Accounting Principles in Business Report

Financial Accounting
Principles

Table of Contents
INTRODUCTION...........................................................................................................................4
BUSINESS REPORT......................................................................................................................4
1.Financial Accounting and its purposes:...................................................................................4
2. Internal and external stakeholders:..........................................................................................5
CLIENT 1........................................................................................................................................7
(a) Journal Entry in the books of Alexandra Study:...................................................................7
(b). Ledgers:................................................................................................................................7
(c). Trail Balance in the books of Alexandra Study:...................................................................7
CLIENT 2........................................................................................................................................8
(a) Profit and loss account of Munteanu Limited........................................................................8
(b) Balance Sheet of Munteanu Limited.....................................................................................8
(c) Accounting Concepts: Consistency and Prudence:...............................................................9
(d) Purpose of Depreciation and its Methods::...........................................................................9
(e) Evaluation of difference between financial statements prepared by sole traders and limited
companies :................................................................................................................................10
CLIENT 3......................................................................................................................................10
1. Purpose of preparation of Bank Reconciliation Statement:..................................................10
2 . Areas where bank records vary from personal records........................................................10
3. Imprest:.................................................................................................................................11
4. Bank-reconciliation statements of Burcu Ltd, for September 2018:.....................................11
CLIENT 4......................................................................................................................................11
(a) Sales Ledger Control and Purchase Ledger Control Account:............................................11
(b) Control account...................................................................................................................12
Client 5...........................................................................................................................................13
(a) Suspense account and its features:.......................................................................................13

(b) Preparation of Trail Balance:...............................................................................................13
(c) Journal entries in order to show necessary corrections for eliminating suspense account
balance:.....................................................................................................................................13
CONCLUSION .............................................................................................................................14
REFERENCES .............................................................................................................................16
APPENDIX....................................................................................................................................17

INTRODUCTION
Financial accounting principles refers to various guidelines and rules which are necessary
for business organisation in order to report its financial data. Financial accounting process
includes recording of financial transactions, posing them in different ledgers, summarizing,
preparation of financial position statements and reporting of financial performance to various
stakeholders. These all activities involved in financial accounting process are governed by
financial accounting principles (Edwards, J. R., 2013). In UK common set of accounting
principles is UK GAAP(Generally Accepted Accounting Principles). Financial accounting
provides groundwork for decision making functions of business organisation. This report
exhibits financial accounting and its purposes, internal and external stakeholders, importance of
control accounts and main purpose of preparation of bank reconciliation statement.
BUSINESS REPORT
1.Financial Accounting and its purposes:
Financial accounting is unique field of accounting that includes a systematic process of
recording, classifying, summarizing and reporting of financial transaction resulting from various
functions of business organisation during a particular period. These financial transaction are
classified systematically in order to prepare final accounts such as balance sheet, profit and loss
account, profit and loss account or income statement, cash flow statements, change in equity
statement and other relevant statements, that are used by business organisations to assess actual
financial performance and position (Fourie, 2015). Reporting under financial reporting process
assist business organisations to present true picture about financial performance and position
before shareholders, government, employees, landers and creditors etc. In financial accounting
accounts are prepared by entities as per accounting principles, assumptions and different
guidelines, It is governed and administrated by intentional and local guidelines and standards.
Purpose of financial accounting: Following points are describing key purpose of financial
accounting, as follows:
 Main purpose of financial accounting is reporting of actual position and performance to
internal and external users of financial data and information.
 Activities in financial reporting is framed in a systematic way to provide smoothness in
accounting operations.

 Financial accounting ensures compliance of rules and regulation relating to relevant
statute.
 Activities involved in Financial accounting, acts in conformity of various assumptions,
accounting policies, concepts, principles and other significant fundamentals.
 Strategy formulating and implementation processes in business organisations are purely
depends upon results of financial accounting.
 It provides a decision making framework for investors, shareholders, owners, lenders and
creditors, governing body etc.
 It provides an assurance that accounting policies and procedures adopted by business
organisation are uniformly followed.
2. Internal and external stakeholders:
Stakeholders refers to individuals, persons, body of individuals or organization that has
substantial interest or concern in an business organization. Stakeholders are highly influenced by
actions of organization, goals or objectives and policies adopted by business organisation.
Stakeholders are classified by their nature and concern in two parts: Internal stakeholders and
external stakeholders. Large scale organisations have direct or indirect influences of different
stakeholder (Hale, 2012). Key stakeholders in business organisation are shareholders, creditors,
government directors, employees, owners, suppliers, unions, and the community. Internal
stakeholders are those individuals, persons, group or organisation who can influence or are
influenced by an business organisation such as directors, owners, employees and management.
External stakeholders incudes individuals, persons,groups, body of individuals or organizations
outside of business organisation like customers, suppliers, creditors, government or regulatory
body, society etc.
Major Internal Stakeholders and their interest in large business organisation: Following are
the major internal stakeholders of a large business organisation:
1. Employees: Employees are prime internal stakeholders because employees have
monetary interests in form of salary, bonus and incentive in the organization. Employees
in an entity play a major role in formulation of strategy and other vital operations of
organisation. A large business organization considers employee opinions, their concerns,
and values in formulating of strategy, objectives, mission and any long term visions of
business organisation.

2. Owners or Shareholders: Owners or shareholders as the case may be are individuals or
group of individuals holding major shares of company. Owners or shareholders having
substantial interest in forms of monetary investment and shares held by them in business
organisation . Decisions of owners or shareholders can affect organisation in various
ways. Owners are responsible for key decisions related to both internal and external
stakeholders (Hall, 2012).
Key External Stakeholders and their interest in large business organisation:
1. Customers: Customers are significant external stakeholder in large business organisation,
Customers affects demands and marketing strategy of business organisation. Customers
have interest in business organisation in form of quality, brand status, price sensitiveness
and popularity. Main purpose of a business organisation is to fulfil the demands of
customers while providing maximum customer satisfaction.
2. Suppliers: Suppliers can influence organisations supply and demand perceptiveness.
Suppliers are tries to receive their payments within scheduled times and having interest in
liquidity position of business organisation (Jönsson, 2013).
3. Regulators: Every organisation is governed by their relevant regulator as per their
business structure. Regulators are external stakeholder and always tries to monitor
compliance of issued regulations and formalities. Regulators having interest in business
organisation in form of assurance of constant compliance of existing and potential
regulation.
4. Government: Governments collects various taxes on business organisations, therefore
have firm stake in profitability and success of business organisation. Government also
ensures compliance of various laws and regulations and provides a framework for
organisation's sustainable growth.