Financial Accounting & Principles Assignment
Added on 2020-07-23
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Financial Accounting &Principles
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1A) Preparation of report for Line Manager............................................................................1CLIENT 1........................................................................................................................................41. Passing journal entries........................................................................................................42. Preparation of ledger accounts...........................................................................................8................................................................................................................................................9................................................................................................................................................9................................................................................................................................................9..............................................................................................................................................10..............................................................................................................................................10..............................................................................................................................................113. Trial balance.....................................................................................................................18M1. Purchase and sale transactions......................................................................................19D1 Trial balance...................................................................................................................19CLIENT 2......................................................................................................................................19A) Income statement.............................................................................................................19B) Balance sheet...................................................................................................................20CLIENT 3......................................................................................................................................22A) Income statement for the company.................................................................................22..............................................................................................................................................23B) Balance sheet...................................................................................................................24..............................................................................................................................................27..............................................................................................................................................28..............................................................................................................................................28C) Concepts of accounting...................................................................................................28D) Methods of deprecation...................................................................................................29M2 Income statement, balance sheet and cash flow statements...........................................29D2 Calculations in producing final accounts........................................................................29CLIENT 4......................................................................................................................................29A) Bank statement................................................................................................................29
B) Outlining causes for preparing bank statements..............................................................29C) Cash books.......................................................................................................................30M3 Reconciliation process...................................................................................................31D3 BRS.................................................................................................................................31CLIENT 5......................................................................................................................................31A) Sales and purchase ledger...............................................................................................31B) Control account...............................................................................................................31CLIENT 6......................................................................................................................................32A) Suspense account and explaining features......................................................................32B) Trial balance....................................................................................................................32C) Journal entries..................................................................................................................32D) Distinguishing between clearing and suspense account..................................................33M4 Various accounts and reconciliation..............................................................................33D4 Outlining accounting methods for the organisation.......................................................33CONCLUSION..............................................................................................................................33REFERENCES..............................................................................................................................34
INTRODUCTIONFinancial accounting is quite important in the business as it helps to record everytransaction which occurs in the organisation. This is required so that final accounts can beprepared with much ease. Present report deals with various companies which requires followingaccounting regulations and concepts in the best possible manner. Moreover, various accountingconcepts and relevant terms are discussed in this report. Financials of the company such asbalance sheet, cash flow statement and income statements are prepared for assessing overallfinancial performance of organisations in effective way. A) Preparation of report for Line ManagerTo: Line Manager of FirmFrom: Junior AccountantSubject: Accounting terms and regulations useful for the companyRespected Sir,Accounting principles and regulations play crucial role in the company so that may beable to prepare various financial statements in the best possible manner. This is quite importantso that effective financials may be prepared in consideration of various regulations implementedby accounting bodies. In relation to this, financials of company are income statement and cashflow statement and balance sheet which are three statements which provides clarity about thefinancial health of organisation quite easily. Accounting concepts are required to be followed bythe company so that error free and true financial statements may be prepared exhibiting realfinancial position of the organisation. Financial accountingThe term financial accounting is the major branch of accounting which deals withrecording, summarizing of business transactions held over particular time frame. This is quiteessential for the business so that it may be able to analyse various transactions. Once financialtransactions are recorded and summarized, final accounts can be easily prepared. The finalaccounts are then provided to various stakeholders such as investors, creditors so that they maybe able to take effective and better decisions with much ease. Thus, financial accounting isrequired in the organisation and should be adhered to accounting concepts and policies1
governed by professional bodies. Moreover, when financials of the company are prepared then,it is available for various stakeholders to take effective and better decisions whether to providefunds to organisation or not. Financial accounting regulationsAccounting regulations are required to be abide by the company so that accuratefinancial statements can be prepared having transparency in the best possible way. This isrequired to be followed by accountant so that he may formulate financials of the company ineffectual way and that too error and mistake free. In relation to this, UK's corporate governanceprofessional body such as FRC (Financial Reporting Council) has provided legal framework tobe followed by the company while preparing financial statements of the organisation in the bestpossible way. These legal frameworks help accountants to prepare financials in quite effectivemanner. Legal frameworksFRC : It is a professional body limited by guarantee and regulates entire organisations of UK sothat financials may be prepared in the best possible way. Moreover, government departmentsare also regulated by it (Financial Reporting Council, 2017). The main objective of FRC is toadequately foster investment in UK and as such, benefiting whole economy in effective way. IASB : It is abbreviated as IASB (International Accounting Standards Board) which regulatesorganisations so that adequate financial statements may be prepared. It provides guidelineswhich help accountants to prepare financials so that true and fair view may be extracted out ofthe statements in the best possible manner. IFRS :It is abbreviated as IFRS (International Financial Reporting Standards) which is anotheraccounting body facilitating accountants to prepare fair financial statements exhibiting truefinancial health of the company. Principles of accountingPrinciples of accounting are provided by GAAP (Generally Accepted AccountingPrinciples) which are as follows-Monetary unit assumption: Transactions should be made in one stable currency so that2
monetary value may be followed. In relation to this, US dollar is universally accepted one andorganisation should made transactions in the same currency.Cost principle: This is useful principle which states that expenses may be analysed in the bestpossible way. This will company to prepare financial budget quite easily by estimatingexpenditures to be made by various units.Full disclosure principles: This principle is based on the concept that business should each andevery record occurred in the normal course period so that adequate financials may be prepared.This will exhibit true financial position of the organisation quite effectively. Moreover, forattaining reliability, financials must be duly audited (Campbell, Khan and Pierce, 2017).Going concern: This principle states that business will go for an indefinite time. This means thatorganisation will not be dissolved in the near future and in anticipation of this basis, financialstatements are prepared by the company in effective manner.Materiality: Material concept states that business should record only material items andconsecutively ignores non-material items. Material items which affects financial statements anddecisions of users of accounting information must only be recorded. Non-material items whichdo not impact users should be ignored. Material disclosure and consistency conceptsConsistency: This accounting concept states that organisation should follow same rules andaccounting policies year after year for effectively attaining reliability. When business followssame policies and methods, comparison of financial health can be easily done by it. In additionto this, deprecation method should be charged same for many years to exhibit correct value offixed assets. Frequent changes injects unreliable outcomes. Material disclosure: this principle states that material items which impact financial statementsand affect decision-making of users of financial information should be accounted for. Thisimplies that all non-material items should be ignored which do not affect decision-making ofusers. Thus, reliable information can be obtained with much ease. 3
CLIENT 11. Passing journal entriesJournal entries of Alexandra Organisation is prepared as this is the first step ofpreparation of final accounts. Summarized data is provided as each and every record of businesstransactions are included in it. From journal entries, ledger accounts are prepared in the bestpossible manner. The main essence of journal is that records are maintained as when they occurand that too in chronological order of transactions. 4
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