Financial accounting Field PDF
Added on 2020-10-23
32 Pages3855 Words370 Views
Finance
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Financial Accounting1
TABLE OF CONTENTSINTRODUCTION......................................................................................................................41. Describing financial accounting.........................................................................................42. Assessing key rules and regulations related to financial accounting.................................53. Defining accounting principles..........................................................................................54. Stating consistency and materiality convention of accounting..........................................6CLIENT 1...................................................................................................................................6a. Recording transactions in Journal......................................................................................6b. Posting transactions in the ledger accounts........................................................................9c. Drafting trial balance........................................................................................................16CLIENT 2.................................................................................................................................17a. Income statement for Peter Piper for 31st December 2017...............................................17b. Balance sheet of Peter Piper for the concerned period....................................................18CLIENT 3.................................................................................................................................20A Preparing profitability statement of Raintree Ltd for the year ended on 30th September2017......................................................................................................................................20B Stating statement of financial position of Raintree Ltd....................................................20C Explaining consistency and prudence concept of accounting..........................................21D. Describing the purpose of depreciation while drafting statements along with themethods................................................................................................................................22CLIENT 4.................................................................................................................................23a. Presenting purposes take place behind the preparation of bank reconciliation statement23b. Explaining reasons due to which cash records vary from the bank statement.................23C. Bank reconciliation..........................................................................................................24CLIENT 5.................................................................................................................................25a. Sales and purchase ledger account...................................................................................251............................................................................................................................................252
2............................................................................................................................................26b. Describing control account..............................................................................................26CLIENT 6.................................................................................................................................27a. Defining suspense account along with its features...........................................................27b. Presenting trial balance and use of control account as per financial accounting system.27c. Rectifying accounting entries...........................................................................................29d. Differentiating suspense and clearing account.................................................................30CONCLUSION........................................................................................................................30REFERENCES.........................................................................................................................313
INTRODUCTIONFinancial accounting field of finance is highly concerned with the preparation andanalysis of final accounts at the end of an accounting year. In the recent times, all businessunits whether large or small lay focus on undertaking financial accounting tool & techniqueswith the motive to ascertain monetary position. Along with this, with the motive to satisfy theinformational needs of stakeholders and evolve satisfaction among them companies use theconcepts, principles and conventions. The present report is based on varied case situationswhich provide deeper insight about the manner in which different principles and conventionshelp in dealing with as well as recording monetary transactions. Further, report will also shedlight on the importance of preparing bank reconciliation statement on a monthly basis. It alsoentails reasons due to which company charges depreciation on fixed assets. It will alsodevelop understanding about the concept of suspense, clearing and control account. 1. Describing financial accounting In UK, all the companies which are listed on London Stock Exchange prepare finalaccounts for assessing financial position and providing stakeholders with suitable informationfor decision making. Now, as per rules, it becomes mandatory for the companies to prepareand publish financial statements at the end of accounting period. Basically, four mainaccounts which company prepares to assess and evaluate its financial position such as:Profitability or income statement: This statement of final account containsinformation about income & expenditure. Companies prepare such account forassessing profit generated over the expense. In the context of business unit, income isgenerated from varied sources such as sales, dividend and interest received. On theother side, expenditures include both direct (material, labour etc) and indirect (selling& distribution etc). On the basis of accounting rules by subtracting expenses fromincome profitability can be assessed easily. Statement of financial position: Balance sheet helps in getting information aboutseveral aspects such as liquidity, efficiency and solvency. Business unit recordsinformation about assets, liabilities and shareholder’s equity in the statement offinancial position (Schaltegger and Burritt, 2017). Hence, by making assessment ofcompany’s position on the basis of such aspects business entity can take suitabledecision for performance improvement and enhancement. 4
Cash flow statement: In this, transactions are recorded under different categories suchas operating, investing and financing. Company prepares such statement for assessingthe position of cash inflow and outflow pertaining to the specific time frame. Themain motive of company behind the preparation of such account is to determine cashposition and take decision for future investments as well as other aspects.Statement of changes in equity: Under this, firm records information about its equityposition and reserves. Considering this, firm can evaluate its capital structure as wellas solvency position and thereby would become able to take suitable decisions for theupcoming time period.2. Assessing key rules and regulations related to financial accounting There are several rules and regulations with which business units need to adhere whilepreparing final accounts. Companies which are operating on a global basis need to undertakeIASB and IFRS at the time of recording transactions in the relative or concerned statement.IASB presents the manner in which tangibles and intangibles should be treated in financialstatements (Warren and Jones, 2018). Further, IFRS presents the way of reportingtransactions and other information in final accounts. In UK, few of the companies arefollowing GAAP at the time of preparing financial statements. Hence, companies which arecarrying out activities at international level recommended following IASB and IFRS. This inturn facilitates standardization and assists in comparing performance with past years as wellas over the rival firms.3. Defining accounting principles Accounting principles present the manner in which transactions should be recorded inthe final accounts. Main principles which are associated with the field of financial accountingenumerated below:Double entry system or concept: On the basis of such concept, transactions should berecorded under two categories such as debit and credit. In other words, for every debit theremust be a credit in relation to the transaction made (Robson, Young and Power, 2017). Forinstance: Furniture worth of £10000 is purchased in against to cash. In this, Furniture will bedebited and cash is recorded in the credit side. Furniture a/c Dr £10000 To cash a/c £100005
Assets = Liabilities + shareholder’s equity Money measurement concept: In the final accounts, only transactions which can bepresented in monetary terms are recorded (Ryan, 2017). In other words, non-financialmeasures such as employee satisfaction, customer base etc is not included in the finalaccounts of firm.Going concern concept: As per such principle, business entity assumes that firm willcarry out its operations for the longer or infinite time period. Accounting period concept: Such concept presents that final accounts should be prepared or drafted on the basis ofquarterly, half yearly and annual basis. Accrual concept:It lays emphasis on recording transactions pertaining to revenue and expenses in theperiod of occurrence. By doing this, company can reflect the clear and precise view ofmonetary transactions. 4. Stating consistency and materiality convention of accounting Consistency principle: This principle states that focus should be placed onundertaking common principles and rules every year. In other words, company shouldconsider similar rules for recording and presenting transactions (Scott, 2015). Along withthis, emphasis should also be placed on specifying reason behind making changes in theexisting rules. By following the rule of consistency firm would become able to docomparison of performance over the years more effectually. Materiality concept: Such accounting concept makes improvement in the disclosureof monetary information prominently. On the basis of such concept business unit shoulddisclose all the material information which influences or having an impact on the decisionmaking aspects of suppliers, shareholders etc. CLIENT 1a. Recording transactions in Journal Journal of Alex Study’s for the period of 2017 is as follows: 6
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