Financial Accounting Project
Added on 2020-12-29
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Financial Accounting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11. Definition of financial accounting..........................................................................................12. Regulations related to financial accounting............................................................................13. Accounting rules and principles..............................................................................................24. Convention and concepts related to consistence and material discloser.................................3TASK 2............................................................................................................................................4CLIENT 1....................................................................................................................................4CLIENT 2..................................................................................................................................14CLIENT 3..................................................................................................................................16CLIENT 4..................................................................................................................................18CLIENT 5..................................................................................................................................21CLIENT 6..................................................................................................................................22CONCLUSION..............................................................................................................................24REFERENCES..............................................................................................................................25
INTRODUCTIONFinancial accounting can be defined as process in which all the final accounts such asbalance sheet, income statement and cash flow are prepared, analysed and summarised in orderto evaluate liquid strength of an organisation. Internal as well as external stakeholders mayassess the actual position and performance of the company with the help of financial statements(Beatty and Liao, 2014). Main aim of this project is to enhance knowledge about financialaccounting and its components. In this report various topics are discussed such as regulations,rules, principles, conventions that are related to financial accounting. Formulation of journals,ledgers, trial balance, bank reconciliation statement, final accounts, sales and purchase ledgercontrol, suspense account etc. are also been covered under this assignment.TASK 11. Definition of financial accountingFinancial Accounting: It is the field of accounting that keeps record of company'stransactions by using standardized guidelines. The transactions are recorded, summarised, andpresented in a financial report or financial statement. Financial accounting is the summary ofcompany's revenues, expenses, assets, liabilities, balance sheet, and statement of cash flows. Inorder to understand the concept of financial accounting Talent Plus has been taken. ThisCompany prepares financial accounts after analysing the accounting reports and all the neededinformation. This is a consultancy firm which helps to find out and optimise a person's fullpotential, so that the individual, team, and the company can thrive.Purposes of financial accounting : The main purpose of financial accounting is to provide financial information to thecompany for decision making and financial report provides company's performance report tothe external parties such as investors, creditors, and tax authorities. Such types of informationshelps to make better decisions for the company and get the accurate profit and loss statements(Henderson and et.al., 2015).2. Regulations related to financial accountingThe Accounting standards board (ASB) taken from the Accounting standard committee(ASC) in 1990. The ASB has power to issue its own standards, the motive being to increase thequality of standard and increase speed.1
The accounting standards established by the ASB are called 'Financial Reportingstandards' (FRS). Accounting standards are authoritative statements which includes howparticular types of transaction should be recorded in financial statements and accordinglycompliance with accounting standards will normally be needed for financial statements to givetrue and fair view.Development of Accounting standards :The ASB defines points that become the subject of FRSs, either from own research orexternal sources. once the issues have been identified, the ASB produces a discussion draftwhich is circulated to any parties who have registered in their interest. All the relevantinformation is available on the ASB website and interested parties can make comments onproposals by e-mail (Hoyle, Schaefer and Doupnik, 2015).International Accounting standards board:The International Accounting standards boards (IASB) was formed in April 2001 inLondon. IASB foundation is an independent organisation having two main bodies, the Trusteesand the ISAB. The ISAC trustees appoint the ISAB members, and raise the funds needed, but theISAB has an responsibility for setting Accounting standards.3. Accounting rules and principlesAccounting rules are the statement that establishes to record transactions. All thetransactions should be recorded in the books of company using double entry method. Doubleentry account6ing method means each transaction involved two or more account, one is debitand next is credit with the same amount.Golden rules of Accounting:Debit the Receiver, credit the giver – This principle is used in case of personal accountswhich relates to persons with whom a business keeps dealings. Debit What comes in, credit What Goes out -This principle is used in case of realaccounts. Real accounts include tangible assets such as machinery,land &building etc.Debit All Expenses and losses, credit All incomes and gains – This rule is applied incase of nominal account which relates to business expenses, loss should be debit andincomes and gains should be credit.Accounting Principles:2
Accounting principles are the set of uniform practices which entities follow to record,prepare and present financial statements. These principles helps to present true and fair view ofaffairs of entity.Going concern principle : It assumes the business will continue to exit and function withno defined end date. A business never exit whether employees and owner of the companyexit and if an accountant is concerned the business should be liquidate, they have todisclose this GAAP principles.Full Disclosure principle : It is generally accepted accounting principle that requires todisclose all the information which relates to business and financial statements.Cost principle : The cost principle highlights the cost of an item shouldn't change. Itstates that A business should use the historical cost of an item in books, not the resellcost.Matching principle : This principle states that each item of revenues should match withan item of expenses.Materiality principle : This principle defines that the accountant should use their bestjudgement in order to record a transaction or addressing an error also use theirprofessional opinion.Conservatism : This principle defines that the accountant use their best judgement in asituation . When there is more than one option to record transaction then the accountantshould select best option for running the business.Revenue Recognition principle : This principle helps to reported revenues when itsearned, regardless payment for the product is actually received.Monetary unit : This principle dictates all transactions be recorded in same currency.Inflation shouldn't be considered in financial reports (Kieso, Weygandt and Warfield,2016).4. Convention and concepts related to consistence and material discloserAccounting concept defines the assumptions on the basis of which financial statements ofany entity are prepared. Concept provides a unifying structure and internal logic to accountingprocess. In order to maintain uniformity and consistency in preparing and keep record of book ofaccounts, certain principles and rules have been followed. These rules/ principles are classifiedas concepts and conventions which helps to maintain accounting records.3
Consistency:According to this convention accounting policies should remain unchangedfrom one period to another. The rules, practices, concepts and principles used in accountingshould be observed continuously. It states that whenever any organisation has selected a methodfor the accounting treatment of an item, all similar items should be treated in the same day, yearto year or period to period. It helps in comparison of financial performance on yearly basis.Materiality:This concept is the exception of “full discloser concept” materialinformation and its misstatement influence the economic decisions of organisation which is takenon the basis of financial information. Whenever decisions are required regarding theappropriateness of a particular accounting judgement then materiality concept suggests (Libby,2017).TASK 2CLIENT 1Journals entries:4
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