FINANCIAL ACCOUNTING PRINCIPLES TABLE OF CONTENTS

FINANCIAL ACCOUNTING
PRINCIPLES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
REPORT..........................................................................................................................................1
1. Defining financial accounting and its purpose...................................................................2
2. Regulations relating to financial accounting......................................................................2
3. Accounting rules and principles.........................................................................................3
4 Convention and concepts of financial accounting...............................................................5
CLIENT 1........................................................................................................................................6
A. Journals entries..................................................................................................................6
B. Ledger Account..................................................................................................................8
Cash Book............................................................................................................................14
C. Trial balance ...................................................................................................................16
CLIENT 2......................................................................................................................................17
A. Laurent's income statement.............................................................................................17
B. Financial statements of Laurent.......................................................................................17
CLIENT 3......................................................................................................................................18
A. Preparation of profit and loss account.............................................................................18
B. Preparation of statement of financial position ................................................................18
C. Accounting concept of prudency and consistency...........................................................19
D. Purpose of depreciation in formulation of accounting statements..................................20
CLIENT 4......................................................................................................................................21
A. Purpose of preparation of Bank reconciliation statement...............................................21
B. Reasons for occurrence of variation between cash book and bank records.....................21
C. I) Cash book.....................................................................................................................22
C. II) Bank reconciliation statement ....................................................................................23
CLIENT 5......................................................................................................................................23
A. Preparation of Ledger accounts ......................................................................................23
B. Control accounts and its importance................................................................................24
CLIENT 6......................................................................................................................................24
A. Suspense accounts and its main features.........................................................................24

B and C. Preparation of Trial Balance making correction ..................................................25
D. Differentiation between clearing and suspense account .................................................26
CONCLUSION..............................................................................................................................26
REFERENCES..............................................................................................................................27

INTRODUCTION
In an organisation accounting is integral part as it is the process through which all
monetary transactions related with business operations are summarized and reported to draw an
interpretation about flow of organization finance and its performance in an accounting year. All
material financial transactions are identified and with following relevant accounting principles
and standards they are recorded in books of accounts. In the present report accounting standards
and regulations which a business must comply are mentioned along with their relevance and
importance. Apart from this various accounting terms and statements are prepared in an entity
for reconciliation and closing of books of accounts are also explained with purpose they serve.
REPORT
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To
Line Manager
From: Junior Accountant
Subject: Presentation and application of accounting principles, standards and regulation in
business accounting and reporting which is helpful in evaluation of operational efficiency.
Sir,
The present report is prepared to explain and define knowledge acquaintance of
financial accounting for all personnel in organisation. This report will define that how
accounting principles and regulation are applied to different financial transactions. The
treatment of revenue and capital expenses/incomes is determined by various accounting
standards laid down for this purpose. These reports present all regulations and bodies
responsible for formation of those rules, applicable in accounting of business.
1. Defining financial accounting and its purpose
Financial accounting means to present all monetary transactions of a business for a
particular fiscal period in a definite format. The information is laid down by following all
accounting regulations and standards by regulating bodies and authorities formed by
government. This is mainly concerned with collection al financial information of a business,
analysing and reporting them. This process determines income generated, expenses incurred
and profits earned by business. This information presented through preparation of financial
reports provide significant info to related people outside the business. These people can be
stakeholders, creditors, banks, government, business owners, investors etc. The financial reports
prepared under this are profit and loss account, balance sheet, statement of cash flow and
shareholders equity's statement (Miller-Nobles, Mattison and Matsumura, 2016). These
statements all together reveals relevant information related with a business such as net worth,
profits earned, financial growth of firm, market valuation, cash inflows and outflows along with
assets with and liability that company needs to meet.
2. Regulations relating to financial accounting
Financial accounting regulations are important laws and generalisation for preparation
of fiscal statements of a business. These are formed and regulated by authoritative bodies made
by monitoring board. Regulations are formed for both domestic and international business.
Domestic regulation is formed by institute of charted accountants in England and Wales.
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International regulations are developed by the accounting standard committee. They issue
global accounting standards which are applicable to all business organisation involved in
foreign trade and commerce. After this IASC was updated as IAS was updated and issued as
IFRS (international financial reporting standards).
IFRS: These are regulations formed by international accounting committee. And are an updated
version of those standards. The regulations provide guidelines for preparation of financial
statements.
IAS: Foreign accounting standards were originally developed by international institute
of charted account in England and Wales (Henderson and et.al., 2015). These were basic
principles and guidelines which a business must adhere while preparing financial statements.
GAAP: These rules and regulations are generally accepted by all business in their
accounting practices and are given a legal format by relevant authorities. A legal establishment
is given to bring uniformity in accounting policy by each and every business of nation.
SORP's: Statement of recommended practice- these are developed by accounting
standard committee and are formed specially for particular sector or industries. Guidelines are
provided by these industries or sector that are to be applied in their accounting practice.
3. Accounting rules and principles
1. Separate legal entity: this principle states that a business is totally separate from its
owner but an entrepreneur and business activities can be related. Owner of business invests
capital that belong solely to that firm only, members do not have any right over it. Similarly, no
personal expense of a director/member or owner can be recorded in books of organisation as
business expenditure. This principle defines that a business holds a legal separate identity of its
own, it does not require anyone's identity for its recognition. It has a right to sue and to be sued.
2. Value in monetary units: all business proceedings must be recorded in a domination
of particular currency this means that a single monetary system unit shall be kept to record all
financial transactions. Even two monetary units cannot be used by an organisation to record all
transactions. In case of international transactions, other currency monetary category shall be
converted into organisation’s denomination and then is shall be recorded.
3. Going Concern: a business is created by law and can be ended by it only. This
principle states that people may come and go this will not affect an organisation's legal stability.
In case all members of a firm dies, business will continue to go on in its name until an end to it
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