Financial Accounting: Transactions, Bookkeeping, Trial Balance, Financial Statements

This document provides an introduction to financial accounting, covering topics such as transactions, bookkeeping methods, trial balance, and financial statements. It explains the difference between financial statements and financial reports and highlights the importance of trial balance in ensuring accurate financial records. The document also includes examples and explanations of key accounting standards.

Financial Accounting
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INTRODUCTION
Financial accounting relates to practices or processes for readying financial statements
which a corporation uses to demonstrate its financial status and efficiency to outsiders like
creditors or lenders, investors, clients and suppliers. Simply put, this is specific accounting area
that involves different processes, like recording, efficiently summarizing as well as reporting the
outcomes of fiscal transactions from business processes over specific time-frame (Warren,
Jonick and Schneider, 2020).
The assignment is split in two parts and each of them contains different information. In
order to finish first part, some queries need to be addressed, like the kinds of transactions
involving single entry system as well as double-entry system of book keeping, trial balance as
well as its significance. The second part in such section is focused on making journal entries with
respect to each transaction, the Ledgers and a Trial Balance. The distinction between the
financial statement vs the financial report, the basic principles of the accounting and statement of
income are also key part of this portion. Section 2 is focused on preparing bank reconciliation
report, journal entries, multiple control account and many other dimensions.
SCENARIO 1
Question 1
Forms of business transaction
Business transactions are financial events that have taken place within a commercial entity that
could be specific in financial terms. Business transactions have monetary or direct effect on the
client. There are many types of business financial transaction, almost all of which are categorized
into inner versus external transactions. These are listed as follows:
Internal business transactions: The participation of outer parties isn't always allowed in such a
transaction (B Romney, 2018). These transactions have a clear effect on financial performance
of corporation, as they do not demand that value be passed to third party companies. For
example: internal investments entail monitoring deterioration of the fixed assets as well as loss of
property due to fire or robbery etc.
 External business transactions: Among these transactions, the company shall exchange
cash with third parties. These are modest dealings that are passed out by the company on
a regular basis. For instance: outer dealings involve selling of products to consumers,
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acquisition of products from manufacturers, payments of utilities or water charges,
payment of wages to staff, etc.
Single entry and double entry book keeping
Holding a single-entry book is referred to as a simple and cohesive form of accounting.
Under which as well as every financial transaction is reported at the same period as single entry
within journal. Single entry system of bookkeeping is a cash-based accounting methodology that
records all incoming and outgoing cash in journal.
Double-entry bookkeeping system is yet another mechanism or procedure for recording
commercial transactions wherein, for every deal, entry is noted in at minimum 2 accounts that
are credited or debited accounts (Duska, Duska and Kury, 2018). Through this process, the
number of recorded capital as debits would be equivalent to the total of recorded capital as
credits. This appropriate strategies according to the bookkeeping method, for example, assets =
liabilities + capital of the proprietor. It is shown as follows:
Trial balance and its importance
It may be incorporated as accounting or booking statement, that shall include the balance
sheets in each of the general ledger balances or accounts of the company. Debit balance sums are
placed in column with the correct headed 'Debit balances' while credit balance sums are placed in
an alternate column with same headed 'Credit balances.' Number or figures of both of these two
columns should be the same. There is great deal of value and meaning to Trial Balance which
supports a company in business transactions. Below role of this are mentioned in such manner
that are as:
 It is a crucial method as it permits the organization to test the mathematical consistency
of all its accounts' balance by making sure that the balance of track is comparable on each
side.
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 It shows credits and debits balance of the company transactions. If balance of debit does
not align the balance of the credits, it implies that there are several mistakes in the
accounting record (Schroeder, Clark and Cathey, 2019). As a result, trail balance allows
an entity to locate errors.
Trail balance lets the organization manage the final statements. This keeps a database of balance
of accounts that allows a company to file a finished report. The ending accounts will be drawn up
at the ending of financial year by realizing the financial situation, the operational results and
actual performance of entity.
Question 2.
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Ledger accounts
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Trail balance
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Question 3
Monetary report is known as a documentation that contains information about financial
transactions within an entity. The key purpose behind the creation of such report is to document
every financial activity of a corporation in order to assess its effect on organizational functioning
(Schaltegger and Burritt, 2017). There's really no specific time limit for the preparation of such
report. Though, financial statements are diverse from financial report as described above.
As Financial Statement is compulsory document that each organization needs to make
preparations for effective presentation of its profits and losses to its interested parties. The other
distinction that is clearly evident with both, that is separately fiscal account is report, but not
each monetary report is entity's financial statement. The comprehensive level of difference
between them is described below, with aid of multiple points;
Origin of
variance
Financial report Financial statement
Content It includes sum of monetary (money
related) transactions relating to an
It involves just those
all transactions as well as
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organization. information which are
mentioned priority by the
policymaking specialist.
Governance The entire process relating to financial
reports are governed by IASB. These are
referred to as the International Accounting
Standards Board.
Here, the framework of
drawing up financial
statements is regulated
by standards
being developed by IASB.
Scope The scope here of all financial reports
are broad in comparison to financial
statement. It will be comprehended on
2 bases: firstly, all financial transactions
under such and, secondly, all fiscal
reports of entity are reports, although not
all entity's financial reports and
different financial statements.
Scope of entity's financial
statements seems to be
narrow comparison
to financial reports. It is
even though limited
transaction is recorded in
the same way.
Examples There are multiple instances that may even
be displayed as illustrations of financial
reports, like bank statements, accounts
receivables, bad debts reports, debt analysis
reports, etc.
In addition, in terms of
financial reporting there
have been no incidents. But
that is of 4 forms of
financial statements.
Requirement These documents are needed by commercial
executives, as they provide information
about to how much spending and
purchases organization has made though
because that these can build an efficient
budget for future time-frame (Mepham,
2020). The range of use of such reports is
greater than other because it will offer all
information regarding the organization. In
addition, such reports have also been used
Financial statements being
used organizations, and
only for specific reasons.
These are obviously
explored by stakeholders of
the organization in regards
to the determination
of financial growth, the
status, the accessibility of
cash funds and market
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by mangers in developments of financial
strategy that enables them to make a huge
proportion of the profits including a
decrease in sum of expenditure.
situation of the stable. In
addition, such reports are
often used by outer
investors when it comes
to decision-making on
supporting in the
organization or not.
Users The varying range of users commonly used
in these reports includes business
management teams, members of board
and distinct users of company's financial
reports, as they are also portion of entity's
financial reports.
Users those who employ
financial statements widely
involve stockholders,
suppliers ,
lenders, creditors,
clients, public, authorities,
account receivables and
many others.
Question 4
Key bookkeeping ranges implies to rule that restrict and restrict business organization
associations whilst also producing budget reports and outlining money-related details. There’re
many different basic standards under the supervision of the business organization.
Such standards depend on measures set out in 'mostly recognized accounting gauges' as well
as 'entitre budgetary disclosure rule.' A part of the key accounting standards involves:
Money related unit supposition: This rule states that certain budgetary exchanges that
also have taken place in a business organization should be recorded using a comparable fiscal
segment in order to ensure that understanding as well as coherence can be maintained (Jeter and
Chaney, 2018).
Monetary substance presumption:pertaining to such a rule, a company should have its
own specific identity and the initials under that it could even work together here. The essential
aspect of a company should not be exactly same as that of its owner.
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Full Honesty Policy: This financial regulation is a policy of the entire company entity that
states that all financial proceedings essential be reportable in the financial accounts of the group
such that a fair and rational decision may be taken on the organization's operation and status in
relation to revenue.
Going concern specification: As per this framework, a business group must in the certain
case continue to survive on the circumstance of the downfall of the shop owner. However if a
corporate group were decomposed, it's assumed there was in the meanwhile (Muda, 2016).
Materiality framework: This norm notes that sole money dependent trade should be
reported in the company content financial statements so these transactions must be documented
as they arise such that company collects or charges a financial interest.
Income identification standard: The organization should only recognize or report the
value when it is received not when company gains money.
Coordinating standard: Under this regulation that as a guideline refers to company
groups the sum of the tax returns' costs and credit aspects should be equal or organized. Costs
incurred by a company will be organized separately with the revenue generated by that
relationship.
Norm of Conservatism: It is among the most fundamental law for company group
and obviously, official business unions must be reasonable but for the most notably awful should
be formed (Karabarbounis and Neiman, 2019). As suggested under it estimated monetary
condition in the agreement must be reported regularly in the agreement once it is actually
gathered the usual cash outflow must be enrolled while the influx is unpredictable. This law
deals with future-money disasters in an organization.
Question 5
Profit and Loss Account
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Balance Sheet
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SCENARIO 2
Question 1.
This is the process that offers the company with an power to adjust its fiscal documents
with the sum of evidence obtained by a bank statement. That involves matching the two accounts
with an individual's cash account and financial balance issued by the government of the same
entity that represents both purchases.
This is crucial when undertaking from a company's perspective because this will help to measure
the variance here between two accounts respectively (Loft, 2020). It provides the company and
chance to identify the mistakes and make adjustments in all textbooks and work out the number.
All the details controlled in the financial statement is issued by the financial and involves
tracking any expenses and specifically impact a company's bank account. There are various
analysis why the correlation between two accounts did not acceptable as well as the need to
activity the reconcile bank experiment in addition to having the gap. The key and typical
component behind the Bank reconciliation structure involve unpaid verification, NSF, and
transition transaction. It is because whenever the sum credited in the wallet is not reflected
immediately in the general ledger as it takes years and it's the explanation that the amount is
uncertain within two accounts.
There are respective other explanations why planning BRS, i.e. unpaid cheque, is crucial.
In this scenario, on obtaining the transaction in cheque, the candidate makes the credit entry
before dumping as well in the register. That is the explanation that because of the disparity all
books produce and ought to use the BRS method to decide where error occurs and what has to be
stated in quantities for corrections. From the other side, the explanation for the difference in sum
is also NFS which stands for insufficient figure. There are a range of cases in which the
reimbursement is received in money order and the same is deposited in consideration but dis
honoured and the proportion is not mentioned in payment if another person does not have
enough balance in consideration. In this scenario, the recipient party is making a bank statement
entry, but there is no down payment in the bank. That's the statement why it is detectable
variable in the amount of monetary system of all accounts. The same goes for refining with the
help of BRS.
So planning BRS is relevant from the perspective of eliminating any difference in the
volume of both books together with ensuring the complete documents that do not reflect the
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mistake in different manner. It permits a company's management to make the right choices from
that they can most expeditiously implement corporate tasks in the forthcoming.
Question 2.
It is a database linked to monetary system that is generated to be held for broad evidence.
This report analyses the specific interventions of secondary documents and render a liquify view
on accounts that include a large number of act ( Brusca and Martínez, 2016). Money owed and
borrower obligations would be the most commonly known documents on which changes are
made across management systems. All of such documents are repositories with a large number of
transactions for the most part, so it is important to review them using a monitoring account while
attempting to analyse everything. In comparison to reporting in general accounts, the balanced of
these documents are reportable in an additional level report account reported to the money-
related financial reporting method.
Such funds collectively play a significant role in an entity of financial accounting. Here are
the some aspects which aid in the same;
 The key function of the financial reporting monitoring system is to hold the accounting
record away from the facts so that this might be complex to interpret the statistics in the
future.
 Control account does have the function of having the appropriate balance number from
which successful financial reports can be generated from where the financial reporting
component can be attained.
 The monitoring aims to consider liquify information along with thorough information in
the subordinate accounts of where necessary to grasp all the data with little interpretation
and can be better utilized for internal audit and expense account creation goal.
Question 3
Suspense account:
A suspense account is a record that is used intermittently or at any time to issue suspicious
sections and inconsistencies pending their unverified review and resolution. It could very well be
a source of financial exchanges recorded with invalid numbers (Florou, Kosi and Pope, 2017).
The indicated record may not exist or may be deleted / confirmed.
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A suspension account contains sections that contain vulnerabilities or errors. For example,
if a person in the store inadvertently registers a registration number incorrectly, the money is
kept in a leave account until the error is resolved. In another case, a customer can issue an
indemnity, however neglecting to determine which receipt he intends to pay with these funds.
Despite the mentioned vulnerabilities, dilution records are obtained once the disturbance is
resolved, at which point the funds are immediately reconciled with the deferred records assign
them correctly. At the time, the record should reach an alleged equivalent of zero dollars.
Although there are no authoritative records for the management of the discovery method, several
organizations try to achieve this goal usually month by month or quarterly.
Home loan Suspense Accounts
A home loan services can use the advance schedules to back up when a lender loses its mark on a
month-to-month credit repayment, where the strain registers capacity as a vessel insuring the
assets (Mnif Sellami and Gafsi, 2019). Currently, a home loan manager can choose to distribute
the fractional amount received in several warehouses, including the principal amount due, the
collections collected, the instalments the cost of property and mortgage custodian protection
programs.
From time to time, a borrower deliberately makes fractional instalments, separating the
regularly recorded portion into two pieces. In such cases, contract producers can use the voltage
tables to host the main input in half until the next input is switched off. After taking appropriate
actions to make a full contribution, the home loan manager then adds the consolidated equity to
the correct schedule.
Financier Suspense Accounts
Like corporate dilution records, treasurer accounts hold stores while exchanges are complete. For
example, if a financial specialist sells a collection of securities worth $ 500, but intends to
quickly put that amount into cash in another profit agreement, the deal's $ 500 would be
transferred to a tightening table so that it is likely to be assigned to the new purchase.
Reasons for drafting suspense accounts:
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A suspense account is an account segment where a company reports unclear entries and may
need more review to ascertain their appropriate description and/or endpoint. In the install
process, a suspense account is a brokers description in which a shareholder parks his cash
momentarily until he can implement that capital to purchase investment projects(Laux and
Stocken, 2018).
Having a suspense account gives flexibility to discuss the premise of an agreement whilst also
documenting it in the records of the company:
 If the essence of the suspended sums is settled, suspension accounts are regularly cleaned
out, and eventually rotated to their properly assigned account.
 Suspense account is created when accounting irregularities spark Trial Balance dispute.
The error can be rectified after final reports have been processed. Suspense payment is
rolled over through the following fiscal year in such a situation.
Suspense accounts provide for transfers to be uploaded until sufficient evidence is available to
render a portion of the right record or documents. Without submitting such exchanges, there may
be transactions that aren't documented before an announcement period is over, resulting in bad
money-related results.
Notwithstanding, recall that things in a tension record speak to unallocated sums. Thus,
having a tension record introduced on the fiscal summaries with an equalization is for the most
part seen contrarily and can debilitate the announcement to outside financial specialists
(Baskerville and Grossi, 2019). In this way, exertion ought to be made to clear anticipation
accounts toward the finish of each monetary period.
These are cleared by checking on every individual exchange in the evidence. The target for
checking on aspects is to change the exchange to the proper evidence at the earliest opportunity.
Exchanges will be increasingly hard to clear over the long haul, particularly if there is
negligible documentation with regards to why the exchange was at first positioned in the record.
Hence, the time of belongings ought to be followed and limited.
These are likewise viewed as a control hazard. As a prerequisite under SOX, these
transactions essential be dissected by kind of item, maturing class, and business defence so as to
comprehend which types of information is contained. This data should be given to reviewers
intermittently too.
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The reason for the suspense account preparation is to support trades without random
division. Open a suspense account when you need to use one. Next the table after oncoming the
section to the right eternal evidence.
In order to regular measures of the dilution table, open an expectation account in the
generic evidence (Bergmann and Fuchs, 2017). The arrangement of the portions of the legal
document records shall be a credited or commissioned. Also, enter a similar amount with
opposite section in another table.
When you get the data you need, change your account area in advance and make a step in
perpetual registration. It completes the compression table and displays the exchange on the
correct table.
Question 4
Updated bank reconciliation and cash book as on 28th February 2010
Question 5
Journal entries
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Suspense account
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REFERENCES
Books and Journals
Warren, C., Jonick, C. and Schneider, J., 2020. Accounting. Cengage Learning.
B Romney, M., 2018. Accounting information systems. Pearson Education Limited.
Duska, R.F., Duska, B.S. and Kury, K.W., 2018. Accounting ethics. John Wiley & Sons.
Schroeder, R.G., Clark, M.W. and Cathey, J.M., 2019. Financial accounting theory and
analysis: text and cases. John Wiley & Sons.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Mepham, M.J., 2020. Accounting in eighteenth century Scotland. Routledge.
Jeter, D.C. and Chaney, P.K., 2019. Advanced accounting. John Wiley & Sons.
Karabarbounis, L. and Neiman, B., 2019. Accounting for factorless income. NBER
Macroeconomics Annual, 33(1), pp.167-228.
Loft, A., 2020. Understanding accounting in its social and historical context: the case of cost
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Baskerville, R. and Grossi, G., 2019. Glocalization of accounting standards: Observations on
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Bergmann, A. and Fuchs, S., 2017. Accounting standards for complex resources of international
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Mnif Sellami, Y. and Gafsi, Y., 2019. Institutional and economic factors affecting the adoption
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