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Financial Accounting Principles Assignment - Airdri company

   

Added on  2020-10-04

30 Pages6507 Words439 Views
Financial AccountingPrinciples

ContentsINTRODUCTION...........................................................................................................................1Business Report...............................................................................................................................11. Financial accounting and its purposes.....................................................................................12. Regulation related with the financial accounting....................................................................33. Accounting principles and rules..............................................................................................44. Accounting conventions related to concepts of consistency and Material disclosure.............6CLIENT 1........................................................................................................................................7Journal entries of David Study’s..................................................................................................7CLIENT 2......................................................................................................................................14Profit and Loss statement for Peter DOO..................................................................................14b) Statement of financial position for Peter Doo as at 31st July 2018........................................15CLIENT 3......................................................................................................................................16a) Profit and loss statement of Bowling Ltd..............................................................................16(b) Statement of financial statement of Bowling ltd..................................................................17C. Accounting concepts.............................................................................................................19CLIENT 4......................................................................................................................................20Client 5...........................................................................................................................................24Client 6...........................................................................................................................................25CONCLUSION..............................................................................................................................26REFERENCES..............................................................................................................................28

INTRODUCTIONFinancial accounting is part of accounting as it keeps track of financial transaction ofbusiness. With the help of pre set guideline, it records, summarized and presented in a financialreport. These transaction are summarized in the preparation of financial statements whichincludes the balance sheet, cash flow and income statement. This is helpful in measuringcompany's overall financial performance. These financial statement are helpful in decisionmaking of organisation. As these are prepared for the external and internal stakeholder in orderto provide actual financial position. To better understand this concept the company Airdri isbeing selected. The main objective of this report is to get information of use of financialaccounting principles while making financial statements. The double entry book keepingsystem , use of trial balance, preparation of final accounts of various client is being prepared anddiscussed in this report. Apart from this profit and loss account, balance sheet, creation of bankreconciliation statements is also being prepared in this present report.Business Report1. Financial accounting and its purposesFinancial Accounting:The financial accounting is a process of recording, evaluating, monitor and controlling ofdifferent transaction of business. There are various financial statements which are prepared, thesestatements are trading and profit and loss account, balance sheet and cash flow statement. Thesefinancial statements are given to internal and external stakeholders of business in order to makethem aware about actual financial position of business (Tsalavoutas, Andréand Evans, 2012). These reports are very helpful as Airdri can get loan from bank on the basis of these reports, thecredit score of company is being determines on the basis of these reports and Airdri can attractnew investors in order to get investment. The main aim of financial accounting is giveinformation to external stakeholders and parties outside the organisation. The different purposeof financial accounting is discussed below:To record business transactions in books of prime entry.Posting into respective ledger accounts.Preparing of profit and loss statement and balance sheet.Income Statement:1

This is one of crucial financial statement which is prepared to determine income andexpenses for a specific given time period. This is helpful for company to know the performanceof business within a given period of time. As main focus of income statement is on revenues,expenses, gains and Losses of Company. Revenues include operating and non operating revenuefor business. The companies are obliged to keep record of its revenues in order to pay off theirexpenses (Peytcheva, Wrightand Majoor, 2014). Purpose of Income Statement:The main aim of this income statement is find out the profit and loss of company for aparticular period.This provides actual and realistic information of financial earning for particular financialyear.Balance Sheet:Balance sheet is a crucial financial statement which is prepared by the companies at theend of an accounting year. This is also known as financial position which displays the detailinformation of assets, liabilities and owner's equity. The balance sheet gives actual financialposition of every business to its external and internal stakeholders of business (Oulasvirta, 2014).Purpose of Balance Sheet:The main purpose of preparing balance sheet is to get actual financial position ofcompany.To know detail of current, non current liabilities and assets of business.Cash Flow statement:Cash flow is a statement which is keep records of all transaction which is related withcash. As company record their cash related transaction which is done by the company is financialyear. This displays the changes of cash and cash equivalent which are influenced by fluctuationin balance sheet. The chartered accountant or an accountant of company is obliged to makerecord of all transaction which are related with cash and its equivalent.Purpose of cash flow statement:To give detail information of cash receipts and cash payments This also provide the net changes in cash which is resulted from operating, investing andfinancing activities.2

2. Regulation related with the financial accountingThere are various rules, regulation and policies which are formulated by the financialbodies, these rules needs to be followed by the business. The regulation assist business tomaintain their financial accounts in effective manner. As it is very important to follow all rulesand regulations in effective way so they can perform their work smoothly. As Airdri is followingall the rules and regulations which is formulated by various bodies. There are some regulationswhich are discussed below:IASB:This stands for International Accounting Standard Board. This is an independent privatesector body which develops and approve the international financial reporting standards for thevarious companies which can direct them at the time of recording transaction in the financialstatements. The IFRS was introduced by IASB to give proper direction to companies while theyare preparing their financial statements.IFRS:The IFRS is International Financial Reporting Standards which was set up for bettermentof accountants and managers in order to expand their business at global level. As this set aworldwide language for various companies. As it has replaced different accounting standardswhich was previously set up. The various IFRS standards are there, some of these is beingexplained below:IFRS 9:International financial reporting standard 9 talks about recording and accounting offinancial instruments in different statements. This gives direction to company to manner in whichall financial assets and liabilities are determined and measured.IFRS 10:This is related with the presentation and preparation of consolidated financial statementswhen an entity controls one or more other entities. As this standard defines the principle ofControl and set control as basis for the consolidation. The standard defined an investment entityand sets out the exception of consolidating particular subsidiaries of an investment entity.As these kinds of standards are formulated in order to prevent the frauds in financialstatement of business organisation. These standards needs to be followed by the organisationwhile preparing financial statement of organisations.3

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