Financial Accounting Principles Assignment - Munteanu Ltd
Added on 2020-10-22
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Financial AccountingPrinciples
Table of ContentsINTRODUCTION...........................................................................................................................4BUSINESS REPORT......................................................................................................................41.Financial Accounting and its purpose:................................................................................42. Internal and external stakeholder:......................................................................................5CLIENT 1........................................................................................................................................61. Journal Entries and Ledgers in the book of Alexandra Study:...........................................62. Trial Balance as at 31st January 2019 in the books of Alexandra Study:........................13CLIENT 2......................................................................................................................................141. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018:142. Statement of financial position of Munteanu Ltd. As at 31st December 2018:...............153. Accounting Concepts: Consistency and Prudency:..........................................................164. Purpose of depreciation in formulating accounting statement:........................................165. Evaluation of difference between financial statements prepared by the sole trader & thelimited companies ................................................................................................................16CLIENT 3 .....................................................................................................................................171. Purpose of preparation of Bank-reconciliation Statement:..............................................172. Reasons for difference between balance of bank column of cash book and bank statements:..............................................................................................................................................173. Imprest:.............................................................................................................................174. Bank-reconciliation Statement as at 30 September 2018:................................................17CLIENT 4......................................................................................................................................181. Sales Ledger Control Account in the books of January 2018:.........................................182. Purchase Ledger Control Account in the books of January 2018:...................................183. Control Account:..............................................................................................................19CLIENT 5......................................................................................................................................191. Suspense account and its main features:..........................................................................192. Trial Balance using a control account as balancing figure:..............................................193. Journal Entries for corrections:........................................................................................20CONCLUSION..............................................................................................................................20
REFERENCES .............................................................................................................................22INTRODUCTIONFinancial accounting is an organised course of action including activities such asrecording of accounting transaction, classification, verification, interpreting, summarizing andcommunicating or reporting of financial information. Financial accounting provides details andinformation regarding availability of existing or potential resources, way of financing and outputthrough their utilisation. Financial accounting also provides groundwork for Internal and externalstakeholders in order to take significant decisions (Agasisti and Catalano, 2013). In order toanalyse the performance of PURCO company has been taken into account. All activities andfunctions of financial accounting are governed or administrated by some rules and guidelinescalled as financial accounting principles such as UK GAAP (Generally Accepted AccountingPrinciples). This report provides an explanation about definition of financial accounting, purposeof financial accounting, internal and external stakeholders and brief knowledge about accountingconcepts, purpose of providing depreciation and major methods of depreciation, control accountsand purpose of bank reconciliation statements.BUSINESS REPORT1. 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 andreporting under a formal format to internal and external stakeholders. Financial accountingprocesses are structure in a systematic way and ensures compliances of various accountingprinciples, policies, rules and regulations (Alver, Alver and Talpas, 2013). Financial accountinggives a structure for quick assessment of any problems and for taking vital decisions. Followingare the most considerable purpose of financial accounting, as follows:Financial reporting helps to record all financial transactions as per double entrysystem 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 otherstakeholders actual profitability and liquidity situation of business organisation as ona particular date.It ensures compliance of statutory requirements, policies, framework, rules andregulations.It provides a comparative data and records along with previous years’ data andcompetitor’s data and record to evaluate the performance effectively.It serves as a formal report of financial health of business organisation to topmanagement and external users of financial information (Barth, 2015).It helps to classify organisation's various assets and liabilities in order to managethem efficiently.2. Internal and external stakeholder:Stakeholders are person, individual, group, body of individuals or organisation havingdirect or indirect interest in organisation's position, performance, objectives or goals and results.Stakeholder are classified as internal stakeholders and external stakeholders. Internalstakeholders are person, group or individuals within the business organisation having substantialinterest. Whereas external stakeholders are individuals, persons, group or organisation outsidethe 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 discussionabout major internal stakeholders and, possible way through which they are interested infinancial information of organisation, as follows:Owners and shareholders: They are real stakeholders of entity. Owner and shareholdersare holding major shares of a large business organisation and gain profits in case ofincrease in share price. They are highly affected by the performance and financialposition of company. Employees: Employees are most considerable resources of a business organisation andalways wants to achieve growth within the organisation. Employees are havingsustainable stake in business organisation because their salary and career are dependenton performance and growth of organisation.
External Stakeholder: External stakeholders in case of a large business organisation are itscustomers. Suppliers, government, creditors etc. Following is a short explanation about keyexternal stakeholders and, manner through which they are interested in financial information oforganisation, as follows:Government: Government collect various taxes on income of business organisation sogovernment hold stake in profits of entities in form of taxes. Government along with collectionof taxes insures proper compliance of rules and regulation in business organisation.Suppliers: Suppliers of goods and raw material receives payments from businessorganisation and full-fills the demands. They always try to receive payment in scheduled timesand provides credit based on liquidity position of company so suppliers having stake in businessorganisation in form of their payments and sales (DRURY, 2013).Customers: Customers decides an organisation's growth and revenue. They contribute inbusiness by purchasing and by recommending product of company to others. Customers buyproduct or services of organisation by analysing their popularity, quality, performance, growthand beliefs therefore they are holding stake in form of performance and sustainability of businessorganisation.Investors: Investors are most significant for business organisation because theycontribute in expansion and growth of company by investing their money or other financialassets in company. They are highly affected by performance and growth of businessorganisation. Investors are actual stakeholder of company because they always try to getmaximum return from investment made by in business organisation.CLIENT 11. Journal Entries and Ledgers in the book of Alexandra Study:SALES DAY BOOKDATEDETAILS£201803 January2018J Wilson1,200T Cole1,650F Syma2,100J Allen1,020P White2,520F Lane980
09 January2018T Cole680J FOX1,310Credit in sales account in Nominal Ledger11,460PURCHASES DAY BOOKDATEDETAILS£201802 January 2018S.Hood1,450D Main2,060W.Tone960R Foot1,61022 January 2018L Mole1,830W Wright1,910Debit Purchases account in Nominal Ledger9,820PURCHASES RETURNS DAY BOOKDATEDETAILS£201819 January 2018R Foot50Credit purchases returns account in Nominal Ledger50SALES RETURNS DAY BOOKDATEDETAILS£201811 January 2018J Wilson270F Syma410
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