Financial Accounting - Sample Assignment

FINANCIAL
ACCOUNTING
PRINCIPLES

Table of Contents
INTRODUCTION...........................................................................................................................3
BUSINESS REPORT......................................................................................................................3
(a) Financial Accounting and its purposes.............................................................................3
(b) Internal and external stakeholders....................................................................................4
CLIENT 1........................................................................................................................................6
1. Journal Entries and Ledger in the book of Alexandra Study..............................................6
Ledgers...................................................................................................................................7
..............................................................................................................................................12
2. Trial Balance as at 31st January 2019 in the books of Alexandra Study:........................12
2. Trial Balance as at 31st January in the books of Alexandra study...................................13
CLIENT 2......................................................................................................................................14
1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 201814
2. Statement of Financial Position of Munteanu Ltd. As at 31st December 2018...............15
3. Accounting Concepts – Consistency and Prudency.........................................................15
4. Purpose of depreciation in formulating accounting Statement.........................................16
CLIENT 3......................................................................................................................................17
1. Purpose of preparing Bank Reconciliation Statement......................................................17
2. Reason for difference between balance of bank column of cash book and bank statements17
3. Imprest..............................................................................................................................18
4. Bank Reconciliation Statement as at 30 September 2018................................................18
CLIENT 4......................................................................................................................................19
1. Sales Ledger Control Account in the book of January 2018............................................19
2. Purchase Ledger Control Account in the books of January 2018....................................19
3. Control Account...............................................................................................................20
CLIENT 5......................................................................................................................................20
1. Suspense Account and its main features..........................................................................20
2. Trial Balance using a control account as balancing figure...............................................20
3. Journal Entries for corrections..........................................................................................21
CONCLUSION..............................................................................................................................21

REFERENCES..............................................................................................................................22
INTRODUCTION
Financial Accounting is a specialized branch of accounting that keep records of
company's financial transactions (Tinoco and Wilson, 2013). It is the process of prepare financial
reports to present performance of a company. These reports are applying standardized guidelines
for record the transactions and present in summarized way. The main purpose of the accounting
to provide financial information for sound economic decision making. It can prepare financial
report shows performance company to external parties like investors, creditors and tax
authorities. In the present report selected company Airdri limited, which is dealing in electronic
components, net contacts in WITNEY in United Kingdom. In particular report focused on record
business transactions using double entry book keeping after then produce trial balance. In
addition, Prepare final accounts for sole traders, partnership and limited companies in the
reference of accounting principles, convections and standards. Apart from, there is performing
bank reconciliation for ensure bank records are correct or not and adjust control accounts
according to requirements and recorded transactions from the suspense accounts to right
accounts.
BUSINESS REPORT
(a) Financial Accounting and its purposes
Financial accounting refers to recording, summarizing, classifying and analysing the
transactions recorded in the company books of accounts. It represents the actual picture of
financial position of business. It is a systematic process and classification of financial and non
financial information after then record according to their nature. The financial transactions are
presented in financial reports like income statement, cash flow statement and balance sheet.
These reports are part of formal report and provide to external and internal stakeholders. It will
show operating performance of the company related to accounting time period (Anandarajan,
Anandarajan and Srinivasan, 2012). The transactions are recorded on the basis of accounting
principles, convections, policies, rules and regulations. The main purpose of preparing this
statement are as follows :-

 The recording activity of financial accounting every transaction in the books of accounts
is recorded, that helps to keep a track of all the information. The book consist of cash as
well as credit transactions.
 Analysing the purpose for the evaluation of various alternatives and selection of best
alternatives.
 It assist in projecting anticipated earnings and performance of business organization.
(b) Internal and external stakeholders
Stakeholder is either an individual, group or organization who is impacted by the success
or failure of a business. Stakeholders can have a significant effect on decision regarding the
operations and finances of an organization (Chiang, Nouri and Samanta, 2014). The primary
stakeholders of regular organizations are investors, suppliers, employees and customers.
Stakeholders are categorised into two parts who is directly and indirectly related to the large
organisation -
Internal Stakeholders –
Internal stakeholders are people who are already related to company as volunteers, board
of directors and donors. In a large business organization, internal stakeholders are management,
owners, employees and shareholders. According to brief discussion there is including major
internal stakeholders and they are directly related to the company and interested in outcomes
which is related to financial situation, as follows - Owners and Shareholders – They are a subset of the stakeholder category where all
shareholders have invested funds in the business and they become automatically
stakeholders. Shareholders and owners are the most likely to lose their money at the time
of shut down of business. They become last priority to be paid from any left over funds.
They are interested into financial information because they wants to survive company for
long time and it helps in decision making process.
 Employees – They are local community and most considerable resources of a business
organisation. They always wants to achieve growth with in a business to acquire
sustainability growth. Employees are interested into financial information because their
salary and career are dependant on organisation's performance and growth.
External Stakeholders -

External stakeholders are those people who are impacted by work as community partners,
clients, constituents and others (Lawrence, 2013). In the case of large organisation in external
stakeholders including customers, creditors, suppliers and government etc. As a brief description
key external stakeholders are those person, group who are interested in financial information of
company. Government – Government can play role as stakeholder because it collect several taxes
on incomes and on other resources. Government can collect taxes and compliance with
proper rules and regulations in business organisation. Government charges tax on income
so for this there is need financial information. Suppliers – They are stakeholder because they are supplied raw materials and other
things on time for fulfil requirement of company. If they provide on time so they try to
receive payments on time and they can also provide liquidity position due to credibility.
So suppliers having stake in business organisation in form of their payments and sales.
They need financial information in order to get their money on schedule time. Customers – Customers are important part an organisation who can decide growth and
revenues of an organisation. They are purchasing products of company and recommended
to other for product. They can buy products and services of company after using
determine their popularity, growth, quality, beliefs and performance therefore customers
are holding performance and sustainability of business organisation. They can buy
products of Investors – These are most significant part of an organisation because they are providing
money on time and they can help to increase and growth of a company after investing
money and other financial asset. Investors are actual stakeholders of company because
they always try to get maximum return from investment made by in business
organisation. They are investing money in company on the basis of financial position.
(Zadek, Evans and Pruzan, 2013) .
 Creditors – The company can borrow money from creditors and provide secure interest
in the company's assets. Creditors are ranked as stockholders to paid in the event of a
business shutdown. In the terms of creditors there is including bond holders, suppliers
and banks. They are interested in financial information because they invest in company.

CLIENT 1
1. Journal Entries and Ledger in the book of Alexandra Study
SALES DAY BOOK
DATE DETAILS £
2018
03 January
2018 J Wilson 1,200
T Cole 1,650
F Syma 2,100
J Allen 1,020
P White 2,520
F Lane 980
09 January
2018 T Cole 680
J FOX 1,310
Credit in sales account in Nominal Ledger 11,460
PURCHASES DAY BOOK
DATE DETAILS £
2018
02 January 2018 S.Hood 1,450
D Main 2,060
W.Tone 960
R Foot 1,610
22 January 2018 L Mole 1,830
W Wright 1,910
Debit Purchases account in Nominal Ledger 9,820
PURCHASES RETURNS DAY BOOK
DATE DETAILS £
2018
19 January 2018 R Foot 50
Credit purchases returns account
in Nominal Ledger 50

SALES RETURNS DAY BOOK
DATE DETAILS £
2018
11 January 2018 J Wilson 270
F Syma 410
Debit sales returns account
in Nominal Ledger 680
Ledgers
Purchases A/c
Date Particulars Amount Date Particulars Amount
02/01/19 To S Hood A/c 1450 31/01/19 By Trading and P&L
A/c
9820
To D Main A/c 2060
To W Tone A/c 960
To R Foot A/c 1610
22/01/19 To L Mole A/c 1830
To W Wright
A/c
1910
Total 9820 Total 9820
Bank A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening
Balance (B/f)
68400 01/01/19 By Storage cost A/c 450
16/01/19 To P Mullen A/c 1400 24/01/19 By S Hood A/c 3600
To F Lane A/c 3100 By J Brown A/c 4600

To J Wilson A/c 850 By R Foot A/c 1400
To F Syme A/c 1670 27/01/19 By Salaries A/c 4800
30/01/19 By Business Rates A/c 1320
31/01/19 By Closing Balance
C/d
59250
Total 75420 Total 75420
D Main A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Closing
Balance A/c
2060 02/01/19 By purchases A/c 2060
Total 2060 Total 2060
By Purchases Return A/c
Date Particulars Amount Date Particulars Amount
31/01/18 To Trading and
P&L A/c
50 19/01/18 By R foot A/c 50
50 50
R Foot A/c
Date Particulars Amount Date Particulars Amount
19/01/18 To Purchase
Return A/c
50 02/01/19 By purchases A/c 1610
24/01/19 To Bank A/c 1400
31/01/19 By Closing
Balance C/d
160
Total 1450 Total 1610
T Cole A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 1650 31/01/19 By Closing Balance 2330

C/d
09/01/19 To Sales A/c 680
Total 2330 Total 2330
J Allen A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 1020 31/01/19 By Closing Balance
C/d
1020
Total 1020 Total 1020
F Lane A/c
Date Particulars Amount Date Particulars Amount
01/01/18 To Opening
Balance (B/f)
6100 16/01/19 By Bank A/c 3100
03/01/18 To Sales A/c 980 31/01/18 To Closing Balance C/d 3980
Total 7080 Total 7080
Cash A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening
Balance (B/f)
15600 04/01/18 By Motor Expenses A/c 470
07/01/19 By Capital A/c 1500
31/01/19 By Closing Balance
C/d
13630
Total 15600 Total 15600
Sales Return A/c
Date Particulars Amount Date Particulars Amount
11/01/19 To J Wilson A/c 270 31/01/19 By Trading and P&L
A/c
680

To F Syme A/c 410
Total 680 Total 680
L Mole A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Closing
Balance C/d
1830 22/01/19 By Purchases A/c 1830
Total 1830 Total 1830
W Wright A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Closing
Balance C/d
1910 22/01/19 By Purchases A/c 1910
Total 1910 Total 1910
J Brown A/c
Date Particulars Amount Date Particulars Amount
01/01/19 By Opening Balance
b/f
16600
24/01/19 To Bank A/c 4600 31/01/19 By Closing Balance
C/d
31/01/19 To Closing
Balance C/d
12000
Total 16600 Total 16600
Business Rates A/c
Date Particulars Amount Date Particulars Amount
30/01/19 To Bank A/c 1320 31/01/19 By Trading and P&L
A/c
1320
Total 1320 Total 1320

Storage Cost A/c
Date Particulars Amount Date Particulars Amount
01/07/19 To Bank A/c 450 31/07/19 By Profit & Loss A/c 450
Total 450 Total 450
Sales A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Trading and
P&L A/c
11460 03/01/19 By J Wilson A/c 1200
By T. Cole A/c 1650
By F. Syme A/c 2100
By J .Allen A/c 1020
By P .White A/c 2520
By F .Lane A/c 980
09/01/19 By T .Cole A/c 680
By J fox A/c 1310
Total 11460 Total 11460
S Hood A/c
Date Particulars Amount Date Particulars Amount
24/01/19 To Bank A/c 3600 01/01/19 By Opening Balance
(B/f)
12150
02/01/19 By purchases A/c 1450
31/01/19 To Closing
Balance C/d
10000
Total 13600 Total 13600
W Tone A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Closing 960 02/01/19 By purchases A/c 960

Balance C/d
Total 960 Total 960
J Wilson A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 1200 11/01/19 By Sales Return A/c 270
16/01/19 By Bank A/c 850
31/01/19 By Closing Balance
c/d
80
Total 1200 Total 1200
F Syme A/c
Date Particulars Amount Date Particulars Amount
03/01/18 To Sales A/c 2100 11/01/19 By Sales Return A/c 410
16/01/19 By Bank A/c 1670
31/01/19 By Closing Balance
c/d
20
Total 2100 Total 2100
P White A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 2520 31/01/19 By Closing Balance
c/d
2520
Total 2520 Total 2520
P Mullen A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening 4400 16/01/19 By Bank A/c 1600

Balance (B/f)
31/01/19 By Closing Balance
c/d
2800
Total 4400 Total 4400
Capital A/c
Date Particulars Amount Date Particulars Amount
07/01/18 To Cash A/c 1500 01/01/18 By Opening Balance
b/f
389000
31/01/18 To Closing
Balance C/d
387500
Total 389000 Total 389000
J Allen A/c
Date Particulars Amount Date Particulars Amount
09/01/18 To Sales A/c 1310 31/01/18 By Closing Balance
c/d
1310
Total 1310 Total 1310
Motor Van A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening
Balance (B/f)
51250 31/01/19 By Closing Balance
c/d
51250
Total 51250 Total 51250
Salaries A/c
Date Particulars Amount Date Particulars Amount
27/01/19 To Bank A/c 4800 31/01/19 By Trading and P&L
A/c
4800
Total 4800 Total 4800

Motor Expenses A/c
Date Particulars Amount Date Particulars Amount
04/01/19 To Cash A/c 70 31/01/19 By Trading and P&L
A/c
470
Total 470 Total 470
2. Trial Balance as at 31st January 2019 in the books of Alexandra Study:
Trial Balance for the month of July..........
Particulars Debit Credit
Storage Cost 450
Purchase 9820
Sales 11460
Motor Expenses 470
Receivables:
P Mullen 3000
F Lane 3980
J Wilson 80
T Cole 2330
F Syme 20

J Allen 1020
P. White 2520
J Fox 1310
Cash At Bank 52680
Cash In Hand 20200
Payables:
S. Hood 10000
J. Brown 12000
W Tone 960
R Foot 160
L Mole 1830
W. Wright 1910
D Main 2060
Premises 240000
Van 51250
Fixtures 8100
Inventory 23900
Sales Return 680
Purchase Return 50
Salaries 4800
Business Rates 1320
Capital 387500
Total 427930 427930

2. Trial Balance as at 31st January in the books of Alexandra study
A trial balance is a bookkeeping worksheet where is all remaining balances are recorded
of general ledger accounts. There is debit amount shows in debit side and credit amount shows in
credit side. The total of each of these two columns should be identical (Thornton, 2013).
Trial Balance for the month of July..........
Particulars Debit Credit
Storage Cost 450
Purchase 9820
Sales 11460
Motor Expenses 470
Receivables:
P Mullen 3000
F Lane 3980
J Wilson 80
T Cole 2330
F Syme 20
J Allen 1020
P. White 2520
J Fox 1310
Cash At Bank 52680
Cash In Hand 20200
Payables:
S. Hood 10000
J. Brown 12000
W Tone 960
R Foot 160
L Mole 1830
W. Wright 1910

D Main 2060
Premises 240000
Van 51250
Fixtures 8100
Inventory 23900
Sales Return 680
Purchase Return 50
Salaries 4800
Business Rates 1320
Capital 387500
Total 427930 427930
CLIENT 2
1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018
Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018
Particulars Amount Particulars Amount
To opening inventory 15000 By Sales 138000
To Purchases 61000 Less: Return Inward 3000 135000
Less: Return Outward 1500 59500 By Closing Inventory 20000
To Gross profit 80500
Total 155000 Total 155000
To Administration Cost 32000 By Gross Profit 80500
To Distribution Cost 32000
To Depreciation 8800
To Finance Cost 1500
To Tax 2000
To Net Profit 4200
Total 80500 Total 80500

2. Statement of Financial Position of Munteanu Ltd. As at 31st December 2018
Statement of financial position of Munteanu Ltd. As at 31st December 2018
Assets Amount in EUR
Land 20000
Building 40000
Less: Accumulated Depreciation 10000
30000
Depreciation for the year 800 29200
Plant and machinery 60000
Less: Depreciation 20000
40000
Depreciation for the year 8000 32000
Total non-current assets 81200
Inventories 20000
Prepaid Rent 3000
Accounts receivable 26000
Total current assets 49000
Total assets 130200
Equity and liabilities
Share capital 40000
Share premium 20000
Retained Earnings including current year profit 26200
Equity 86200
Current and other tax liabilities 2000
Accrued salaries 2000
Bank Overdraft 18000
Accounts payable 22000

Total current liabilities 44000
Total equity and liabilities 130200
3. Accounting Concepts – Consistency and Prudency
Accounting concepts and principles are a set of broad convections which is described the
basic assumptions and rules and principles which can follow by an organisation when recorded
transactions in the books of accounts. These are working as guideline for guide accountant to
how to record transactions in specific manner (Williams and Dobelman, 2017). As financial
accounting it involves important professionals judgements by accountants, there are assure about
the users of financial information are not misguide after following accounting policies and
practices. There are following two accounting concepts as follows -
Consistency – The accounting concept of consistency related to continuity where all
financial statement are following particular strategy for statements. The accounting principle has
been remaining same in all accounting period and apply same accounting standards and calculate
profit and loss. It can maintain consistency regarding to accounting policies and procedures.
Prudence – In this accounting concepts requires financial statements use accountancy
policies and predications. It is required that business organisation must estimate their incomes
and expenses but does not over and also does not underestimate its expenses, obligations and
losses.
4. Purpose of depreciation in formulating accounting Statement
Depreciation can charged on fixed assets to know actual value of assets for the following
year. It is charge as expenses a portion of an asset that relates to the revenue generated by the
assets. It is also known as matching principle because in income statement, revenues and
expenses are appeared in same reporting period (Beaumont, 2015). It can help to show how well
a company has perform in particular accounting period.
Straight line method – It is a default method which is used by organization to know
carrying amount of a fixed assets in their useful life. It is adopted by an organization when
particular pattern can not mention so in the manner it will applied on fixed assets to calculate
depreciation. It is the easiest depreciation method to calculate depreciation and end a result get
few calculations errors. This method used by company when economic benefits get from fixed
assets.

Written down method – It is the value of an assets after amortization and accounting for
depreciation. According to this method depreciation can charges on the book value of the assets
after then reduce amount from book value and remaining amount record in the books. It is also
called reducing balance method, diminishing balance method.
There is identified major differences between sole traders and limited companies
regarding to preparation of financial statements -
Sole Traders Limited Companies
They are free from create balance sheet like
horizontal and Vertical.
On limited companies apply rules to prepare
vertical balance sheet.
By sole proprietorship shows financial position
through the amount of the assets held.
It is mainly used for financial information to
take overall decision in the manner of company
profitability (Bryer, 2013).
CLIENT 3
1. Purpose of preparing Bank Reconciliation Statement
A Bank Reconciliation Statement is a summary of banking and business activity that
accommodate an entity in the bank account with the help of financial records. It is a document
which is maintain balance between bank balance and cash balance (Ball, 2013).
 Bank reconciliation is a statement which is prepared to compare the data recorded in the
books of accounts to that of cash balances in the banks. The main purpose of this
statement is to ensure that the records comply with that of bank account.
 It helps to maintain the accuracy of records and makes the data more reliable.
 Reducing the error and duplication of records is also one of it's purpose.
 It also informed the company about the undue payments and and collection of cash from
creditors.
 This helps to validate company's claims and can be used as proof in court in case of any
complaints made by customers.

2. Reason for difference between balance of bank column of cash book and bank statements
There is described most common reasons for difference between bank balance and cash
balance. There are -
 Recorded in wrong side
 Electronic charges charged by bank but can not recorded in the books
 Check printing charges
 Cheque dishonoured
 Errors of books
 Deposit in transit
 Outstanding charges
 Cheque issued but not presented
3. Imprest
It is a kind of financial accounting system and it is designed to track document how cash
is being spent. Petty cash system is example of of imprest system and in this system fixed
amount is reserved for certain time period when circumstances require due to money spent
(Hope, Thomas and Vyas, 2013).
4. Bank Reconciliation Statement as at 30 September 2018
Dr Corrected Cash Book (Bank) Cr
£ £
31-Dec Balance b/d 19,973
Overstated
amount 1
Overstated
amount 9 Bank charges 47
Standing order 137
310923 (Direct D) 297
Balance c/f 19,500
19,982 19,982
Balance b/d 19,500
Particulars Amount
- Bank Balance as per pass book 398

Add: Items having effects of higher balance in cash
book
- Bank charges not recorded in cashbook... 36
- Adjustment for direct debit rates.............. 105
Less: Items having effects of lower balance in cash
book
 Payments to:
- C David 122
- S Leeming 116
- C Lyons 87
Bank balance as per cash book 214
CLIENT 4
1. Sales Ledger Control Account in the book of January 2018
Sales ledger control account is a summary account which is helping to check errors
related to arithmetic accuracy of sales ledger. It is type of T accounts, individual trade receivable.
It can show total trade debtors of a company in a particular time period. It is part of balance sheet
and short term asset.
Sales Ledger Control A/c
Particulars Amount
(£)
Particulars Amount (£)
Balance b/d... 12600 Sales Return............. 4320
Credit Sales............. 152350 Bad Debts.................. 1600
Discount Allowed............. 1060
Bank/ Cash (Receipt from credit
customers)..................
120610
Set-off (Transfer to purchase 640