Financial Accounting: Types of Transactions, Bookkeeping, Trial Balance

Financial accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Question 1. Types of business transactions, book keeping and importance of trial balance......3
Question 2...................................................................................................................................4
Question 3: Examining the difference between financial statement and financial report...........8
Question 4: Different fundamental principles of accounting......................................................9
Question 5.................................................................................................................................11
SCENARIO 2.................................................................................................................................13
Question 1: Evaluation on the bank reconciliation system and why is it necessary.................13
Question 2: Control accounts and its role in financial management.........................................13
Question 3: Suspense account and reason for drafting it..........................................................14
Question 4:................................................................................................................................15
Question 5.................................................................................................................................17
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................22

INTRODUCTION
Financial accounting is a specialized branch related with the accounting which is useful
in keeping complete track associated with the key financial statements of the company. Financial
statements are set up in standard guidelines which can be analysed, summarized and useful in
representing the key financial statements (Kimmel, Weygandt and Kieso, 2018). This study
highlights on various different types of transactions and examine the difference between
financial statements. It is useful in examining the different fundamental principles associated
with accounting. This study also develops profit and loss account. Moreover, the study also
applies management accounting techniques in order to respond to the key financial problems.
SCENARIO 1
Question 1. Types of business transactions, book keeping and importance of trial balance.
Different types of business transactions
Business transactions is considered to be as an activity which is measured in the
monetary value and also tends to affect the operations and financial position of the company.
There are various types of financial transactions which mainly includes: Sales transaction: It is the transactions where the property is significantly transferred
from the buyer to seller in exchange for the money or credit (Kimmel, Weygandt and
Kieso, 2018). Sales transactions has been recorded within the journal on behalf of the
seller as debit to cash. Purchase transaction: Such transactions are carried out by the business to obtain the
goods and services. Purchases which has been made in the cash leads to credit in cash
account and debit in inventory account. Receipts: The business tends to get paid which is carried out at the time of delivering of
the goods and services to the other party or business. Payments: This is where the business tends to receive money for the specific goods and
services.
Single entry and double entry book keeping
Single entry bookkeeping is a significant accounting system which is useful in effectively
keeping track about the finance of the business (Schroeder, Clark and Cathey, 2019). Only single
entry is made for each transactions. Entries in turn has been recorded as a positive or a negative
amount.

Double entry book keeping is a significant system associated with the book keeping
where each entry tends to require opposite and corresponding entry to the different account.
Within the double entry book keeping there seems to have 2 equal and the corresponding sides
which are referred to as credit side and a debit side.
Trial balance and its importance
Trial balance is considered to be as the list of general ledger accounts which has been
contained within the ledge of business (Warren and Jones, 2018). Within the trail balance all the
ledgers for the accounting period has been compiled all together within debit and credit account
columns in order to make it equal. The trail balance is prepared at the end of accounting period.
The key importance of the trail balance is that, all the entries has been made within the general
ledge of the organization in order to keep it properly balanced. The debit side and credit side of
the trail balance must match. It helps in rectifying errors and preparation of the financial
statements by checking arithmetical accuracy.
Question 2
1. Journal entry
Date Particulars Debit Credit
01/06/20 Bank 65000
To Capital 65000
02/06/20 Purchases 8000
To Creditors 8000
07/06/20 Cash 4000
To Sales 4000
08/06/20 Creditors 4000
To Bank 4000
14/06/20 Insurance 75
To Bank 75

15/06/20 Debtors 12000
To Sales 12000
16/06/20 Purchases 10000
To Creditors 10000
18/06/20 Computer Equipment 3000
To Cash 3000
20/06/20 Rent 150
To Bank 150
21/06/20 Cash 10000
To Sales 10000
25/06/20 Petty Cash 100
To Bank 100
30/06/20 Stationary 30
To Petty Cash 30
2. Ledger accounts
LEDGER ACCOUNTS
Dr. Bank A/c Cr.
Date Particulars Amount Date Particulars Amount
01/06/20 To Capital 65000 08/06/20 Creditors 4000
14/06/20 Insurance 75
20/06/20 Rent 150
25/06/20 Petty Cash 100