Accounting Principles and Practices

The assignment covers essential topics in accounting, including the significance of following accounting principles, the reliability of double-entry bookkeeping over single-entry systems, and the mandatory preparation of financial statements such as cash flows, income statements, and balance sheets. It also highlights the role of bank reconciliation statements and purchase/sales control accounts in maintaining accurate records and monitoring debtors/creditors positions. The assignment is a valuable resource for students seeking to understand key concepts in accounting and their practical applications.

Financial Accounting
Principles

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Financial accounting and its purposes ....................................................................................1
2. Regulation of financial accounting..........................................................................................2
3 . Accounting principles & rules : .............................................................................................2
4. Conventions related to consistency and material disclosure...................................................3
CLIENT 1........................................................................................................................................4
(a) Journal Entry in the books of David Study...........................................................................4
(b) Ledger Accounts....................................................................................................................6
(c) Trial Balance as at 31st January, 2018................................................................................13
CLIENT 2......................................................................................................................................14
(a) Statement of profit and loss for Peter Hampau for the year ended 31st July 2018 .............14
(b) Statement of financial position for Peter Hampau as at ended 31st July 2018 ...................15
CLIENT 3......................................................................................................................................15
(a) Profit and loss account of Bowling Limited.........................................................................15
(b) Balance Sheet of Bowling Limited......................................................................................16
(c) Accounts concepts such as consistency and prudency.........................................................17
(d) Depreciation and its methods..............................................................................................17
Client 4...........................................................................................................................................17
(i) Purpose of bank reconciliation statement ............................................................................17
(ii) Prepare Durrell Ltd's updated cash book for December 2017.............................................18
(iii) Bank Reconciliation Statement as at 31"t December 2017................................................19
CLIENT 5......................................................................................................................................19
(a) Books of Henderson.............................................................................................................19
(b). Control account...................................................................................................................20
CLIENT 6......................................................................................................................................20
A. Suspense Account.................................................................................................................20
B. Drafting of Trial Balance......................................................................................................21
C. Journal entry for suspense account........................................................................................21
D . Difference between clearing account and suspense account ..............................................21

CONCLUSION..............................................................................................................................22
REFERENCES..............................................................................................................................23

INTRODUCTION
Financial accounting is the field of accounting concerned with the analysis, summary and
recording the financial transactions pertaining to a business. It provides help to organisations for
preparation of financial statements appropriately and reflects the financial position of company.
There are various regulations and rules which are needed to be follow by the corporation. In this
report chosen company is RBS Accountants Ltd. which is incorporated in London, UK. The aim
of this report is to ensure that corporations follows the compliances and regulations of
accounting. There are following topics which are discussed in this report such as: accounting
rules and principles, conventions & concepts related to consistency and material disclosure,
business transactions using double entry book- keeping and trial balance, final accounts for sole
trader, partnerships & limited companies and bank reconciliation statement. Apart from this it
also discusses about recorded transactions from the suspense accounts to the right accounts.
1. Financial accounting and its purposes
It refers to the process of recording, analysing, summarizing and interpreting the
business transactions over a stipulated period of time. It is useful for supplier, creditors, investors
and other stakeholders which are directly or indirectly related to the organisation. Junior
accountant of RBS Accountants Ltd. is responsible to prepare financial reports as per the
regulations and rules of accounting as a result it will able to provide accurate data and
information which help the corporation to take important business decisions. It includes cash
flow statement, income statement and balance sheet. Cash flow statement is being prepared so
that company can know the inflow and outflow of cash through various activities such as:
operating, investing and financing activity. Income statement is being prepared so that
organisation can know its profitability level for a stipulated period of time. Balance sheet is
being prepared so that RBS Accountants Ltd. can know their total liabilities and assets of its
business. There are various purposes to financial accounting which are discussed as below:
 Purpose of financial accounting is to give relevant information about financial position of
corporation (Agasist and Catalano, 2013).
 To provide useful data and information to the stakeholders of company so that they can
take important decisions about the investment.
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 It provide help the corporation to take important decisions such as: expansion, investment
etc. (Barth, 2015).
2. Regulation of financial accounting
To follow the regulations of financial accounting is necessary for an organisation so that
financial statements can be prepare in effective manner and chances of errors can be avoided.
Junior accountant of RBS Accountants Ltd. is responsible to follow the regulations of financial
accounting. Regulations of financial accounting are described as below:
 International financial reporting standards contains various compliances and principles
which provides help to prepare financial statements such as: cash flow statement, income
statement and balance sheet. Junior accountant of RBS Accountants Ltd. has follow the
principles of IFRS while preparing the financial reports. International Accounting
Standard Board has issued the IFRS rules which provide the regulations to accountant
that how they have to maintain the accounts.
 International accounting standards has been issued by International Accounting Standard
Board. It is globally accepted accounting principle.
 According to the Companies Act 2006, it is the responsibility of accountant to follow the
compliances of this act and prepare accounts as per the regulations of it (Alver and
Talpas, 2013).
3. Accounting principles & rules:
There are different rules and principles which are needed to be follow by the firms while
preparation of financial report. It provides help to the junior accountant of RBS Accountants Ltd.
to make financial statement are per the rules of accounting. Rules of accounting are discussed as
below:
Types of account Rules of accounting
Nominal account Credit, the gain or income of the business
Debit, the expenditures or losses of business
Real account Credit what goes out from the business
Debit what comes into the business
Personal account Credit the giver
2

Debit the receiver
So, these are the three golden rules of accounting which are needed to be follow by the
Junior accountant of RBS Accountants Ltd. while preparing books of accounts of company
(Collins and Riley, 2012). As a result, true and relevant information and data can be generated
which is helpful for the organisation to take important decisions related to business growth.
Money measurement principle: This concept is based upon the value of money and as
per this principle only those transactions can be recorded which can be expressed in the terms on
money. Junior accountant of RBS Accountants Ltd. has follow this concept while recorded the
items for preparation of financial report.
Matching principle: As per this principle, all revenue and expenditures of business
should match which are generated in same accounting period.
Cost principle: According to this principle, amount of an assets should be recorded at
acquiring value means value at which they have purchased by the owner of organisation.
Dual aspect principle: As per this principle an organisation should record the transactions
of business in both side which are debit side and credit as well as credit side in account. Junior
accountant of RBS Accountants Ltd. can follow this principle while recorded the items
(DRURY, 2013).
Business entity principle: As per this principle, business and its owner are not same
persons means they are separate persons from each other. An individual can sue and it can be
sued as well as corporation can be sue or can be sued.
4. Conventions related to consistency and material disclosure
Conventions are the guidelines which are from the practical applications of principle of
accounting. It is mandatory to follow these guidelines besides it is a generally accepted
convention which is based upon the customs. There are various accounting conventions which
are as:
Convention of consistency: To compare the data of previous year, it is important so that
organisation can know growth of its business in current year. With the help of accounting
policies and rules similar transactions which are followed consistently and continuously. For an
example, if corporation has follow market price or cost method for valuation of inventory and
written down method has followed for depreciation of fixed assets so it is required for the
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organisation to follow these methods continuously and consistently. It provides help to make
comparison more convenient (Edwards, 2013).
Convention of material disclosure: According to this method it is necessary for an
organisation to disclose all facts and figures which are related to the business of company. As a
result, accurate and relevant information and data can be presented to the public or reader who
reads the financial statement of corporation. It helps to provide required information to the
stakeholders of organisation and on the basis of this data they can take investment decisions.
CLIENT 1
(a) Journal Entry in the books of David Study
Date Particulars Debit Credit
01/01/
18
Premises A/c Dr. 440000
Motor Van A/c Dr. 45250
fixtures A/c Dr. 10100
Inventory A/c Dr. 40900
P Mole A/c Dr. 2200
F Lane A/c Dr. 2100
Bank A/c Dr. 42400
Cash A/c Dr. 10600
To S Hamid A/c 10150
To J. Brown A/c 9600
To Capital A/c (Balancing Figure) 573800
(Being Owner's Capital is calculated )
Therefore, David Study's Capital at 1st January = £
573800
Date Particulars Debit Credit
01/01/ Storage cost A/c Dr. 800
4

18
To bank A/c 800
(Being storage cost is paid)
02/01/
18
Purchases A/c Dr. 7680
To S Hamid A/c 2450
To D Main A/c 2560
To W Tag A/c 1060
To R Foot A/c 1610
(Being goods purchases on credit from various parties)
03/01/
18
J Wilson A/c Dr. 2020
T Cole A/c Dr. 1840
F Seema A/c Dr. 2380
J Allen A/c Dr. 990
P White A/c Dr. 2820
F Lane A/c Dr. 1170
To Sales A/c 11220
(Being goods sold on credit to various parties)
04/01/
18
Motor Expenses A/c Dr. 670
To Cash A/c 670
(Being motor expense is paid)
07/01/
18
Capital A/c Dr. 2000
To Cash A/c 2000
5

(Being cash withdrawal by owner himself)
09/01/
18
T Cole A/c Dr. 1280
J fox A/c Dr. 2310
To Sales A/c
(Being goods purchase on credit with various parties)
11/01/
18
Sale Return A/c Dr. 680
To J Wilson A/c 370
To F Seema A/c 310
(Being goods is returned back by the parties
16/01/
18
Bank A/c Dr. 7150
Discount Allowed A/c Dr. 461
To P Mole A/c 1710
To F Lane A/c 3364
To J Wilson A/c 963
To F Seema A/c 1574
(Being Payment received from parties after allowing
discount @ 5%)
19/01/
18
R Foot A/c Dr. 110
To Purchases Return A/c 110
(Being Goods is returned to creditor)
6

22/01/
18
Purchases A/c Dr. 3140
To L Mole A/c 1330
To W Wright A/c 1810
(Being goods purchased on credit)
24/01/
18
S Hamid A/c Dr. 3860
J Brown A/c Dr. 4260
R Foot A/c Dr. 1750
To Bank A/c 7500
To Discount Recieved A/c 2370
(Being payment is made to creditors after receiving discount
@ 10%)
27/01/
18
Salaries A/c Dr. 14500
To Bank A/c 14500
(Being salaries are paid through cheque)
30/01/
18
Business Rates A/c Dr. 2220
To Bank A/c 2220
(Being business rates are paid through cheque)
(b) Ledger Accounts
Storage Cost A/c
Date Particulars Amount Date Particulars Amount
01/07/
18
To Bank A/c 800 31/07/1
8
By Profit & Loss A/c 800
Total 800 Total 800
7

Sales A/c
Date Particulars Amount Date Particulars Amount
31/01/
18
To Trading and P&L
A/c
14810 03/01/1
8
By J Wilson A/c 2020
By T Cole A/c 1840
By F Seema A/c 2380
By J Allen A/c 990
By P White A/c 2820
By F Lane A/c 1170
09/01/1
8
By T Cole A/c 1280
By J fox A/c 2310
Total 14810 Total 14810
S Hamid A/c
Date Particulars Amount Date Particulars Amount
24/01/
18
To Discount Received
A/c
1260 01/01/1
8
By Opening Balance
(B/f)
10150
To Bank A/c 2600 02/01/1
8
By purchases A/c 2450
31/01/
18
To Closing Balance
C/d
8740
Total 12600 Total 12600
W Tag A/c
Date Particulars Amount Date Particulars Amount
31/01/
18
To Closing Balance
C/d
1060 02/01/1
8
By purchases A/c 1060
Total 1060 Total 1060
8

J Wilson A/c
Date Particulars Amount Date Particulars Amount
03/01/
18
To Sales A/c 2020 11/01/1
8
By Sales Return A/c 370
16/01/1
8
By Bank A/c 880
By Discount Allowed
A/c
83
31/01/1
8
By Closing Balance c/d 687
Total 2020 Total 2020
F Seema A/c
Date Particulars Amount Date Particulars Amount
03/01/
18
To Sales A/c 2380 11/01/1
8
By Sales Return A/c 310
16/01/1
8
By Bank A/c 1470
By Discount Allowed
A/c
104
31/01/1
8
By Closing Balance c/d 496
Total 2380 Total 2380
P White A/c
Date Particulars Amount Date Particulars Amount
03/01/
18
To Sales A/c 2820 31/01/1
8
By Closing Balance c/d 2820
Total 2820 Total 2820
9

P Mole A/c
Date Particulars Amount Date Particulars Amount
01/01/
18
To Opening Balance
(B/f)
2200 16/01/1
8
By Bank A/c 1600
By Discount Allowed
A/c
110
31/01/1
8
By Closing Balance c/d 490
Total 2200 Total 2200
Capital A/c
Date Particulars Amount Date Particulars Amount
07/01/
18
To Cash A/c 2000 01/01/1
8
By Opening Balance b/f 573800
31/01/
18
To Closing Balance
C/d
571800
Total 573800 Total 573800
J fox A/c
Date Particulars Amount Date Particulars Amount
09/01/
18
To Sales A/c 2310 31/01/1
8
By Closing Balance c/d 2310
Total 2310 Total 2310
Motor Van A/c
Date Particulars Amount Date Particulars Amount
01/01/
18
To Opening Balance
(B/f)
45250 31/01/1
8
By Closing Balance c/d 45250
Total 45250 Total 45250
10

Discount Allowed A/c
Date Particulars Amount Date Particulars Amount
16/01/
18
To P Mole A/c 110 31/01/1
8
By Trading and P&L
A/c
461
To F Steel A/c 164
To J Wilson A/c 83
To F Seema A/c 104
Total 461 Total 461
Discount Received A/c
Date Particulars Amount Date Particulars Amount
31/01/
18
To Trading and P&L
A/c
2370 24/01/1
8
By S Hamid A/c 1260
By J Brown A/c 960
By R Foot A/c 150
Total 2370 Total 2370
Salaries A/c
Date Particulars Amount Date Particulars Amount
27/01/
18
To Bank A/c 14500 31/01/1
8
By Trading and P&L
A/c
14500
Total 14500 Total 14500
Motor Expenses A/c
Date Particulars Amount Date Particulars Amount
04/01/
18
To Cash A/c 670 31/01/1
8
By Trading and P&L
A/c
670
Total 670 Total 670
11

Purchases A/c
Date Particulars Amoun
t
Date Particulars Amount
02/01/
18
To S Hamid A/c 2450 31/01/1
8
By Trading and P&L A/c 10820
To D Main A/c 2560
To W Tag A/c 1060
To R Foot A/c 1610
22/01/
18
To L Mole A/c 1330
To W Wright A/c 1810
Total 10820 Total 10820
Bank A/c
Date Particulars Amoun
t
Date Particulars Amount
01/01/
18
To Opening Balance
(B/f)
42400 01/01/1
8
By Storage cost A/c 800
16/01/
18
To P Mole A/c 1600 24/01/1
8
By S Hamid A/c 2600
To F Lane A/c 3200 By J Brown A/c 3300
To J Wilson A/c 880 By R Foot A/c 1600
To F Seema A/c 1470 27/01/1
8
By Salaries A/c 14500
30/01/1
8
By Business Rates A/c 2220
31/01/1
8
By Closing Balance C/d 24530
Total 49550 Total 49550
12

D Main A/c
Date Particulars Amoun
t
Date Particulars Amount
31/01/
18
To Closing Balance
A/c
2560 02/01/1
8
By purchases A/c 2560
Total 2560 Total 2560
By Purchases Return A/c
Date Particulars Amoun
t
Date Particulars Amount
31/01/
18
To Trading and P&L
A/c
110 19/01/1
8
By R foot A/c 110
R Foot A/c
Date Particulars Amoun
t
Date Particulars Amount
19/01/
18
To Purchase Return
A/c
110 02/01/1
8
By purchases A/c 1610
24/01/
18
To Discount Received
A/c
150 31/01/1
8
By Closing Balance C/d 250
To Bank A/c 1600
Total 1860 Total 1860
T Cole A/c
Date Particulars Amoun
t
Date Particulars Amount
03/01/
18
To Sales A/c 1840 31/01/1
8
By Closing Balance C/d 3120
13

09/01/
18
To Sales A/c 1280
Total 3120 Total 3120
J Allen A/c
Date Particulars Amoun
t
Date Particulars Amount
03/01/
18
To Sales A/c 990 31/01/1
8
By Closing Balance C/d 990
Total 990 Total 990
F Lane A/c
Date Particulars Amoun
t
Date Particulars Amount
01/01/
18
To Opening Balance
(B/f)
2100 16/01/1
8
By Bank A/c 3200
03/01/
18
To Sales A/c 1170 By Discount Allowed
A/c
164
31/01/
18
To Closing Balance
C/d
94
Total 3364 Total 3364
Cash A/c
Date Particulars Amoun
t
Date Particulars Amount
01/01/
18
To Opening Balance
(B/f)
10600 04/01/1
8
By Motor Expenses A/c 670
07/01/1
8
By Capital A/c 2000
31/01/1 By Closing Balance C/d 7930
14

8
Total 10600 Total 10600
Sales Return A/c
Date Particulars Amoun
t
Date Particulars Amount
11/01/
18
To J Wilson A/c 370 31/01/1
8
By Trading and P&L A/c 680
To F Seema A/c 310
Total 680 Total 680
L Mole A/c
Date Particulars Amoun
t
Date Particulars Amount
31/01/
18
To Closing Balance
C/d
1330 22/01/1
8
By Purchases A/c 1330
Total 1330 Total 1330
W Wright A/c
Date Particulars Amoun
t
Date Particulars Amount
31/01/
18
To Closing Balance
C/d
1810 22/01/1
8
By Purchases A/c 1810
Total 1810 Total 1810
J Brown A/c
Date Particulars Amoun
t
Date Particulars Amount
24/01/
18
To Discount Received
A/c
960 01/01/1
8
By Opening Balance b/f 9600
15

To Bank A/c 3300 31/01/1
8
By Closing Balance C/d
31/01/
18
To Closing Balance
C/d
5340
Total 9600 Total 9600
Business Rates A/c
Date Particulars Amoun
t
Date Particulars Amount
30/01/
18
To Bank A/c 2220 31/01/1
8
By Trading and P&L A/c 2220
Total 2220 Total 2220
(c) Trial Balance as at 31st January, 2018
Trial Balance for the month of July
Particulars Debit Credit
Purchases 10820 -
Bank 24530 -
D Main - 2560
Purchases Return - 110
R Foot 250 -
T Cole 3120 -
J Allen 990 -
F Lane - 94
Cash 7930 -
Sales Return 680 -
L Mole - 1330
W Wright - 1810
J Brown - 5340
16

Business Rates 2220 -
Storage cost 800 -
Sales - 14810
S Hamid - 8740
W Tag - 1060
J Wilson 687 -
F Seema 496 -
P White 2820 -
P Mole 490 -
Capital - 571800
J fox 2310 -
Motor Van 45250 -
Discount Allowed 461 -
Discount Received - 2370
Salaries 14500 -
Motor Expenses 670 -
Premises 440000 -
Fixtures 10100 -
inventory 40900 -
Total 610024 610024
CLIENT 2
(a) Statement of profit and loss for Peter Hampau for the year ended 31st July 2018
Particulars Amount
(in £)
Particulars Amount
(in £)
To Opening stock 4500 By Sales 120000
To Purchase 70000
To Wages and salaries:
16500
Add: Outstanding wages & salaries
1520
18020
17

To Gross Profit 70120 By Closing stock 42640
Total 162640 Total 162640
To Depreciation: By Gross Profit Carried
forward
70120
Freehold property
560
Equipment
1900
Motor vehicle
360
2820
To Motor expense 4580
To Admin expense 1650
To Heating and lighting expense 550
To Advertisement Expense: 1030
To Net Profit 59490
Total 232760 Total 232760
WORKING NOTE: Prepaid expenses of advertisement amounting to £4,470 which are
given in the question, then advertisement expenses for the year ended 31st July, 2018 will
become negative that is - £3,440, so the additional information given in the problem is ignored.
(b) Statement of financial position for Peter Hampau as at ended 31st July 2018
Capital Amount
(in £)
Asset Amount
(in £)
Capital Account: Fixed Asset:
Opening Balance
24380
Freehold Premises: cost
28000
Add: Net Profit as per statement of
profit & loss
59490
Less:Accumulated
Depreciation
5010
22990
18

Less: Drawing
2800
81070 Equipment : cost
19000
Less:Accumulated
Depreciation
8700
10300
Current Liabilities: Motor Vehicles: cost
3000
Bank overdraft 1000 Less:Accumulated
Depreciation
1560
1440
Payable 5600
Outstanding wages and salaries 1520
Current Assets:
Inventory 42640
Receivable 11520
Cash in hand 300
Total 89190 Total 89190
CLIENT 3
(a) Profit and loss account of Bowling Limited
Consolidated Income Statement for the years ended July 31, 2018
EUR
Sales 107000
Other income -
Total Revenue 107000
Cost of system sales 32000
Change in inventory 1000
Return inwards 2000
Total cost of sales 35,000
19

Gross profit on sales 72,000
Distribution cost 30000
Administrative costs 30000
Operating income 12,000
Interest income -
Interest expense -
Income before income taxes 12000
(b) Balance Sheet of Bowling Limited
Consolidated Balance Sheets for the years ended July 31, 2018
Assets Amount in EUR
Land 10000
Building 50000
Less: Accumulated Depreciation 7000
Depreciation for the year 1000 42000
Plant and machinery 65000
Less: Depreciation 15000
Depreciation for the year 10000 40000
Total non-current assets 92,000
Inventories 18000
Current tax assets
Derivative financial instruments
Prepaid Rent 3000
Accounts receivable 24000
Total current assets 45,000
Total assets 1,37,000
20

Equity and liabilities
Share capital 50000
Share premium 20000
Retained Earning including current year profit 34000
Equity 104000
Current and other tax liabilities 4000
Accrued salaries 2000
Bank Overdraft 13000
Accounts payable 14000
Total current liabilities 33,000
Total equity and liabilities 1,37,000
(c) Accounting concepts such as consistency and prudency
There are various accounting concepts which are needed to be follow by an organisation
such as:
Consistency: This concept is mainly focuses on follow the same accounting policy
which is being used from last few years in order to maintain books of accounts. This helps in
maintaining accounts in adequate manner (Maskell and Grasso, 2016).
Prudence: Prudence concept states that an organisation will only record those
transactions which are actually occurred. They will not overestimate or underestimate them.
(d) Depreciation and its methods
The purpose of concept of depreciation has been used to know the current market value
of an assets because value of an assets can be reduced due to the wear and tear over a stipulated
time duration.
Straight line method: It is that method which is used to charge depreciation at the same
rate for evert year over the life of an asset (Tassadaq and Malik, 2015). If company wants to sell
the assets at its book value than in this circumstance company can adopt the straight line method.
21

Written down value method: According to this method the amount of depreciation at
different rates for every year over the life of an assets & assets value gets down year after year.
To know the actual market value of assets the company uses this method.
Client 4
(i) Purpose of bank reconciliation statement for Durrell Limited
It is an evidence which is used for comparing records of bank and enterprise and helps to
see the difference between two sets of record of cash transactions. This modify the controller to
know variation between balance in bank statement and balance in accounting records which
occur due to various reasons such as payment in process, mistake in recording transaction, fraud
etc.
Bank reconciliation statement at 1st December 2017
Particulars Amount
Bank Balance as per pass book 17478
Less: Suspense due to wrong carry forward 987
Actual balance as per cash book after reconciliation 16491
(ii) Prepare Durrell Ltd's updated cash book for December 2017
Updated Cash Book for December Month
Particulars Amount Particulars Amount
Balance B/d 16491 Alexander 857
Suspense A/c 987 Bank Charges 47
Able 962 Burgess 221
Baker 1103 Barry 511
22

Direct deposit by
customer
176 Cook 97
Charlie 2312 Payment 120
Delta 419 Hay 343
Instrument No. 785 106 Rent 260
Echo 327 Instrument No. 780 426
Cash Sales 529 Instrument No. 781 737
Fred 119 Instrument No. 310923 297
Instrument No. 787 260 Standing order rates 137
Balance c/f 19738
Total 23791 Total 23791
(iii) Bank Reconciliation Statement as at 31"t December 2017
Bank Reconciliation Statement
Particulars Amount
Bank Balance as per pass
book
19738
Add: Items having effects of higher balance in cash book
Cheque deposited but not yet cleared 120
Bank charges not recorded in cash book 47
Payment by bank not recorded in cash book
Instrument No.780 426
 Instrument No.781 737
 Instrument No.310923 297
Adjustment for standing order rates 137
23