Financial Accounting Principle Assignment Sample

FINANCIAL ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
A) Regulation relating to accountancy in terms of rules, principles and conventions....................3
1) Financial accounting and its purposes:..............................................................................3
2) Examining the internal and external stakeholders of the organization..............................4
CLIENT 1........................................................................................................................................4
i...............................................................................................................................................4
ii. Trial balance.....................................................................................................................15
CLIENT 2......................................................................................................................................16
a. Preparing statement of profit & loss.................................................................................16
b. Presenting statement of financial Position of Munteanu Ltd...........................................17
C) Accounting concepts.......................................................................................................18
D) Purpose of depreciation in accounting statement............................................................19
E) Difference between the financial statement prepared by sole traders and the limited
companies.............................................................................................................................19
CLIENT 3......................................................................................................................................19
A) Purpose of preparing the Bank Reconciliation statement (BRS)....................................19
B) Determine the areas which causes record to vary from banks........................................19
C) Explaining the term Imprest in pretty cash system.........................................................20
d. Preparing updated cashbook and BRS............................................................................20
CLIENT 4......................................................................................................................................21
a............................................................................................................................................21
B) Examining the term Control Account..............................................................................22
CLIENT 5......................................................................................................................................22
A) Suspense account.............................................................................................................22
b. Passing entries for necessary corrections and clearing of suspense account....................23
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25

INTRODUCTION
Financial accounting refer to the statement that is prepared by the company to maintain
their financial statement to syndicate their company annual position in the market. In this
accounting statement, the transaction and entries are prepared, analysis, summarized and
prepared to reflect the financial position of their working to achieve various objectives (Pijper,
2016). The financial statement of the company are mainly based on the income statement, total
cash flows in the business and balance sheet which reflect the total working structure of the
company.
Present report will include the meaning of financial accounting and its various
stakeholders either internal or external and their interest in the financial information. It also
includes records of various business transaction regarding book entry keeping. Further it includes
final accounts for sole traders, partnership or limited companies with respective of principles,
conventions and standards. Lastly the report ends up with the various transaction relating to the
suspense account in respect of financial accounting of the company.
A) Regulation relating to accountancy in terms of rules, principles and
conventions.
1) Financial accounting and its purposes:
Financial accounting in respect of accounting in relation to discloses the financial
transaction of the company. This financial statement is mainly prepared to avail the use of public
and the can examine the financial position of the company in better perspective (O'Regan, 2015).
Usually company preprepared their financial accounting to examine the statement in respective
of income, cash flows and balance sheet reflecting the purpose for which company is dealing in
other activities externally to expanding their operational activities into large scale. Financial
accounting is mainly prepared under the international accounting standards and the company had
to follow certain accounting norms which is not be avoided or bifurcated from any other activity.
(Brandau and et.al., 2017). Thus, financial accounting is mainly prepared to provide the
information and data which is useful for the outsider to know the stability of the company in
carrying their operational activities for further uses.
The main purpose of financial accounting is that it provide the complete and detailed
information about the company and their financial activity to their external stakeholder, so that

the inventor and lender who invested money in the company are secured, and they can live the
stress free life (Abdel-Maksoud, Cheffi and Ghoudi, 2016). The financial accounting reports are
prepared in the systematic format and their main purpose is to set some goals to the managers,
supervisors and the employees to achieve and maintain the targets to accomplish the goals.
2) Examining the internal and external stakeholders of the organization.
Stakeholder may be organization, individual or group of person who carry forward or
minutely examine the business activities of the company. The two internal stakeholders namely
employees and Owners (Internal and external Stakeholder: Definition and Examples, 2019). The
employees are interested in viewing the financial information of the organization by knowing the
operational activity of the company and their stability in achieving or dealing in other projects.
This reflects their job security and their wages which they received in context of committing
work. In context of Owners, by getting more information about the financial stability of the
company they are in relation of earning more profits to maximize the income and reducing the
expenses in relation for longer term.
The external stakeholders of the organization are suppliers, investors, government and
Society. The suppliers are interested in knowing the information which makes them satisfied that
they contribute to purchase their raw materials from them only (Cameran, Campa and Francis,
2018). That's the reason they are more conscious to know the financial position of the company.
Investors had invested their amount in the company for longer term profit's and provide good
interests in such investment. The reason to analyse the financial reporting is to examine that there
money are invested at the proper place or not. Government examined that the company is
following the proper accounting norms and the laws which they are bounds in relation to paying
taxes. Though the financial reporting it reflects the financial condition of the company and the
stability of employees working in the premises (Madawaki, 2016). Society is the major aspects
of the business as they always demand contribution of business in some social changes which
improves the condition of environment. Thus, by viewing their financial statement, they can
examine the income which they expand in bringing more innovation in society.
CLIENT 1
i.
Journal entries in the books of Alexandra for January 2019 are as follows
Date particulars Debit Credit

1st jan 2019 Storage exp.A/c Dr 450
To bank A/c
2nd jan 2019 Purchase A/c Dr 6080
To S. hood A/c 1450
To D main A/c 2060
To W Tone A/c 960
To R foot A/c 1610
3rd jan 2019 J Wilson A/c Dr 1200
T . Cole A/c dr 1650
F. Syme A/c Dr 2100
J . Allen A/c Dr 1020
P. white A/c Dr F. Lane A/c Dr 2520
F. lane A/c Dr 980
To sales A/c 9470
4th jan 2019 Motor Exp. A/c Dr 470
To cash A/c 470
7th jan 2019 Drawing A/c Dr 1500
To cash A/c 1500
9th jan 2019 T. cole A/c Dr 680
J. Fox A/c Dr 1310
To sales A/c 1990
11th jan 2019 Sales return A/c Dr 680
To J. wilson 270
F.syme 410

16th jan 2019 Cash A/c Dr 7020
To P. Mullen A/c 1400
To F. Lane A/c 3100
To J. Wilson 850
To F. Shyme 1670
19th jan 2019 R. foot A/c Dr 50
To Purchase return A/c 50
22st 2019 Purchase A/c Dr 3740
To L.Mole A/C 1830
To W. Wright 1910
24th jan 2019 S. Hood A/c DR 3600
J. Brown A/c Dr 4600
R. Foot A/c Dr 1400
To Bank A/c 9600
27th jan 2019 Salary A/c Dr 4800
To bank A/c 4800
30th jan 2019 Business rates A/c Dr 1320
To bank A/c 1320

ii. Trial balance
Trial balance for the month ended on 31st January 2019
Particular Debit Amount (in £)
Credit Amount (in
£)
S. Hood 10000
J. Brown 12000
D. Main 2060
R. foot 160
W. Tone 960
L. Mole 1830
W. Wright 1910
J whilson 80
F. syme 20
T.cole 2330
J. Allen 1020
P white 2520
F.lane 3980
J.fox 1310
P.mullen 3000
Sales 11460
Purchase 9820

purchase return 50
sales return 680
storage cost 450
Motor expense 470
salary 4800
drawings 1500
business rates 1320
capital 389000
premise 240000
van 51250
Fixtures 8100
inventory 23900
Cash in hand 13630
Cash at bank 59250
Total 429430 429430
CLIENT 2
a. Preparing statement of profit & loss
Profitability statement of Munteanu Limited for 31st December 2018
Particulars Amount (in £)
Amount (in
£) Amount (in £)
Sales revenue 138000
Less: Return inward 3000 135000
Cost of goods sold (W.N.1) 54500
Gross Profit 80500
Depreciation charged on land & building 800

Depreciation on plant & machinery 8000
Administrative Expenditure 30000
Distribution expenses 35000
Less: Prepaid rent -3000
Add: Outstanding salaries 2000
Finance Cost 1500 74300
Corporation tax 2000
Total 76300
Net margin 4200
Cost of Goods sold (w.n. 1)
Particulars Amount (in £)
Opening Inventory 15000
+Purchases 61000
-Closing Inventory -20000
-Return Outward -1500
54500
b. Presenting statement of financial Position of Munteanu Ltd
Balance sheet of Munteanu Limited for 31st December 2018
Particulars Amount (in £)
Amount (in
£) Amount (in £)
Current assets
Debtors or bills receivable 26000
Prepaid rent 3000
Closing stock 20000
49000
Fixed assets

Land & Building 60000
Less: Accumulated Depreciation charged
on L&B 10800 49200
Plant & Machinery 60000
Less: Depreciation @ 20% 28000 32000
81200
Total assets 130200
Liabilities
Current liabilities
Creditors or bills payable 22000
Outstanding salaries 2000
BO 18000
Corporation tax 2000
Total current liabilities 44000
Owners’ s fund 40000
share premium 20000
Retained earnings 22000
Net profit 4200
Total shareholders’ equity 86200
Total liabilities 130200
C) Accounting concepts
Consistency: in this accounting concept it reflects the duty of the company to maintain their
accounting standard and follow it on constant bases (Kend and Basioudis, 2018). They not
change according to the change in the situation of the company.
Prudence: In this concept, business cannot overestimate or underestimated their revenue, and
they had to mention the accurate way which is incurred in the organization (Nobes and Stadler,

2015). If they reflect in some higher way it reflects more profits which affects the interests of the
investor at the time of viewing their financial statement.
D) Purpose of depreciation in accounting statement
The main purpose is to measures the costs of assets with the expenses incurred from the
revenues arises. The two methods for calculating the depreciation are firstly the written down
value method is the method in which the book value is reducing on every year and it brings the
amount of deprecation for the past years to the next years (Modugno and Di Carlo, 2019).
Another method is the Straight line method in which same amount is deducted at every year and
it mainly based on time and not of use.
E) Difference between the financial statement prepared by sole traders and the limited
companies.
The major difference between the sole traders and the limited company in respect of
financial statement is that in context of profits the limited company has a separate entity, and
they are the owners of the company (Dutta and Patatoukas, 2016). So they enjoy the profits at
high rate and also bear expenses and risk in the business, in case of sole traders they had to
individually manage the accounts and finance of the company, and they enjoy profits of its own
without any sharing risk.
CLIENT 3
A) Purpose of preparing the Bank Reconciliation statement (BRS)
BRS means to interrelated your transaction with the banks and compare various entries.
Thus, in this statement it compares they record and other transaction with the banks and also
identify any other activity which reflects their balance available, and they expected to be
mentioned in their bank statement (Haslam and et.al., 2016). The main purpose for preparing the
bank reconciliation statement are To identifying the errors which occurs as the statement is
reflecting the amount is debited and the bank account is showing the amount is not debited. It
also sometimes occurs fraud or misrepresentation of entries. It also helps to track the records and
other transaction which is useful for the business.
B) Determine the areas which causes record to vary from banks
The major aspect which is related to causes vary in records are in terms of time difference
in committing the records. The cash book which is reflecting the deduction of amount but it is
not mentioned in bank detail reflects the causes of vary in entries. The another variance are in

terms of Checks which are issued by bank but not presented within the stipulated time and efforts
(Flower, 2018). It also results in occurring variance in bank details and the transaction which are
omitted by banks. The another aspects is related to interest which the bank directly added to the
firm account, and they came to know only through checking the statement of the bank.
C) Explaining the term Imprest in pretty cash system
Imprest system which is used under the financial accounting reflects the cost which is
spent and the procedure which they used to save track the records of such expenses. In pretty
cash system, company keeps a monthly amount of cash which is to spend monthly and at the
starting of next month they keep the same amount if that pretty cash which is spent such
procedures is called imprest (Shields, 2015). Such amount is fixed and reserved by the company,
and they use according to the expenses incurred.
d. Preparing updated cashbook and BRS
Bank Reconciliation account as at 30th Sept. 2018
Details Cheque No. In$
Balance as per
bank statement 515
Add:- C lyons 87
Updated cash book for the year ended on 31st sept. 2018
Date Receipts Amount Date Payments Amount
1 sept. 2018 balance b/d 515 9th sept. 2018 m. potter 251
7th sept.2018 cash sales 64 10th sept. 2018 c. lyons 87
17th sept. 2018 cash sales 171 14th sept. 2018 C hallen 89
24th sept. 2018 cash sales 103 20th sept. 2018 C. david 122
12th sept. 2018 m pointer 26 28th sept. 2018 S leeming 116
17th sept. 2018
Direct debit -
rates 105
30th sept. 2018 bank charges 36
30th sept. 2018 Balance c/d 73
Total 879 Total 879

Bank Statement as at 30th sept. 2018
Date Particulars Receipt Payment Balance
1st sept.2018 Opening Balance 515
8th sept. 2018 cash sales 64
11th sept. 2018 101202 251
13th sept. 2018 deposit 26
17th sept. 2018 101204 89
17th sept. 2018 debit rates 105
18th sept.2018 cash sales 171
26th sept.2018 cash sales 103
30th sept.2018 bank charges 36
10th sept.2018 C. lyons 87
20th sept.2018 C. david 122
28th sept. 2018 S. leeming 116
364 806
Balance as per cash
book 73
CLIENT 4
a.
Sales ledger control account for January 2018
Purchase ledger control account for January 2018

B) Examining the term Control Account
Control account means an account in which all the number of summary of the subsidiary
account are put under the control account and to keep a minute check on such account to know
any details from such account. It is also called as the controlling account in which the cost and
other information are controlled and inserted into ledger account which can be checked when
there is a need of such information (Toms, 2019). The major purpose to use the control account
is that it gives more accurate results and there is no such transparency in the entries which results
in managing the accounts in more simplified and organized formats. This is major important in
presenting the favourable financial statement and the errors if any will be easily identified it is
presented in proper format and also subsidiary account is mentioned in definite way.
CLIENT 5
A) Suspense account
Suspense account means an account which is generally prepared to enter some entries
which bring consequences or errors in they general transaction (What is suspense account, 2019).
They are mainly prepared in the books of accounts and under this the temporary and permanent
entries are carried to analysis the defects in errors which occurs to affects the financial statement.

Thus, suspense account is considered to be the assets of the company which holds the accounts'
payment related to the income receivables (Higson and Kassem, 2016). The main features of
suspense account is that it is to be maintained properly so that if any transaction entries are not
clear they can use it from the suspense account. It is generally prepared for temporary use only in
the ledger account.
Examples of suspense account is relation to Geetha regarding incurring the personal expenses
than the entry related to suspense account will be examined as:
Suspense a/c (Dr.) 390
To geetha's a/c 390
b. Passing entries for necessary corrections and clearing of suspense account

CONCLUSION
From the above study it is clearly interpreted that Financial accounting helps the senior
and supervisors of the company which manages their financial activities in more accurate and
concise manners. It also evaluates to take effective decision and maintain their financial position
in the business for longer term. Its major gaols is to provide information of the company to the
internal and external stakeholder to support the decision of the company and also guides them if
they are taking wrong decisions.