Financial Accounting: Preparation of Journal Entries, General Ledger, and Trial Balance

Financial Accounting
PROJECT 1

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Preparation of Journal entries and general ledger using double book keeping system.........1
P2 Developing trial balance........................................................................................................6
TASK 2............................................................................................................................................7
P3 Preparation of final accounts using adjustments for accruals, depreciation and repayments 7
P4 Producing final accounts for a sole trader and private limited company...............................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Financial accounting is a process of preparing accounts and statements which reflects
position of a business organisation. These accounts are prepared to serve reliable and accurate
financial performance of an organisation to stakeholders such as creditors, investors, suppliers
and may more. In this project report, final accounts along with primary books are developed as
Junior accountant of a small accountancy firm. Statutory accounts which are prepared in this
report are Journal accounts, general ledger, trial balance, income statement and balance sheet.
The main aim of this report is to build an understanding about financial accounting by preparing
its accounts.
TASK 1
P1 Preparation of Journal entries and general ledger using double book keeping system
Double entry book keeping system is a fundamental concept of financial accounting
which states that every financial transaction has affect on both the sides of the account. This
system is a method of bookkeeping which helps in maintaining books of accounts and records. In
every account, there are two sides which are known as debit and credit. According to this system,
every financial transaction will have impact on both the sides. Double entry system is concerned
with the accounting equation of (assets=liabilities+owner's equity) to always to be in balance.
Bookkeeping and accounting is method of measuring, recording and communicating a firm's
financial information. Journal entries and general ledger are the accounts which are developed
using this system (Carrington and et. al., 2011).
Journal entries: These entries are used to record transactions of a business. The main
aim of recording transactions into this book is to hold and track all the adjustments for
organisational operations. Transactions recorded in this book are further recorded in general
ledger.
General ledger: Ledger provides complete record for financial transactions over the life
of the company. The main aim of this ledger is to hold information that is needed to prepare
financial statements. Both the sides of the accounts which are recorded in general ledger should
be equal.
Accurate bookkeeping is not only important for the organisation but it is also significant
for external users of a company too. This users are the external parties such as creditors, debtors,
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suppliers, investors and many more. This system provides reliable measure for performance of a
business organisation. The books and accounts prepared in this system are developed by
professional accountants and managed by financial managers of the company. All the
transactions are either recorded using cash basis of accounting or by using accrual basis of
accounting. All money inflow and outflow is transacted and then analysed to prepare financial
statements. Journal entries, general ledger and trial balance for the business of Muhammad is
prepared below:
Journal entries for the year 2016
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