Financial Accounting Principles Assignment - Doc
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Added on 2020-10-22
Financial Accounting Principles Assignment - Doc
Added on 2020-10-22
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Financial AccountingPrinciples
Table of ContentsINTRODUCTION...........................................................................................................................1BUSINESS REPORT......................................................................................................................11. Financial accounting and it's purpose......................................................................................12. Explain regulations related to Financial accounting................................................................23. Describe accounting rules and principles................................................................................34. Explain conventions and it's concept consistency & material disclosure................................4CLIENT 1........................................................................................................................................4(a) Preparation of Journal Entries in books of David Study........................................................4(b) Ledger Accounts of David Study's financial statements........................................................7(c) Trial balance of David Study as on 31st January 2018........................................................14CLIENT 2 .....................................................................................................................................16(a) Statement of profit and loss account....................................................................................16(b) Statement of financial position of Peter Hampau as at 31st July 2018................................16CLIENT 3......................................................................................................................................18(a) Profit and loss account of Bowling Limited.........................................................................18(b) Balance sheet of Bowling Limited.......................................................................................18....................................................................................................................................................19(c) Accounting concepts of Consistency and Prudency.............................................................19(d) Purpose of depreciation and its methods..............................................................................20CLIENT 4......................................................................................................................................21(A) Bank Reconciliation Statement...........................................................................................21(B) Prepare Durrell Ltd's updated cash book for December 2017.............................................21
(C) Bank Reconciliation Statement as on 31st December 2017................................................22CLIENT 5......................................................................................................................................22(a) Books of Henderson.............................................................................................................22(b) Control account and its need................................................................................................23CLIENT 6......................................................................................................................................24(a) Suspense account..................................................................................................................24(b) Trial Balance........................................................................................................................25(c) Trial balance have credit balance of £ 330 as suspense account..........................................25(d) Difference between Clearing and Suspense account............................................................26CONCLUSION..............................................................................................................................26REFERENCES .............................................................................................................................28Books & Journals...........................................................................................................................28
INTRODUCTIONFinancial accounting principle provide some rules and regulations to the organisationwhich help them to make financial statements. These standard and guidelines should be followby the every business. Generally accepted accounting principle (GAAP) provide generalguidelines for the company that is helpful at the time of preparing financial accounts such asbalance sheet or profit and loss accounts. As a junior accountant it is very important to use thesestandard that provide accurate information to prepare statements. Further report is about financialaccounting, it's purpose and regulation (Agasisti and Catalano, 2013). Along with this, they alsodiscussed about accounting principle, conventions, it's concept such as consistency or materialdisclosure. It is also included that double entry book keeping system, trial balance and finalaccounts in respect of sole proprietor, limited company or partnership. Rest of the topic is aboutbank reconciliation statement, it's process, suspense account with the relevant example and italso include the sales and purchase control account. These statement help the accountant takenecessary decision and it provide the help to achieve business objectives and goals. BUSINESS REPORT1. Financial accounting and it's purposeFinancial accounting: It is a process of recording business transactions, summarised andanalyse these data provide a accurate information to the organisation. Financial accounting is thespecialised branch of accounting which help the organisation to create income statement andfinancial position. This accounting system follow the some guidelines which provide themproper guidelines. It is also prepared for further use such as decision making process, record datafor future budget and for analysing. It is prepared for it's users such as shareholders andstakeholders of the company. Accounting system helps the organisation to record it's dailyactivities that further helpful in manager's decision making process (Akenbor and Ibanichuka,2012). There are various purpose of financial accounting such as: Identify the performance of the company through it's financial activities. It is helpful for the identification of true position of business in respect of incomestatement and balance sheet. It provide helps to the manager to take decision on the basis of financial information. Helpful for the analysis of accounting fundamentals. 1
Financial accounting provide these information to it's users such as creditors, suppliers,investors, employees, government and other institutes who are interested in the businessaccounts.It provide information regarding profit and loss of the business that further help themanager to take decision on behalf of the organisation (Akisik, 2013). 2. Explain regulations related to Financial accountingThis accounting system has various regulation which is follow by the organisation foreffective work. It help the manager to identify the company's true position in respect of profitand loss of the business. So manager can analyse these information and take effective decisionfor the organisation. Business adopt these regulation and prepare company's accounts accordingto guidelines. That is beneficial for the investors which help them to take decision to invest inthis company or not. There are some regulations which is followed by the organisation:Financial accounting is the proper system that follow some guidelines, rule, standards andprocedure according to GAAP principle. Organisations adopt Generally AcceptedAccounting Principle (GAAP) which help them to prepare their accounts in appropriateway (Sunder, 2015). GAAP includes various principle which is follow by the businesssuch as regularity, sincerity, constancy, non- compensation, continuity etc. Organisations also follow the International Financial Reporting System (IFRS) forfinancial accounting. It provide a proper framework which define that how publiccompany discover their financial statements. IFRS give basic guidelines for recordingtheir accounts rather than fix any rules for specific activity. Treatment of an each transaction such Debit or Credit provide accurate balance of thecompany's income and expenses. With the help of this rule accountant can record eachactivity in appropriate way which further help in building financial statements (Baker andBurlaud, 2015).According to Company's Act, organisation need to prepare their annual report and it ispresented in every general meeting of the entity. This report is also publish for the publicso they can analyse the financial position of the business. 2
3. Describe accounting rules and principlesAt the time of recoding company's accounts, accountant need to follow some rules andrelated principle which help the company to prepare financial statement. There are some rulessuch as:Debit what comes in, Credit what goes out: - This principle is used in case of real accountsand it involves the assets such as building, land, machinery etc. If company purchase any assetsthat increase the debit balance of the account. Similarly, if company sale their goods than indecrease the account balance of that particular item (Budding, Grossi and Tagesson, eds., 2014).Than it comes in the credit side of the accounts. For example: - Company purchase £20,000machinery so the balance debited by the £20,000. Same as sale of goods worth £10,000, so thestock balance will be credited by £10,000. Debit the receiver, Credit the giver: - This rule is applicable in case of personal accounts. Thisaccount include any person, organisation or legal entity they all are consider as a person in theeyes of law. If company receive something from another party, so company going to be debitedand other party is going to be credited because company is the receiver and party is the giver. Forexample: - John receive £500 from Wilson, so debit the John account balance and credit theWilson's account.Debit all the expenses and loss, Credit all the profits and gain: - It is applicable for thenominal accounts. Company debited all the expenses and losses which occur through businessactivities. Credit all the incomes which is generated by the various activities. For example: -Maintenance expenses of £150 will be debited because it a expense for the company. Same as,profit on sale of fixed assets £2500 is credited because it is a profit for the company. Principles: Dual aspect concept: - According to this concept every transaction have dual aspectmeans two effects. For every single transaction company need to open two accounts andone have debit effect and another one have credit effect on their balance. This concept isinspired by the accounting equation, that is assets equal to the liabilities and equity sharesof the company (Caplan, Dutta and Marcinko, 2012). This concept reduce the problem offinancial accounts which occur due to use of single entry system. Cost principle: - This principle is the part of GAAP that record the value of assets at thetime of purchasing price and it also known by the historical cost concept. This principle3
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