Accounting Techniques and Principles

The provided document is a detailed report on accounting techniques and principles. It includes a comprehensive analysis of financial statements such as balance sheets, trial balances, and income statements for different clients. The report also delves into the concepts of suspense accounts and clearing accounts, highlighting their similarities and differences. The document provides references to relevant books and journals, as well as online resources for further learning.

FINANCIAL
ACCOUNTING
PRINCIPLES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A. The accounting regulations has been reported for organization to the Line manager...........1
1. Explaining Financial Accounting............................................................................................1
2. Regulations of financial accounting .......................................................................................2
3. Accounting rules and principles..............................................................................................3
4. Conventions and concepts with respect to consistency and material disclosures...................3
CLIENT 1........................................................................................................................................5
1. Drafting the journal for Client 1 for the date 1st May 2017...................................................5
2. Presenting the ledger accounts of all Journal entries..............................................................7
..........................................................................................................................................................8
3. The trial balance of client 1...................................................................................................16
CLIENT 2......................................................................................................................................17
A. Peter piper's profit and loss statement for the year ended 31st December 2017..................17
B. Peter piper's Balance sheet for the year ended 31st December 2017...................................17
Client 3...........................................................................................................................................19
A. Rain tree ltd's profit and loss statement for the year ended 30th September 2017..............19
B Raintree Limited Financial position......................................................................................20
C. Identifying different concepts and principles of accounting principles...............................25
C. Significance of measuring and representing depreciation with context of business giving
brief about both methods of business........................................................................................26
CLIENT 4......................................................................................................................................26
A. Aim for framing bank statement .........................................................................................26
B. Identifying the reasons for recording in bank statements.....................................................27
C. Client's cash book ................................................................................................................27
CLIENT 5......................................................................................................................................28
Forming Sales ledger control account and purchase ledger control account for the year 2017
(May) of Henderson..................................................................................................................28
B. Defining the term Control account.......................................................................................28
CLIENT 6......................................................................................................................................29

A. Suspense account with its characteristics.............................................................................29
B. Preparing trial balance..........................................................................................................29
C. Journal entries.......................................................................................................................30
D. Difference between Clearing account and Suspense accountant.........................................30
CONCLUSION..............................................................................................................................30
REFERENCES..............................................................................................................................31

INTRODUCTION
Financial accounting is considered as very important and essential element of each and
every company. In the present era, different accounting principles, rules and regulations are
followed by every industry and it will be giving great advantage to that specific industry. It gives
brief analysis of funds which are required for performing the various activities related to
business. The present report will be giving brief discussion about different financial regulations,
principles and basic rules for accounting. Further there are six clients which helps in describing
different financial statements such as balance sheet, profit and loss statement, cash flow
statements and so on. There is proper analysis of transactions of purchase and sale for compiling
in trial balance. The clients are giving details about bank reconciliation statement, sales and
purchase ledger account and even there is discussion about suspense account.
A. The accounting regulations has been reported for organization to the Line manager
To: Line Manager
From: Junior Accountant
Subject: Implying the terminology of accounting along with the awareness which is relevant for
regulations of accounting.
Respected Sir,
For improving the activities of transactions which are related to business, there is huge
requirement of analysing the rules, regulations, usage and method of applying different
accounting principles. The operations of the business can be improved by different accounting
techniques and it will directly lead to improve transactional activities. There are different
applications of accounting techniques and its outcome will be very beneficial for allocating
cost, budgeting and forecasting different operational tasks related to the organization or
business.
1. Explaining Financial Accounting
Financial accounting is referred as the most specialized accounting branch which traces
the financial transactions of organization. By using the guidelines which are standards, all the
transactions are summarized, recorded and represented in financial statement or report like
balance or income statement (Hepworth, 2017). The financial statements are issued by company
on daily schedule.
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There are various types of financial statements which are established for general
objective which are as follows:
 Balance sheet
 Income statements
 Statement of stockholder's equity-trusts-formalities
 Statement of cash flows
All the statements are considered as external due to reason that it is used by the persons
who are considered as outsiders. Along with this, all stock holders and even lenders. If the stock
of corporation is traded publicly, then its all financial statements will be circulated and its
information will be with various secondary recipients like investment analysts, customers,
labour organization, employees and competitors. It is very essential to obtain the objective of
financial accounting is not to form the valuation of any of organization. As its main objective is
to give information to others for analysing the valuation of organizations for themselves only.
2. Regulations of financial accounting
Financial accounting consists of different rules and regulations which will be beneficial
for giving a legal framework of accounting. There has been corporate reporting of UK and its
own government regulator as Financial Reporting Council (FRC). It will be giving different
disclosure of financial reporting of all units, government departments and different corporates
(Dung, 2016). In the same series, there are different regulations which are accepted as universal
legal framework like:
IFRS: The information which has been stated by IFRS standards give relevant
framework and forms disclosure of all financial statements which help the organization for
attracting a large number of investors and it will be giving benefit for estimating costs and for
relevant expenses which are caused by operational activities.
FRC: This regulation of financial accounting has been set up by different corporations
of UK by considering accounting standard which are framed for monitoring and executing all
the disclosures related to finance for promoting governance of very high quality.
IASB : The main objective of IASB is to provide adequate information to all the
accounting professionals and guidelines with the perspective of drafting database of financial
and even for providing specific disclosure of all accounts. There has been set up of legal
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framework for financial disclosure which is accepted by every one in the world and it also leads
to attract all the investors who are operating internationally.
3. Accounting rules and principles
There are various accounting principles and guidelines which are founded by Generally
accepted accounting principles (GAAP) which are as follows :
Going concern principle : This accounting principle has assumption about the
organization that it will exist to carry its aims and commitments and it will be not able to
liquidate in coming future. The company will be able to perform in industry for having adequate
growth and for beneficial disclosure about the financial statements.
Full disclosure principle : In this principle, it has been stated that whole information
should be disclosed in financial statement or its notes as it is very important aspect for every
investor. It is the main reason behind many footnotes or endnotes in the financial statements.
Generally organisation mentions its important policies of accounting on the initial note of the
given statement.
Materiality : There are different aspects of financial data which are considered and it
should be generated from authenticate sources and even efforts would be in perspective of
providing the material which is relevant (Ritchi, Fettry and Susanto, 2016).
Matching Principle : In this principle, there is requirement that each and every
organization must perform accounting with respect to accrual basis of accounting. It has need
of matching all expenses with revenue.
Economic entity assumption : All the transactions related to business must be considered
separate from the personal transactions.
Monetary Unit assumption : it has been considered that transactions related to business
must be in context of US dollar because this currency is accepted by whole world or universe
and it has most stable rate of return with fewer fluctuations.
4. Conventions and concepts with respect to consistency and material disclosures
With the perspective of concepts and conventions of the financial accounting there is
presence of different terms like materiality, conservatism convention, full disclosure and
consistency. For understanding the conventions of principles there is requirement of framing
perfect disclosure about different accounts and even for having great understanding of these
concepts are ;
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Material disclosure : There is requirement of disclosing different financial accounts
which includes different material like objects which are required for keeping record of business
professionals by analysing the efficiency and profitability of the organization for accomplishing
the set targets and objectives (Trucco, 2015).
Consistency : In this principle the nature of the organization has been followed and even
trade practices have been formed in market. All the operations related to business will consiste
of perfect consistency and to have great benefit in terms of profit. This principle will lead to
generate more profit and gathering all the returns for long term and giving it back to managers
by providing outcomes which are operational and adequate as well.
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CLIENT 1
This case is all about Alexandra case where different balances of financials are given by
the given client with respect to assessing the trial balance, journals and ledger account of every
financials.
1. Drafting the journal for Client 1 for the date 1st May 2017
The disclosure of journal entries are given here and there is requirement for analysing the
balance sheet and income statement of the year 2017 (May) by Alexander. There are different
accounting techniques which gives benefit for tracking and recording the transactions which are
performed in this duration and for giving summary of transactions of given data set are as
follows :
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2. Presenting the ledger accounts of all Journal entries
Each and every account has different transactional entries with the perspective of every
transaction and item which has been recorded in the accounts of journal. It will be giving great
advantage to the managers and owners for giving brief analysis of costs and gains which has
been obtained from different sources from all the activities related to operations of the
organization. These entries will contribute its major part in framing plans and even for decision
making which will be decreasing the cost and expenses of the organization.
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Nominal Ledger
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Real Ledger accounts
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3. The trial balance of client 1
There are different balances which can be interpreted by organization with different
perspective of entries in Journal and Ledger. These accounts have the basic data set which is
summarized and all the transactions of these balances are part of general accounts. The trial
balance account of Alexandra for the year 2017 (May) is as follows :
Interpretation : With respect to trial balance, there are different transactions of purchase
and sales which are framed in this specific period. The assets which were reevaluated in the
above trial balance as van, premises, inventory and fixtures. 10930 is referred as sales and in the
same series purchase is of 38320 (Li, Sougiannis and Wang, 2017). It is clearly viewed that
purchase are higher than sales then in other words it can be elaborated as client has more
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expenses as compare to income. The accounting principles which are directly issued by different
boards and institutions with the context of trial balance which is framed. The transactions are
recorded under the basic framework and format of the trial balance is given by different
principles and concepts of IASB, IFRS and GAAP.
CLIENT 2
There are different balances given by Peter Piper as Client 2 for the given period of 31st
December 2017 which has to give deep analysis of financial statements like income statement
and in the same context financial position, performance and stability for given period.
A. Peter piper's profit and loss statement for the year ended 31st December 2017.
B. Peter piper's Balance sheet for the year ended 31st December 2017.
The individual or corporation's financial position has to be observed and analyzed by
considering profit and loss statement by some transactions which are relevant and held in this
specific period. These transactions will be giving advantage to each and every organization for
attaining adequate growth and even equity and strength of capital can be analyzed for perfroming
efforts related to operations of the organization. The financial position of Peter Piper can be
disclosed in very efficient manner by :
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Client 3
The client Raintree limited has provided trial balance of different accounts which are
transited in the given period as 30th September 2017 which has to be properly analyzed and
calculated for giving income statement, balance sheet and depreciation with the context of both
methods and even there is brief discussion about different accounting concepts like prudence and
consistency.
A. Rain tree ltd's profit and loss statement for the year ended 30th September 2017
The client has given trial balance with several measurements and calculations of different
expenses and income raised because of sales, production and even from the activities of specific
period which are directly linked to the operations of business (Shroff, 2017).
Statement of Profit and Loss as on 30 September 2017
B Raintree Limited Financial position
Raintree ltd has given basic specifications by considering different information with the
context of balance sheet and even it has been represented in trial balance, profit and loss
statements with perspective of business.
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Balance Sheet as on 30 September 2017
C. Identifying different concepts and principles of accounting principles
The organization follows various accounting principles and concepts for preparing
different financial statements of their own and it should be originated from perfect and
authenticate format. It will be giving positive impact to each and every corporation for
improving the activities of operations related to business and it should be easily understandable
by everyone. There are two major concepts which can be discussed here such as :
Prudence : This concept gives the significance that business will not consider the amount
of those transactions which are held in this specific period but even there should be no perfect
track of all those transactions (Dung, 2016). The liabilities of business must be properly
analyzed. It can be concluded that there is not any requirement of framing efforts which will be
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giving benefit to business and along with this, concepts and principles of these tasks should be
properly understood by business.
Consistency : The operational activities of business should be performed in very
consistent way and along with this, sufficient efforts will be giving the best outcome to the
business. By considering these principles, organization is liable for disclosing the cost which is
predicted on daily basis. These disclosures will help the organization for attaining huge attraction
of stakeholders and even there will be more adequate efforts for improving the future (Sales
Ledger Control account. 2018.).
C. Significance of measuring and representing depreciation with context of business giving brief
about both methods of business.
Depreciation can be defined as fall in value of asset and it will be giving advantage to business
for creating efforts and for representing the asset value in given current time. The main objective
of summing deprecation in these statements is about devaluation of assets with the value of
purchase. The two methods of deprecation are as follows:
Written down method : In this method deprecation has been measured for increase in
proportion with increase in value of charges of depreciation and even for the balance which has
been estimated for completing useful life of all these assets (Küpper and Pedell, 2016).
Straight line method : In this method depreciation has been charged over all the assets on
technique which is default and in this fixed amount of depreciation has been deducted from
assets for remaining period.
With the context of analyzing profit and loss statement of the following business, there is
presence of different transactions which are recorded and then net profit of 10000 has been
generated with sufficient balance. There are different profit and losses which are framed and
recorded and it will be giving outcome as perfect balance.
CLIENT 4
A. Aim for framing bank statement
The main objective of representing the bank statement in the given period for Kendal,
there is presence of different transactions which helps in understanding of expenses and gains
with given specific data set which will lead to understanding of flow of money (Dutta and
Patatoukas, 2016). It will be giving advantage to business for preparing efforts and even for
extracting information for disclosure.
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B. Identifying the reasons for recording in bank statements
There are various causes which will be giving advantage to organization for identifying
the different factors which will be highly influenced for this reason of recording all these
transactions like analyzing deposit transit, interest charged, outstanding cheque and dishonor of
cheque over the specified period.
C. Client's cash book
Bank Reconciliation statement
Cash book
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CLIENT 5
Forming Sales ledger control account and purchase ledger control account for the year 2017
(May) of Henderson
Purchase Ledger control account
Sales Ledger control account
B. Defining the term Control account
It is referred as summary account in general ledger. This account consists of sum total of
every transactions which are stored individually in subsidiary level of ledger accounts. Usually
these accounts summarize accounts payable and accounts receivable as it consists of transactions
in very large volume and there is requirement of separating the subsidiary ledger instead of
gathering general ledger in very detail information (Control Account, 2018). The balance in
context of control account must match the aggregate related for subsidiary ledger and if the
situation is vice versa then there is probability that journal entry is framed in control account
which is absence in subsidiary ledger.
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CLIENT 6
A. Suspense account with its characteristics
Suspense account indicates the account which is prepared for extracting the mistake
which is created in previous year. This nature of this account is temporary and for very less
duration. After finding these problems and resolving issues there will be absence of any single
amount in this account. While preparing this account, it should be always considered that its
duration is very less, as it should be rectified as soon as possible. Its deadline for becoming zero
is before drafting final accounts and these mistakes should be resolved simultaneously.
B. Preparing trial balance
The particular list should be identified with closing balance of the account of ledger at
some given date and it is the most prior step for drafting financial statements. Usually the
preparation of trial balance and all financial statement in the end of accounting period. Basically
there are two sides in trial balance i.e. debit side and credit side. Various assets are included in
debit side and all liabilities, expenses and income consists in credit side (Trial Balance, 2017).
Interpretation : The present statement is considered as a trial balance of the year end.
The particulars side gives the names of account about its extraction. Generally it is applicable for
all the entries which are drafted in right manner and if debit and credit side are not matched then
there is some error in trial balance.
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C. Journal entries
Suspense account
Particulars Debit (in
£)
Particulars Credit (in
£)
Whites 750 Balance b/d 330
Jones 420
750 750
Trial balance after adjusting suspense figure
Particulars Debit Credit
Purchase 700
Sales 1100
Rent paid 250
Cash at bank 840
Travel expense 160
Receivables (540+ 420) 960
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Payables (350+750) 1100
Capital 710
Total 2910 2910
D. Difference between Clearing account and Suspense accountant
Suspense Account Clearing Account
Clearing and suspense account both are intermediate.
Clearing and suspense account both are temporary.
Problem has been resolved with ambiguity. Certain event is occurred till happening.
Zero has been balanced by posting in account
which is correct.
Zero has been balanced by posting in account
which is final.
Balance indicates the transactions in suspense
or resolution.
Balance indicates the transactions in waiting
settlement.
Track the problems or errors. Track the transactions which are ongoing.
CONCLUSION
From the above report it has been concluded that different concepts and principles of
techniques of accounting has to be adopted by different professionals of organization. The report
is highlighting the financial statements such as balance sheet, trial balance and income statement
of different client with given specification. Further it can be concluded that suspense and
clearing account have very fewer similarities but they both are very different from each other in
many aspects.
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REFERENCES
Books and Journals
Dung, N. V., 2016. Value-relevance of financial statement information: A flexible application of
modern theories to the Vietnamese stock market. Quarterly Journal of Economics. 84.
pp.488-500.
Hepworth, N., 2017. Is implementing the IPSASs an appropriate reform?. Public Money &
Management. 37(2). 141-148.
Küpper, H. U. and Pedell, B., 2016. Which asset valuation and depreciation method should be
used for regulated utilities? An analytical and simulation-based comparison. Utilities
Policy. 40. pp.88-103.
Li, S., Sougiannis, T. and Wang, I., 2017. Mandatory IFRS Adoption and the Usefulness of
Accounting Information in Predicting Future Earnings and Cash Flows.
Ritchi, H., Fettry, S., & Susanto, A, 2016. Toward Defining Key Success Factors of E-
Government and Accounting Information Quality: Case of Indonesia. International
Journal of Accounting Research. 2(1). 20-35.
Shroff, N., 2017. Corporate investment and changes in GAAP. Review of Accounting
Studies. 22(1). pp.1-63.
Trucco, S., 2015. Premises for the Convergence of Financial Accounting and Management
Accounting. In Financial Accounting (pp. 41-64). Springer, Cham.
ONLINE
Control Account. 2018. [Online]. Available through
:<https://www.accountingcoach.com/blog/accounts-receivable-control-account-subsidiary-
ledger>.
Sales Ledger Control account. 2018. [Online]. Available through
:<https://www.accountingcapital.com/books-and-accounts/sales-ledger-control-and-
purchase-ledger-control/>.
Trial Balance. 2017. [Online]. Available through :<http://accounting-simplified.com/trial-
balance.html>.
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