Financial Accounting Principles: Assignment
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Added on 2020-12-30
Financial Accounting Principles: Assignment
Added on 2020-12-30
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Financial AccountingPrinciples
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1A. Preparation of report for Line Manager.............................................................................1Meaning of financial accounting............................................................................................1Accounting regulations...........................................................................................................2Principles and rules in financial accounting...........................................................................2Accounting concepts..............................................................................................................3CLIENT 1........................................................................................................................................3A. Journal entries for firm......................................................................................................3B. Preparation of general ledger accounts..............................................................................6C. Producing trial balance....................................................................................................16M1. Purchase and sale transactions......................................................................................16M2. Producing trial balance.................................................................................................17CLIENT 2......................................................................................................................................17A. Income statement for company........................................................................................17B. Preparation of Balance sheet............................................................................................18CLIENT 3......................................................................................................................................21A. Income statement for organisation..................................................................................21..............................................................................................................................................22B. Producing Balance sheet .................................................................................................22..............................................................................................................................................24..............................................................................................................................................25..............................................................................................................................................26..............................................................................................................................................27..............................................................................................................................................27C. Concepts and principles of accounting............................................................................27D. Importance of depreciation and various methods............................................................28M2. Analysis of balance sheet, income statement and cash flow statements.......................28D2. Accurate calculations in producing final accounts........................................................28CLIENT 4......................................................................................................................................28A. Bank reconciliation statement.........................................................................................28
B. Causes of recording bank reconciliation statement.........................................................29C. Producing cash books......................................................................................................29..............................................................................................................................................30..............................................................................................................................................30M3. Reconciliation process and related terms......................................................................30D3. Bank reconciliation statement in relation to accounting principles...............................31CLIENT 5......................................................................................................................................31A. Producing sales and purchase ledger account..................................................................31B. Control account................................................................................................................31CLIENT 6......................................................................................................................................32A. Suspense account and features........................................................................................32B. Trial balance....................................................................................................................32C. Producing journal entries.................................................................................................33D. Distinguishing clearing and suspense account................................................................34M4. Reconciliation and type of accounts.............................................................................34D4. Discussing accounting methods for organisation..........................................................35CONCLUSION..............................................................................................................................35REFERENCES..............................................................................................................................36
INTRODUCTIONFinancial accounting principles are crucial for effectively preparing financials oforganisation. Present report deals with various accounting problems of six clients. The finalaccounts are prepared by considering guidelines imparted by professional accounting bodiesquite effectually. Furthermore, income statement and balance sheet is produced by making outjournal entries and posting them in ledger. Concept of control and suspense account is discussedas well. Hence, financial accounting is helpful in producing true financials.A. Preparation of report for Line ManagerTo: Line ManagerFrom: Junior Accountant of firmSubject: Accounting terms, concepts and regulations relevant to companyRespected Sir,Accounting regulations and principles are crucial for organisation to be taken intoaccount so that financial statements may be prepared in accordance to them. This is essentiallyrequired because true and fair view of overall financial performance can be attained with muchease. The financials like income statement, balance sheet and cash flow statement. These areprepared in accordance to the principles and regulations which are helpful for accountants asthey guide them in preparing final accounts (Accounting Concepts, Principles and Basic Terms,2017 ). Accounting concepts play crucial role in company so that no accounting errors mayprevail and true financial position can be extracted in the best possible manner. The informationgathered by financial accounting and statements are prepared help users of financial data orexternal users in taking well-structured decisions in effective manner. Moreover, internalmanagement team is also able to analyse financial performance of firm quite effectually. Meaning of financial accountingThere are numerous transactions which occurs in the company and thus, it is required tokeep record of each and every items so that transparency may be achieved in a better way. Thecompany is able to accomplish accuracy by recording business transactions quite effectively. Byrecording transactions, financial statements are prepared which is possible because of financialaccounting in effective way. It is branch of accounting recording transactions with the help of1
which final accounts are produced quite effectually. It helps firm to provide financials ineffective manner and they are provided to external users of accounting information in the bestpossible way. Investors and creditors are benefited by relying on financial statements to takedecisions with much ease. Furthermore, firm is able to provide relevant information tostakeholders as investors relies on the profitability position of company while, creditors' judgesliquidity position and thus, they are able to take well-structured decisions (Rodrigues andRodrigues, 2018). Thus, financials are quite relevant to company and stakeholders as well fortaking decisions.Accounting regulationsThe accounting regulations are important in extracting true and fair view of financialcondition of company as several guidelines are imparted by professional bodies helpingaccountants to produce reliable information. UK's corporate regulator has provided FRC whichregulates financial reporting of government and corporations as well. The legal frameworks areas follows-FRC (Financial Reporting Council)- The accounting body regulates department ofgovernment and organisations. Furthermore, main objective is to inject investment and thus,benefits are provided to the nation. IFRS (International Accounting Standards Board)- It is another professional bodygoverning accountants to prepare final accounts quite effectually. These guidelines help toformulate financials as per the standards provided and as a result, true and fair view is extractedwith the help of universally applicable provisions of body (Ombati and Shukla, 2018).Principles and rules in financial accountingThe principles are provided by GAAP (Generally Accepted Accounting Principles) inproducing reliable financial statements. These are described below-Cost principle- It states that need and demand of various units or department may beattained so that relevant budget can be prepared quite effectually. This is required ascosts can be effectively assessed and estimated. Thus, budgeted figures are carried outby organisation. Full disclosure principle- This type of principle states that firm should enter each andevery transaction in accounting books so that reliable information can be extracted. Forfurther increasing reliability, financials should be audited and segregated in single2
statements to maximise accuracy. Hence, these must be disclosed at the end ofaccounting period.Principle of going concern- This principle simply means that business is started and willbe operated for longer time frame. Moreover, it will not close in short period and hence,financials are prepared in such anticipation only.Monetary unit consumption- This principle is based on the fact that firm should madebusiness transaction in a particular currency which is somewhat stable and does notfluctuate constantly. It is based on monetary value of currencies and as such, US dollarshould be used by the company (McCarron and Burstein, 2017). Accounting conceptsConsistency concept- It is the accounting concept which states that policies and methods shouldbe consistently followed by organisation so that better information can be extracted. In simplerwords, for year's together same accounting policies should be used in order to attain reliabilityin the best possible manner. It is essentially required as when frequent changes are done in thisaspect, then, reliability is lost. Hence, consistency concept lays emphasis to follow samemethods for achieving accurate information which also helps to compare with previous yearfigure as well. Concept of material disclosure- The concept states that firm should disclosed all materialinformation affecting financials statements. It is required as financials need to be prepared andwithout sufficient and accurate information, these cannot be formulated. Moreover, non-material items can be ignored which do not affect decision made by users of accountinginformation. Hence, transparency is attained by the concept of material disclosure. CLIENT 1A. Journal entries for firmThe accounting records are entered in the books of prime entry and as such, transactionsare effectively recorded (Brandau, Endenich, Luther and Trapp, 2017). Journal entries areprovides complete summary of data set and are helpful for producing financial statements in thatmanner exhibiting fair view of financial condition of organisation. Entries recorded in journal ismade in chronological order which provides accuracy relating to the transactions entered. Thejournal entries are recorded for Alexandra below-3
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