Financial Accounting Standards and Practices

The assignment delves into the significance of regulations and principles in financial accounting. It examines various accounting standards such as IFRS and GAAP, highlighting their impact on financial statement preparation. The document emphasizes the importance of financial statements like balance sheets and income statements for understanding a company's financial position, growth, and profitability. It also analyzes the role of suspense and clearing accounts in facilitating accurate financial reporting.

FINANCIAL ACCOUNTING
PRINCIPLES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Report related to financial accounting with its rules and regulations.........................................1
1. Defining financial accounting with its goal and objectives....................................................1
Drafting financial accounting regulations...................................................................................2
Accounting principles and rules for governing financial statements..........................................3
Elaborating various concepts of accounting which are disclosure, materiality and consistency4
CLIENT 1........................................................................................................................................4
1. Justifying its journal entries....................................................................................................4
2. Representing its ledger accounts with reference to double entry recording...........................6
B. Ledger accounts......................................................................................................................7
3. Identifying accuracy level of trial balance............................................................................22
CLIENT 2......................................................................................................................................23
(a) Representing Income statement of July 2018 for Sierra Laurenmt.....................................23
(b) Representing Income statement for July 2018 for Sierra Laurent.......................................25
CLIENT 3......................................................................................................................................26
(a) Representing Profit and loss statement of July 31 for LMS Limited..................................26
(b) Representing balance sheet for July 2018 of LMS limited.................................................27
(c) Justifying prudence and consistence with reference to accounting concept .......................27
(d) Representing motive of depreciation for accounting aspect with reference to its each
method.......................................................................................................................................28
CLIENT 4......................................................................................................................................28
A. Representing objective of preparing Bank Reconciliation Statement (BRS)......................28
B. Representing entries which helps in creating variances with context of bank statements...29
C. Representing Cash book of Kendal with its Bank reconciliation statement........................30
CLIENT 5......................................................................................................................................32
(a) Representing Purchase and Sales Ledger account ..............................................................32
(b) Defining control account ....................................................................................................33
CLIENT 6......................................................................................................................................33
a. Representing features of suspense account...........................................................................33
b.c. Representing trial balance .................................................................................................34
d. Representing difference between suspense and clearing account ........................................34
CONCLUSION..............................................................................................................................35
REFERENCES..............................................................................................................................37

INTRODUCTION
The principles of financial accounting are termed as very important for any business
entity as it helps in creating ease for perspective of understanding expenses of future. The main
objective is to control cost on basis of its operation which are held in premises. The present
report is giving brief discussion related to regulations and principles of accounting. In the same
series, it had represented its significance of accounting for attaining growth and profitability
which is followed by every industry along with business entity. There report is signifying
importance of depreciation with its both methods. It had also articulated different financial
statements like balance sheet, income statement, trial balance, bank reconciliation statements etc.
Further it had represented suspense account with its important features and it had been compared
with control account.
Report related to financial accounting with its rules and regulations
1. Defining financial accounting with its goal and objectives
It is considered as a particular accounting branch as it helps in tracking financial
statements of any organization in appropriate aspect. The main role of financial accounting has
been specified as measurement, reporting, gathering and recording of transactions related to
investors and shareholders. It is replicated as appropriate source for determining financial
performances of any organization along with its stability. The major concern is of representing it
in very consistent and fair aspect. The financial statement must be prepared by considering
financial standards which are Generally Accepted Accounting Principles and (IFRS)
International Financial reporting standards.
Its goals and objectives are defined with 4 classifications such as:
 Reliability
 Relevance
 Comparability
 Consistency
Reliability: The information which is given via statements of financial must be totally
reliable. In the same series, investors would be gaining difficulty for getting information which is
reliable and in its absence it also creates issues for decision making process. It had been justified
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that information which is reliable does not mislead others because it had been framed by
ignoring bias and its verifications had been framed with ease.
Relevance: The financial information which had been provided must be relevant and
useful for its final users. It also creates ease for understanding and process of decision making
with context of organization's financial performance. The present information is known as very
relevant for giving outcome on yearly and quarterly aspect (Beatty and Liao, 2014).
Comparability: It also helps in creating ease for comparing statement of business entity
to other organization or from previous year statements It also signifies system which had formed
for purpose of financial statements for reporting and recording it in systematic aspect. In same
series, it would be making easy with perspective of investors according to date as it could be
adjusted with decision making process related to investments.
Consistency: There are various changes in standards as it would be creating lack for
process of preparing financial statements with consistence. It is considered as specific reason for
purpose of standards so it would represent its data with proper consistency and in decision
making process it could be used for comparison aspect.
Drafting financial accounting regulations
The information regarding finance must be fair, unbiased, understandable and
comparable. On this basis various regulations with context of financial statements are prepared,
presented and developed. In United Kingdom, the organizations which are listed under FTSE had
to work on standards of GAAP (Generally Accepted Accounting problems) for preparing
financial statements according to its principles. The organization could be expanded on basis of
global market international accounting as it has to follow specific regulations like IFRS and
IASB. Theses accounting regulations could be elaborated as below:
International financial reporting standards (IFRS): In the year 2005 in United
Kingdom it had directly constituted through contribution of financial reporting. It is prepared on
basis of setting different global standards for disclosure and preparation of financial statements.
If there is adaption of single accounting standard for different countries to provide financial
information in consistent aspect. It also creates ease for investors for comparing procedure. In the
same series, it provides guidance rather than setting regulations for financial reporting
(Mullinova, 2016).
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International accounting standards board (IASB): The main goal of IASB is to
disclose each financial information to its professionals. It also helps in giving guidelines for
objective of preparing reports and database for preparing financial statements. The accounts
could be evaluated from this standard. There is presence of acceptance of legal structure through
stakeholders and for determining financial information which would directly influence investors
on basis of various countries.
Accounting principles and rules for governing financial statements
There is presence of various rules, principles and concepts for objective of financial
reports for application of accounting. There is presence of various rules and concepts which are
justified below:
 Business Entity: In this concept, financial statements would not be using any personal
transactions with reference to owner. Business is referred as separate entity with its
particular owner.
 Matching principle: All revenues and expenses must be similar in accounting duration
for extracting its earnings of actual concept.
 Consistency: The process of accounting must be used for business perspective as it
should be similar and consistent with huge necessity of its changes.
 Objectivity: There should be appropriate recording of its particular amount with context
of financial statements as it should also give proper evidence on impartial basis.
 Materiality: In this principle, accounting process would be justifying impact on decision
of user for attaining significance and need for reporting in proper aspect.
 Historical cost: The valuation of asset which is mentioned in financial statement with
reference to its original value but not recorded on its current value of market.
 Monetary unit: The amount must be recorded on monetarism aspect and if its presence
in vice versa format then it would be not considered in financial statements.
 Going concern:There is always an assumption with context of organization about its
continuity and it would be performed in specific indefinite duration (Pointer, Pointer Ivan
Andrew, 2011).
 Accounting period: It would be signifying process of accounting in given duration on
basis of half year, quarterly and fiscal year.
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 Conservatism: It would be signifying two particular amounts with reference to business
transaction as it would be directly considering its financial statements.
Elaborating various concepts of accounting which are disclosure, materiality and consistency
 Full Disclosure principle: It is indirectly related to concept of materiality as it has huge
necessity for disclosing its every detail about financial like policies of accounting related
to its financial statements. There is attainment of knowledge with reference to its
creditors and investors as well with reference to business entity's operation on specific
accounting basis. It also helps in justifying changes of decision with reference to its user
on external basis related to particular business entity with its disclosure. It would be
directly ensuring about deficiency in information as it would not mislead any of financial
statements.
 Materiality: The concept of accounting always signifies that it should always disclose
each thing as it creates very efficiency for its users. The business entity had gained
importance related to its items as it had gained importance to other business entity.
Different items had given significance to any other business entity which must be
avoided due to not providing any effect on its financials. This accounting concepts is
termed as very important as it helps accountants and auditors for decision making process
with reference to its classification about immaterial or material.
 Consistency: It is known as very significant measure for purpose of accounting process
as it must be very consistent for specific financial duration to any other. If these
techniques could be altered, then it would justify its changes in techniques for disclosing
true performance related to financial statements. It is termed as very important measure
for comparison aspect from statement of past year. The policies of accounting must be
changed with techniques as it would directly replicate in stability and performance of any
business entity (Sharma and Panigrahi, 2013).
CLIENT 1
1. Justifying its journal entries
There is representation of journal entries with context of given transactions. It would be
altering its entries which are termed as very significant for business related to sales and purchase
are stated below:
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5

2. Representing its ledger accounts with reference to double entry recording
The below ledger accounts are representing transactions of journal entries which are
stated below:
6

B. Ledger accounts
Purchase ledger
7

Sales Ledger
8

9

10

11

12

13

14

15

16

17

18

19

20

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3. Identifying accuracy level of trial balance
The trial balance comprises every balance of journal and ledger which is directly
classified in above scenario (Needles, Powers and Crosson, 2013). It had also justified various
data set which is used for summarizing its transactions on left side which are considered as
primary element of general accounts. The trial balance had been drafted below of year 2018:
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CLIENT 2
(a) Representing Income statement of July 2018 for Sierra Laurenmt
It would be signifying different balances of July 2018 which is justifying financial
stability with reference to its income statements. It would also represent its financial performance
of given duration.
23

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(b) Representing Income statement for July 2018 for Sierra Laurent
25

CLIENT 3
(a) Representing Profit and loss statement of July 31 for LMS Limited
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(b) Representing balance sheet for July 2018 of LMS limited
(c) Justifying prudence and consistence with reference to accounting concept
 Consistency principle: It could be replicated as accounting concept which helps in
recording each transaction and it would signify its specific data set on regular schedule. It
also helps in referencing its absence for purpose of continuity related to techniques which
are adopted. It would be providing advantage on regular basis for developing
organization in effective way for approving its performance which is directly linked to its
operations (Tsalavoutas, André. and Evans, 2012).
 Prudence principle: It helps in justifying specific understanding with reference to gains
and revenues which are estimated on increased aspect. On its contrary, the business entity
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gives the least attention to its expenses along with its liability as well. In the same series,
if disclosures related to finance are represented then it would be performed via
conservatism as it gives relevancy factor. According to this technique, different
assumptions should be undertaken with context of specific level of increment along with
business entity's capacity and liabilities for attaining meetings with reference to debt of
particular business.
(d) Representing motive of depreciation for accounting aspect with reference to its each method
Depreciation has its major applications in every business entity. It could be stated as fall
in value of any particular asset. These assets could justify as computer, machinery or plant etc.
are purchased for duration of long term as it would help in extracting its net value for every year.
If there is consideration of any life span, then its value will decrease. This particular scenario is
replicated on mandatory aspect for tracing depreciation value with reference to its accounts. It
would be justifying its depreciation value of particular asset. In the same series, it would directly
exclude its salvage value from earned money with motive of selling asset from its actual cost.
The basic elements are useful life, historical cost and salvage value as it is extracted by methods
which are Straight line and Written down value method. It would signify its importance in below
stated manner:
 The historical cost of specific asset had been reduced with uses of straight line method.
 The original value of asset had been traced in end of each financial year.
 While considering written down value it helps in comparing with loss and profit which
are estimated with context of sale.
 There should be proper review about information for purpose of asset replacement with
context of written down value.
 The business entity could not applicable method of depreciation as it would bear loss
during transaction which had been incurred for earning good profit with reference to
financial result (Dung, 2016).
CLIENT 4
A. Representing objective of preparing Bank Reconciliation Statement (BRS)
The statement of Bank Reconciliation is prepared for justifying differences in its bank
records and BRS. With reference to perspective of accounting, it is considered as very basic
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document. On legal concern, this statement is not mandatory but in same series it justifies
different objectives which are:
 Accuracy had been provided with reference to cash-book and passbook. Generally, its
accuracy level had been recorded on basis of transactions which are recorded in these
mentioned books.
 The mistakes could be extracted from each book with reference to outflow and inflow of
cash as it should match to its cash-book and bank statement. It would be providing
special focus on its error and irregularities in books with context of business.
 The business entity's balance could be provided which was initially rectified.
 The cheque position could be gained for collection purpose is known with Bank
reconciliation statement.
 It would be also creating level of convenience for issuing cheque with context of future
of knowing bank balance.
B. Representing entries which helps in creating variances with context of bank statements
There are different factors for creating variance in context of bank statements:
 Each book gets overwrite for purpose of issuing cheque on immediate aspect to any of
particular party. In the same series, cheques must be absence for purpose of encashment
related to bank (Power, 2018).
 There is presence of different mistakes due to server issue, in that scenario amount would
be transferred and information would be retained from depositor but books would be
maintained and on actual basis transfer would not be incur due to server problem.
 There is presence of different services which are given by bank for purpose of cheque
issuance to its depositors, gathering bills and cheques so it would be charging
commission with penalty if irregularity of enough balance.
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C. Representing Cash book of Kendal with its Bank reconciliation statement
30

31

CLIENT 5
(a) Representing Purchase and Sales Ledger account
Sales ledger Control Account
Purchase Ledger Control Account
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(b) Defining control account
It would be used for identifying for department of each organization. It could be stated
through its name of tittle for its execution as in same series, it should be capable for
accomplishing proper control from its professional for decision making process. The
organization could be easily benefited for analysing cost and gain for duration which had been
specified. Usually, the preparation and measurement of accounts for objective of receiving
information as it is directly related to operation unit which could be sales, marketing, purchases
etc. It is replicated as very important tool for producing specific estimation of performance of
any business. It is justified in format which could be summarized as it is referred as general
ledger which consist of sum of each transaction and separated on individual aspect with
reference to subsidiary account's ledger (Control Account, 2018).
CLIENT 6
a. Representing features of suspense account
The mistakes which are occurred in previous year are corrected with help of suspense
account. The main characteristic of this account could be stated as it is framed on basis of short
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duration and temporary aspect. The main objective of this particular account for creating
promptness in its accounts with context of operation. This statement should be balanced if
belongingness is not determined. It should be capable for extracting its error which must be
resolved on earlier aspect. The most important feature could be stated as it should be zero before
preparation of final accounts.
b.c. Representing trial balance
d. Representing difference between suspense and clearing account
Clearing and suspense account always favour each other with reference to its various
features but in similar aspect it consists of various differences. These accounts are prepared on
short term and temporary aspect. There is presence of different transactions which are considered
in each account. The differences are mentioned below:
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 The information could be identified through clearing accounts which is recorded in
appropriate format and adjusted on later basis. On its contrary, preparation of suspense
account is during problem and at time of resolution it is balanced as zero.
 The balance had been transferred in specific accounts but in clearing zero is moved in
final account and in suspense zero is transferred in correct account.
 There is holding of uncertainties via suspense account and it considers only if there is any
existence of problem but in clearing account transactions are hold on temporary basis.
 With the context of clearing account expenses of utility are hold and it may be closed in
end of month but on suspense account acts in unique aspect as amount has been recorded
when uncertainties are resolved.
 The suspense account could be ended if fixed schedule is not present and on its contrary,
clearing account has specific closing time which is fixed (Cochran, 2018).
CONCLUSION
It could be concluded from above report that financial accounting is considered as very
important for each business organization with its industry. It had been articulated from this report
that financial stability and performance of organization could be determined by financial
accounting. There is presence of different rules, regulations and principles for the purpose of
preparation of financial statements. In the same series, different standards had been represented
such as IFRS, GAAP which are considered as very important aspect. It could be easily justified
from above report that different financial statements such as balance sheet, Income statement,
trial balance plays very important role as they are implied for gaining financial position. Further
it could be stated that growth and profitability could be accomplished by following these specific
regulations. It could be summed by analysing variances with reference to suspense and clearing
account with similarity of temporary aspect and vital for every business organization.
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REFERENCES
Books and Journals
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
empirical literature. Journal of Accounting and Economics. 58(2-3). pp.339-383.
Cochran, R. J., 2018. The Financial Accounting Standards Board’s Fair Value Mandate: Are
Level 3 Assets and Liabilities Being Measured Accurately? Accounting and Finance
Research. 7(2). p.33.
Dung, N. V., 2016. Value-relevance of financial statement information: A flexible application of
modern theories to the Vietnamese stock market. Quarterly Journal of Economics. 84.
pp.488-500.
Mullinova, S., 2016. Use of the principles of IFRS (IAS) 39" Financial instruments: recognition
and assessment" for bank financial accounting. Modern European Researches. (1). pp.60-
64.
Needles, B. E., Powers, M. and Crosson, S. V., 2013. Principles of accounting. Cengage
Learning.
Pointer, I. A., Pointer Ivan Andrew, 2011. Financial, account and ledger web application and
method for use on personal computers and internet capable mobile devices. U.S. Patent
Application 13/021,732.
Power, M., 2018. Accounting, boundary-making and organizational permeability. Research in
the Sociology of Organizations.57. pp.31-53.
Sharma, A. and Panigrahi, P. K., 2013. A review of financial accounting fraud detection based
on data mining techniques. arXiv preprint arXiv:1309.3944.
Tsalavoutas, I., André, P. and Evans, L., 2012. The transition to IFRS and the value relevance of
financial statements in Greece. The British Accounting Review. 44(4). pp.262-277.
Online
Control Accounts. 2018. [Online]. Available through:
<http://www.soofiainternational.org/control-accounts/>.
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