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Assignment on Financial Accounting Process

   

Added on  2020-01-07

18 Pages6063 Words131 ViewsType: 131
FinancePhilosophyPolitical Science
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FINANCIAL ACCOUNTING
Assignment on Financial Accounting Process_1

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Purpose and use of different accounting records...................................................................31.2 Assessing the importance and meaning of the fundamental accounting concepts................41.3 Evaluating the factors influencing the nature and structure of accounting systems..............5TASK 2............................................................................................................................................62.1 Identifying the different components of business risk...........................................................62.2 Analyzing the control system in place of business................................................................72.3 Evaluating the risk of fraud within a business’s suggesting methods for detection..............8TASK 3............................................................................................................................................93.1 Planning and audit with references to scope, materiality and risk ........................................93.2 Identifying and using appropriate audit tests.......................................................................103.3 Recording the audit process.................................................................................................114.1 Preparing a draft audit report...............................................................................................124.2 Drafting suitable management letters in relation to a statutory audit .................................13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................152
Assignment on Financial Accounting Process_2

INTRODUCTIONFinancial accounting is an imperative aspect of organization because it helps to keep therecords in a systematic manner. It enables corporation to carry out all the business activities bymaintaining ethical aspects. The prime responsibility of management is to ensure proper recordkeeping so-as-to meet the expectations of different stakeholders. Present report is based ongeneral accounting processes through which all accounting information is recorded bycorporation. Further, different factors affecting or influencing nature and structure of accountingsystem are explained. In addition to this, different components of business risk are describedalong with analysis of control system.TASK 11.1 Purpose and use of different accounting recordsThe accounting records are maintained to keep detail and systematic recording of allfinancial or accounting information. These records consist of journal, ledgers, income statementand balance sheet. Along with that trial balance and cash flow are also included. These areexplained as follows-Invoices: These are the basic sources for accounting that are used by the commercialentities. It is not feasible for accountant to make journal entries for the accountingtransaction. Thus, vouchers are prepared and entries are made there on. Generally,invoices are made at the time of sales by business. These invoices are later recorded insales journal. Similarly, collected purchase invoices are used in the purchase journal.Journal vouchers-These are prepared at initial level which consists of informationrelated to all transaction. It is maintained on daily basis as per the transaction done inbusiness with the help of journal voucher all other accounts are prepared (Arens, Elderand Beasley, 2000). Under this, double entry system is followed so as to bring equalbalance at the end.Ledgers-These ledgers are prepared in accordance with transaction mentioned in journal.In this, transactions are posted into their respective ledgers so that management can haveeffective record of underlying business of each account (Bandyopadhyay and Saha,2011). It facilitates to keep record related to all business activities in an effectual manner.3
Assignment on Financial Accounting Process_3

Income statement-This is also one of the most imperative financial statements whichcontain information related to income and expenses. It assists management to deriveprofitability for particular financial year. Furthermore, calculation of operating profit aidto plan future business plan effectively (Bloodgood, 2006).Trial balance-It is made at initial level which helps to get information related to grossprofit. Here, debit and credit side of trial balance consists of details with regards topurchase, sales and material as well as all related direct expenses and income.Balance sheet-It is the most important financial statement which includes detail related toassets and liabilities (Dhanani and et. al., 2007). For example current and fixed assets &liabilities are included in the balance sheet. With the help of balance sheet, financial,liquidity and solvency performance of corporation can be assessed.Cash flow statement-This financial statement is helpful in keeping record related tosources of income and the one where money is being used. Thus, cash inflow and outfloware recorded in relevant financial year. This in turn enables company to have propercontrol on its cash (Hardy, 2003).Statement showing changes in equity: This financial statement shows the changesoccurred in equity share capital during accounting period. This statement showsshareholder’s valuation by showing their contribution in total capital.1.2 Assessing the importance and meaning of the fundamental accounting conceptsFundamental accounting concepts play vital role in managing financial statements of anorganization. It includes different concepts like business entity, going concern and prudence aswell as accrual system of accounting. All these concepts have their own meaning and importancein a company through which business operate in an effectual manner. These concepts areexplained as follows-Business entity concept-The business owner and organization are separate from eachother. According to this concept, there does not take place any conflict between businessentity and owners of business (Deumes, 2012). It reflects that information presented infinancial statements is directly related to business only not to owner.4
Assignment on Financial Accounting Process_4

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