Financial Accounting: Introduction, Scenarios, and Concepts

Financial Accounting

Contents
INTRODUCTION.......................................................................................................................................3
SCENARIO 1..............................................................................................................................................3
Question 1...............................................................................................................................................3
Question 2...............................................................................................................................................4
Question 3 (Difference between financial statement and financial report)............................................10
Question 4.............................................................................................................................................11
Question 5.............................................................................................................................................12
SCENARIO 2............................................................................................................................................13
Question 1.............................................................................................................................................13
Question 2.............................................................................................................................................14
Question 3.............................................................................................................................................14
Question 4.............................................................................................................................................15
(b) Explain the following terms.............................................................................................................16
Question 5.............................................................................................................................................16
CONCLUSION.........................................................................................................................................18

INTRODUCTION
Financial accounting is the process by which a company's operations information is
recorded, summarized and reported via financial reports. Those reports are: the report of profits,
the cash flow, the financial statement and the report of borrowed capital. Financial accounting is
primarily focused on producing such statements, based on gathered facts and implementing
"Generally Accepted Accounting Principles" (anything else recognized as GAAP). GAAP
establishes accounting guidelines on a broad variety of subjects in the United States, namely
financial statements of the company (Pelz, 2019). To better understand the concept of financial
accounting selected Brooks’ city accounting firm which is established in London. In this report
consist of various tasks of reporting business operations in terms of reports, ledger, trial balance,
and accounting records for different forms of company. This study also included a bank audit in
order to determine whether financial records are right or not.
SCENARIO 1
Question 1
There are different individual and double entry bookkeeping, there are many forms of
business activities that occurred. It has essentially four main types that are as follows:
Sales: This sale is carried out by company wherein they market their goods & payment systems
to any other organization and return the money to the client or may buy things on loan. Both
sales exchanges identified in accounting records but instead rendering publications and other
documents has been further evaluated for external reporting. During this contract, customers are
debited, and selling reports are paid.
Purchase: When an entity or individual purchases some products, the quickly went under
purchases. If the corporation is buying things, and the transaction is publicized as the debit of the
financial planning and the personal or lender to which the acquired person would be attributed.
This activity is mostly carried out in cash or on a credit-based basis. In addition, this expenditure
was registered for accounting purposes in the accounting records (Fang and et.al, 2016).
Receipts: If a corporation charges for selling products or services to some other organization,
such payments extend to other businesses or individuals. These same transactions are recorded in
publications where vendors are paid as credit and debit or card payments to exchange retained
earnings.
Payment: It involves corporate practices where companies are expected to lend on credit or
money rates to other entities. It will be reported in the financial accounts and are often published
by newspapers for accounting purposes. Spending is debt and profits owed to some other party.

Single entry book keeping: Single-entry bookkeeping is a simple and obvious recordkeeping
process, where expenditure is documented as a single item in a document. This is really a cash-
based form of book - keeping that records inbound and outbound cash in a document. They often
document financial transactions and payable accounts using the singular-entry bookkeeping
system. They will report money-book input and output cash. The financial assets are typically
tracked independently. Single-entry bookkeeping is characterized, as in the check ledger, by the
fact that one report on each operation is produced. Records are listed whether as a favorable or as
a specific value in one row. They would clearly retain a two-column ledger for singular-entry
bookkeeping, one section for revenue and one section for expenses. This is also called single-
entry, and there's only a row for every operation (Morales-Díaz and Zamora-Ramírez, 2018).
Double entry book keeping: Most companies, like the majority of small enterprises, have
double-entry bookkeeping to fulfill the financial obligations. Two book-keeping functions with
double entry in which each ledger has two sections, and then every transaction is in two
accounts. For each selling two activities are processed in one fund as just a reduction while in
other as an addition. When the company has to spend on investors, a double-entry payment will
be one instance. The amount of the corporation owing the lender should slash the balance of the
money market fund where the accounts payable is debited. Rather, double entry excludes the
money that the company starts paying to the creditor account as it received the firm's credit sum
and the corporation is enhancing and account will be credited.
Trial Balance and its importance
A trial balance is essentially a summary of the account transactions together with their
corresponding amount of debt or credit. The trial balance is not a structured financial statement
but instead a personality-check in order to decide whether debits are equivalent to balances.
Different entries in numerous items form a transaction. Taking all the ledger balances and
displaying them in a particular worksheet as at a particular date is Trial Balance. Team is
reviewing its month-end money transfers and classifying them into distinct areas. Presently they
make a sheet and divide the organizations into efficient / semi-effective ones (Kanodia and
Sapra, 2016).
The importance of a trial balance is to ensure that all expenditures reported in a firm's
cash book are properly accounted for. A trial balance shows the beginning equilibrium within
each general ledger account. The exact figure of the debits and credits amounts will suit it in
every other accounting point of view.
Question 2
Date Particulars Debit Credit
01-Jun Cash a/c Dr. 65000
To capital a/c 65000

(Being invest cash into
business)
02-Jun Purchase a/c Dr. 8000
To creditor a/c 8000
(Being purchase goods on
credit)
07-Jun Cash a/c Dr. 4000
To sales a/c 4000
(Being sell out inventory in
cash)
08-Jun Creditor a/c Dr. 4000
To Bank a/c 4000
(Being issue cheque for
purchase credit goods)
14-Jun Insurance a/c Dr. 75
To Bank a/c 75
(Being pay insurance amount
by cheque)
15-Jun Debtor a/c Dr. 12000
To Sales a/c 12000
(Being sell out inventory on
credit)
16-Jun Purchase a/c Dr. 10000
To Creditor a/c 10000
(Being purchase goods on
credit)
18-Jun Computer equipment a/c Dr. 3000
To Cash a/c 3000
(Being purchase computer
equipment)
20-Jun Rent a/c Dr. 150
To bank a/c 150
(Being paid rent by cheque)