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Introduction to financial accounting : Assignment Sample

   

Added on  2019-12-17

14 Pages4333 Words109 Views
Introduction to financial accounting 1

Table of ContentsINTRODUCTION................................................................................................................................3Preparation of accounting records and financial statements for Corr, a sole trader.........................3Final account with adjustments........................................................................................................8Explain the usefulness of information provided on assets, liabilities and equity.............................9Explain the prudence concept and accruals concept and assessing its application for Domino Pizza................................................................................................................................................11CONCLUSION..................................................................................................................................12REFERENCES...................................................................................................................................132

INTRODUCTION The art of recording, classifying, summarizing and interpreting or evaluating monetarytransaction of an enterprise is called financial accounting. It is regarded as the process of keepingsystematic records so as to ascertain business profitability and financial position at the end ofaccounting year. It is very important for the managers in order to make proficient and accuratedecisions to reach success in the future. The aim of the present assignment is to prepare journal,ledger, trial balance, income statement and balance sheet for Corr, a furniture merchandiser. Inaddition to this, report will also lay emphasizes on assessing the usefulness of information reportedin Domino Pizza’s annual accounts such as assets, liabilities and equity. Furthermore, companiesprepare all the necessary accounts by complying with several concepts such as accrual, prudenceand so on. Henceforth, the report will guide the accounting principles and concepts for constructingannual accounts. Preparation of accounting records and financial statements for Corr, a sole traderAs per the scenario, Corr is a small sole proprietor who kept accounting records for the first11 month ending on 31st August 2016. Its financial statement can be prepared by using followingsteps, enumerated hereunder:Journal: At the beginning stage, every monetary transaction needs to be record in journalfollowing dual accounting concept. It states that each transaction must be recorded in both the debitand credit side complying with the accounting rules of personal, real and nominal accounts. Ledger: It classify all the transactions into sub-parts, every ledger summarizes all thetransactions associated with a given element. Trial balance: It consolidates results of all the ledger accounts either by balance or totalbalance. In the former, only balance is reported in trial balance whereas later method report total ofboth the debit and credit into trial balance. Income statement: It report about total revenues and expenditures incurred by Corr in agiven duration prepared to determine net operational results either profit or loss. This statement hastwo sides such as income and expenses. It provides deeper insight about the revenue generated bythe firm during the accounting year over the expenses. Income side of profitability statementrenders information about dividend and interest received during the year. On the other side,expenses include electricity, miscellaneous expenses etc. Hence, by preparing the income statementbusiness unit can assess its profitability aspect. 3

Balance sheet: It summarizes three elements assets, liabilities and equity as well mainlyprepared to determine financial status. Assets include fixed as well as non-current assets whereasliabilities include short-term as well as long-term liabilities. However, excess of total assets overtotal liabilities is called stockholders equity.Journal entries ParticularsL.F.Debit Credit Cash a/c Dr.24500 To sales a/c 24500(6 event sales has been made on cash basis)Debtors a/c Dr.6500 To sales a/c 6500(5 event sales has been made on credit)Sales return a/c Dr. 5000 To debtors a/c 5000(2 event sales has been returned by debtors)Cash a/c Dr. 3000 To trade receivables a/c 3000(credit sales of 2 event has been received from receivables)Purchase a/c Dr. 40000 To cash a/c 40000Purchase a/c Dr.6125 To creditor a/c 6125Creditors a/c Dr. 550 To Purchase return a/c 550Trade payables a/c Dr.1500 To cash a/c 1500Cariage inward 200To cash a/c200Discount allowed a/c Dr. 1225 To sales a/c1225Purchases a/c dr. 1200 To discount received a/c 12004

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