Financial Accounting Assignment

This assignment explores key financial accounting concepts, including control accounts, suspense accounts, and bank reconciliation statements. It provides explanations, examples, and illustrations to help students understand their importance and application in business. The assignment also discusses the differences between suspense and clearing accounts.

Financial Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
QUESTION 3...................................................................................................................................2
QUESTION 4...................................................................................................................................3
B)............................................................................................................................................3
CLIENT 6........................................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
In business Financial Accounting plays very important role whether it is small or large.
This helps to determine the financial status of a company whether it is in profit or loss. The
present report is explaining the meaning of financial accounting and rules which are related to it.
The present report is giving brief discussion about control and suspense account with its
importance. The report describes rules & principle related to accounting and also present
conventions related to consistency, material, and disclosure. The report also explains the bank
reconciliation statement along with its procedure and purpose of preparing bank statement for
year ending and differences varies between bank records and cash book. Report also explains the
meaning of control account and suspense account which has been illustrated with its examples
for better understanding. The report also presents differences between suspense and clearing
account.
MAIN BODY
QUESTION 1
Income statement
Bamber Sharpe trading profit and loss account for the year ended on 31st April 2018
Particulars Amount (in £) Amount (in £) Amount (in £)
Sales revenue 140000
less : COGS 80000
GP 60000
wages 44000
add: Outstanding wages 6400 50400
Heat & light 8000
Sundry expenses 8000
less: prepaid expenses 4400 3600
gas payment 800
Depreciation on F&F 4800
Total expenses 67600
Net Loss -7600
Working note for COGS:

Cost of goods sold: Opening stock + purchase – closing stock
Particulars Figures (in £)
Opening stock 16000
Add: purchases 84000
Less: closing stock 20000
Cost of goods sold 80000
Balance sheet
Particulars
Amount (in
£)
Amount (in
£)
Amount (in
£)
Fixed Assets
Fixture & fittings 48000
less: depreciation 4800 43200
Total fixed assets 43200
Current Assets
Trade receivables 16000
closing inventory 20000
prepaid expenses 4400 40400
Total current assets 40400
Total Assets 83600
Liabilities
Current liabilities
Bank overdraft 8000
Outstanding wages 6400
Outstanding gas payment 800 15200
Total current liabilities 15200
Owners fund
Capital 96000
less: Drawing 22000
loss 7600 66400
Total owner's fund 66400
Total Liabilities and shareholders’ equity 83600

QUESTION 2
Oak Patoh Ltd P& L for the month ended 31/08/2018
Particulars
Amount
(in £)
Amount
(in £)
Sales 616000
Less: COGS 246000
Gross Profit 370000
Depreciation on Plant 19200
Depreciation on Office
Equipment’s 4800
Distribution Costs 84000
Administration Cost 68000
Interest on Loan 17160
Unpaid Dividend 11600
204760
Net Profit 165240
Working note for COGS:
Cost of goods sold: Opening stock + purchase – closing stock
Particulars
Figures
(in £)
Opening inventory 24000
Add: Purchase 256000
Less: Closing
inventory 34000
COGS 246000
Oak Patoh Ltd Balance Sheet as on 31/08/2018
Assets Amount (in £) Amount (in £) Amount (in £)
Fixed assets
Premises 308000
Plant and Equipment 192000

Less: Depreciation 19200 172800
Office Equipment 48000
Less: Depreciation 4800 43200
Total fixed assets
524000
Current assets
Trade Receivables 152000
Bank 8000
Closing Stock 34000
Total current assets
194000
Total assets 718000
Long-term Liabilities
Long term Loan @ 13% 132000
Total non-current liabilities
132000
Current liabilities
Trade Payables 160000

Outstanding Income tax 15000
Outstanding interest on Loan 17160
Unpaid Dividend 11600
Total current liabilities
203760
Less: Total current and non- s
335760
Total Assets
382240
Funded by
Share capital 232000
Retained profit 150240
Total shareholders’ equity
382240
Working Note:
Depreciation
Assets Cost Depreciation % Amount of
depreciation
Plant & Equipment 192000 10% 19200
Office equipment 48000 10% 4800

Description Cost of sales Distribution Administration
Opening stock 24000
Purchases 256000
Closing inventory 34000
Depreciation
Plant & equipment
Office equipment
19200
4800
Distribution expenses 84000
Administration
expenses
68000
Total 246000 84000 92000
QUESTION 3
Bank reconciliation statement is replicated as document which matches balance of cash
with respect to balance sheet of organization for the corresponding amount which is stated in
bank statement. If two accounts are reconciled then it identifies accounting alterations which are
required. The bank reconciliation is modified at daily intervals which ensures about cash record
of organization which is correct. The procedure of bank reconciliation might help the ones who
compares internal cash records to bank. It is replicated as one of the most important technique
which ensures about accuracy of bank balance. There is presence of various reasons in context of
differences are replicated below:
 Cash and checks which are recorded and received but are not reflecting in bank statement
is termed as deposits in transit.
 There is presence of various checks which are issues by organization to its creditors but
its payment is not in mode of process is replicated as outstanding checks.
 There are various deductions by banks with perspective of services which are provided to
consumers but this specific amount are not noticeable are known as fees of bank service.
 Income which has been earned in form of interest which has been provided by banks on
some bank accounts.

 It is termed as no sufficient fund when any consumer deposits cheque into an account but
there is presence of insufficient amount so bank decreases from that customer account of
cheque which was credited previously. The cheque is returned again to depositor in
context of NSF cheque.
Illustration 1: Example of BRS
Procedure of Bank reconciliation
 With respect to bank statement, list of organizations are compared for cheques which are
issued and it has been deposited to statement which are shown for determining uncleared
cheques and deposit in transits.
 Rechecking cash balance on bank statement and deposits are aggregated who are in
transit.
 Outstanding cheques are deducted.
 Adjusted bank cash balance

 By ending cash balance of organisation. Add interest which earned and receivable
amount.
 Deduction of amount of bank services, NSF cheques and penalties.
 Adjusted bank balance should be equal to organization's ending adjusted cash balance.
It is used to compare the records of bank with cash book which maintain by organization.
The main objective is to detect fraud for preparing bank statement and it should be
prepare in every month and then cross checked with the passbook. At the time of audit, auditors
also examine company's cash book and pass book. The accuracy and balance both are ensured in
pass book and cash book. It also keeps track on accuracy of entries which are framed in both
books. It is the statement which helps in updating cash book by discovering various entries
which are not yet traced.
 When check is issued but not deposited in bank, at that time, balance is credited in cash
book but not in pass book (Cañibano, 2017).
 Sometimes debtor deposited money directly into a bank without informing the owner at
that time balance vary from cash book to pass book.
 Sometimes, bank also debited charges and interest without intimation at that time pass
book show less balance as compared to cash book.
QUESTION 4
Control account sum ups all the transactions which are recorded in an individual account.
It is a summary of account in general ledger (Salvatore and Del Gesso, 2018). It is the most
common account which is used to summarize credit and debit items which contain a large
volume of transactions. Therefore, there is a need to separate them into subsidiary ledger rather
than showing same in general account which contains detailed information. Control account are
termed as one of type of accounting control which is applicable for accounting system in manual
aspect. It is similar to trial ledger which observes arithmetical accuracy of specific accounts as it
is replicated in very detail aspect which only manages one activity at specific time like debtor
and creditor amount. There are two types of control account such as:
 Debtors control account
 Creditors control account

It is an account which records unclassified transactions. It is created at that time when
proper account is not determined when transaction are recorded. But after some time when exact
account is identified then the entry should be transfer to that account and the whole amount in
suspense account will be nil (Power, 2018). For example, when a company receives partial
payment of £30 from a customer then suspense account is open and accountant credit £30 to
suspense account and debit cash account and when whole amount is received then the entry
changes by debiting £30 to the suspense account. The main objective of control account is to
keep all general ledger free of its details as it should have stated correct balance with context of
financial statements.
Suspense account: This account is mostly prepared to handle uncertainties. If an
accountant does not know from where the amount should go then he transfers the amount in
suspense account but when the actual account is identified then the amount will be transferred to
that account (Warren and Jones, 2018). Its main benefit is that it keeps accounting books in very
systematic manner. Suspense account is make to match up debit and credit amount so that it will
help to further making financial accounts. It ensures that all transactions are accounted properly
in books or not. Generally it helps in avoiding such transactions in wrong account due to missing
Illustration 2: Sale ledger Account

information. At the year ending, it is necessary to clear the suspense account by zero value which
means that everything will be moved to other account that can be closed at any time.
For example: 1. Partial payment has been received from customer of £70.
Account Amount (Debit) Amount (Credit)
Suspense account 70
Cash 70
This illustration gives example of suspense account in which when full payment has been
received from customer, in which £70 has been debited to suspense account. In the same series
similar amount has been credit account receivable which will be closing suspense account and
then move towards correct account payment.
In GBP
Illustration 3: Suspense account
Clearing Account: This account is mostly used to record the transactions at proper time
to a permanent account. It is the simplest method which enters cash received as a clearing
amount until the money is identified or verified (Difference between suspense account and
clearing account, 2018). It is used for different clearing purposes such as incorrect amount posted
which has to be cleared after a particular time.
CONCLUSION
From above report it is concluded that accounting has its own importance in business
environment. This accountancy helps to identify the status of a company whether it is in profit

and loss. These statements are help to identify the actual position of a company. This report helps
to understand the meaning and importance of financial accountancy in business growth. It also
describe different types of accounts such as suspense account and clearing account. It also
explain major areas of bank statement account which vary cash book and bank statements.

REFERENCES
Books and Journals
Cañibano, L., 2017. Accounting and intangibles.
Cascino, S. and et.al., 2017. The Usefulness of Financial Accounting Information: Evidence
from the Field.
Downs, L. C., 2017. Financial Accounting.
Mayo, W., 2017. GAAP: An Analytical Study of Financial Accounting Standards (Doctoral
dissertation, University of Mississippi).
Power, M., 2018. Accounting, boundary-making and organizational permeability. Research in
the Sociology of Organizations.57. pp.31-53.
Robson, K., Young, J. and Power, M., 2017. Themed section on financial accounting as social
and organizational practice: exploring the work of financial reporting. Accounting,
Organizations and Society, 56, pp.35-37.
Salvatore, C. and Del Gesso, C., 2018. From financial accounting to management accounting in
Italian public universities: results of an empirical study.
Scott, W. R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Warren, C. S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.
Online
Difference between suspense account and clearing account. 2018. [Online] Available
through:<https://www.completecontroller.com/the-difference-between-a-suspense-
account-and-a-clearing-account/>.