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Financial Accounting report

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Added on  2020-01-07

Financial Accounting report

   Added on 2020-01-07

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FINANCIAL ACCOUNTING1
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INTRODUCTION Financial accounting is a process which is used to record, analyze, summarize and reportingmultitude of business transaction which result in operation of the business in the financial periodof time. The main objective behind making annual accounts is to reflect the results of monetaryactivities so as to measure their operational results and financial health as well. The presentproject reports aims at analyzing the rules and conventions that are followed during preparationof annual accounts. Moreover, various statements will be prepared so as to reflect the result ofdaily business activities. In this report, journal, ledger, trial balance, bank reconciliationstatements, suspense account and many other accounts will be constructed for finding out theperformance of the business unit. 1 Define financial accountingFinancial Accounting refers to the information which is used to maintain the businessdata and financial transition. It's a process which is used to record, analyze, summarize andreporting multitude of business transaction which result in operation of the business in thefinancial period of time. Mostly, the report comprises of the financial statement which furtherinclude the database about the balance, statement related to cash-flow and income which areused by the organization to maintain the the operating performance for specific period of time.Organization issues the financial report on certain period of time. This are regarded as theexternal statement as they are related to those people which are not related to the organization.Financial accounting purpose Is to provide necessary information regarding the organization toothers so that they can assess the valuable positive information about the organization. Accounting principles are used as the series of financial accounting. Mostly the financialaccounting is dependent on the rules and regulatory as well as the requirement of the reporting ofbusiness faces. As it include the external financial database which are utilized by the other personin various ways so it has some common rules mentioned as accounting standards and are mostlydescribed as Accounting principles (GAAP). 4
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LO 22.1 Regulation relating to financial accountingAccording to the International Accounting Standards Board the main objective of thefinancial reporting is to provide the basic financial related information which are used for thecollection of the information related to finance and reporting the entity which are necessary tothe external existing and potential investors, creditors for making the necessary decision relatedto the resources to the table. The decision-making can be based on the purchasing, selling equityand related to debt instrument, settling and providing loans and credits in various forms. The necessity and need of the accounting regulation is to provide the medium throughwhich various characteristically medium of the organization venture are mentioned for theexamination. 1.SOLE Trader: Business owned by the single person. They are small in size and areinformal operated. Further about the Sole trader is mentioned below: They participate actively in the management and in business running. The statement ofthe sole trader related to the profit and loss as well as the financial position produced atthe specific period of time which they are already being aware. LO 4These business are not recognized as separate legal database as they have unlimitedliability. They are mainly responsible for the tax on the business profit and it is mentioned asdrawing. 2.Partnerships: this business are divided among the group of people. They may be extendedup to 20 partners. They are involved in the day to day information and they don't enjoythe liability.3. Unlimited companies: In unlimited companies they have limited number of theliabilities. They have the profit of not providing the court order in order to return itscapital to its members. This has become more common in many organizational groups tohave group structure of the unlimited company. 4.Limited companies: In terms of the liability the limited companies have limited funds5
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which are being invested in the organizational development. There may be chances ofhaving fraud and reckless trading which is the matter being discussed by the court. Themain profit of the limited business is that they have personal wealth of the owners isprotected to a greater extent. But there is great disadvantage as when the organization hasgone for liquidation, then the creditors don't provide the personal wealth to owner of theorganization. Further the resources are limited in regards with the assets and wealth of theorganization. There are two system which provide the rules for the operator report control in its financialreports. The first is Uniform System of Accounts and Second is accounting separation. The firstone is related how the operators are to keep and report there financial record for the regulatorypurpose and second on is related to the operator operation on the information related to thefinancial. LO 33.1 Accounting rules and principles “Generally accepted accounting principles” decides the basic rule of the accounting.These are:Basic accounting guidelines and principlesComplete detailed rules and standards issued by the FSAB and its predecessor theAccounting Principles Boards. Industrial practices which are generally accepted. There are 10 basic accounting principles mentioned below: 1.Economic entity assumption which are being separated from the organization owner'spersonal transaction.2.Monetary Unit Assumption which means that the transaction can be expressed in U.S.Dollar.3.Time period assumption 4.Cost principles.5.Full Disclosure Principle which includes complete information provided to the investorsand lender by utilizing the financial statements. 6
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6.Going along Principle which allows the organization to defer some expenses related toprepaid for further future accounting time. 7.Matching principle are required for the accounting basic information. 8.Revenue recognition Principle 9.Materialist 10.Conservation which is needed by the accountant to break a tie. LO 44.1 Conventions and concepts relating to consistency and material disclosure. It is related to the tradition and custom which provides the necessary information toaccountant while preparing the accountant statements. Following are important accountingconventions: Convention of disclosure which includes the material information must be clearlymention to the accounting statement Convention of materiality which is related to the relative importance of the item. Themain things must be included and unnecessary things must be neglected. Convention of consistency is described as the accounting practices must remainunchanged during change in period from one to another. Convention of Conversation includes the uncertainties and risk which are included in thebusiness transaction. The losses must be considered first and profit must be taken after itsdoesn't materialize. CLIENT 11. Prime Entry BooksDateParticulars L.FDebit Credit May 1, 2016Storagea/cDr. 400 To Bank a/c400(Storage expense paid by cheque)May 2, 2016Purchasea/c60807
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Dr. To S. Hood a/c 1450 To D. Main a/c 2060 To W. Tone a/c 960 To R. Foot a/c 1610May 3, 2016J.Wilsona/cDr.1120T.Colea/cDr. 1640F.Symea/cDr.2080J.Allena/cDr.910P. White a/c Dr.2420F.Lanea/cDr. 770 To Sales a/c 8940May 4, 2016Motor expense a/c Dr.470 To cash a/c 470May 7, 2016Drawinga/cDr. 1500 To cash a/c 1500May 9, 2016T.Colea/cDr. 680J.Foxa/cDr. 1310 To Sales a/c 1990May 11, 2016Sales return a/c Dr. 680 To J. Wilson a/c270 To F. Syme a/c 410May 14, 2016Vana/cDr. 28500 To Abel Motors Ltd a/c 28500May 16, 2016Casha/cDr. 6669Discount allowed a/c Dr. 351 To P. Mullen a/c 1400 To F. Lane a/c 3100 To J. Wilson a/c8508
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