Accounting for Business Decisions

This solved assignment focuses on the significance of accounting in business decision-making. It delves into control accounts, trial balances, journal entries, and the specific roles of suspense and clearing accounts. The comparison between these two temporary accounts highlights their distinct purposes and characteristics. The assignment emphasizes the importance of meticulous record-keeping and careful analysis for accurate financial statements.

FINANCIAL ACCOUNTING
PRINCIPLES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
(A)Report for line managers.......................................................................................................1
B. Portfolio to carter the various clients and resolving their financial needs..............................3
CLIENT 1........................................................................................................................................3
1 Analysing the journal entries for Alex study............................................................................3
2 Presenting the double entry recording with the help of various ledger accounts.....................5
3. Analysing the arithmetical accuracy of double entry system with the help of trail balance. 15
CLIENT 2......................................................................................................................................16
A income statement for the client Peter Piper as on 31st December 2016.................................16
B Analysing the financial position of Peter Piper as on 31st December 2016...........................17
CLIENT 3......................................................................................................................................19
A. Determining the profit and loss statement for Raintree Ltd as per 30th September 2016.....19
B. Determining the financial position of Raintree Ltd as on 30th September 2016...................19
C. Explaining the accounting concepts for Prudence and Consistency.....................................20
D. Analysing the depreciation formulation as well as highlighting the functioning of the two
methods of depreciations...........................................................................................................20
CLIENT 4......................................................................................................................................21
1 Bank reconcilition statement and its purpose.........................................................................21
2 Analysis of transactions of Kendal Ltd..................................................................................21
(3) Analysis of BRS on December 2016...................................................................................21
CLIENT 5......................................................................................................................................22
A. Control accounts and their balancing....................................................................................22
B. Control accounts and their concepts.....................................................................................23
CLIENT 6......................................................................................................................................23

A. Suspense account and its main characterisitcs......................................................................23
B. Trial balance.........................................................................................................................23
C. Journal entries.......................................................................................................................24
D. Comparing the Suspense account and Clearing account......................................................24
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25

INTRODUCTION
Accounts is the one of the important domain that have due importance for the firms. In
the present research study, formal business report is prepared for line managers and for different
clients varied accounts are prepard like income statement and balance sheet. In middle part of the
report, different approaches of depreciation are compared with each other. At end part of the
report, difference is discussed between clearing account and suspense account. In this way, entire
research work is carried out.
(A)Report for line managers
To : Line manager
(Small Accountancy Firm)
Subject: Accounting rules and principles for the firms
Sir,
Explanation on financial accounting
Financial accounting is the branch of accounts under which income statement and balance
sheet is analysed by using ratio analysis and common size as well as comparative statements.
It can be said that there are multiple advantage of financial accounting for the firms.
Regulations for financial accounting
GAAP: In GAAP accounting standards are given that need to be followed to do recording of
transactions in company books of accounts (Zimmerman and Yahya-Zadeh, 2011). These
standards are used by most of the nations of the world.
IFRS: In this reporting formats and rules are clearly specified that are followed to prepare
finnaicial statements in particular structure.
Analysis of accounting rules, procedure and principles
Cost principle: Transations that are recorded must be measured in monetary terms and at their
actual cost. Non monetary transactions can not be reocrded in books of accounts.
Time period assumption: Current year transactions must be recorded in present year books of
accounts. Amount of current year transaction can not be carry forward next year (Garrison and
et.al., 2010).
Monetary unit: Transaction must be meausred in monetary terms.
Full disclosure: All accounting transactions with detail must be disclosed in books of
accounts.
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Going concern concept: It is assumed that firm will always remain in existence and due to this
reason all transactions are recorded on its names.
Consistency and material disclosure
Consistency: Only those transactions that are actual and related to busines as well as possible
to be included in financial statements must be recorded in books of accounts.
Material disclosure: All relevant details related to transactions must be recorded in company
books of accounts.
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B. Portfolio to carter the various clients and resolving their financial needs.
CLIENT 1
1 Analysing the journal entries for Alex study
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2 Presenting the double entry recording with the help of various ledger accounts
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3. Analysing the arithmetical accuracy of double entry system with the help of trail balance
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CLIENT 2
A income statement for the client Peter Piper as on 31st December 2016
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B Analysing the financial position of Peter Piper as on 31st December 2016
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CLIENT 3
A. Determining the profit and loss statement for Raintree Ltd as per 30th September 2016
B. Determining the financial position of Raintree Ltd as on 30th September 2016
Particulars Amount
Assets
Current Assets
Prepaid rent 3000
Closing inventory 18000
Bills Receivables 24000 45000
Total Current Assets 45000
Fixed Assets
Plant and Machinery 65000
Less: Dep. @ 20% 25000 40000
Land and Building 60000
Less: Dep. On Building 8000 52000
Total Fixed Assets 92000
Total Assets 137000
Liabilities
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Trade creditors 14000
O/S wages 2000
Corporation tax 4000
Bank overdraft 15000
Total Current Liabilities 35000
Retained Earnings 22000
shareholder's capital 50000
premium 20000
NP 10000
Total shareholder's capital 102000
Total Liabilities 137000
C. Explaining the accounting concepts for Prudence and Consistency Prudence: This princple state that in the accounting of transactions expenses as well as
liabilities must not be undervalued and revenue must not be overvalued. All transactions
must be recorded at their accurate value in the business. Consistency: There must be consistency in recording of transactions means that all items
that are relevant to income statement must be recorded in it and all assets as well as
liability related items must be included in balance sheet (Romney. and Steinbart, 2012).
There must not be fraud in recording of transactions. By doing so it can be ensured that
accounts are prepared accurately.
D. Analysing the depreciation formulation as well as highlighting the functioning of the two
methods of depreciations.
Depreciation is the one of the important method that is used to compute new value of an
asset. It can be observed that with passage of time asset become obsolete and it is the
depreciation approach that help firm in computing actual value of asset. Straight line method of depreciation: It is the one of the method of computing
depreciation and under this specific percentage is charged every year on asset value at
which it was purchased and by deducting that amount from asset new value is computed
(DRURY, 2013).
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 Written down value of depreciation: In written down value method depreciation amount
is subtracted from asset value and next year from previous year net asset value again
depreciation is deducted that was computed by charging percentage on previously
computed net asset value.
CLIENT 4
1 Bank reconcilition statement and its purpose
Bank reconcilition statement is the tool that help managers in matching their cash book
with pass book. On basis of matching it is identified that whether there was mistake in recording
of transactions in bank pass book or cash book (Kieso, Weygandt and Warfield, 2010). It can be
said that there is huge importance of the bank reconcilition statement for the businss firms
because major purpose behind using it is to ensure that all transactions are recorded at accurate
value in books of accounts. Thus, this statement help in preparing financial statements
accurately.
2 Analysis of transactions of Kendal Ltd
In case of mentioned company it can be observed that multiple transactions have impact
on recording of transactions in books of accounts. Thus, in cash book fund flows are recorded
and same are also recorded in bank pass book. Varied items such as dishonous of checks,
withdraw of cash from account, cheque issued but not encashed and amount deposited in bank
account are some of the important transactions that are recorded in both books of accounts
(Young and et.al., 2010). Many times transaction is in process and due to this reason any specific
item is recorded in pass book but same not recorded in bank pass book. Hence, due care need to
be done while recording transactiions in both books of accounts.
(3) Analysis of BRS on December 2016
BRS:
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Cash Book:
CLIENT 5
A. Control accounts and their balancing
Sales ledger control account:
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Purchase ledger control account:
B. Control accounts and their concepts
Control accounts are like ledger account which provide business summary of transactions
that are made by the company during specific time period. By analyzing these transactions in
proper manner lots of information are received by the managers which help them in making
business decisions (Gow, Ormazabal. and Taylor, 2010). By using control account financial
statements are prepared. If control accounts are prepared accurately then chances of preparing
financial statements accurately also increased.
CLIENT 6
A. Suspense account and its main characterisitcs
Suspense account is the one of the major account that is prepared in trial balance to bring
balance between debit and credit side of mentioned statement. Its main characteristics it is the
account in ledger under which those transactions are recorded that can not be specifically
reocrded in any specific account. Thus, when both balance does not matched by using suspense
account debit and credit sides are made equal which facilitate preparation of financial
statatements.
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B. Trial balance
C. Journal entries
D. Comparing the Suspense account and Clearing account
There is similarity and difference between suspense and clearing account. Both sort of
accounts are temporarily prepared but there is difference between them. Suspense account is
prepared when there are transactions and it is not clear that in which account they must be
transferred (What is a suspense account, 2017). In case of suspense acccount it is not fix whether
transaction will be transferred to specific account. However, in case of clearing account it is fix
that if any transaction is included in this account the suerly it will be transferred to any relevant
account. This is the major difference between both sort of accounts.
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