Financial Accounting Principles: A Comprehensive Guide

Financial Accounting Principles
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Contents
Introduction.................................................................................................................................................3
PART A.......................................................................................................................................................4
Introduction.............................................................................................................................................4
1. Financial accounting Meaning.........................................................................................................5
2. Regulations related to Financial Accounting...................................................................................5
3. Description about accounting rules and principles...........................................................................6
4. Conventions and Concepts...............................................................................................................7
Conclusion...............................................................................................................................................8
TASK B.......................................................................................................................................................9
Client 1....................................................................................................................................................9
Client 2..................................................................................................................................................17
Client 3..................................................................................................................................................19
Client 4..................................................................................................................................................21
Client 5..................................................................................................................................................23
Client 6..................................................................................................................................................24
Conclusion.................................................................................................................................................26
Bibliography...............................................................................................................................................27
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Introduction
The main aim of the report is to understand about the various management accounting principles
with the explanation about the financial accounting, and the rules as well as principles of
financial management. The profit and loss statements are also prepared so that the understanding
of the financial accounts can be gained in the better way. These are the accounts which will help
the manager for the strategic decision making and in turn the profitability will be attained.
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PART A
Introduction
This part of the report deals with the understanding about the financial accounting and what are
the rules and regulations which are used in the financial accounting by the organization. With
this the concepts and the conventions are also heighted which are related to materiality disclosure
and consistency.
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1. Financial accounting Meaning
Financial accounting can be defined as one of the field of accounting which can be used for the
reporting and the analysis of the financial transactions. It is also used in the preparation of the
financial accounts (Onuoha, 2012). The various statements are prepared and then summarization
is done according to that which can be done in balance sheets, profit and loss accounts/income
statement or the cash flow statement. These statements are used to evaluate the performance of
the business operations within the organization. It is governed with the International Financial
Reporting Standards as well as the local standards which are used in the country. But the main
standard which is given in the jurisdiction is the Generally Accepted accounting Principles
(GAAP). These are the standards which define the rules as well as regulations which should be
considered by the organization so that the financial statements can be prepared in accordance
with those standards. These financial statements should be prepared accordingly as they helps to
take the strategic decisions for the long term objectives of the organization (Ramamoorti, 2017).
The statements available in the financial accounts are recorded so that the outsiders can get the
information related to the organization so that they can take decisions related to the investment
purposes. The main objective of the financial accounting is to maintain the capital of the various
objectives of the financial reporting.
2. Regulations related to Financial Accounting
There are various regulations which are related to the financial accounting so that the reporting
of the financial accounting can provide the clear and fair view of the financial statements of the
organization (Tool, 2018). But the main of the regulations which are used by most of the
organizations are:
Accounting Standard Board
The accounting standard board was taken in 1990 from the Accounting Standard Committee. The
main aim of the accounting standard board was to solve the problem of the financial reporting
and corporate accounting by providing the accurate framework (Ramamoorti, 2017). The
accounting standards determines that how the particular transaction should be reported in the
financial statements so that the true and the fair view of the financial accounts can be provided.
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These standards can be applied to all kinds of the organization irrespective of their nature. But
the initial aim of developing the accounting standards was to properly define the practices of
accounting so that better understanding can be created between the users and the managers of the
organization who are involved in the preparation of financial accounts (Onuoha, 2012).
Statement of Principles
The statement of principle for the financial reporting was published by the accounting standards
board in 1999. It was believed that the statement of the principle helps in assisting the areas of
issues and rethinking on them so that the judgment regarding sufficiency of the disclosures can
be facilitated (Onuoha, 2012). These statements describe the setters of standards on the view that
the activities should be reported and highlighted in the financial statements. The main motive of
these are to provide the framework which will helps in resolving the issues which are faced by
the accountants (Jones, 2012).
3. Description about accounting rules and principles
The accounting rules and the principles are the basic mechanism through which the financial
transactions are recorded in the financial accounts (Jones, 2012). The set of rules are established
so that the recording can be done according to the set rules and the principles are the common set
of the principles which are to be followed so as to comply with financial statements. There are
basically three rules which are:
Type Debit Credit
Personal The receiver The giver
Real What comes in What goes out
Nominal All expenses and losses All income and gains
The principles of accounting are as follows:
Full Disclosure Principle: It states that all the information should be disclosed by the
organization in their financial statements as all the information is important to the investor and
any other lender and the explanation about each entity should also be provided (Jones, 2012).
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