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Financial Accounting Principles Assignment Solved (Doc)

   

Added on  2020-10-22

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FINANCIAL ACCOUNTINGPRINCIPLES

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1A. Report of accounting regulations to line manager of organisation........................................11. Describing financial accounting..............................................................................................12. Financial accounting regulations.............................................................................................23. Principles of accounting with its rules....................................................................................34. Concepts related to material disclosure and consistency........................................................3CLIENT 1........................................................................................................................................41. Journal entry of client 1 as per date 1st may 2017...................................................................42. Drafting ledger account of above journal entries....................................................................73. Client 1's trial balance...........................................................................................................15CLIENT 2......................................................................................................................................16A. Profit and loss statement of Peter Piper for year ended 31st December 2017......................16B. Balance sheet of Peter Piper for the year ended 31st December 2017..................................17CLIENT 3......................................................................................................................................18A. Income statement of Raintree limited for the year ended 30th Septmeber, 2017.................18B. Financial position of client 3 (Raintree limited)...................................................................19C. Justifying various principles and concepts of accounting principles...................................24C. Importance of deprecation by both methods with context of organization..........................25CLIENT 4......................................................................................................................................25A. Objective of preparing bank statement.................................................................................25B. Justification related to recording of bank statements...........................................................26C. Cash book of client...............................................................................................................26CLIENT 5......................................................................................................................................27Drafting purchase ledger control account and sales ledger control account of Henderson forMay 2017..................................................................................................................................27A. Describing control account...................................................................................................28CLIENT 6......................................................................................................................................28A. Define suspense account with features.................................................................................28B. Drafting trial balance............................................................................................................28C. Journal entries.......................................................................................................................29D. Clearing account vs Suspense account.................................................................................29CONCLUSION..............................................................................................................................29REFERENCES..............................................................................................................................31

INTRODUCTIONIn present era, financial accounting is determined as the most important element oforganization. The present report is giving brief discussion on various principles of accounting,rules and regulations which are followed by all the industries. While following these conceptsalong with regulation are giving great advantage for drafting financial performance of their own.These concepts, rules and regulation will lead to achieve great success of the organization interms on monetary aspect and even brand image. The report is discussing about six clients inwhich all the financial statements such as trial balance, balance sheet, profit and loss statementare covered with proper journal entry and ledger account. This report has also highlighted oncontrol account that is sales ledger control account and purchase ledger control account.A. Report of accounting regulations to line manager of organisation To : Line ManagerFrom : Junior accountantSubject: Expressing the term accounting and its awareness with respect to accountingregulationsRespected Sir,There is essential need of analysing all the rules and regulations as well as differentmethods for applying various principles of accounting for improving the transactions which arebased on activities which are directly linked to business. Different accounting techniques helpin improving different business operations and all transactional activities. The outcomes of suchtechniques will be beneficial for allocating cost, predicting and budgeting with differentoperational tasks in context of business and organisation.1. Describing financial accountingFinancial accounting refers to the area whose special emphasis is on giving usefulinformation to all external users. It is replicated as a way for reporting each and every businessactivity and all important information related to finance has been provided to creditors,investors and various people who are considered as outsiders but are relevant for organization.Outsiders include creditors and investors as they use financial information of organization formaking appropriate decisions (Shroff, 2017). The set of financial statements which are beenissued to external users by organisation. Financial statements are of different types and which1

provided very general objectives such as Profit and loss statement, Balance sheet, statement ofcash flow and statement of stockholder's equity. All the financial transactions are tracked withthe help of financial accounting. It can be summarized, recorded and presented in the financialstatements which are stated above. The financial statements are issued on daily schedule whichhave been set by organization. As all these are used by outsiders, stock holders and evenlenders.2. Financial accounting regulationsThere are various rules and regulations in financial accounting which will be givinggreat advantage for providing legal framework for accounting. In UK, there is presence of itsown government regulator which is named as Financial Reporting Council. There are variousdisclosure about all units, corporates and different departments of government (Basicaccounting principles. 2018). In the series of regulations, there is the presence of different legalframeworks which are accepted universally:IFRS: International Financial reporting standards can be defined as standards which areissued for giving a specific global language for the affairs of different business and so, in thiscontext, organizations will be able to understand the accounts and even it will be giving goodcontribution towards comparison. IFRS standards provides a basic framework which willinclude complete information in the perspective of financial statement and it will lead to attracta high number of investors.IASB: International Accounting Standards Board leads to private sector body and it alsohas its significance in IFRS Foundation. It performs its various operations in technical mattersin the context of IFRS Foundation. The technical agenda has been pursued for developing fullliberty and even requirements of consultation with different trustees and public. In other words,its main aim of IASB is to give information to accounting professionals and for framingdatabase of each financial with disclosure (International Accounting Standards Boards. 2017).FRC: As discussed above, it is the regulator of UK for the purpose of audit, accountingand actuarial professions and even for UK's corporate governance. It considers accountingstandards which are framed on the basis of executing all financial disclosure who are closelyrelated to accounting (Financial Reporting Council. 2017).GAAP: Generally accepted accounting principles are the rules and procedures which are2

defined by industry of professional accounting and they are mostly adopted by all UScompanies who are traded publicly (GAAP generally accepted accounting principles. 2018).3. Principles of accounting with its rulesThere is presence of various accounting principles which are developed for basic usageand on the basis of modern accounting. Some basic principles are as follows :Accrual principle: All the accounting transactions should be recorded in that specificaccounting period when it has been actually occurred instead of period cash flow which isassociated with it.Matching principle: While recording revenue, all the expenses related to same timemust be recorded. This refers as a cornerstone of principle of accrual basis of accounting.Cost principle: In this concept, all assets, liabilities and equity investment should berecorded at their original purchase price. Economic entity principle: The transactions should be recorded separately of bothbusiness and its owners. It will be preventing the mix match of assets and liabilities of variousidentities.Going concern principle: Business should stay in operation for future which can beeasily predictable as there is requirement of proper justification of deferring some expenses forrecognition.Full disclosure principle: On the basis of this principle, all the financial statementsrelated to business must be included and it should be understandable for each reader. Variousdisclosures of financial information should be implied by accounting standards (FinancialAccounting. 2018).Monetary unit principle: Business should always record those transactions which canbe elaborated with respect to currency.4. Concepts related to material disclosure and consistencyIn the present era, there are different concepts and conventions related to financialaccounting such as materiality, full disclosure, conservatism convention and consistency. Forhighlighting these principles, there is need to draft appropriate disclosure on the basis of variousaccounts such as : Materiality principle: The specific transactions must be traced in accounting records3

which include various material required for accounting record and if there is absence of doingthis activity, then it has been altered in process of decision making for reading the financialstatement of company. This concept is usually known as very vague because it is tough toquantify (Materiality Principle. 2018).Consistency: This principle leads to be consistent. In other words, accounting principlewhich has been adopted once should remain consistent until better principle or method has notbeen generated. If there is mismatch in accounting principle from year to year then it will begiving long term financial results very difficult for recognize.CLIENT 11. Journal entry of client 1 as per date 1st may 2017The journal entries are disclosed below as they are also required for analysing balancesheet and profit and loss statement of May 2017 with context of Alexander. The transactions canbe recorded and traced with various techniques of accounting who are framed in specificduration and transactions which are summarized in the given data set are:4

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