Financial Accounting Principles: Book-keeping, Journals, Ledgers, and Control Reconciliation Statement

Financial Accounting
Principles

Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Define book-keeping and how are the business transactions maintained in this system of
accounting...................................................................................................................................3
2. Define book-keeping, books of prime entry, journals and ledgers.........................................4
3. Extract the trial balance with the help of the data of ledger balances provided......................6
4. Prepare the Bank reconciliation statement with the help of data given. ................................7
5. Define the Role of suspense and control account. Also mention the difference between
them.............................................................................................................................................7
6. Prepare the control reconciliation statement for the accounts receivables and payables of the
business. .....................................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
In this report it discuss about the concept of bookkeeping and the various of business
proceedings which are truly maintained in the accounting system of organization (Abdullah,
Stroulia and Nawaz, 2020). This is very significant to record the transactions in the debit and
credit side of the balance sheet because this statement show the company financial position and
ensure that total of both the assets and liability are similar if its not similar then its shows
irrelevancy in accounts. In another task it define the books of journals, ledgers and prime entry.
Afterwards it describe the meaning of trial balance and with the assistance of information it
provides the ledger balances and its important to create or put balance correctly in the trial
balance because the income statement of the firm also depends upon the accurate trial balance.
Also in another instance it prepare the bank reconciliation statement for the provided
information. Apart form this, it mainly explain the role and objective of suspense and control
account and show the comparison on them also. At last it create the control reconciliation
statement through the assistance of accounts receivable and payable.
MAIN BODY
1. Define book-keeping and how are the business transactions maintained in this system of
accounting.
Double entry book-keeping system is defined as a system which explains that there are
two parts to every transaction that occurs and affects two ledger accounts as a result. This
system deals in two or more than two accounts for each and every transaction or dealings that
takes place. The two effects are in the form of debit and credit (Cao, Jia and Manogaran, 2019).
Hence, there comes about two parts in the form of an equal and an opposite transaction affecting
two respective accounts. This system bases on the accounting equation Assets= Liability +
Equity. Hence any transaction that takes place, it has two respective effects. If it impacts the
asset side it needs to affect and change the amount of liability also so that the equation can be
balanced.
The respective principles that are required to be followed are:
 Debit is recorded on the right and credit in the left.
 Every debit constituent should have a comparable credit element.
 Debit account gets the benefit and credit account provides the benefit.

The steps involving in double entry system of recording are:
1. Procurement of written documents: The first step in this system involves attainment of all
the documents that are proof of the business transactions that took place from the
accounting source document.
2. Recording in journal: The initial place where the transactions are recorded is in the books
of original entry as journal books of the company also referred as the day books
(Chandra and Siswanto, 2021). It gives an overview of the transaction and of the accounts
in ledger that are affected by the transaction.
3. Updating ledger accounts: The respective transactions are then written down in the
bookkeeping ledger accounts in a T structure. Each account represents a different ledger
and affects either of the two sides.
4. Debit or credit: The transactions are recorded in the ledger accounts through debit or
credit methods. With being recorded as a debit and then as a credit in the respective two
different ledger accounts. The bookkeeper should be well versed with the concepts to
make sure that the entries in the books are correct.
5. List in charts of accounts: All the different accounts in ledgers are all kept at a single
place named as chart of accounts with all the transactions in the ledger maintained,
recorded and created at a single place.
6. Support through mathematical formula: all the ledger accounts are then supported and
checked through the accounting equation formula to ensure the debits and credits
done in the entire book keeping are true and correct (Doron, Baker and Zucker, 2019).
This helps to then establish a trial balance.
7. Trial balance : If all the balances in ledger are matching and correct, the trial balance
shows up. With all the debits and credit sides match with the amount. If not, then
corrections need to be made so that a rectified trial balance could be generate.
8. Formulation of financial statements: After the completion of making of the trial balance,
then the financial statements are prepared such as income statement and balance sheet.
In the end, it also involves, making adjustment entries, rectifying if any mistakes and preparing a
modified trial balance and preparing for closing entries to ensure correct financial statements.