Financial Accounting Principles Assignment Solved - Doc
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FINANCIAL ACCOUNTINGPRINCIPLES
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1A. Regulation of financial accounting has been discussed in the form of report to line manager.....................................................................................................................................................11. Define financial accounting ..................................................................................................12. Regulations relating to financial accounting...........................................................................23. Accounting rules and principles.............................................................................................34. Conventions and concepts relating to consistency and material disclosure............................4CLIENT 1........................................................................................................................................41. Journal of Client 1 as on 1st may 2017...................................................................................42. Drawing ledger accounts of above journal entries..................................................................6..........................................................................................................................................................73. Client 1's Trial Balance.........................................................................................................15CLIENT 2......................................................................................................................................16A. The income statement of Peter Piper as on 31st December 2017........................................16B. Balance sheet as on 31st December 2017 of Peter Piper......................................................16CLIENT 3......................................................................................................................................18A. Income Statement as on 30th September 2017 of Raintree limited.....................................18B. Financial position of Raintree limited..................................................................................19C. Describing various accounting principles and concepts.......................................................24C. Depreciation with its purpose and types...............................................................................25CLIENT 4......................................................................................................................................25A. Objective of drawing bank statement ..................................................................................25B. Specifying reasons for records maintained in Bank statements...........................................25C. Cash book in context of client..............................................................................................25CLIENT 5......................................................................................................................................26A. Drawing Sales ledger control account and purchase ledger control account as of May 2017of Henderson.............................................................................................................................26B. Elaborate Control account ...................................................................................................27CLIENT 6......................................................................................................................................27A. Defining suspense account with its essential features..........................................................27B. Framing trial balance............................................................................................................28C. Journal entries.......................................................................................................................28D. Difference of Clearing and Suspense account .....................................................................29CONCLUSION..............................................................................................................................29REFERENCES..............................................................................................................................30
INTRODUCTIONFinancial accounting is analysed as an essential element which is used for recording ofkey financial transactions. It is useful for small business owners as it provides a methodologicalapproach in order to describe the business activities. It is also considered as a broader term forthe controlling of assets and liabilities (Deegan, 2013). Financial accounting provides in-depthanalysis of monetary resources which are required for performing various important activitiesassociated with business. Present report is based on analysis of different key financialregulations, basic rules and principles of financial accounting. As a junior accountant in smallconsultancy firm, report is to determine the awareness of organisation towards regulations ofaccounting. In addition, six clients that provide support in describing different key financialstatements like profit and loss account, balance sheet and cash flow statement are also discussed.Appropriate structure and analysis transactions related to sales and purchase for compilation intrial balance are also evaluated in this report. At last, clients will provide important propertiesabout reconciliation statements, purchase as well as sales ledger account along with thediscussion related to suspense account.A. Regulation of financial accounting has been discussed in the form of report to line managerFrom: Junior accountant To: Line ManagerSubject: Determination of different regulation, rules and principles of financialaccounting Respected Sir, This report is made for improvement of the important activities of financialtransactions associated with business. However, there is the major need of recognisingvarious rules, regulations and important methods used for application of variousprinciplesofaccounting.Further, business operations must be improved through application of differentaccounting techniques and their results will be considered as beneficial for the allocationof budget, cost and prediction of various operational activities linked with theorganisation or business. 1
1. Defining financial accounting Financial accounting has been analyzed as specialized and important branch ofaccountancy which keeps record and track on organization’s financial businesstransactions. Utilizing standardized guidelines, the transaction of sales and purchase havebeen recorded, analyzed and presented in the form of reports for determination ofcompany’s financial position in market (Scott, 2015). It is an important tool for attractingshareholders whereas small business enterprise can use it as tool for analysis of financialstrength of their business. There are usually various kinds of financial statements which are formulated by smallbusiness enterprise in order to attain set objectives. Some of them are mentioned asbelow:Profit and loss statementIncome statement Balance sheetStakeholder' equity statementCash flow statement Budgets These financial statements are analyzed as external because these are formulatedfor people outside the organization such as shareholders, investors, financial institutionsand government. Company can issue these financial statements on their website so thatthese will be easily accessible to capitalist and it will be able to attract more investors.When the stock of business enterprise is traded publicly, then its financial statements willhave circulated to the stakeholders (Edwards, 2013). It is significant for accomplishmentof financial business objectives. It is not in the form of financial evaluation of firm. Keyobjective of financial accounting is to provide information related company financialstatements to externals. 2. Regulations relating to financial accountingThis usually involves various regulations that will be effective for formulation oflegal structure of accounting. These rules and provision have been formulated bygovernment for corporate reporting and monitoring business enterprises in UK. The2
major authorities involved in formulation of regulations are corporate reporting of UKand financial reporting council.It has provided different methods of financial reporting to department of government andvarious corporate (Deegan, 2012). In this context, there are various important regulationwhich are accepted by organization are mentioned below:IASB: Aim of this accounting standard is to maintain and disclose appropriateinformation to professionals and important guidelines for the purpose of drafting reportsand database of financial statement. It is also used for providing appropriate revelation ofaccounts. A legal structure is there for determination of financial information that will beaccepted by stakeholders and used for influencing investors from different countries(Financial Accounting, 2018). FRC: It is a major regulation of financial accounting which is formulated by differentauthorities and corporation of UK after consideration of standards of accounting. Thesestandards are usually framed by monitoring and execution of important financialdisclosures associated with finance with promotion high quality governance (Scott,2015). IFRS: Information provided by the standards of IFRS has provided a relevant frameworkand organization’s disclosure of key financial statements. It provides support toorganization in influencing a large population of institutions and investors. It is beneficialfor the estimation of expenditures and cost that occur while performing operationalactivities of business. 3. Accounting rules and principlesThere are various important principles of financial accounting which areprovided by GAAP used for controlling company's transactions. Some of them arediscussed as below:Principle of Going Concern: Principles of accounting are based on theassumption that small business enterprise will remain within company for theforeseeable future. Adequately, it means that company will not be forced forhalting its business operations and liquidation of assets.Principle of Full Disclosure: This principle needs an organization to disclose the3
necessary information so that individuals are accustomed for analysis ofstatements and they will be able to create informed decisions concerning thebusiness enterprise (Warren, and Jones, 2018). In this, company will describe itsaccounting policies on important and initial note of given statement. Matching principles: This principle provide understanding that expenses needs tobe matched in the specific accounting year with total revenues. It is a principle ofaccrual accounting and revenue recognition (Lubbe, Modack and Watson, 2014).Assumption of Monetary Unit: It provides understanding that transactions relatedto business should be in US dollars as the currency has been accepted by everycountry and it is also stable currency which contains fluctuations.Materialist: Various aspects of financial statement and data are there which areanalyzed and gathered from relevant sources. In this, efforts will be in theperspective of providing important material information that is completelyrelevant (Scott, 2015). Economic Unit Assumption: Overall, important transactions related to businessenterprise will be considered as separate from personal transactions. 4. Conventions and concepts relating to consistency and material disclosure.Study determined that there is major presence of different terms such asmateriality, convention, full consistency, disclosure and conservatism within perspectivesof financial accounting concepts and conventions (Weil, Schipper and Francis, 2013). Inorder to analyze the principles, there are major needs of formulating perfect disclosureabout different account. It is also useful to gain understanding of concepts like: Material disclosure: There is the major requirement of disclosing various financialaccounts that involve various materials like important objects which are needed formaintaining the records of stakeholders through analysis of efficiency and probability ofenterprise for accomplishment of set standards and goals (Horngren and et.al, 2012). Consistency: In this principle, company's nature of business will be followed and tradepractices are accomplished in market. Overall, operations related to business will achieveconsistency of perfection and important benefit in terms of profitability. 4
CLIENT 1In this task, all financial statements are given with respect to Alexander such as trialbalance, ledger and journal that are been assessed with respect to each transaction (Edwards,2013).1. Journal of Client 1 as on 1st may 2017DateParticularsDebitCredit1Storage expenses a/c dr.400To bank a/c4002Purchase a/c dr6080To R. foot a/c1610To S. Hood a/c1450To W. tone a/c960To D Main a/c20603F. Lane a/c dr770J. Wilson a/c dr1120P. White a/c dr2420T. Cole a/c dr1640F. Syme a/c dr2080J. Allen a/c dr910to sales a/c89404Motor car expense a/c dr470To cash a/c4707Drawing a/c dr1500to cash a/c15009T. Cole a/c dr680J. Fox a/c dr1310To Sales a/c199011Sales return a/c dr680To F. Syme a/c410To J. Wilson 27014Van a/c dr28500To Abel Motors2850016(a) bank a/c dr.1330Discount allowed a/c dr70To p Mullen14005
(b) Bank a/c dr2945Discount allowed a/c dr155To F. Lane3100(c) Bank a/c dr807.5Discount allowed a/c dr42.5To J. Wilson 850(d) Bank a/c dr1586.5Discount allowed a/c dr83.5To F. Syme 167019R. foot a/c dr50To Purchase return a/c5022Purchase a/c dr3740To W. Wright a/c1910To L. Mole a/c183024(a) S. wood a/c dr3600To Bank a/c3240To discount received a/c360(b) J. Brown a/c dr4600To Bank a/c4140To discount received a/c460(c) R. foot a/c dr1400To bank a/c140To discount received a/c126027Salaries a/c dr4800To Bank a/c480030Business artes a/c dr1320To bank a/c132031Abel motors Ltd a/c dr20500To Bank a/c205002. Drawing ledger accounts of above journal entriesThere are various accounts which have several transactional entries according to eachtransaction in above journal entries. Managers and owners of business will be benefited by briefanalysis of cost and gains which are obtained on the basis of various sources of each activity incontext of operations of specified business (May, 2013). There will be major contribution instructuring plans and for decision making that will lead to reduce the cost and expenses ofcompany.6
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