Financial Accounting Report

This financial accounting report delves into the main motive of financial accounting, which is to communicate the true and fair view of an organization's financial performance and position. It highlights how all accounting functions are linked with reporting financial performance and guided by principles of financial accounting. The report also emphasizes the importance of financial accounting in providing a framework for decision-making activities and determining objectives and goals of a business organization.

Financial Accounting
Principles

Table of Contents
INTRODUCTION...........................................................................................................................4
BUSINESS REPORT......................................................................................................................4
1.Financial Accounting and its purpose:................................................................................4
2. Internal and external stakeholder:......................................................................................5
CLIENT 1........................................................................................................................................6
1. Journal Entries and Ledgers in the book of Alexandra Study:...........................................6
2. Trial Balance as at 31st January 2019 in the books of Alexandra Study:........................13
CLIENT 2......................................................................................................................................14
1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018:14
2. Statement of financial position of Munteanu Ltd. As at 31st December 2018:...............15
3. Accounting Concepts: Consistency and Prudency:..........................................................16
4. Purpose of depreciation in formulating accounting statement:........................................16
5. Evaluation of difference between financial statements prepared by the sole trader & the
limited companies ................................................................................................................16
CLIENT 3 .....................................................................................................................................17
1. Purpose of preparation of Bank-reconciliation Statement:..............................................17
2. Reasons for difference between balance of bank column of cash book and bank statements:
..............................................................................................................................................17
3. Imprest:.............................................................................................................................17
4. Bank-reconciliation Statement as at 30 September 2018:................................................17
CLIENT 4......................................................................................................................................18
1. Sales Ledger Control Account in the books of January 2018:.........................................18
2. Purchase Ledger Control Account in the books of January 2018:...................................18
3. Control Account:..............................................................................................................19
CLIENT 5......................................................................................................................................19
1. Suspense account and its main features:..........................................................................19
2. Trial Balance using a control account as balancing figure:..............................................19
3. Journal Entries for corrections:........................................................................................20
CONCLUSION..............................................................................................................................20

REFERENCES .............................................................................................................................22
INTRODUCTION
Financial accounting is an organised course of action including activities such as
recording of accounting transaction, classification, verification, interpreting, summarizing and
communicating or reporting of financial information. Financial accounting provides details and
information regarding availability of existing or potential resources, way of financing and output
through their utilisation. Financial accounting also provides groundwork for Internal and external
stakeholders in order to take significant decisions (Agasisti and Catalano, 2013). In order to
analyse the performance of PURCO company has been taken into account. All activities and
functions of financial accounting are governed or administrated by some rules and guidelines
called as financial accounting principles such as UK GAAP (Generally Accepted Accounting
Principles). This report provides an explanation about definition of financial accounting, purpose
of financial accounting, internal and external stakeholders and brief knowledge about accounting
concepts, purpose of providing depreciation and major methods of depreciation, control accounts
and purpose of bank reconciliation statements.
BUSINESS REPORT
1. Financial Accounting and its purpose:
Financial accounting refers to a systematic process classification of financial and non-
financial transactions, recording of transaction, summarizing them for a better interpretation and
reporting under a formal format to internal and external stakeholders. Financial accounting
processes are structure in a systematic way and ensures compliances of various accounting
principles, policies, rules and regulations (Alver, Alver and Talpas, 2013). Financial accounting
gives a structure for quick assessment of any problems and for taking vital decisions. Following
are the most considerable purpose of financial accounting, as follows:
 Financial reporting helps to record all financial transactions as per double entry
system in an organised manner.
 It helps to assess the actual position and performance of business organisation.
 It assists in projecting anticipated earnings and performance of business organisation.

 Financial reporting provides a basis for better decision making to investors and other
stakeholders actual profitability and liquidity situation of business organisation as on
a particular date.
 It ensures compliance of statutory requirements, policies, framework, rules and
regulations.
 It provides a comparative data and records along with previous years’ data and
competitor’s data and record to evaluate the performance effectively.
 It serves as a formal report of financial health of business organisation to top
management and external users of financial information (Barth, 2015).
 It helps to classify organisation's various assets and liabilities in order to manage
them efficiently.
2. Internal and external stakeholder:
Stakeholders are person, individual, group, body of individuals or organisation having
direct or indirect interest in organisation's position, performance, objectives or goals and results.
Stakeholder are classified as internal stakeholders and external stakeholders. Internal
stakeholders are person, group or individuals within the business organisation having substantial
interest. Whereas external stakeholders are individuals, persons, group or organisation outside
the business organisation associated with organisation and having direct or indirect interest
(Edwards, 2013).
Internal Stakeholder: In a large business organisation, internal stakeholders are shareholders,
owners, management and employees (Stice and Stice, 2013). Following is a brief discussion
about major internal stakeholders and, possible way through which they are interested in
financial information of organisation, as follows:
 Owners and shareholders: They are real stakeholders of entity. Owner and shareholders
are holding major shares of a large business organisation and gain profits in case of
increase in share price. They are highly affected by the performance and financial
position of company.
 Employees: Employees are most considerable resources of a business organisation and
always wants to achieve growth within the organisation. Employees are having
sustainable stake in business organisation because their salary and career are dependent
on performance and growth of organisation.

External Stakeholder: External stakeholders in case of a large business organisation are its
customers. Suppliers, government, creditors etc. Following is a short explanation about key
external stakeholders and, manner through which they are interested in financial information of
organisation, as follows:
Government: Government collect various taxes on income of business organisation so
government hold stake in profits of entities in form of taxes. Government along with collection
of taxes insures proper compliance of rules and regulation in business organisation.
Suppliers: Suppliers of goods and raw material receives payments from business
organisation and full-fills the demands. They always try to receive payment in scheduled times
and provides credit based on liquidity position of company so suppliers having stake in business
organisation in form of their payments and sales (DRURY, 2013).
Customers: Customers decides an organisation's growth and revenue. They contribute in
business by purchasing and by recommending product of company to others. Customers buy
product or services of organisation by analysing their popularity, quality, performance, growth
and beliefs therefore they are holding stake in form of performance and sustainability of business
organisation.
Investors: Investors are most significant for business organisation because they
contribute in expansion and growth of company by investing their money or other financial
assets in company. They are highly affected by performance and growth of business
organisation. Investors are actual stakeholder of company because they always try to get
maximum return from investment made by in business organisation.
CLIENT 1
1. Journal Entries and Ledgers in the book of Alexandra Study:
SALES DAY BOOK
DATE DETAILS £
2018
03 January
2018 J Wilson 1,200
T Cole 1,650
F Syma 2,100
J Allen 1,020
P White 2,520
F Lane 980

09 January
2018 T Cole 680
J FOX 1,310
Credit in sales account in Nominal Ledger 11,460
PURCHASES DAY BOOK
DATE DETAILS £
2018
02 January 2018 S.Hood 1,450
D Main 2,060
W.Tone 960
R Foot 1,610
22 January 2018 L Mole 1,830
W Wright 1,910
Debit Purchases account in Nominal Ledger 9,820
PURCHASES RETURNS DAY BOOK
DATE DETAILS £
2018
19 January 2018 R Foot 50
Credit purchases returns account
in Nominal Ledger 50
SALES RETURNS DAY BOOK
DATE DETAILS £
2018
11 January 2018 J Wilson 270
F Syma 410

Debit sales returns account
in Nominal Ledger 680
Ledgers
Purchases A/c
Date Particulars Amount Date Particulars Amount
02/01/19 To S Hood A/c 1450 31/01/19 By Trading and P&L
A/c
9820
To D Main A/c 2060
To W Tone A/c 960
To R Foot A/c 1610
22/01/19 To L Mole A/c 1830
To W Wright
A/c
1910
Total 9820 Total 9820
Bank A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening
Balance (B/f)
68400 01/01/19 By Storage cost A/c 450
16/01/19 To P Mullen A/c 1400 24/01/19 By S Hood A/c 3600
To F Lane A/c 3100 By J Brown A/c 4600
To J Wilson A/c 850 By R Foot A/c 1400
To F Syme A/c 1670 27/01/19 By Salaries A/c 4800
30/01/19 By Business Rates A/c 1320
31/01/19 By Closing Balance
C/d
59250
Total 75420 Total 75420
D Main A/c
Date Particulars Amount Date Particulars Amount

31/01/19 To Closing
Balance A/c
2060 02/01/19 By purchases A/c 2060
Total 2060 Total 2060
By Purchases Return A/c
Date Particulars Amount Date Particulars Amount
31/01/18 To Trading and
P&L A/c
50 19/01/18 By R foot A/c 50
50 50
R Foot A/c
Date Particulars Amount Date Particulars Amount
19/01/18 To Purchase
Return A/c
50 02/01/19 By purchases A/c 1610
24/01/19 To Bank A/c 1400
31/01/19 By Closing
Balance C/d
160
Total 1450 Total 1610
T Cole A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 1650 31/01/19 By Closing Balance
C/d
2330
09/01/19 To Sales A/c 680
Total 2330 Total 2330
J Allen A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 1020 31/01/19 By Closing Balance
C/d
1020
Total 1020 Total 1020

F Lane A/c
Date Particulars Amount Date Particulars Amount
01/01/18 To Opening
Balance (B/f)
6100 16/01/19 By Bank A/c 3100
03/01/18 To Sales A/c 980 31/01/18 To Closing Balance C/d 3980
Total 7080 Total 7080
Cash A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening
Balance (B/f)
15600 04/01/18 By Motor Expenses A/c 470
07/01/19 By Capital A/c 1500
31/01/19 By Closing Balance
C/d
13630
Total 15600 Total 15600
Sales Return A/c
Date Particulars Amount Date Particulars Amount
11/01/19 To J Wilson A/c 270 31/01/19 By Trading and P&L
A/c
680
To F Syme A/c 410
Total 680 Total 680
L Mole A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Closing
Balance C/d
1830 22/01/19 By Purchases A/c 1830
Total 1830 Total 1830

W Wright A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Closing
Balance C/d
1910 22/01/19 By Purchases A/c 1910
Total 1910 Total 1910
J Brown A/c
Date Particulars Amount Date Particulars Amount
01/01/19 By Opening Balance
b/f
16600
24/01/19 To Bank A/c 4600 31/01/19 By Closing Balance
C/d
31/01/19 To Closing
Balance C/d
12000
Total 16600 Total 16600
Business Rates A/c
Date Particulars Amount Date Particulars Amount
30/01/19 To Bank A/c 1320 31/01/19 By Trading and P&L
A/c
1320
Total 1320 Total 1320
Storage Cost A/c
Date Particulars Amount Date Particulars Amount
01/07/19 To Bank A/c 450 31/07/19 By Profit & Loss A/c 450
Total 450 Total 450
Sales A/c
Date Particulars Amount Date Particulars Amount

31/01/19 To Trading and
P&L A/c
11460 03/01/19 By J Wilson A/c 1200
By T. Cole A/c 1650
By F. Syme A/c 2100
By J .Allen A/c 1020
By P .White A/c 2520
By F .Lane A/c 980
09/01/19 By T .Cole A/c 680
By J fox A/c 1310
Total 11460 Total 11460
S Hood A/c
Date Particulars Amount Date Particulars Amount
24/01/19 To Bank A/c 3600 01/01/19 By Opening Balance
(B/f)
12150
02/01/19 By purchases A/c 1450
31/01/19 To Closing
Balance C/d
10000
Total 13600 Total 13600
W Tone A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Closing
Balance C/d
960 02/01/19 By purchases A/c 960
Total 960 Total 960
J Wilson A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 1200 11/01/19 By Sales Return A/c 270

16/01/19 By Bank A/c 850
31/01/19 By Closing Balance
c/d
80
Total 1200 Total 1200
F Syme A/c
Date Particulars Amount Date Particulars Amount
03/01/18 To Sales A/c 2100 11/01/19 By Sales Return A/c 410
16/01/19 By Bank A/c 1670
31/01/19 By Closing Balance
c/d
20
Total 2100 Total 2100
P White A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 2520 31/01/19 By Closing Balance
c/d
2520
Total 2520 Total 2520
P Mullen A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening
Balance (B/f)
4400 16/01/19 By Bank A/c 1600
31/01/19 By Closing Balance
c/d
2800
Total 4400 Total 4400
Capital A/c

Date Particulars Amount Date Particulars Amount
07/01/18 To Cash A/c 1500 01/01/18 By Opening Balance
b/f
389000
31/01/18 To Closing
Balance C/d
387500
Total 389000 Total 389000
J Allen A/c
Date Particulars Amount Date Particulars Amount
09/01/18 To Sales A/c 1310 31/01/18 By Closing Balance
c/d
1310
Total 1310 Total 1310
Motor Van A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening
Balance (B/f)
51250 31/01/19 By Closing Balance
c/d
51250
Total 51250 Total 51250
Salaries A/c
Date Particulars Amount Date Particulars Amount
27/01/19 To Bank A/c 4800 31/01/19 By Trading and P&L
A/c
4800
Total 4800 Total 4800
Motor Expenses A/c
Date Particulars Amount Date Particulars Amount
04/01/19 To Cash A/c 70 31/01/19 By Trading and P&L
A/c
470
Total 470 Total 470

2. Trial Balance as at 31st January 2019 in the books of Alexandra Study:
Trial Balance for the month of July..........
Particulars Debit Credit
Storage Cost 450
Purchase 9820
Sales 11460
Motor Expenses 470
Receivables:
P Mullen 3000
F Lane 3980
J Wilson 80
T Cole 2330
F Syme 20
J Allen 1020
P. White 2520
J Fox 1310
Cash At Bank 52680
Cash In Hand 20200
Payables:
S. Hood 10000
J. Brown 12000
W Tone 960
R Foot 160
L Mole 1830
W. Wright 1910
D Main 2060
Premises 240000
Van 51250

Fixtures 8100
Inventory 23900
Sales Return 680
Purchase Return 50
Salaries 4800
Business Rates 1320
Capital 387500
Total 427930 427930
CLIENT 2
1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018:
Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018
Particulars Amount Particulars Amount
To opening inventory 15000 By Sales 138000
To Purchases 61000 Less: Return Inward 3000 135000
Less: Return Outward 1500 59500 By Closing Inventory 20000
To Gross profit 80500
Total 155000 Total 155000
To Administration Cost 32000 By Gross Profit 80500
To Distribution Cost 32000
To Depreciation 8800
To Finance Cost 1500
To Tax 2000
To Net Profit 4200
Total 80500 Total 80500

2. Statement of financial position of Munteanu Ltd. As at 31st December 2018:
Statement of financial position of Munteanu Ltd. As at 31st December 2018
Assets Amount in EUR
Land 20000
Building 40000
Less: Accumulated Depreciation 10000
30000
Depreciation for the year 800 29200
Plant and machinery 60000
Less: Depreciation 20000
40000
Depreciation for the year 8000 32000
Total non-current assets 81200
Inventories 20000
Prepaid Rent 3000
Accounts receivable 26000
Total current assets 49000
Total assets 130200
Equity and liabilities
Share capital 40000
Share premium 20000
Retained Earnings including current year profit 26200
Equity 86200
Current and other tax liabilities 2000
Accrued salaries 2000
Bank Overdraft 18000
Accounts payable 22000
Total current liabilities 44000

Total equity and liabilities 130200
3. Accounting Concepts: Consistency and Prudency:
Accounting concepts are fundamentals rules that are required to be follow while framing
financial statement of a business organisation (Fourie, 2015). Accounting concepts are acts as
guideline for finalization of accounts. Following are the major accounting concepts, as follows:
Consistency: This accounting concept emphasises towards maintaining consistency with
respect to accounting policies and procedures followed by a business organisation from one
period to other. This accounting concept ensures uniformity in accounts of one or more periods.
Prudence: This accounting concept requires that business organisation should not
overestimate its income or revenues, assets, and should not underestimate its expenses, losses
and obligation or liabilities.
4. Purpose of depreciation in formulating accounting statement:
Depreciation provided by business organisation on fixed assets aims a reduction in value
of fixed asset due to physical wear and tear or obsolescence and by any other reason during a
particular period. Two significant methods used by entities to provide and calculate depreciation
are discussed as below:
a. Straight Line Method: Under this method of depreciation, entity provides depreciation cost
evenly throughout the completely useful life or effective life of a tangible fixed asset. This
method is use by organisations in case where economic benefits from a fixed asset are expect to
be realised equally over its effective life. This method is also appropriate in case of uncertainty
regarding economic benefits (Hale and Held, 2012).
b. Written Down Method: It is method of depreciation under which depreciation in form of a
fixed percentage is charge by entity on book value of assets, over its effective useful life5.
Evaluation of difference between financial statements prepared by the sole trader & the limited
companies
Following are the major differences among financial statements prepared by sole traders
and limited companies:
Sole trader Limited companies
Sole proprietor is free to develop either Limited companies have compulsory

horizontal or vertical balance sheet (Hall,
2012).
obligation to prepare vertical balance sheet
only
In this, the financial position of a sole
proprietorship is showing through the amount
of the assets held.
They mainly use their financial information for
making overall decision in relation to the
company profitability.
CLIENT 3
1. Purpose of preparation of Bank-reconciliation Statement:
Every business organisation prepares cashbook in which cash as well as bank transactions
are record. Sometimes difference arises in amount in bank column of cashbook and balance of
bank statement due some common reasons. So in order to reconcile such balance bank-
reconciliation statement is prepared by Burcu organisation. Bank-reconciliation statement is
prepared by entities on monthly basis, annual basis and quarterly basis. However, most of the
entities prepare bank reconciliation statements on monthly basis to avoid any complexity at year-
end (Jonson, 2013).
2. Reasons for difference between balance of bank column of cash book and bank statements:
Most common reasons for difference between balance on the bank statement and the
balance on the books are deposits in transit, errors of books, electronic charges charged by bank
but not yet recorded in books, outstanding charges, check printing charges, bank service charges,
cheque issued but not presented etc.
3. Imprest:
Imprest is a system of accounting in which a fixed amount is reserve by organisation for
payment of day-to-day small amount of expenses. Petty cash book is an example of accounting
under imprest system (Tschopp and Nastanski, 2014).
4. Bank-reconciliation Statement as at 30 September 2018:
Dr Corrected Cash Book (Bank) Cr
£ £
31-Dec Balance b/d 19,973
Overstated
amount 1

Overstated
amount 9 Bank charges 47
Standing order 137
310923 (DirectD) 297
Balance c/f 19,500
19,982 19,982
Balance b/d 19,500
Particulars Amount
- Bank Balance as per pass book 398
Add: Items having effects of higher balance in cash
book
- Bank charges not recorded in cashbook... 36
- Adjustment for direct debit rates.............. 105
Less: Items having effects of lower balance in cash
book
 Payments to:
- C David 122
- S Leeming 116
- C Lyons 87
Bank balance as per cash book 214
CLIENT 4
1. Sales Ledger Control Account in the books of January 2018:
Sales Ledger Control A/c
Particulars Amount
(£)
Particulars Amount
(£)
Balance b/d... 12600 Sales Return............. 4320

Credit Sales............. 152350 Bad Debts.................. 1600
Discount Allowed............. 1060
Bank/ Cash (Receipt from credit
customers)..................
120610
Set-off (Transfer to purchase
ledger).............
640
Balance c/d................. 36720
Total 164950 Total 164950
Balance b/d 36720
2. Purchase Ledger Control Account in the books of January 2018:
Purchase Ledger Control A/c
Particulars Amount
(£)
Particulars Amount
(£)
Discount Received... 850 Balance b/d............ 11360
Purchase Return.......... 3110 Credit Purchase................... 126500
Bank/ Cash (Payment to
suppliers)..............
91010 Bank (Refund from supplier)............. 500
Set-off (Transfer from sales
ledger)............
640
Balance c/d.......... 42750
Total 138360 Total 138360
Balance b/d 42750
3. Control Account:
A control account is general ledger account that exhibits total amount of balance of
related subsidiary ledgers accounts. Main purpose of control account is to keep all general
ledgers free of any complex headings or details and still to provide accurate balance for
preparing final accounts (Oulasvirta, 2014).

CLIENT 5
1. Suspense account and its main features:
Suspense account is prepared by business organisation to record unclassified transactions.
Suspense account is a general ledger account that temporarily records balances on temporally
basis, amounts or entries that are remain unclassified or unidentified at the year-end. For
example, in an organisation supplier invoices amounting $1250 for services. Entity has doubt
about name of department to be charged, such amount can be place in a suspense account.
Features of suspense account:
 Suspense account is prepared by business organisation to identify any error or in-
appropriate amount in accounts.
 It provides a framework for quick assessment of any type of error.
 It assists in finalization of accounts within the scheduled time (Mullinova, 2016).
 It defines nature of error and helps to allocate them.
 It helps to find out any fraudulent bills, payments. Embezzlement or unidentified thefts.
2. Trial Balance using a control account as balancing figure:
Particulars Dr. (in £) Cr. (in £)
Purchase Account 7000
Sales Account 11000
Rent Paid Account 2500
Cash in bank Account 8400
Travel expense Account 1600
Receivables Account 3200
Payables Account 3500
Opening Inventory 2200
Capital Account 7100
Control Account 3300