Accounting and Financial Reporting Standards

This document provides a collection of studies and research papers related to accounting and financial reporting standards. It includes articles from various journals such as Journal of Accounting Research, Accounting, Organizations and Society, Critical Perspectives On Accounting, and more. The documents cover topics like market pricing of banks' fair value assets, internal information quality, and management accounting. This resource is useful for students and researchers looking for past papers and solved assignments on accounting and financial reporting standards.

Financial Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A. Produce a report to Line Manager for discussing accounting regulations........................1
Material disclosure and consistency concepts........................................................................4
CLIENT 1........................................................................................................................................5
A. Journal entries for the sole trader......................................................................................5
B. Producing ledger accounts for business...........................................................................10
C. Preparing trial balance for firm........................................................................................18
M1. Compiling trial balance by taking purchase and sale transactions...............................19
M2. Trial balance by considering accounting rules and regulations....................................20
CLIENT 2......................................................................................................................................20
A. Income statement for the sole trader................................................................................20
B. Balance sheet for firm......................................................................................................21
CLIENT 3......................................................................................................................................22
A. Profit and Loss account for organisation.........................................................................22
B. Balance sheet for Raintree Ltd.........................................................................................23
..............................................................................................................................................25
..............................................................................................................................................26
..............................................................................................................................................27
..............................................................................................................................................28
..............................................................................................................................................28
C. Outlining principles and concepts of accounting.............................................................28
D. Importance of measuring and presenting depreciation in financials...............................29
M2. Assessing P&L, balance sheet and cash flow statements.............................................29
D2. Accurate calculations in accounting for producing financial statements......................29
CLIENT 4......................................................................................................................................30
A. Preparation of bank reconciliation statement..................................................................30
B. Causes of recording transaction in bank reconciliation statement...................................30
C. Producing cash books......................................................................................................30
..............................................................................................................................................31

..............................................................................................................................................31
M3. Reconciliation process and related accounting terms...................................................31
D3. Producing bank reconciliation statement.......................................................................32
CLIENT 5......................................................................................................................................32
A. Producing sales and purchase ledger account for the company......................................32
B. Explaining control account..............................................................................................33
CLIENT 6......................................................................................................................................33
A. Discussing suspense account and main features of suspense account.............................33
B. Preparation of trial balance..............................................................................................33
C. Producing journal entries.................................................................................................34
D. Distinguishing clearing and suspense account................................................................35
M4. Exploring types of accounts..........................................................................................35
D4. Providing accounting methods for organisation............................................................35
CONCLUSION..............................................................................................................................36
REFERENCES..............................................................................................................................37

INTRODUCTION
Financial accounting is crucial branch of accounting which is required for preparation of
financial statements in effective way. Present report deals with importance of accounting in the
business in order to record various transactions that occurs on day-to-day basis. The solutions for
various clients are provided by seeking information given and as a result, financials are prepared.
In accordance to this, journal entries are made, then entries are posted to general ledger accounts
in effective manner. From this, trial balance is formulated to check on errors if any that might
creep in posting entries into ledger. Finally, balance sheet and income statements are drawn.
Apart from this, bank reconciliation statement is prepared to rectify balances of bank and that
with records maintained by firm. Suspense account and control account is explained.
Furthermore, accounting regulations, principles and concepts are discussed which are provided
by various professional bodies. Thus, it can be said that accounting plays crucial role in the
business as it provides clarity regarding the transaction occurred in and classified into their
respective nature of accounts.
A. Produce a report to Line Manager for discussing accounting regulations
To: Line Manager
From: Junior Accountant
Subject: Accounting terms, regulations to be taken into account by organisation
Respected Sir,
Accounting is one of the important functions in the business so that day-to-day
transactions may be effectively recorded (Damodaran, 2016). It is essentially required because
without taking into account various transactions into account, financial statements cannot be
prepared in effectual manner. In carrying out this task, accounting principles and regulations
play a crucial role in preparing financials in the best possible manner. The financials such as
cash flow statement, balance sheet, income statement are important pillars of accounting which
is used to carry out proper financial health of the concern in effective way.
The balance sheet shows assets and liabilities of organisation for a particular period
usually one year. On the other side, cash flow statement effectively shows cash position
whether surplus or deficit exists. While, Profit and Loss account clarifies expenditures incurred
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and income earned in particular financial year. Hence, all these statements are prepared by
relying on proper accounting practices by accountant so that clear position can be highlighted
regarding health in effective manner.
Accounting principles and regulations governed by the accounting professional bodies
are important because financials cannot be formulated in effective way without abiding by rules
and principles of accounting (Nash, 2018). This helps to effectively prepare proper financials
which highlights true and fair view of financials in the best possible manner. On the other hand,
if regulations are not properly followed, then organisation is not able to produce financials in
effective way. This affects fairness of accounts and as such, it is required that such regulations
and principles should be followed for producing financials with ease. The accounting
information derived through financials is quite useful for the organisation as it imparts to the
external users of financial information for taking enhanced decisions. Creditors' are benefited as
they seek financials and attain clarity about the solvency position of company. On the other
side, investors' are benefited as they analyse profitability aspect of organisation. Moreover,
other users also seek such information and then take decisions. Hence, accounting regulations
are important part in carrying out accounting as firm is benefited by following various requisites
and thus, authentic financials are formulated in effective way.
Financial Accounting
Financial Accounting is useful as past data is used to draw effective financials. In simple
words, monetary transactions which occur on daily basis are taken into account and thus,
financials are prepared with ease. It is required so that proper statements may be formulated and
it may impart necessary information to external users quite effectually (Busco and Quattrone,
2018). This is essentially required because external users rely on financials which serves them
the required information by which they are able to take enhanced decisions.
Apart from external parties, internal management is also benefited by seeking financial
statements because they make strategies and initiates improvement for strengthening internal
operations. It is required to strengthen organisation internally so that output may be produced
more and customers' satisfaction level is enhanced in a better way.
Creditors and investors are able to take better decisions and thus, financial accounting is
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the main element in producing authenticated financials of organisation highlighting health in
terms of financial performance. Moreover, profitability, efficiency, solvency and liquidity
aspects of firm are effectively attained which is possible by preparing financial statements by
information provided by such accounting. In relation to this, monetary transactions such
recording in books of prime entry and posting them into ledger and then constructing trial
balance are bases for effectively producing balance sheet, income and cash flow statements
(Constable and Kuasirikun, 2018). In addressing this, taxation authorities are benefited by
seeking financials as it serves them to effectively ascertain tax liability of organisation in the
best possible manner. Thus, it can be said that financial accounting gives clarity regarding
overall position of firm quite effectually.
Regulations of Financial Accounting
The financials are produced in order to gain useful insight with regards to overall
position of company in effective manner. In relation to this, for preparing adequate and
authenticated statements, it is required that accounting regulations must be properly followed by
the organisation so that reliability and transparency may not get diminished. This helps to
produce effective and better statements by relying on various accounting regulations imparted
by professional bodies entrusted to provide guidelines to accountants so that reliable financials
may be prepared in effective way.
In addressing this, financial statements may be manipulated by company which affects
reliability and as such, imparts wrong information to users. It adversely affects them as when
they rely on manipulated statements, decision-making is hampered badly. False information is
provided to them impacting on external parties up to a high extent (Heitzman and Huang,
2018). This should be alleviated in order to produce reliable financials and thus, financial
regulator of UK has given FRC guidelines which have to be effectively followed by
organisation and government also for preparing authenticated financials. The legal frameworks
are listed under-
FRC (Financial Reporting Council)- The body is entitled to foster development in the nation
and regulates organisations and government units as well. Hence, accounting practices are
adopted by accountants quite effectually.
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IASB (International Accounting Standards Board)- This body is entrusted to provide
guidelines to the company's accountant by which reliable and fair financials may be prepared.
This helps to effectively prepare statements and no false information is indulged in.
IFRS (International Financial Reporting Standards)- The accounting body also imparts
guidelines to the accountants in order to abide by legal framework so that adequate financials
may be formulated in the best possible manner.
Rules for accounting
GAAP (Generally Accepted Accounting Principles) which is another important body
has imparted guidelines for preparing financials in effective manner. The several principles and
rules are described below-
Economic assumption- This accounting rule postulates that organisation analyses economic
environment and as such, assumptions are made accordingly (Libby, 2017). In additional to
this, assumptions are made to estimate how economic environment will impact upon sales and
forthcoming project.
Principle of full disclosure- It states that firm should prepare financials by taking into account
all the monetary transactions. In simple words, to produce reliability, it is needed to compile
financials in single statements so that more transparency may be imparted in a better way.
Going concern principle- The accounting principle states that financial statements are produced
by taking into consideration this principle. It means that firm carries on business for long run
and will not shut down immediately. Observing this, financials are prepared.
Materiality principle- This principle postulates that only material information should be taken
into account which do not affect decision-making by external users. Hence, immaterial items
must be ignored. This is required so that material items are taken into account for producing
financials (Nitzl, 2018).
Monetary unit assumption- The principle is related to monetary value of currencies. The US
Dollar is universally applicable and accepted currency which can be used by organisation in
order to made business transactions in effective manner.
Material disclosure and consistency concepts
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Concept of consistency- The accounting concept states that firm should take into account only
that accounting policies which it has used in previous year. In simple words, consistent methods
should be followed in order to produce reliability in the best possible manner. It can be said that
if consistent accounting methods are not taken into then transparency and reliability of
organisation is hampered. Hence, it is required to follow same policies. For instance, if straight
line method is followed by the organisation, then should be followed in forthcoming years in
order to produce reliable information.
Material disclosure- The concept states that material information should be taken into account
which affects financial statements up to a high extent. In other words, immaterial items or
information should be ignored which do not have impact on users of accounting information
and thus, reliability can be ascertained in a better way. The books of accounts should disclose
only material items which is effectively evaluated by external stakeholders and they are able to
take decisions in the best possible manner.
CLIENT 1
A. Journal entries for the sole trader
The transactions are to be recorded in a better way so that receipts and withdrawals may
be effectively ascertained (Schneider, 2018). For recording transactions, books of prime entry
also known as journal is made in the best possible manner. It can be said that for producing
financials, journal entries is the first step which is done by recording business transaction in
chronological order. This is made in chronological order so that every transaction occurred on a
particular date should be recorded on that date only for the purpose of reliability. Hence, entries
are posted in journal so that each and every transaction may be recorded and accounted for quite
effectually. The journal entries are produced for Alexandra firm below-
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6

7

8

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B. Producing ledger accounts for business
The journal entries are produced which is the basic step in formulating financials of the
company in effective manner. After all the entries are accounted for, next step is to post them in
general ledger accounts. The term ledger accounts are summarized set of data which is taken
from journals and as such, individual accounts are effectively prepared. Moreover, separate
accounts are prepared which is used to analyse transaction of receipts and payments for a
particular time frame. It helps management to assess costs and income garnered in a better way.
Hence, costs are effectively controlled and profits are maximised up to a high extent. Ledger
accounts are produced for client below-
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11

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13

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15

16

17

18

19

20

21

22

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C. Preparing trial balance for firm
The journal entries are made and posted into ledger, next important step is to produce
trial balance in effective way (Trial Balance. 2018). Trial balance is a statement which is
prepared to assess arithmetical accuracy of business transactions made in previous steps such as
journal and ledger. It can be said that financials are prepared by relying on accurate trial balance
produced in a better way. It is possible by checking on both side of transaction such as debit and
credit. Thus, any errors that might have creep in can be effectively rectified with the help of
constructing trial balance. Hence, summarized statement is prepared in order to produce
reliability up too much extent.
Particulars Debit Credit
Capital of firm 529000
Van 51250
Furnitures and fixtures 8100
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Stock 63900
Office Premises 340000
Sales 10930
sale returns 680
Purchases 38320
purchase returns 50
Owner's Drawings 1500
Stock storage cost account 400
motor expenditures 470
Bank Balance 36700
Cash in hand 3630
F. lane A/c 770
Discount received 960
Miscellaneous gains attained 5132
Discount allowed 352
Total 546072 546072
M1. Compiling trial balance by taking purchase and sale transactions
By compiling trial balance, transactions related to purchase and sales are extracted in a
better way. It can be analysed that revaluation of fixed assets are made. Furthermore, sales are
10930 and purchases are 38320. It shows that sales are less in comparison to purchases. The
expenses are increased in relation to income generated.
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M2. Trial balance by considering accounting rules and regulations
Preparation of trial balance is made in accordance to the rules and guidelines provided by
various professional bodies such as IASB, GAAP and FRS. Mathematical accuracy is observed
by following guidelines in appropriate way (Adalı and Kızıl, 2017).
CLIENT 2
A. Income statement for the sole trader
The trial balance is prepared with the help of journal and ledger and thus, arithmetical
and mathematical accuracy can be observed as well. After this, income statement is prepared
which highlights expenditures incurred and income earned in a better way. It can be analysed
that financials are prepared by relying on trial balance. Income statement is produced usually at
the end of accounting year and as such, organisation gets clarity regarding expenses made and
income generated in a particular year. Hence, income statement is used to analyse financial
position whether earnings are more than expenses or not. It is prepared for the sole trader below-
Particulars Amount
Sales Revenue 1215000
Opening stock 82200
Purchases 778800
Closing stock 101640
Less: Cost of goods sold
(COGS) -759360
Gross profit 455640
Salaries and wage 178720
Less: Indirect expenditures
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Administration expenditures 17650
motor expenditures 87400
Advertising expense 4810
Heating and Lighting
expenditures 4950
Depreciation on Equipments' 17250
Depreciation on premises 5400
Depreciation on motor vehicle 2800
Total indirect expenditures 318980
Net profit 136660
B. Balance sheet for firm
The balance sheet is termed as statement which is prepared to analyse position of
organisation in a better way. It is required so that firm may be able to assess assets and liabilities
in the best possible manner (Warren and Jones, 2018.). The balance sheet is usually prepared at
the end of financial year and as such, ascertainment of liabilities and assets are made in the best
possible manner. This is required in order to check whether assets are in adequate quantum to
meet for the liabilities of the company in effective way. Hence, balance sheet clarifies position of
company quite effectually. It is prepared for Peter Piper below-
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CLIENT 3
A. Profit and Loss account for organisation
The income statement is prepared in order to carry out revenue earned and expenditures
incurred in the best possible manner. It can be said that Profit and Loss account is formulated
which shows expenses and income in effective way. This helps to have clarity regarding
expenses so that company can easily initiate control upon the same to maximise revenue quite
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effectually. It is required because expenditures may not go beyond income else firm will start
getting losses. Hence, Profit and Loss account is prepared for Peter Piper-
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B. Balance sheet for Raintree Ltd
Balance sheet is a statement which is done in order to assess whether firm has enough
assests both current and fixed to meet liabilities in the best possible manner (Bloomfield and
et.al, 2017). This is required to be prepared as overall financial health is ascertained in a better
way. Furthermore, it is also called statement of financial position as it shows position at the end
of year quite effectually. The balance sheet is also useful as comparison can be easily made with
previous year data. The current year figure can also be matched with past data and thus, balance
sheet provides clarity regarding assets and liabilities of organisation in effectual manner. The
statement for Raintree Ltd is formulated under-
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32

33

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C. Outlining principles and concepts of accounting
The concepts and principles are important for organisation to follow them in order to
prepare proper financials. By complying with principles of accounting, true and fair view of
financial statements can be analysed in effective way. This helps to effectively formulate
statements and as such, accountants are able to make better financials by complying with
financials. The concepts are described below-
1. Consistency concept-
This accounting concept states that organisation should follow same principles so that
financial can be prepared with much ease (Beaumont, 2015). In simple words, it means that
accounting methods should not be changed frequently because, it affects financials of company
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in effective manner. It helps to attain clarity regarding accounting policies in the best possible
way. It helps to obtain reliability in effective way.
2. Prudence concept-
The prudence concept means that organisation should anticipate all losses and do not
count for gains. This is useful concept as business operates in an dynamic environment in which
changes are inevitable. Overestimation of assets should not be done and liabilities must be
underestimated.
D. Importance of measuring and presenting depreciation in financials
Depreciation is applied on fixed assets as they are useful life of asset gets reduced after
certain passage of time. It is charge on an asset because it is treated as an expense. However, it is
added back to net profit to ascertain cash flows (Dudin and et.al, 2015). There are two methods
of depreciation used in the business which are described below-
Straight line method :
The straight line method is quite useful method which charges depreciation on fixed rate
only. It means that company charges fixed rate of depreciation on yearly basis. It is charged till
life of asset becomes zero.
Written down method :
This method of depreciation is helpful as business charges depreciation which is based on
diminishing value. It is preferred by taxation authorities as it provides better view and correct
deprecation is measured through applying written down method.
M2. Assessing P&L, balance sheet and cash flow statements
The financials such as balance sheet, Profit and Loss account and cash flow statements
are used by external users to assess financial health of company. It can be said that without
preparation of these three financial statements, firm's overall position cannot be ascertained.
Hence, adequate information is imparted by them (Goh., Li, Ng and Yong, 2015).
D2. Accurate calculations in accounting for producing financial statements
The computations should be made accurately so that financials may be prepared without
any errors. The total assets 137000 and stockholders' equity were 102000 and thus, total
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liabilities are 137000 which means that due to accurate calculations, both side of balance sheet is
matched.
CLIENT 4
A. Preparation of bank reconciliation statement
The bank reconciliation statement is effectively prepared in order to carry out
discrepancies that are being observed in bank passbook and accounting books of organisation. It
is prepared because balances differ a lot. For instance, if cheque is presented by firm to the bank,
in firm's records, entry is made. However, the same is not recorded by bank as it do not clear
cheque on same day and hence, balances are different. In order to rectify it, bank reconciliation
statement is formulated to eradicate differences with much ease. Thus, at the end of month, it is
prepared and rectification can be made quite easily (Klychova and et.al, 2015).
B. Causes of recording transaction in bank reconciliation statement
There are various reasons which causes discrepancies in the balances in effective manner.
These are deposit in transit, outstanding cheques, dishonoured cheques etc. Furthermore, errors
in cash book, standing orders, direct debits etc.
C. Producing cash books
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M3. Reconciliation process and related accounting terms
1. Outstanding cheques- This main reason behind dishonour of cheques as company presents
cheque to bank but it is still pending for clearance and thus, balances differs a lot in records of
bank and that of accounting records of company.
2. Deposit in transit- The transactions such as coins and related currency which are not recorded
in bank records and thus, balances are not the same.
3. Not sufficient funds- If funds are short to pay for cheque presented, then it is dishonoured by
bank. These cheques are included and balances differ up to a high extent. It is required that it
should be written-off by firm (Trucco, 2015).
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D3. Producing bank reconciliation statement
The concepts that are used in preparing bank statements are ratio analysis, trend analysis
etc.
CLIENT 5
A. Producing sales and purchase ledger account for the company
Sales ledger control account
Date Particulars Amount Date Particulars Amount
I/05/2017 To balance b/d 12600 By debtors' 152350
Credit sales 152350 By bad debt 120
By discount
allowed a/c 380
By Bank 141610
By sales
returns 7320
by contra 330
Total 164950 Total 164950
Purchase ledger control account
Date Particulars Amount date Particulars Amount
To discount
received a/c 290 01/05/17 By balance b/d 9160
Payments to 101010 By refund 400
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suppliers
To purchase
returns 1110 Purchases 116500
To sales
ledger contra 330 by balance c/d 108760
To bal c/d 23320
Total 126060 Total 126060
By bal b/d 23320
B. Explaining control account
The control account is prepared by fairly large organisations in which numerous
transactions takes place on daily basis. It is required because transactions are more in quantum
and as such, it is needed to prepare control account so that clarity can be maintained of every
transaction that has occurred on day-to-day activities. This helps to initiate control over the
expenditures if costs incurred are more and thus, control account is maintained in effective
manner. It is not prepared by large organisation as it adds to expenses up to a high extent. Hence,
accuracy is achieved in a better way as summarisation of accounts are done quite effectually.
CLIENT 6
A. Discussing suspense account and main features of suspense account
There are certain transactions which are classified in accordance to their respective nature
(Weygandt, Kimmel and Kieso, 2015). On the other hand, some of cannot be classified and as
such, to put these undisclosed transactions in temporary account until nature is identified,
suspense account is prepared quite effectually. This helps to eradicate certain errors or
transactions whose nature is unclassified. Hence, suspense account is quite useful for company
as temporary account is opened and after classification of nature, it is shifted back to proper
account. The main feature of such account is that if doubts are there regarding transactions, then
it is helpful to open suspense account.
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B. Preparation of trial balance
Particulars Debit Credit
Sales 1100
Purchases 700
Bank Balance 840
Rent paid 250
Travel expenses 160
Accounts receivable 320
Accounts payable 350
Capital of firm 710
Trade payables (b/f) 330
Sales debited 220
Total 2490 2490
C. Producing journal entries
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D. Distinguishing clearing and suspense account
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M4. Exploring types of accounts
There are various statements which helps to effectively analyse financial position in
effectual manner. Basically, income statement is formulated which shows revenue earned and
expenditures incurred quite effectually. Furthermore, business reduces expenses so that it may
not exceed income in effective manner. On the other hand, balance sheet is prepared showing
assets and liabilities in the best possible manner (Warren Jr, Moffitt and Byrnes, 2015).
D4. Providing accounting methods for organisation
The accounting methods help to produce financial statements in effective manner. The
methods are required in order to prepare true and fair financials. Hence, by applying methods,
reliability and transparency can be effectively observed. This helps company to prepare
financials which are useful for external users to rely upon.
CONCLUSION
Hereby it can be concluded that business may be able to inject efficiency with the help of
accounting. It is required in order to attain clarity regarding operations of business. The
regulations imparted by professional bodies help accountants to construct financials in the best
possible manner. It can be said that firm is able to produce fair statements and thus, reliable
information is provided to stakeholders to take decisions. Moreover, financials such as balance
sheet, income statement and cash flow statement are pillars of financial statements and clarifies
overall position of company quite effectually. Thus, it can be said that by taking into account,
regulation and concepts, true and fair view of financials may be ascertained.
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REFERENCES
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Beaumont, S. J., 2015. An investigation of the short‐and long‐run relations between executive
cash bonus payments and firm financial performance: a pitch. Accounting & Finance.
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Bloomfield and et.al, 2017. The Effect of Regulatory Harmonization on Cross‐Border Labor
Migration: Evidence from the Accounting Profession. Journal of Accounting
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Busco, C. and Quattrone, P., 2018. Performing business and social innovation through
accounting inscriptions: An introduction. Accounting, Organizations and Society.
Constable, P. and Kuasirikun, N., 2018. Gifting, Exchange and Reciprocity in Thai Annual
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Perspectives On Accounting.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate
finance (Vol. 324). John Wiley & Sons.
Dudin, M. N. and et.al, 2015. International Practice of Generation of the National Budget Income
on the Basis of the Generally Accepted Financial Reporting Standards (IFRS).
Goh, B. W., Li, D., Ng, J. and Yong, K. O., 2015. Market pricing of banks’ fair value assets
reported under SFAS 157 since the 2008 financial crisis. Journal of Accounting and Public
Policy.34(2). pp.129-145.
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