Financial Accounting Principles Assignment

Financial Accounting
Principles

Table of Contents
INTRODUCTION...........................................................................................................................1
Business Report...............................................................................................................................1
(a): Meaning of financial accounting.....................................................................................1
(b): Regulation associated with financial accounting.............................................................2
(c): Accounting principles and regulations.............................................................................3
(d): Accounting convention and concept of consistency and materiality...............................4
CLIENT 1: Journal Entries..............................................................................................................5
P1: Detail data regarding double entry bookkeeping.............................................................5
P2: Concept of trail balance and their balancing regulations...............................................14
M1: Analyse sales and purchase transactions to compile a trail balance.............................15
D1: Recording of transaction accurately into the trail balance............................................15
CLIENT 2......................................................................................................................................15
P3: (a): Development of final account and associated trail balances...................................15
CLIENT 3......................................................................................................................................16
P4: Formulation of financial statements and large number of examples.............................16
M2: Analysis of profit and losses statement and other financial account............................19
D2: Application of accurate calculation for the final account..............................................19
CLINET 4......................................................................................................................................19
P5: Bank reconciliation process...........................................................................................19
M3: Apply reconciliation process........................................................................................20
D3: Formulation of BRS......................................................................................................20
CLIENT 5......................................................................................................................................21
P6: Prepare and balance the books of Henderson................................................................21
D4: Produce various accounts that have been use for reconcile the statements...................22
CLINET 6......................................................................................................................................23
Suspense account and reconcile control accounts................................................................23
M4: Understanding of various types of accounts.................................................................23
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25

INTRODUCTION
Finance is considering as one of the crucial aspects for an organisation. It is uses for the
purpose of making effective planning and allocating future aims and objectives within an
accounting period of time. It is known as of the vital field of accounting those are concerned with
the summary, analysing and reporting financial transaction in pertaining to all business
transaction those are discussed during the period of time. This project report is all about various
crucial aspects those are associated with accounting principles.
All necessary financial statements those are prepared by the company can be analyse by
using appropriate tools and techniques. This consist of formulation of financial records that are
available for public consumptions. Overall this report guides an organisation to attain more
reliable outcome in case all statements are providing sufficient amount of gain in coming period
of time. Analysis of bank reconciliation is done effectively in order to determine total cash
balance of the company (Scott, 2015).
Business Report
(a): Meaning of financial accounting
Financial accounting is one of the special branch of accounting which track of overall
financial transactions that are done within an organisation. It is used to be based on certain
guidelines, transactions that are recorded, summarise and present in preparation of financial
statements. With this all relevant data associated with the financial condition and position of the
company easily be analyse in effective manner. This information is then after use by different
investors and stakeholder those are connected with the company in order to make relevant
decision regarding, whether to make invest in future projects of a company. The financial
statements also aid overall supplies in deciding, whether sufficient amount of raw material is
being provided by the company through judging their overall condition in effective manner. This
financial report is done with use of certain goals that are based on overall profitability of an
organisation (Agoglia, Doupnik and Tsakumis, 2011). The various companies select various
accounting systems that are prepared by using standard bodies such as IFRS etc. Financial
accounting that is being done in order to keep in views that standards and their duties of
managers to be shown in financial statements of the company. Some crucial statements are
discussed underneath:
1

Income statements: According this accounting reports a company’s financial
performances during a particular period of time. It has been assessing by using a summary of
business activities that are incurs their earning and expenses from various activities such as
operating and non-profit aspects. It assists companies in evaluating, whether the company is
making earning, profit and losses. The transactions related to operating gains, gross and net profit
are determining in overall profit and loss statements of the company.
Balance sheet: This seems to be one of the crucial statements of the company which used
to provide specific information about all detail aspects of assets and debt a company is having
with them. By using this statements, financial position and stability in respect to other company’s
positions are taken into account (Zeff, 2016). Financial organisation and other stakeholder
determine their financial statements for providing sufficient loans and investing in the
companies.
Cash flow statements: This seems to be one of the crucial statements which will be used
to determine inflows and outflows from various activities of an organisation that are collected
from various operating activities, investing and financing activities. This statements enable
managers to detect the overall fluctuations of cash during accounting period of time.
Changes in statement of equity: It is known as more similar statements of alteration of
all necessary changes in partner’s equity for a various taxpayer’s equity for a government
financial reports. It records all necessary changes that are done in capital balance of an
organisation over a given period of time.
(b): Regulation associated with financial accounting
Financial accounting standards is concern with private, non-profit organisation those are
setting bodies. Their role is to establish and make modification in GAAP as per the interest of
public. Regulators used to apply those two effective system for managing and controlling about
operators report their financial outcomes during an accounting period of time. There are no any
current legal needs that a companies used to report on extent to which their activities are
harmony with essential demand or sustainability development. Current reporting and practices
are having only more connection with overall sustainability of an organisation. However, UK
system reports on progresses towards attempts to incorporate overall needs of sustainability into
the economic overall life of reports (Horngren and et. al., 2012). The financial data users are very
wide and diversified range as per the financial accounting. Because of such modification the data
2

needed to every individual is required for plenty of ways. To maintain all rules and regulations,
various regulatory bodies are created by following IASB etc. The ASB is another important
accounting norm which are used by the company during formulation of financial reports. These
standard used to provide accounting regulation that can assist managers and accountant in
formulating financial records through using financial data of the company
(c): Accounting principles and regulations
In every business organisation, it is based on various common rules and regulations that
are being adopted or proposed by using certain guidelines those are needed to be taken during
formulation of appropriate statements. There are various rules and concepts that are govern
appropriate accounting. It consists of major three rules that basic accounting principles and
regulations, the detailed rules and policies those are being issued by FASB and their predecessor
the accounting principles board. It every industry distributes their financial statements to public,
it is needed to implement GAAP principles during formulation of various statements. Further, in
case company overall stock is publicly traded and required financial records be audited by a
skilled accountant (Warren and Jones, 2018). Below mentioned various accounting principles
and guidelines together are discussed effectively. Some of them are:
 Cost principles: As per as accountant is concern, they used to consider cost as those
amount which is spent during an items were originally obtained. For this particular
reason, the total value indicates on financial statements those are referred to be recorded
on historical cost basis. Hence, an assets amount does not reflect the total amount of
income a company which will be receive if it is sell the asset at current period of time.
 Full disclosure principles: there are certain information which is to be made by
investors through using financial statements that data would be disclosure within
prepared statements. It is related with basic accounting aspects that taken as for attaining
more suitable results in coming period of time. It is requirements that are related with
publicly traded companies those are releasing and provide free exchange of facts that are
relevant to their continuing business operations.
 Going concern principles: This types of accounting aspects assumes that a company will
continues to exist for longer period of time in order to attain their aims and objectives
into the allotted time frame. In case accountant believe that, the condition of company is
3

not so effective then the accounting books of that particular companies accounting books
are closed for next coming time.
 Matching principles: This accounting principles need for companies to make use of
accrual basis of data. This particular principle need that all expenses to be matched with
total earnings of the company. It cannot be measure the future economic benefits of all
things like advertisement the accountant charges (Henderson and et. al., 2015).
Regulations and rules:
There are certain accounting rules which will be consider for effective recording of
financial transactions those are done within an accounting period of time. Some of them are
mentioned underneath:
 Personal account: It is known as one of the effective account which is being used by an
individual for that persons that are own requirements. The accounting rules says that
debit the receivers and credit all amount to givers. Some crucial examples, capital and
drawings.
 Real account: Such kind of account is related with nature of assets those are used by an
organisation. As per this rules, debit what comes in and credit all values those are goes
out during the period of business operations.
 Nominal account: This seems to be utmost important financial transactions that are done
at the time of every financial period. The rules provide information about debits all
expenses and losses and credit all incomes and profit.
(d): Accounting convention and concept of consistency and materiality
It is known as common aspects of accounting that are used for the recording of a business
transactions. It is helpful in those situations which is not having any kind set guidelines in
accounting standards that are govern during period of time. There are various effective types of
accounting conventions that are held responsible for betterment the growth and gainfulness for
an organisation. Some of them are:
Consistency: It would be required to select most appropriate accounting tools and
techniques that are made for the adjustments on regular basis. Alteration can only be done in
which new methods it adopted by the company (May, 2013). There are certain examples that are
being consider for examine overall strength and financial position of the company.
4

Materiality: This seems to be one of the effective accounting conventions which are
consider for making influenced the economic decision of users. This concept is universally
attainable that all material aspects are to be disclosed by the company. This would be applied
through the applied auditors in planning and evaluation the audit and in analysing effect for
determining misstatements on report of the statements.
Concepts:
There are various concepts that being followed by the accountant within an accounting
period of time. Some of them are discussed underneath:
 Money measurement: It refers as money measurement concepts that used to guide
business only for the purpose of recording accounting transactions if it can be mentioned
in respect to overall capital. In case products are cannot be recorded as accounting
transactions because they cannot be able to state in respect to money.
 Conservatism: This conservatism concept is basically related with that concepts in more
common aspect for recognizing expenses and debts that are possible in uncertainty
regarding various results that are attain during the period of time. In accounting, the
convention of conservatism is associated with the policy of anticipating best possible
losses during the future of aims (Mulford and Comiskey, 2011).
CLIENT 1: Journal Entries
P1: Detail data regarding double entry bookkeeping
In accounting terms double entry system of accounting means that every business data. It
means that every transaction will be associated with at least two account effects. If company
used to borrow money from the banks, they overall asset increase total liability as net payables is
increased effectively. A fundamental aspect for underlying effect in day to day bookkeeping and
accounting detail aspects those are related with financial transaction has opposite effects in at
least two various account. Every transaction need to satisfy below equation:
Asset= Liabilities + Equity
Date Particular Debit
(Amount)
Credit
(Amount)
01/05/16 Store expenditure A/c............... Dr
To Bank A/c......................CR
400
400
5

(Being payment is made through using cheques)
02/05/16 Purchase Account ….....................Dr
To Creditor.........................Cr
(Goods purchase on credit)
6080
6080
03/05/16 T. Cole A/c...............................Dr
J. Allen A/c................................Dr
F. lane A/c.................................Dr
J. Wilson A/c.............................Dr
F. Syme A/c................................Dr
P. white A/c................................Dr
To Sales account.............................Cr
(Being goods sold on credit)
1640
910
770
1120
2080
2420
8940
04/05/16 Motor expenses A/c.......................................DR
To cash A/c........................Cr
(Being payment is made through cash)
470
470
07/05/16 Drawings Account.........................................Dr
To cash account.............................................Cr
(As cash goes out from business in related to make
payment for personal use)
1500
1500
09/05/16 J. Fox A/c.....................................Dr
T. Cole A/c...................................Dr
To Sales A/c...................................Cr
(Selling of products on credit)
1310
680
1990
11/05/16 Sales outward A/c.........................Dr
To F. Syme A/c........................Cr
To J. Wilson A/c.......................Cr
(Being Creditor return their merchandise)
680
410
270
14/05/16 Van A/c.............................Dr
To Able motor Ltd A/c..................Cr
28500
28500
6

(As products are brought on credit)
16/05/16 Bank A/c.............................Dr
To F. Lane A/c.............................Cr
To P. Mullen A/c.........................Cr
To J. Wilson A/c..........................Cr
To F. Syme A/c.............................Cr
Discount allowed A/c..............Dr
To J. Wilson.............................. Cr
F. Syne.,,................................Cr
F. Lane...................................Cr
P. Mullen.................................Cr
(Being deduction allowed to the creditors)
6670
352
2945
1330
808
1587
44
84
155
70
19/05/16 R. Foot A/c.............................Dr
To Purchase outward
account............................Cr
(Being return goods to R. foot)
50
50
22/05/16 Purchase A/c.................................Dr
To W. Wright.................................Cr
L. Mole......................................Cr
(Goods are brought on credit)
3740
1910
1830
7

24/05/16 J. Brown A/c.....................................Dr
S. Hood A/c.......................................Dr
R. Foot A/c........................................Dr
To Bank A/c.....................................Cr
R. Foot A/c...................................Dr
S. Hood A/c..................................Dr
J. Brown A/c.................................Dr
To Discount receive A/c................Cr
(Being certain amount of discount is received and
payment made with 10 %)
4140
3240
1260
140
360
460
8640
960
27/05/16 Salary A/c.....................Dr
To Bank A/c..................Cr
(Being commerce of salaries is successful by the usage
of cash)
4800
4800
30/05/16 Business Rate A/c..........................Dr
To bank A/c...................................Cr
(Being enterprise rates are cashed through cheques)
1320
1320
31/05/16 Able motors A/c......................Dr
To Bank A/c.........................Cr
(Motor expenditure paying through cheque)
20500
20500
Ledger posting
It is utmost crucial process that is being done to record all effective financial entries into
various statements. This seems to be needed in other stage in accounting period which is being
post the entries in respect to analyse all implications that are seen in near future. The major
source of financial report preparation is taken from journal entries those are made within the
internal department of the company. Posting is more common means for transferring all financial
entries into joural into their respective accounting books. A ledger is consider main accounting
aspects whcih are responsible for recording of all associated measure that re sufficient enough to
get more reliable outcomes in coming period of time. Investors uses these ledger account details
to increase overall profitability position of the company (Renz and Herman, 2016).
8

9

10

11

12

13

P2: Concept of trail balance and their balancing regulations
It seems to be more effective statement of all debit and credit statements with any
disagreement which would be indicating overall errors those are analyse during positing of
journal entries. It is considered as an effective list of all ledger accounts which contains all
crucial information which need to be consider while recording transactions. After journal entries,
trial balance should be prepared for a particular period which are consider recording of business
transactions. It is essential for every organisation to prepare all such financial accounts with an
objective of identifying the errors that may occurred while recording transactions into general
accounts statements. If the principles of double entry used in organisation which is correctly
included to record business transactions in ledger accounts (Weygandt, Kimmel and Kieso,
2015).
The debts and credit column of trail balance must be equal. The operations of trial
balances are required to first analyse the errors which are made during recording of financial
transactions with a motive of comparing debit and credit side. It happens to be primary base of
14

preparation of financial statements at the end of accounting period of time. Accountants and
bookkeepers are liable to prepare such financial accounts in order to find out true and fair
financial position of company.
M1: Analyse sales and purchase transactions to compile a trail balance
In order to consider all accounting and booking component of a company, it is necessary to
make understanding of actual sales, expenses and other incomes documented of an organisation.
As per the above transactions that are made in respect to sales and purchase are providing
effective information about 9820 of total purchase is being. The Sales incurred during the time is
14670.
D1: Recording of transaction accurately into the trail balance
On the basis of journal entries some valuable information about sales and purchase is being
collected that can assist them to record every transaction in order to determine total net profit
they are getting from their overall transaction. A total of 147160 total net profit they are getting
during an accounting period of time.
CLIENT 2
P3: (a): Development of final account and associated trail balances
(b): Financial statements of Peter piper
15

Particulars Amount (figures in ￡)
Current assets
Inventory 101640
Advertisement cost expenses 8470
Trade receivables 106960
Cash in bank 2440
Total current assets 219510
Free Hold Premises 270000
Equipment cost expenses 172500
Vehicle charges 28000
Total non current assets 470500
Total assets 690010
Liabilities and equities:
Current liabilities
Trade payable 76910
Bank overdraft 11290
Outstanding salary expenses 1220
Accumulated depreciation 163950
Total current liabilities 253370
Capital 332120
Add: Gains 147160
Less :- Drawings (42640) 436640
Total equities and liabilities 690010
CLIENT 3
P4: Formulation of financial statements and large number of examples
(A): Various statement of income statements that are prepared by Rain-tree Ltd for the
year ended as on 31st March, 2017
Particulars Amount Particulars Amount (Figures in £)
To Stock at the beginning 17000 By sales a/c 107000
To Purchases a/c 32000
16

To return Inwards 2000
To Gross Profit c/d 74000 By Stock at closing year 18000
125000 125000
To Allocation costs 19000 By Gross profit c/f 74000
To Depreciation charged 15000
To office Expenses 4000
To Operating expenses 30000
To Net profit 6000
74000 74000
(b): Balance sheet as at 31st march 2017
Particulars Amount (Figures in £)
ASSETS:
C.A
Inventories 18000
Trade receivables 24000
Rent expenses paid in advance 3000
Cash at bank -15000
Total current assets 30000
Non-Current Assets:
Building and Land 60000
Machinery and plant 65000
Total non- current assets 125000
T.A 155000
Shareholder's equity and Liabilities:
C.L
Trade credit payable 14000
Outstanding operating cost 2000
Tax provision 37000
Office 4000
17

Tax
T.L 57000
Shareholder's Equity
Equity stock issues at 1 per share 50000
Equity premium reserve 20000
Retained Profit 22000
Net profit 6000
Total equity 98000
Total equities and liabilities 155000
(c): Different types of accounting concepts
There are various types of accounting aspects those are related with the overall growth
and financial stability of an organisation. Some of them are discussed underneath:
Consistency: Under this accounting concept all the detail information is needed to be
taken into account. This seems to be more reliable aspects states that data cannot be written that
will be violate into the accounting rules for valid data. If certain transaction that occurs to
attempts to determine inconsistent data to be entire into transactions to be rolled back during the
period of time (McCarthy and et. al., 2012). This concept of financial statements suggest that
overall company would be liable to avoid various modification regarding policies and rules there
are consider more reasonable phase for the modification or adopting other regulations. There are
various significance aspects of accounting principles of consistency in order to make ensure that
overall comparability of the financial of the companies with other investors and shareholders.
Prudence concept: As per this accounting implies that overall financial statements that
are made by accountant that would not overestimate the earning, profit and other gains of the
company. An accounting principles that need to record all expenses and liabilities but the earning
can only be realised or assured in right manner. It is key accounting aspect which used to make
sure that assets and income are mentioned properly under this concept. The primary aspects of
using this accounting aspect that would be conservative in reporting the earning other associated
matter of the company. The losses and debt obligation will be recorded in financial statements of
the company which are occurred during the period of time. The provision for bad-debts cannot
be indicate that debtors are having suitable amount of return that are indicated for analysing risk
of the company.
18

M2: Analysis of profit and losses statement and other financial account
According to the all information that are collected from the above statements, it has been
found that a total of 6000 as net profits is gather during the time from their incomes account.
While in case of balance sheet, it has been analysing that the total current assist is higher as
compare to debts. It means that the position of the company is much stronger as compare to
other.
D2: Application of accurate calculation for the final account
There are various formula and techniques are used while formulating incomes statement of
balances sheet of the cited company. Trading account is being prepared for the evaluation of
gross profit of loss. A balances sheet is framed with a views to analyse the exact balance of
current assets and liabilities of the company.
CLINET 4
P5: Bank reconciliation process
Reconciliation is known as major aspects which is used by an organisation to record all
organisations transactions for cash account in correspondence data on company’s overall bank
statements. It seems to be process of explaining the comparison on particular date among bank
balance those are shown in an organisation bank statements. It is calculated for designing eligible
service members in order to determine the performance of the cited organisation. These are
mainly prepared by using accountant or bookkeepers with the aim of banks records with their
company’s overall records. It is known as fundamental accounting process that is being used to
make sure that actual money is being invested to determine in the given accounting time frame.
This statements assist manager various difference between bank balance and total cash generated
during the time. There are certain accounting transactions which are to be detectable with help of
using Bank reconciliation statements (Hyndman and Connolly, 2011). Some effective aspects are
taken into account. Such as:
 All those deposit that are made to the banks but could not be credited by banks during the
time. Such as this is associated with cheques those are sent to bank for the objective of
data collection.
 Certain amount of deposit made to the bank statements at certain amount from those are
mentioned in accordance with company’s overall records.
19

 Determine records in bank statements those are not recorded at every point of
transactions.
Problem associated with bank reconciliation:
There are certain simple cash control process those are related with bank reconciliation
statements. In every business, all bank statements would be reconciling through an individual
those are not otherwise associated with the cash receipts and other disbursements operations. The
bank reconciliation used to display all transaction those are mentioned in the bank account as per
the mentioned date.
M3: Apply reconciliation process
It is a kind of accounting process that uses into two set of records that ensure that amount
recorded into the statements are correctly arrange. This can be done by following below
mentioned process:
 Making comparison of transactions
 Included all deposit (+)
 Collect all kind of errors
 Check registered reconciliation
 Interest Earned
 Checking properly the register errors
 Making journal entries
 Make comparison of both statements
D3: Formulation of BRS
Bank reconciliation is the said to be more reliable accounting system which will be followed
by an organization. Account reconciliation used to ensure that account balance are more reliable
aspects for the company. This is necessary for internal control in order to make financial
reporting process of more effective. (Hyndman and Connolly, 2011) There are certain effective
process those are mentioned underneath:
 Situation regarding getting ready for bank reconciliation.
 Reason those are cause bank records and account detail.
20

CLIENT 5
P6: Prepare and balance the books of Henderson
Sales ledger account: It is known as one of the effective sales ledger accounts those are
consider as trade debtors account and complete list of record of balances of amount that client
have been given on credit. The main objective of control account is to record all common ledger
free from all detail those are made on the basis of total sales made during the time (Sales Ledger
Control Account, 2018). This seems at the any point of stage that how much customer owe an
individual and their companies. It is one of the important part of double entry system which is
recorded as credit and debit entry of amount those are made during the period of time.
Purchase control account: It is said to be more appropriate trade creditor account which
is being consider as one of the crucial part of balance sheet those are prepared during the period
of time. Such kind of account are considering as essential element of double entry system
21

bookkeeping tools that are make use to evaluate overall balance sheet of an organisation. The
main aim concern of accounting tools that consist of creditor and debtors to reduce all kind of
mistakes those are occurs in the account books.
D4: Produce various accounts that have been use for reconcile the statements
22

CLINET 6
Suspense account and reconcile control accounts
M4: Understanding of various types of accounts
It has been found that in respect to preparation of bank reconciliation statements, it is vital to
make use of various types of account. Such as sales ledger control account and purchase ledger
control account. These are considering one of the effective statements that can be reliable for
future growth of the company.
(c) suspense account
Suspense account
Particulars Amount Particulars Amount
To White's personal account 750 By balance b/d 330
By John's personal account 420
750 750
23

CONCLUSION
This project report is providing vital information about accounting principles. It has been
concluded that accounting concepts are more reliable for analysing overall performance of the
company. All the financial statements of an organisation are needed to be analyse in effective
manner so that better results can be deliver in coming period of time. All these analysis is done to
attain better future growth and sustainability for an organisation.
24