Financial Accounting Principles: A Comprehensive Guide

Financial Accounting Principles
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Contents
Introduction.................................................................................................................................................3
PART A.......................................................................................................................................................4
Introduction.............................................................................................................................................4
1. Define financial accounting.............................................................................................................5
2. Explain regulations related to financial accounting.........................................................................5
3. Describe accounting rules and principles.........................................................................................6
4. Explain the conventions and concepts related to consistency and material disclosure.....................7
Conclusion...............................................................................................................................................8
Client 1........................................................................................................................................................9
Client 2......................................................................................................................................................16
Client 3......................................................................................................................................................18
Client 4......................................................................................................................................................21
Client 5......................................................................................................................................................23
Client 6......................................................................................................................................................24
Conclusion.................................................................................................................................................26
Bibliography...............................................................................................................................................27
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Introduction
The report deals with the explanation of financial accounting principles. With this various
concepts, rules and regulations which are associated with it are also highlighted. The financial
statements including profit & loss, bank reconciliation statement and trail balances are also
equipped so that the practical perceptive of it can be gained.
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PART A
Introduction
The part of report explains about the debit credit rules that can help in predicting the actual
performance with this it also explains about the principles and conventions related to consistency
and disclosure of all materials.
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1. Define financial accounting
The financial accounting helps in tracking the financial transactions of organization. These
financial transactions are recorded and presented in the financial reports which help the
managers of organization to take the financial decisions. The statements which are prepared to
record the financial transactions are the income statement, balance sheet, profit & loss statement
and the cash flow statement (Tools, 2018). These statements are used by the managers of the
organization to evaluate and determine the financial performance and the position of
organization. The main standard which is used is the generally accepted accounting principles
which are also known as the GAAP. These statements are prepared so that the clients.
Employees, stakeholders and investors can take the strategic decisions for the organization. The
financial accounting is different from the management accounting as the management accounting
helps the insiders to take the decisions but the financial accounting helps the outsider managers
to take the strategic decisions (Mamić Sačer, 2015). It helps in maintaing the capital within the
organization so that the operations of organization can go smoothly. The international financial
standards are the one which is used by all the organizations but with this thee local standards are
also used which are prevalent within the country. The components of the financial accounting are
used so that the cash can be tracked and the revenues of the organization can be increased which
in turn helps in maximizing the profits of organization (Ribeiro, 2016).
2. Explain regulations related to financial accounting.
The regulations of the financial accounting are mandatory for all the organizations to follow so
that the standard reporting can be done and the comparison of the financial accounts can easily
be predicted (Ribeiro, 2016). It also provides the real picture of financial position.
International Accounting Standard Board: These are the statements which are prepared so
that the transparency and the accountability can be maintained within the financial framework of
the organization (Onuoha, 2012). It was founded on April 1, 2001 with the International
accounting standard committee. The main aim of these standards is to develop the interest of
public to maintain the high quality of standards by making it understandable (Onuoha, 2012).
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Statement of Principles: The statement of principles is the one which plays the vital role so that
the equality and diversity can be promoted within the organization (Mamić Sačer, 2015). These
are used by the accounting standard board so that the betterment for the policies and methods can
be maintained. These principles help in rethinking for the various policies of the organization so
that sufficiency and the integrity can be maintained within the organizational context. These
specially help the accountants of the organization for resolving the issues which are faced by
them so that the effectiveness within the organization can be maintained (Onuoha, 2012).
3. Describe accounting rules and principles.
The accounting rules and principles help in ensuring that the double entry book keeping is done
in the appropriate manner so that the accountability within the financial transactions can be
maintained. The accounting rules are:
 Debit the receiver and credit the giver: This approach is basically used in the personal
account which believes that the inflow of cash in the organization is debited and the
outflow is credited (Tools, 2018).
 Debit what comes in credit what goes out: All the transactions which shows that the
amount has been received are debited and the transactions which shows that there is the
outflow of cash is credited. This concept is used in case of the real accounts.
 Debit all losses and expenses and credit all income and gains: This is the nominal
account which uses the expenses, losses and income of the organization (Mamić Sačer,
2015). When the expenses are reduced it means that the profit of the organization is
impacted thus these are debited while when the incomes are received the profit is
increased and thus these transactions are credit as they increase the revenue of the
organization (Donelson, 2016).
Accounting Principles:
Matching Principle: The matching principle states that all the transactions which are related to
the expenses should match the revenues so that the balances of debit and credit can be matched.
Both the expenses and the incomes should be recorded in the same period. There the cost and the
expenses should not have the effect relationship with the sales and revenues.
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