FINANCIAL ACCOUNTING PRINCIPLES TABLE OF CONTENTS INTRODUCTION 1

FINANCIAL ACCOUNTING
PRINCIPLES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Demonstrating the purpose and concept of financial accounting...........................................2
2. Ascertaining financial accounting regulations........................................................................2
3. Determining the 10 accounting rules and principles that will be governed in financial
statements....................................................................................................................................4
4. Defining concepts of material disclosure and consistency.....................................................6
CLIENT 1........................................................................................................................................6
A. Journal entries........................................................................................................................6
B. Ledger accounts......................................................................................................................8
C. Trial Balance........................................................................................................................23
CLIENT 2......................................................................................................................................24
A. Drafting an income statement..............................................................................................24
B. Preparing a statement of financial position..........................................................................25
CLIENT 3......................................................................................................................................26
A. Preparing and Income statement..........................................................................................26
B. Presenting a statement of financial position.........................................................................27
C. Defining the accounting concepts of Prudency and Consistency.........................................27
D. Demonstrating the purpose of depreciation as well as methods used in analysing
depreciation on assets................................................................................................................28
CLIENT 4......................................................................................................................................29
A. Ascertaining the purpose of preparing BRS statement........................................................29
C. Preparing the cash book (bank only) for Kedal Ltd.............................................................30
CLIENT 5......................................................................................................................................33
A. Drafting and balancing the accounts....................................................................................33
CLIENT 6......................................................................................................................................34
A. Purpose of suspense accounts..............................................................................................34
B & C. Drafting the trial balance with consideration of suspense accounts.............................35
D. Differentiating among Suspense Account and a Cleaning account.....................................36
CONCLUSION..............................................................................................................................36
REFERENCES..............................................................................................................................37

INTRODUCTION
Reports and various dataset are being prepared with the motive of creating proper records
of all transactions. Determination of funds, costs and requirements of bringing alternatives which
will reduces these expenses that will be gathered from drafting proper transactional statements.
Disclosure of financial database on the other side plays a significant role in bringing information
among stakeholders associated with business.
In the present report, there will be brief discussion regarding financial accounting
concepts, principles and various regulations. Along with this, there will be presentation of
various data set and accounts such as income statement, financial position, bank reconciliation,
journal, ledgers, trial balance, etc. Further, motive is based on resolving all accounting and
recording issues that will be addressed with proper justification as well as suggestions given to
various clients.
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To: Line Manager
From: Junior Accountant
Subject: Usefulness of financial accounting reports along with its principle and concepts
Sir,
Addressing the facts which insists that, financial disclosure and preparation of various
accounts will be helpful and adequate in making appropriate operational practices. It will be
useful and satisfactory in making profitable changes and determination of all facts. Influences of
various principles, concepts etc. as proposed by international standards, boards and authorities.
Therefore, there will be discussion based on financial accounting concept along with the rules and
regulations which will have influences of all these activities.
1. Demonstrating the purpose and concept of financial accounting
To make an effective economic decision which helps in bringing appropriate details regarding
financial scenario of business. Defining the concept of financial accounting which will be
beneficial in influencing better operational control. Analysing the performance of organisation on
which liabilities of firm is needed to be managed and monitored by the business professionals.
Considering the imapcts of various accounting standards which are based on principles and
regulation that funnels accounting professional with information and demonstration of all the
activities (Johnston and Petacchi, 2017). It is a record of all detail and information relevant with
stockholders, suppliers, banks, employees, government agencies etc. Making disclosure of
accounts will be beneficial in bringing information regarding financial status of industries in long
run.
It is necessary that accounting professionals or auditors in organisation present a fruitful
disclosure which will be appropriate and adequate as per meeting goals in a right time. There has
been various rules and regulations which brings issues and monitoring activities of the firm.
Influences of accounting standard such as GAAP, IFRS, FRC, FRSB etc. will be supporting in
drafting the statements and disclosing financial information among company stakeholders in the
authentic manner.
2. Ascertaining financial accounting regulations
There are various statements which have been prepared in adequate and prominent way as per
making better records of all the transactions. Implication rules and regulations which will be
fruitful in bringing an appropriate framework and structure of setting database in various accounts
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of entity (Nilsson and Stockenstrand, 2015). Aim behind setting the regulations and rules behind
financial disclosures as well as reporting techniques is for bringing a uniformity as well as legal
structure to present the data set. This will be universally accepted by individuals in all nations.
Thus, there are some countries who has their own standards along with international standards on
which UK is one of them (Dutta and Patatoukas, 2016). To facilitating the rules and regulations
among accounting professionals which bring them better monitoring and operational control in
entity such as:
International Financial Reporting Standards (IFRS):
In relation with setting the permanent goal language for the business affairs and the
organisation which are operating activities in capital markets. This standard of preparing the
financial reports are enforced by IASB board which brings the appropriate information,
framework and structure to the businesses in preparing the disclosures (Mullinova, 2016).
Guidelines will be based on drafting final accounts such as incomes statement, balance sheet,
changes in equity, cash flows etc. have proper structured transactional entries which are needed to
be made and prepared accordingly (Henderson and et.al., 2015). On the other side, it will be
profitable to the industries in generation of international investors as these statements being
accepted universally. However, it has been aimed at disclosing the financials of business with
consideration of all the issues and operational practices.
International Accounting Standard Board (IASB):
This is the board, which consist of the information that has an influence in operations and
records of all transactions are based on proper ethics and morals for recording them in the books.
This board presents appropriate guidance and framework among professionals for the purpose of
making better understanding relevant with books and entries associated (International Accounting
Standard Board, 2018). It enables accounting professionals in preparing proper set of books and
accounts which will be used for the internal as well as external purpose (Beatty and Liao, 2014).
For instance, recording income and expenses in income statement as well as in balance sheet there
will be recording based on assets and debts of firm in the proposed period.
Financial reporting council (FRC):
It is the personal boards or reporting council of UK and Republic of Ireland. It approaches
towards facilitating the authentic and adequate corporate governance and reporting of financial
accounts of businesses (Diouf and Boiral, 2017). It has been incorporated with various operating
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bodies such as Accounting standards board, financial reporting review panel, Accountancy and
actuarial discipline board, professional’s oversight board, auditing practices board and board for
actuarial standards (Hope, Thomas and Vyas, 2017). However, it consists of adequate corporate
governance and valuable practices, which will help the industries and investors in relation with an
appropriate control over the financial aspects of a business.
Financial Reporting Standards Board (FRSB):
Preparation of all the reports based on recording with appropriate influences of all the
rules which are stated in its guidelines (Hoitash and Hoitash, 2017). The motive is for reflecting
most adequate appropriate reports that will be beneficial and adequate in meeting the goals of
business in the right time. Execution and monitoring of corporate reporting will be based on
influences of IASB.
Generally Accepted Accounting Principles (GAAP):
Considering all the accounting principles which have been addressed and used by auditors
and accounting professionals as per making better operational control and determination of all the
variables (Johnston and Petacchi, 2017). It has the influences in relation with preparing the data
set and compelling with proper consideration of all the principles and rules which will be helpful
in making appropriate records of transactions.
3. Determining the 10 accounting rules and principles that will be governed in financial
statements
Rules and Regulations have been associated with business as per making appropriate
determination of all records and operations. However, these principles are based on adequate
operational increment such as rise in industrial efficiency, stable financial activities etc. However,
it has been considered by the professionals that they must appropriate execution of all the
resources which will have positive influences in each record of transactions. However, there will
be discussion based on 10 principles of accounting such as:
Time period assumption: Preparation of the statements as well as their disclosure will be
based on implicating adequate time frame in practices. Thus, disclosing the accounts will be
based on periodical basis such as half yearly, quarterly and annually.
Economic entity: It has been considered here that, sole proprietor and business units are
the single units which has separate books of accounts and determination of the all the personal
and professional transactions (Nilsson and Stockenstrand, 2015). The term which insist that the
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business is itself a separate legal entity.
Monetary unit: The final disclosure of the books and accounts will be based on recording
all the transactions in US dollars (Dutta and Patatoukas, 2016). Thus, it is the international
currency which brings the appropriate information regarding the financial conditions of business
in the legal manner.
Cost principle: This principle governs that all the transaction which has been recorded in
the books must have transactional entries after the transaction incurred. Additionally, it will be
helpful in analysing the costs incurred in all the transactions (Accounting Principles, 2018).
Full disclosure: It ascertains that all the financial statements are needed to be well
designed and framed and they must have proper disclosure of them. Therefore, there will be
preparation of all statements such as income statement, balance sheet, cash flows and statement of
change in equity (Mullinova, 2016).
Going concern principle: It has been assumed here that the business will have on-going
operations and the operations will be performed by them on the regular basis (Khan, 2015). It can
be said that the life period of business undefined and it will operate for the longer terms.
Matching: This principle consists of operations, which assists that transactions must be
recorded at dual accounts. Thus, if an entry has debit balance than there will be one credit
transaction for the same (Macve, 2015). Similarly, after completion of all the transactional
entries in various accounts these are needed to be compiled and the balances are needed to be
match in balance sheet and trail balances.
Revenue recognition: It has been assumed that the transactions are needed to be entered in
books must be completed such as the purchase has been made as well as sales has been incurred.
It helps in reducing the manipulation of various accounts.
Conservatism: There have been records of the transactions that will be adequate and
helpful to the business professionals in influencing the alterations in the accounts. The alteration
will be used in making less net income of less amount of assets which approaches the accountant
in being unbiased and have objections in the practices (Beatty and Liao, 2014).
Materiality: It can be said that the disclosure of all the accounts has been prepared on the
basis of making appropriate concrete evidences such as bills, invoices and the transactions which
ensures the existence of such entries (Diouf and Boiral, 2017).
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