Financial Accounting Principles - Assignment Solution
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Added on 2020-12-18
Financial Accounting Principles - Assignment Solution
Added on 2020-12-18
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Financial AccountingPrinciples
Table of ContentsIntroduction......................................................................................................................................1Business Report...............................................................................................................................11. Financial accounting principles and its purpose.....................................................................12. Internal and external Stakeholders..........................................................................................2Client 1.............................................................................................................................................5(a) Journal Entry in the books of Alexandra Study:...................................................................5(b). Ledgers:................................................................................................................................5(c). Trail Balance in the books of Alexandra Study:...................................................................5CLIENT 2........................................................................................................................................6(a) Profit and loss account of Munteanu Limited........................................................................6(b) Balance Sheet of Munteanu Limited.....................................................................................6(c) Accounting Concepts: Consistency and Prudence:...............................................................7(d) Purpose of Depreciation and its Methods:.............................................................................8(e) Evaluation of difference between financial statements prepared by sole traders and limitedcompanies:...................................................................................................................................8CLIENT 3........................................................................................................................................91. Purpose of preparation of Bank Reconciliation Statement:....................................................92 . Areas where bank records vary from personal records..........................................................93. Imprest:.................................................................................................................................104. Bank-reconciliation statements of Burcu Ltd, for September 2018......................................10CLIENT 4......................................................................................................................................13(a) Sales Ledger Control and Purchase Ledger Control Account:............................................13(b) Control account...................................................................................................................13Client 5...........................................................................................................................................14(a) Suspense account and its features:.......................................................................................14(b) Preparation of Trail Balance:...............................................................................................14(c) Journal entries in order to show necessary corrections for eliminating suspense accountbalance:.....................................................................................................................................15A control account is a general ledger account containing only summary amounts.......................15
Conclusion.....................................................................................................................................15References .....................................................................................................................................16Appendix........................................................................................................................................17
IntroductionFinancial accounting principles are considered as the rules and the guidelines that theorganisation or the companies has to follow while reporting the financial statement of thecompany. The process of financial accounting includes recording the transactions in the form ofjournals, ledgers and summarising these transactions in form of income statement and balancesheets. The common set of accounting principles includes generally accepted accountingprinciples on the basis of which recording is done. These accounting process provide thegroundwork for analysing the financial aspects of business organisation. The company which isselected is IAC accountants which is based in UK. The company is working and having theexperience of 15 years in accounting. This report helps to provide information on double entrybook keeping and how to extract the trial balance. Also final accounts of sole trader would bemade. The bank reconciliation that ensure company to consider the bank account have done andat last reconciliation of control accounts is prepared.Business Report1. Financial accounting principles and its purposeFinancial accounting is considered as the specialised branch of accounting which keeps inline of the companies’ financial transactions. Through these standardised guidelines, thetransactions are recorded and summarised through which they are presented in a financial reportand or in financial statements (Edwards, 2013). Various companies issue financial statement on aregular schedule. These financial transactions are classified systematically so that final accountssuch as balance sheets, profit and loss accounts, income statement and cash flows of thecompany can be determined. If the company follows the financial process of accounting then itwould be easy for them to present the actual and the true figures of the financial performance andthe position before the shareholders, government, employees, creditors and total stakeholders etc.The accounts in financial accounting are prepared by the organisation on the basis of accountingprinciples, various assumptions and the different guidelines which are made by the accountingbody of the state or country.Financial accounting principles helps to govern the accounting of the organisationaccording to the general rules and concepts (Fourie and et. al., 2015). These are considered as thegroundwork which helps the organisation in preparing the financial accounts more legalised and1
widely accepted. There are various number of accounting principles some of which includes thegoing concern, revenue recognition, matching concept and many other. There are differentaccounting principles which differs from country to country. Purpose of Financial accounting:There are various tools in the financial accounting whichhelps organisation to achieve the objective of making financial accounting more reliable. Theseincludes the following:The purpose of financial accounting is to accumulate the report on financial informationand its performance to the stakeholders. This information helps in reaching the furtherdecision about how to manage the business and what are the departments where furtherplans are to be made (Hale, Hale and Held, 2012). The activities which are prepared in financial reporting helps in a systematic way so thatit would provide smoothness in the accounting operations.The financial accounting helps in ensuring the compliance of rule and regulations whichrelates to relevant laws and standards.The strategy that are prepared and are implemented in this process all depends upon theperformance and the results of the financial accounting. The preparation of accounting process helps to make the decisions to invest in the otherbusinesses or not.This also helps in assuring that accounting policies and procedures helps in adoption ofbusiness organisation and are uniformly followed by them.2. Internal and external StakeholdersThe term ‘stakeholders’ is defined as a person or an organisation which has interest in thesuccess or failure of business or a project. Stakeholders of the company has a significant impacton the decisions that are made by them through which the operations and the finances of anorganisation is made (Hall, 2012). The stakeholders of the business organisation depend on theactions of organisation, its goals and its objectives. The stakeholders are classified into twodifferent parts which includes the following: Internal stakeholders and the External Stakeholders.Companies has a direct and indirect influence on the decision of the stakeholders. For example,some of the stakeholders includes shareholders, creditors, government, employees, suppliers,consumers etc. The internal stakeholders are considered as the stakeholder which are individuals,persons, or the organisation which has the influence on the business organisation. These includes2
the directors, owners, employees and the management of the company. Whereas externalstakeholder includes customers, suppliers, creditors, government or the regulatory body or thesociety etc.Internal stakeholders and their interest in the large business organisation as a whole:Some of the major internal stakeholders of a large business organisation includes thefollowing:Employees: These are considered as the main internal stakeholders who gets affected orbe affected by the actions, objectives and the policies of the organisation. As they havethe monetary interest in form of salary, bonus and the incentives which forms the part oforganisational goals (Jönsson, 2013). The employees in the company plays major role informulation of the strategies which are related to the working of the company. As it isseen that any business organisation while formulating the business strategy takes intoconsideration the opinions of the employees as well as their concerns. Shareholders: These are the subset of the stake holder's category. Shareholders areconsidered as the group of individuals who owns or holds the shares of the company.These are considered as the sole owner of the company and has a complete interest in theperformance of the company. The shareholders of the company have monetary interest asthey hold the share of the company which gets valued if the performance of the businessincreases. The decision that are made to owners or the shareholders of the company canimpact the organisation in different ways. As the owner of the company are responsiblefor making decision which affects both the internal as well as the external stakeholders ofthe company.External stakeholders and their interest in the business organisation:There are various external stakeholders which have interest in the working oforganisation. These includes the following:Customers: These are the main stakeholders who has the direct impact on the operationsof the business. They are the form of external stakeholders and in the large businessorganisation. As they affect the demand of the product that company produces.Customers are considered as the most important stakeholders who depends on thefinancial performance of the company as if the company is performing well it wouldprovide heavy discount on their products which would make them achieve success. Also3
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