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Principle, Concepts and Importance of Financial Accounting - Assignment

   

Added on  2020-09-03

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Financial Accounting

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1A. Reporting the principles and concepts as well as importance of financial accounting to theline manager...........................................................................................................................11 Describing financial accounting..........................................................................................12 financial accounting and the relevant regulations...............................................................23 Defining the regulations and principle concepts of accounting..........................................34 Analysing the concepts relevant to material and consistency conventions.........................4CLIENT 1........................................................................................................................................5A Measuring the journal entries.............................................................................................5B Ledger accounts for the journal entries...............................................................................8C Following the journal and ledger the trail balance of Alexandra is prepared as..............16M1 ........................................................................................................................................16D1.........................................................................................................................................16CLIENT 2......................................................................................................................................17A Measuring elements for presenting profit and loss statement..........................................17B presenting the balance sheet for Peter Pipe......................................................................18CLIENT 3......................................................................................................................................19A Presenting the income statement......................................................................................19B Presenting the balance sheet.............................................................................................20C Determining the concepts of consistency and prudence in accounting............................24D Analysing the purpose of calculating depreciation as well as evaluating the methods ofdepreciation and their importance........................................................................................25M2.........................................................................................................................................25D2.........................................................................................................................................25CLIENT 4......................................................................................................................................26A Analysing the purpose of presenting the bank statement and determining the reason forpreparing it for the monthly basis.........................................................................................26B Determining the areas which varies the recording of bank statements.............................26C Presenting the bank reconciliation statement....................................................................26

M3.........................................................................................................................................27D3.........................................................................................................................................28CLIENT 5......................................................................................................................................28A Presenting various ledger control account........................................................................28b Determining the requirement of drawing the control account...........................................29CLIENT 6......................................................................................................................................29A Describing the suspense account as well as its main features..........................................29B Measuring the trail balance of the provided figures.........................................................30C presenting the journal entries for the trail balance adjustments........................................30D Analysing the differences between clearing and suspense accounts................................31M4.........................................................................................................................................31D4.........................................................................................................................................31CONCLUSION..............................................................................................................................31REFERENCES..............................................................................................................................33BIBLIOGRAPHY..........................................................................................................................34

INTRODUCTIONFinancial accounting is consists of preparing and presenting the all the transactions whichare incurred in the organisation during the assessment period. Thus, the presentation of the suchtransaction will be in the various accounts or statements which will help the business in makingthe adequate growth as well as professionals will become able to plan for expansion in industrialoperations, changes in policies and procedures and plans budgets or costs for managingprofitability of firm. In the present assessment there has been determination of variousaccounting principles, concepts, rule and regulations as well as there will be preparation ofvarious accounts, statement and reports that will help the clients to fetch the adequateinformations about the transactions incurred in such period. The report will also shed some lightsover the uses of various accounting techniques and tools to analyse the better outcomes andvaluation of the various elements or items stated in the statements.A. Reporting the principles and concepts as well as importance of financial accounting to the linemanagerTo: Line managerFrom: Junior AccountantSubject: Importance of financial accounting and its implications1 Describing financial accountingIn consideration with recording the transactions in the books, preparation of variousaccounts or statements, analysing, measuring and then evaluating the profitable outcomes areknown as the financial accounting. Hence, there will be use of various accounts for differentunits in the firm which in turn helpful for making appropriate record of all the inflows andoutflows of the cash and articles (Zeff, 2016). However, at the end of the period all the accountswere being summarized and audited by the accounting professionals in the business into the 4major financial statements. Thus, the disclosure of such data set will be beneficial for internaland external stakeholders in terms of making the investment decisions. There has beenpreparation of the various financial statements such as balance sheet, income statements, cashflow statements and the changes in the owner's equity which are listed below in the chart as:1

Illustration 1: financial statementssource: (Marshall, 2016)2 financial accounting and the relevant regulationsIn terms of preparing various financial of the business there are need to follow variousaccounting principles which helps in preparing such statement with the help of suchauthenticated framework (Deegan, 2016). Hence, there has been various institutions in theaccounting environment and they are facilitating the guidance, formate and procedure underwhich all the financial accounts of business are being prepared. These principles are helpful forevery business in terms of attracting the large numbers of investors which will be out of thenational boundaries. Therefore, such institutions and the regulations facilitated by them can beunderstand as follows:IASB: This accounting standard presents the regulations of principles under which allthe accounting transactional process were made. Hence, the main motive of such institution isthat all the business or corporations which are facilitating the trade practices as well as makingthe operational efforts there is need to make disclosure of financial of the business which in turnbeneficial for the firm and it stakeholder to fetch informations regarding profitability, liquidityand the overall sale and purchase were made during the period (International AccountingStandards Board (IASB), 2016). Therefore, the main motive of such principles and regulationsare to help the society with the adequate informations and have the faire trade practices.FASB: in terms with this standard which in turn facilitate the framework and guidanceto disclose the various financial statements of the business. The main motive of such accountingboard is to improve the implication of GAAP principles in the daily accounting tasks of thebusiness operations. Hence, such techniques are helpful for business for generating the adequateideas and make the fruitful plans (Gordon and et.al., 2017).2

IFRS: This institution is present in the market as to provide legally approved framework and process of presenting the disclosure of the financial statement. Hence, it has theuniversally accepted formate for income statement, cash flows, balance sheet and the change inequity. Thus, it considers that all the business must follow the principles and regulations whichare need to be mentioned while presenting the data set in front of the external users such asinvestors, shareholders, consumers, government, bank and various financial institutions(Thornton, 2016). Therefore, it also helps in improving the internal control of organisation suchas making the adequate changes in industrial operations and prepare policies procedure toreduce the costs of such daily operations.3 Defining the regulations and principle concepts of accountingThe motive behind presenting the principles and concepts of the managementaccounting is that it brings the adequate, specific and relevant data set which are come throughthe authenticated sources such as purchase of material, sales made during the period as well asprofit generated in the period (Marshall, 2016). Hence, such data set will be beneficial fororganisation in recording all the informations in authorised manner and present the fruitfuldisclosure. Therefore, there are many principles which are need to be understand by theprofessional in the various organisation in terms with analysing the financial statements of thebusiness such as:Time assumption: All the disclosure of the accounts must be prepared in considerationwith the financial period such as many country presents the disclosure for the period started on1 January to 31st December each year, many nations uses 1 April to 31st march of the next year.Hence, the main motive of the time duration set by principle is that the annual report of theorganisation must be displayed so the actual analysis can be made over the profitability of theorganisation (Oulasvirta, 2016). Thus, the preparation of such data base can be annually,quarterly and half yearly.Monetary assumption: In terms with presenting data set on the international level therewill be use of Dollar as the most preferable currency (Evans, 2016). Thus, the value and rate ofsuch currency will not fluctuate frequently as it has the constant rates and facilitate stakeholdersof organisation in terms with making the fruitful assumptions.Economic assumption: In consideration with the legal structure of the organisation it is3

being assumed that an entity is itself a person apart from its members or owners. Hence, thebusiness is itself making efforts and earning the turnover as well as performing in the day to dayindustrial operations. Thus, it can be denoted as the septate individual.Cost principles: the cost principle will be helpful for the manufacturing units in termswith analysing the costs incurred while producing the units, article or delivering the services.Hence, this concept lies over adequate analysis of the various terms and principles which in turnaffect the decision making as well as innovative ideas will be generated by managerialprofessionals of organisation in respect with improving the operational capacity of business.Going concern concept: It is assumed that the business which are come into existenceand have created an identity in the market, which will have the operational activities for thelong period. Thus, the going concern will help the managers to liquidate analysis which will befruitful for the future time of firm (Li, Sougiannis and Wang, 2017).Revenue recognition: This concept follows the regulation that all the transactions whichare relevant With the industrial operations and present the revenue gathering of the firm such assale of products delivery of services are to e recognised and mentioned in the books of accounts.Therefore, such transactions will be helpful for organisation in allocating the revenue andreverse entity and managers will become able plan the expansion and investment in the newprojects.Matching principles: All the entries and transactions held in the premises in theassessment year must have the double entries of all the transactions. Thus, it is assumed that ifthe income or expenses has the entries in the journal and ledger they must have the counterentries with the relevant account of such particular transactions. Thus, on the other side thematching of trail balance and balance sheet of organisation for the period is necessary and itmust reflect the fruitful disclosure of the accounts.4 Analysing the concepts relevant to material and consistency conventionsMaterial:in accordance with such conventions it can be said that with the help of suchoperational activities the business will be beneficial in making the adequate use of variousaccounting principles as well as make the adequate use of such resources. Hence, all theelement which are included in the transaction of such operational activities there is need to4

manage the profitably of organisation.Consistency: this concept follows the rule that all the business must be relevant with theadequate utilisation of the resources and make the efforts in the operational activities on theregular basis. Hence, such principles lies that the business be constantly making operationalactivities and have the favourable earnings.CLIENT 1The presented case is belongs to the client Alexandra study which has facilitated thevarious transactional details for the period of May 2017. Thus, there will be measurements whichare relevant to the journal, ledger and trail balances. Hence, all the transactions are to beanalysed and respected entries will be made in the following listed tables such as:A Measuring the journal entriesThere are some calculations are presents in the journal entries of the Alexandra study forthe period May 2017. Thus, such entries will be helpful for the further financial analysis ofbusiness. Therefore, the following table will reflect the adequate measurements of such journalentries are as follows:5

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