are given by FASB
and are required to describe financial accountancy. These are:
 Economic entity assumption: According to this assumption, proprietorship and its
owner are considered as the same entity. But in terms of accountancy these two are
considered as two different for maintaining the data sheets. Finally, making financial
records separately for the owner and company can make the Financial accountancy
efficiently(Bradshaw and et.al., 2013). Monetary unit assumption: Used for representing the cost in unit. For preparing it
organisation profit, loss related to sales are purchase are required for preparing the true
amount of the transaction for the further organisation strategies and operation. Full disclosure principles: the related principles is required for the income gained and
losses occurred which are required during the time of financial transaction. Such

principles improves the business performance. For such accounting policies depreciated
values, loss and scrape value can be calculated. Going concern principles: Concerning the stakeholder, manager and other member are
required for the ongoing concerns which needed to be sorted out. Such principles are
required for the fame and name in the market. Through above rules company
performance and reputation can enhanced.
1. Revenue recognition principles: Mainly requires the actual data needed like income,
revenue rates which show the good reputation of organisation and losses to be ethical. To
understand more clearly following illustration is taken: Suppose company A collected
10000 for selling goods and in the data sheet mentioned 20000 which is illegal as per
business operation. Taking this, different problems are recorded which involves business
activities (Bushman, 2014).
4 Convention and concepts w.r.t. consistency and material disclosure
Convention and concepts are the methods which are required for the providing different
set of rules and guidelines to accountant for prepare financial information. Using the above
mentioned methods the financial accountancy for disclosing the sales and purchase of the
transaction. Moreover, they can be evaluate as:
 Conventions in terms of consistency: This concepts comprises of recording all the terms
and values of the business operation. The business values needs to be true and fair for
recording accountancy. Moreover, other implication can be applied during after studying
the accountancy. Financial transaction can be made after evaluating the studies. Hence,
consistency is required to be expressive for recoding and writing financial transactions.
 Convention in respect to materiality: Liability of accountant is to mention the business
operation and hence they must make the financial transactions in appropriate ways and in
proper format. Recording wrong details may affect the business operation(Dutta and
Patatoukas, 2016).

CLIENT 1
a. Journal entries
System of book keeping places high level of emphasis on recording financial
transactions in an effectual way. On the basis of double entry system, for every debit there must
be a credit. It assumes that each transaction has dual sided effects and helps in presenting the fair
view of monetary transactions (Oldroyd, Tyson and Fleischman, 2015). It helps business entity
in evaluating the transactions which are made during the year or specified time frame.