Review of Accounting Research Papers and Articles
VerifiedAdded on 2021/02/22
|30
|5400
|41
AI Summary
The provided document is a compilation of abstracts from recent academic research papers and articles related to accounting. It covers a wide range of topics, including corporate social responsibility, accounting information systems, fair value accounting, and financial statement analysis. The papers are sourced from various journals and publications, such as the Journal of Accounting Research, Accounting Horizons, and the British Accounting Review. The document aims to provide a comprehensive overview of current research in the field of accounting, highlighting key findings and methodologies used by researchers. It is likely intended for students or professionals seeking to stay updated on recent developments in accounting research.
Contribute Materials
Your contribution can guide someone’s learning journey. Share your
documents today.
Financial
Accounting
Accounting
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Part (a)....................................................................................................................................1
CLIENT 1........................................................................................................................................4
1. Journal Entries and ledger in the book of Alexandra Study...............................................4
2. Trial Balance as at 31st January 2019 in the books of Alexandra Study.........................16
CLIENT 2......................................................................................................................................17
1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 201817
2. Statement of Financial Position of Munteanu Ltd. As at 31st December 2018...............18
3. Accounting Concepts – Consistency and Prudency.........................................................18
CLIENT 3......................................................................................................................................21
1. Purpose of preparation of bank reconciliation accounts ..................................................21
2. Reason for difference between balance of bank column of cash book and bank statements22
3. Imprest..............................................................................................................................23
4. Bank Reconciliation Statement as at 30 September 2018................................................23
CLIENT 4......................................................................................................................................24
a) (1) Sales Ledger Control Account....................................................................................24
a) (2) Purchase Ledger Control Account..............................................................................24
b) Control Account...............................................................................................................25
CLIENT 5......................................................................................................................................25
a) Suspense account and features.........................................................................................25
b) Trial Balance....................................................................................................................26
c) Journal Entries..................................................................................................................26
CONCLUSION..............................................................................................................................27
REFERENCES..............................................................................................................................28
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Part (a)....................................................................................................................................1
CLIENT 1........................................................................................................................................4
1. Journal Entries and ledger in the book of Alexandra Study...............................................4
2. Trial Balance as at 31st January 2019 in the books of Alexandra Study.........................16
CLIENT 2......................................................................................................................................17
1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 201817
2. Statement of Financial Position of Munteanu Ltd. As at 31st December 2018...............18
3. Accounting Concepts – Consistency and Prudency.........................................................18
CLIENT 3......................................................................................................................................21
1. Purpose of preparation of bank reconciliation accounts ..................................................21
2. Reason for difference between balance of bank column of cash book and bank statements22
3. Imprest..............................................................................................................................23
4. Bank Reconciliation Statement as at 30 September 2018................................................23
CLIENT 4......................................................................................................................................24
a) (1) Sales Ledger Control Account....................................................................................24
a) (2) Purchase Ledger Control Account..............................................................................24
b) Control Account...............................................................................................................25
CLIENT 5......................................................................................................................................25
a) Suspense account and features.........................................................................................25
b) Trial Balance....................................................................................................................26
c) Journal Entries..................................................................................................................26
CONCLUSION..............................................................................................................................27
REFERENCES..............................................................................................................................28
INTRODUCTION
Financial accounting can be described as the procedure of executing final accounts like
balance sheet, trading and profit and loss account. The main reason of this accounting to provide
internal and external shareholders to determine right position of a business and form strategic
decision (Dichev, 2017). In the reference for observing the activity of all company operations in
terms of revenue or loss, together with this management system performs a significant part.
Therefore, it includes different kinds of financial statements as well as reports such as profit and
loss account, balance sheet and cash flow. To better understand the report selected a small
consultancy firm which is Brooks city consultancy. It is a private incorporated on 13 July 2007
and provides different types of accounting services at a small level. This company has been
situated in London. The project report consist of financial accounting and their purposes and in a
broad manner defined role of the companies. In order to assess their involvement in economic
data, inner and outward investors are referenced.
MAIN BODY
Part (a)
1. Financial accounting and its purposes
In particular, the term financial accounting is a type of accounting that is linked to the
provision of financial data in the form of financial reports to external and internal stakeholders.
The aim of financial accounting is to present an actual position in front of top management as
well as to outsiders. Finally, financial accounting prepares financial reports that are present at the
end of financial accounting period. Without this system, a company cannot proper analysis every
business activities which is become reason for different types of issues. The selected accounting
firm, Brooks city consultancy produces various types of financial statements like income
statement, balance sheet, cash flow, etc. Through these accounting reports, they are getting detail
information as well as analysis the situation of company for their external stakeholders to make
investments (Duff, 2016).
Herein, it is essential to understand financial accounting principles as well as regulations that
can help to produce financial reports. Without these principles to make chances of error and
financial statements will be reasoned invalid. Most common principle of financial accounting is
GAAP that is known as generally accepted accounting principle. On the basis of these principles,
1
Financial accounting can be described as the procedure of executing final accounts like
balance sheet, trading and profit and loss account. The main reason of this accounting to provide
internal and external shareholders to determine right position of a business and form strategic
decision (Dichev, 2017). In the reference for observing the activity of all company operations in
terms of revenue or loss, together with this management system performs a significant part.
Therefore, it includes different kinds of financial statements as well as reports such as profit and
loss account, balance sheet and cash flow. To better understand the report selected a small
consultancy firm which is Brooks city consultancy. It is a private incorporated on 13 July 2007
and provides different types of accounting services at a small level. This company has been
situated in London. The project report consist of financial accounting and their purposes and in a
broad manner defined role of the companies. In order to assess their involvement in economic
data, inner and outward investors are referenced.
MAIN BODY
Part (a)
1. Financial accounting and its purposes
In particular, the term financial accounting is a type of accounting that is linked to the
provision of financial data in the form of financial reports to external and internal stakeholders.
The aim of financial accounting is to present an actual position in front of top management as
well as to outsiders. Finally, financial accounting prepares financial reports that are present at the
end of financial accounting period. Without this system, a company cannot proper analysis every
business activities which is become reason for different types of issues. The selected accounting
firm, Brooks city consultancy produces various types of financial statements like income
statement, balance sheet, cash flow, etc. Through these accounting reports, they are getting detail
information as well as analysis the situation of company for their external stakeholders to make
investments (Duff, 2016).
Herein, it is essential to understand financial accounting principles as well as regulations that
can help to produce financial reports. Without these principles to make chances of error and
financial statements will be reasoned invalid. Most common principle of financial accounting is
GAAP that is known as generally accepted accounting principle. On the basis of these principles,
1
an accountant produces reports and statements inaccurate way. There are defined purpose to
apply financial accounting in any organisation such as -
Preparation of financial reports - This is the primary objective of financial accounting
where the financial statements are produced by businesses. With the help of these
reports, company makes important decisions for their operations.
The purpose of financial accounting is to record every transaction systematically and
provide reliable data in the reports (Caskey and Laux, 2016).
Cash Flow Analysis – Through financial accounting analysis different business activities
which is consisting of cash flow such as operating, financing and investing. It helps
investors to analysis of liquid position of company. Creditors sure about the ability of an
organisation to repay them at any day.
Helpful in decision making – It helps in decision-making process to take effective
decision. For instance, if any company decide for further investment so firstly they are
analysing reports which is based on financial accounting than take appropriate decision
to generate more profit.
Beneficial in making a comparison – It is one of the major purposes of financial
accounting because it can help to make comparison their past year profits and
expenditure with current year. On the basis of this comparison, a company can make
changes in its strategies and objectives which is based on the business policy.
2. Types of internal and external stakeholders
Stakeholders – A stakeholder is a group of people who take interest in business activities
and affect by objectives, actions, and policies. Most of the stakeholders connect with companies
to generate profit. There are two types of stakeholders which are as follows -
Internal Stakeholders
External Stakeholders
These two stakeholders are beneficial for every organisation because they have interest in
business activities and always want to success of business. So they are providing good
suggestions and ideas for the development of company (Sunder, 2016). Below these stakeholders
are described in broad sense -
Internal Stakeholders – All consumers of financial reports are regarded as inner
stakeholders within the organization. Every business prepares its policies and plans which can
2
apply financial accounting in any organisation such as -
Preparation of financial reports - This is the primary objective of financial accounting
where the financial statements are produced by businesses. With the help of these
reports, company makes important decisions for their operations.
The purpose of financial accounting is to record every transaction systematically and
provide reliable data in the reports (Caskey and Laux, 2016).
Cash Flow Analysis – Through financial accounting analysis different business activities
which is consisting of cash flow such as operating, financing and investing. It helps
investors to analysis of liquid position of company. Creditors sure about the ability of an
organisation to repay them at any day.
Helpful in decision making – It helps in decision-making process to take effective
decision. For instance, if any company decide for further investment so firstly they are
analysing reports which is based on financial accounting than take appropriate decision
to generate more profit.
Beneficial in making a comparison – It is one of the major purposes of financial
accounting because it can help to make comparison their past year profits and
expenditure with current year. On the basis of this comparison, a company can make
changes in its strategies and objectives which is based on the business policy.
2. Types of internal and external stakeholders
Stakeholders – A stakeholder is a group of people who take interest in business activities
and affect by objectives, actions, and policies. Most of the stakeholders connect with companies
to generate profit. There are two types of stakeholders which are as follows -
Internal Stakeholders
External Stakeholders
These two stakeholders are beneficial for every organisation because they have interest in
business activities and always want to success of business. So they are providing good
suggestions and ideas for the development of company (Sunder, 2016). Below these stakeholders
are described in broad sense -
Internal Stakeholders – All consumers of financial reports are regarded as inner
stakeholders within the organization. Every business prepares its policies and plans which can
2
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
directly affect to internal stakeholders. In the internal stakeholder consist of board of directors
(BOD), employees, managers etc. Thus, mention about the stakeholders in broad way -
Board of directors – The board of directors of any company is a panel of group who deals
in preparing rules and policies (Trigo, Belfo and Estébanez, 2016). After preparation in
effective manner apply in company and monitor activities regarding rules. Mainly, group
of people belongs from higher-level section and they are taking interest in financial
information. With the help of these financial data produce other strategies as well as
plans. The management take interest to know net profit of the company.
Employees – The employees are part of company who is considering as important assets
and help to fulfil the requirement of a company. Staff members complete several tasks
and operations with an expectation to get the wages or salary. They are using financial
data to determine whether or not the business in which they work has a healthy position.
External Stakeholders – These types of stakeholders do not take interest in daily
activities of an organisation but show interest in every operation. They are investing in the
company to get long term return from company on their invested money. Some common
example of these stakeholders are customers, suppliers, creditors etc. There are mentioned about
external below:
Suppliers – Based on their economic situation, the providers create loan transactions
with businesses. Eventually, providers provide credit-based content to businesses on the
basis of goodwill. The vendors are basically interested in the economic situation so that
they can sell the material. It is a reason of company that their financial condition is not
good then they will not sale out the raw material on credit (Nigrini, 2016).
Investors – These types of people invest their money into organisation to achieve
benefits in set percentage. Before investment, they determine the financial position of
different companies where they can get more benefit. So financial accounting is
important to present financial information in efficient manner and investor analysis their
future return on the invested amount by them.
Creditors - These are types of shareholders that provides help to conduct business
activities, when required. On the basis of financial help, they get sufficient amount on
borrowed amount. Thus, it is beneficial for the creditors to analysis the position of the
company in financial activities before providing financial services. When they assure
3
(BOD), employees, managers etc. Thus, mention about the stakeholders in broad way -
Board of directors – The board of directors of any company is a panel of group who deals
in preparing rules and policies (Trigo, Belfo and Estébanez, 2016). After preparation in
effective manner apply in company and monitor activities regarding rules. Mainly, group
of people belongs from higher-level section and they are taking interest in financial
information. With the help of these financial data produce other strategies as well as
plans. The management take interest to know net profit of the company.
Employees – The employees are part of company who is considering as important assets
and help to fulfil the requirement of a company. Staff members complete several tasks
and operations with an expectation to get the wages or salary. They are using financial
data to determine whether or not the business in which they work has a healthy position.
External Stakeholders – These types of stakeholders do not take interest in daily
activities of an organisation but show interest in every operation. They are investing in the
company to get long term return from company on their invested money. Some common
example of these stakeholders are customers, suppliers, creditors etc. There are mentioned about
external below:
Suppliers – Based on their economic situation, the providers create loan transactions
with businesses. Eventually, providers provide credit-based content to businesses on the
basis of goodwill. The vendors are basically interested in the economic situation so that
they can sell the material. It is a reason of company that their financial condition is not
good then they will not sale out the raw material on credit (Nigrini, 2016).
Investors – These types of people invest their money into organisation to achieve
benefits in set percentage. Before investment, they determine the financial position of
different companies where they can get more benefit. So financial accounting is
important to present financial information in efficient manner and investor analysis their
future return on the invested amount by them.
Creditors - These are types of shareholders that provides help to conduct business
activities, when required. On the basis of financial help, they get sufficient amount on
borrowed amount. Thus, it is beneficial for the creditors to analysis the position of the
company in financial activities before providing financial services. When they assure
3
about any specific company who is provide good interest on their borrowed money than
invest in (Marra, 2016).
Government – It is a type of stakeholder and consider as essential external stakeholders.
To operate different types of business they are establishing different rules and regulations
that is required to follow by the organisations. Furthermore, the government have their
interest into financial information of different companies as a reason of analysing about
how much tax should be taken from them.
CLIENT 1
1. Journal Entries and ledger in the book of Alexandra Study
Double entry system – The particular system defines that each business transaction must
be recorded in a minimum of two accounts. For this system required to record every transactions
and records into debit and credit section. These amounts show double effects because every
financial transaction has equal and opposite effects in at least two different accounts. For satisfy
the stakeholders apply this equation -
Assets = Liabilities + Equity
4
invest in (Marra, 2016).
Government – It is a type of stakeholder and consider as essential external stakeholders.
To operate different types of business they are establishing different rules and regulations
that is required to follow by the organisations. Furthermore, the government have their
interest into financial information of different companies as a reason of analysing about
how much tax should be taken from them.
CLIENT 1
1. Journal Entries and ledger in the book of Alexandra Study
Double entry system – The particular system defines that each business transaction must
be recorded in a minimum of two accounts. For this system required to record every transactions
and records into debit and credit section. These amounts show double effects because every
financial transaction has equal and opposite effects in at least two different accounts. For satisfy
the stakeholders apply this equation -
Assets = Liabilities + Equity
4
5
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
6
Ledgers
7
7
8
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
9
10
11
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
12
13
14
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
15
2. Trial Balance as at 31st January 2019 in the books of Alexandra Study
Trial Balance for the month of July..........
Particulars Debit Credit
Storage Cost 450
Purchase 9820
Sales 11460
Motor Expenses 470
Receivables:
P Mullen 3000
F Lane 3980
J Wilson 80
T Cole 2330
F Syme 20
J Allen 1020
P. White 2520
J Fox 1310
Cash At Bank 52680
Cash In Hand 20200
Payables:
S. Hood 10000
J. Brown 12000
W Tone 960
R Foot 160
L Mole 1830
W. Wright 1910
D Main 2060
Premises 240000
Van 51250
Fixtures 8100
Inventory 23900
Sales Return 680
Purchase Return 50
Salaries 4800
Business Rates 1320
Capital 387500
Total 427930 427930
16
Trial Balance for the month of July..........
Particulars Debit Credit
Storage Cost 450
Purchase 9820
Sales 11460
Motor Expenses 470
Receivables:
P Mullen 3000
F Lane 3980
J Wilson 80
T Cole 2330
F Syme 20
J Allen 1020
P. White 2520
J Fox 1310
Cash At Bank 52680
Cash In Hand 20200
Payables:
S. Hood 10000
J. Brown 12000
W Tone 960
R Foot 160
L Mole 1830
W. Wright 1910
D Main 2060
Premises 240000
Van 51250
Fixtures 8100
Inventory 23900
Sales Return 680
Purchase Return 50
Salaries 4800
Business Rates 1320
Capital 387500
Total 427930 427930
16
CLIENT 2
1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018
Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018
Particulars Amount Particulars Amount
To opening inventory 15000 By Sales 138000
To Purchases 61000 Less: Return Inward 3000 135000
Less: Return Outward 1500 59500 By Closing Inventory 20000
To Gross profit 80500
Total 155000 Total 155000
To Administration Cost 32000 By Gross Profit 80500
To Distribution Cost 32000
To Depreciation 8800
To Finance Cost 1500
To Tax 2000
To Net Profit 4200
Total 80500 Total 80500
17
1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018
Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018
Particulars Amount Particulars Amount
To opening inventory 15000 By Sales 138000
To Purchases 61000 Less: Return Inward 3000 135000
Less: Return Outward 1500 59500 By Closing Inventory 20000
To Gross profit 80500
Total 155000 Total 155000
To Administration Cost 32000 By Gross Profit 80500
To Distribution Cost 32000
To Depreciation 8800
To Finance Cost 1500
To Tax 2000
To Net Profit 4200
Total 80500 Total 80500
17
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
2. Statement of Financial Position of Munteanu Ltd. As at 31st December 2018
Assets Amount in EUR
Land 20000
Building 40000
Less: Accumulated Depreciation 10000
30000
Depreciation for the year 800 29200
Plant and machinery 60000
Less: Depreciation 20000
40000
Depreciation for the year 8000 32000
Total non-current assets 81200
Inventories 20000
Prepaid Rent 3000
Accounts receivable 26000
Total current assets 49000
Total assets 130200
Equity and liabilities
Share capital 40000
Share premium 20000
26200
Equity 86200
Current and other tax liabilities 2000
Accrued salaries 2000
Bank Overdraft 18000
Accounts payable 22000
Total current liabilities 44000
Total equity and liabilities 130200
Statement of financial position of Munteanu Ltd. As at 31st
December 2018
Retained Earnings including current
year profit
3. Accounting Concepts – Consistency and Prudency
Accounting concepts and principles are a defined a set which is applied when prepare
accounting books and rules and principle follow by each company to record every dealings in the
books of account. As financial accounting includes significant accountants' skilled judgements,
financial data users are not misguided regarding accounting policies and procedures
18
Assets Amount in EUR
Land 20000
Building 40000
Less: Accumulated Depreciation 10000
30000
Depreciation for the year 800 29200
Plant and machinery 60000
Less: Depreciation 20000
40000
Depreciation for the year 8000 32000
Total non-current assets 81200
Inventories 20000
Prepaid Rent 3000
Accounts receivable 26000
Total current assets 49000
Total assets 130200
Equity and liabilities
Share capital 40000
Share premium 20000
26200
Equity 86200
Current and other tax liabilities 2000
Accrued salaries 2000
Bank Overdraft 18000
Accounts payable 22000
Total current liabilities 44000
Total equity and liabilities 130200
Statement of financial position of Munteanu Ltd. As at 31st
December 2018
Retained Earnings including current
year profit
3. Accounting Concepts – Consistency and Prudency
Accounting concepts and principles are a defined a set which is applied when prepare
accounting books and rules and principle follow by each company to record every dealings in the
books of account. As financial accounting includes significant accountants' skilled judgements,
financial data users are not misguided regarding accounting policies and procedures
18
(Ramachandran Rackliffe and Ragland, 2016). Through all the final reports could be executed in
efficient way. There are defining two concepts of accounting -
Consistency Concept - Corporations should adopt an equivalent accounting notion once
any idea has been implemented. It is because this makes the company's financial statements
consistent and precise. In other words, businesses should attempt to apply the same notion or
concept of accounting as in past years. Because of this concept, it is easy to compare the
performance from the current year to the previous year. Finally, in the unavailability of this
notion, organizations will find it hard to systematically analyse the financial statements. In
addition, the accountants also recommend to their customers that a prevalent reporting idea
should be applied for all periods of accounting. In the lack of this notion of reporting,
accountants may disregard suggestions on financial statements. Most of the companies ignore the
concept of consistence due to present more profit in the financial accounting period.
Prudency Concept – This concept known as conservatism principle that is related to
main concepts of accounting. It is basic accounting concept that produce more confidential data
for transmitting to the management of business. Through prudence concept mainly practices in
setting up the amount for uncertain debts or reserve on the non-current stock. All financial
statements are produced on the basis of international accounting standards (IAS). Financial
statement as well as results are more trustable and accurate of the facts & figures that reported in
the accounting books through this method.
(d) Depreciation purpose in applying the financial statements
Depreciation – The particular term has been applied to decrease the value of fixed assets
after the passing of time. This is usually paid owing to physical harm over the property.
Furthermore, the devaluation is useful in delegating asset costs throughout asset life.
Purpose of depreciation – Mainly, the method of depreciation is applied on any assets to
analysis of their value of life (Charalambakis and Garrett, 2016). Thus, there are defined
different types of purpose of depreciation -
It is mainly applied by company to understand optimal working result.
Another depreciation aim is to analyse the real value of an asset.
Knowing the mass production importance of fixed assets resulting from the passing of
time through the use of fixed assets.
19
efficient way. There are defining two concepts of accounting -
Consistency Concept - Corporations should adopt an equivalent accounting notion once
any idea has been implemented. It is because this makes the company's financial statements
consistent and precise. In other words, businesses should attempt to apply the same notion or
concept of accounting as in past years. Because of this concept, it is easy to compare the
performance from the current year to the previous year. Finally, in the unavailability of this
notion, organizations will find it hard to systematically analyse the financial statements. In
addition, the accountants also recommend to their customers that a prevalent reporting idea
should be applied for all periods of accounting. In the lack of this notion of reporting,
accountants may disregard suggestions on financial statements. Most of the companies ignore the
concept of consistence due to present more profit in the financial accounting period.
Prudency Concept – This concept known as conservatism principle that is related to
main concepts of accounting. It is basic accounting concept that produce more confidential data
for transmitting to the management of business. Through prudence concept mainly practices in
setting up the amount for uncertain debts or reserve on the non-current stock. All financial
statements are produced on the basis of international accounting standards (IAS). Financial
statement as well as results are more trustable and accurate of the facts & figures that reported in
the accounting books through this method.
(d) Depreciation purpose in applying the financial statements
Depreciation – The particular term has been applied to decrease the value of fixed assets
after the passing of time. This is usually paid owing to physical harm over the property.
Furthermore, the devaluation is useful in delegating asset costs throughout asset life.
Purpose of depreciation – Mainly, the method of depreciation is applied on any assets to
analysis of their value of life (Charalambakis and Garrett, 2016). Thus, there are defined
different types of purpose of depreciation -
It is mainly applied by company to understand optimal working result.
Another depreciation aim is to analyse the real value of an asset.
Knowing the mass production importance of fixed assets resulting from the passing of
time through the use of fixed assets.
19
Methods of Calculation of depreciation: To calculate depreciation on fixed assets
applied different types of methods which can help to know accurate amount. Herein, below some
methods are mentioned -
Straight line method – The particular method also called a fixed instalment method.
According to this method, it is a sort of technique that had to determine the holding
quality of any specific fixed asset over the whole lifetime. This technique is ultimately
commonly used to calculate the depreciation. In addition to this technique, those assets
whose price is rapidly reduced in helpful lives are used in businesses (Drake, Quinn and
Thornock, 2017). In this scenario, it is utilised when there is no particular pattern of how
the asset will be used for a long time. There are define steps to calculate the amount of
depreciation in mentioned such as -
Determining the initial cost of fixed assets
From the number of fixed assets less amount of book value.
After than evaluating the estimation of assets life.
In the last step multiply the rate of depreciation and cost of assets.
To following, steps calculate the depreciation of any fixed assets with the help of
particular method. Therefore, the formula of calculation of depreciation is as follows -
Depreciation- (Cost of assets- scrap value)/ Life of assets.
Reducing Balance Method - This is a sort of technique for calculating the depreciation
in that the depreciation quantity is measured at a fixed pace equal to the direct row
approach. Through reducing balance method, percent of rate is not calculated as per the
price of assets such as computer, motors etc. Mostly companies use this method on those
assets which is surrounding long time in the company and give benefits in initial years
and lateral years due to efficiency. It is utilised by a company when they wants to
increase productivity of assets and get different advantages.
(e) Determination of distinguish between the financial statements of sole traders and limited
companies -
Basis of
difference
Sole traders Limited company
Auditing There is not required to perform the On the other side, it is vital for the
20
applied different types of methods which can help to know accurate amount. Herein, below some
methods are mentioned -
Straight line method – The particular method also called a fixed instalment method.
According to this method, it is a sort of technique that had to determine the holding
quality of any specific fixed asset over the whole lifetime. This technique is ultimately
commonly used to calculate the depreciation. In addition to this technique, those assets
whose price is rapidly reduced in helpful lives are used in businesses (Drake, Quinn and
Thornock, 2017). In this scenario, it is utilised when there is no particular pattern of how
the asset will be used for a long time. There are define steps to calculate the amount of
depreciation in mentioned such as -
Determining the initial cost of fixed assets
From the number of fixed assets less amount of book value.
After than evaluating the estimation of assets life.
In the last step multiply the rate of depreciation and cost of assets.
To following, steps calculate the depreciation of any fixed assets with the help of
particular method. Therefore, the formula of calculation of depreciation is as follows -
Depreciation- (Cost of assets- scrap value)/ Life of assets.
Reducing Balance Method - This is a sort of technique for calculating the depreciation
in that the depreciation quantity is measured at a fixed pace equal to the direct row
approach. Through reducing balance method, percent of rate is not calculated as per the
price of assets such as computer, motors etc. Mostly companies use this method on those
assets which is surrounding long time in the company and give benefits in initial years
and lateral years due to efficiency. It is utilised by a company when they wants to
increase productivity of assets and get different advantages.
(e) Determination of distinguish between the financial statements of sole traders and limited
companies -
Basis of
difference
Sole traders Limited company
Auditing There is not required to perform the On the other side, it is vital for the
20
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
audit of the financial statements in the
sole traders ' economic statements.
businesses to perform the audit in the
limited company's financial statements
in order to measure the effectiveness
of the prepared statements.
Equity In sole traders' economic accounts,
the capital of the proprietor comprises
of only one item which is the equity
account of the owner (Ebrahimi,
Bahraminasab and Mamashli, 2017).
On the other side, in the capital of
owners includes share capital, capital
reserve, retained earnings etc.
Preparation of
financial
statements
The owner of sole trader did not
appoint particular person to prepare
accounting books. It is prepared by
own self.
In the limited companies, the financial
statement is produced by accountant.
Amount of
transaction
Due to small size of company there is
not recorded more amount of
transaction.
In the limited companies, there are
recording different types of
transactions which is categorised into
financial and non financial
transactions.
Mandatory It is not important to prepare different
types of accounts by sole traders.
On the other hand, it is important for
limited companies to produce financial
reports to analysis financial position.
Filing accounts Sole traders are not required to file
accounts in front of HMRC.
Limited companies are required to file
all their accounts in front of HMRC.
CLIENT 3
1. Purpose of preparation of bank reconciliation accounts
Bank reconciliation account prepared by a company to match the amount of the balance
of cash account about the information bank statement. Therefore, an organisation prepares both
types of accounts cash accounts and bank accounts to record transactions. With the help of this
21
sole traders ' economic statements.
businesses to perform the audit in the
limited company's financial statements
in order to measure the effectiveness
of the prepared statements.
Equity In sole traders' economic accounts,
the capital of the proprietor comprises
of only one item which is the equity
account of the owner (Ebrahimi,
Bahraminasab and Mamashli, 2017).
On the other side, in the capital of
owners includes share capital, capital
reserve, retained earnings etc.
Preparation of
financial
statements
The owner of sole trader did not
appoint particular person to prepare
accounting books. It is prepared by
own self.
In the limited companies, the financial
statement is produced by accountant.
Amount of
transaction
Due to small size of company there is
not recorded more amount of
transaction.
In the limited companies, there are
recording different types of
transactions which is categorised into
financial and non financial
transactions.
Mandatory It is not important to prepare different
types of accounts by sole traders.
On the other hand, it is important for
limited companies to produce financial
reports to analysis financial position.
Filing accounts Sole traders are not required to file
accounts in front of HMRC.
Limited companies are required to file
all their accounts in front of HMRC.
CLIENT 3
1. Purpose of preparation of bank reconciliation accounts
Bank reconciliation account prepared by a company to match the amount of the balance
of cash account about the information bank statement. Therefore, an organisation prepares both
types of accounts cash accounts and bank accounts to record transactions. With the help of this
21
statement, there is a cross-check the bank balance as per pass bank and cashbook on a certain
date. If there are identified any differences that are presented by this statement. The main reason
to produce it is showing fraud and errors in banks and cash book in references to justify them.
There are producing bank reconciliation accounts as the purpose of -
To check the correctness – The main cause of preparing this statement to identify fraud
and analysis their accuracy regarding cash book (Arnaboldi, Busco and Cuganesan,
2017).
Detecting the frauds – With the help of this bank reconciliation statement recognise
errors and find out errors in the cash book.
Provide Clarity – It helps to provide clarity in the amount entered in the cash book.
So these are the main reason for producing bank reconciliation account for all types of
companies.
2. Reason for difference between balance of bank column of cash book and bank statements
There are defined reason for differences of bank statements and cash books:
Lack of awareness about bank charges – It is one of the major reason to differences
between bank statements and cash books. It is occurring in the company because bank
takes some amounts as a charge for some services. Bank does not inform regarding to
these services and deduct amount from their account so it becomes reason of differences.
Direct debited interest by bank – It is also a reason of difference when bank direct interest
debit in the account and
Many times interest amount does not enter by bank in the cash book that is a cause of
differences.
Cheque issued but not presented – When the cheque is issued and accountant of the
company entered amount in the credit side of the cash book under the bank column
immediately. So it will effect of this transaction is that bank balance in cash book will be
deducted by the amount of cheque issued. On the other side bank debit of this amount
and present for payment. It is identified an ineluctable gap among the date of issuance of
cheque and date of presentation of cheque to the issuing bank.
Cheque paid into the bank but not yet collected by the bank – The business organisation
directly debits the bank column of the cash book after depositing the cheques into bank.
22
date. If there are identified any differences that are presented by this statement. The main reason
to produce it is showing fraud and errors in banks and cash book in references to justify them.
There are producing bank reconciliation accounts as the purpose of -
To check the correctness – The main cause of preparing this statement to identify fraud
and analysis their accuracy regarding cash book (Arnaboldi, Busco and Cuganesan,
2017).
Detecting the frauds – With the help of this bank reconciliation statement recognise
errors and find out errors in the cash book.
Provide Clarity – It helps to provide clarity in the amount entered in the cash book.
So these are the main reason for producing bank reconciliation account for all types of
companies.
2. Reason for difference between balance of bank column of cash book and bank statements
There are defined reason for differences of bank statements and cash books:
Lack of awareness about bank charges – It is one of the major reason to differences
between bank statements and cash books. It is occurring in the company because bank
takes some amounts as a charge for some services. Bank does not inform regarding to
these services and deduct amount from their account so it becomes reason of differences.
Direct debited interest by bank – It is also a reason of difference when bank direct interest
debit in the account and
Many times interest amount does not enter by bank in the cash book that is a cause of
differences.
Cheque issued but not presented – When the cheque is issued and accountant of the
company entered amount in the credit side of the cash book under the bank column
immediately. So it will effect of this transaction is that bank balance in cash book will be
deducted by the amount of cheque issued. On the other side bank debit of this amount
and present for payment. It is identified an ineluctable gap among the date of issuance of
cheque and date of presentation of cheque to the issuing bank.
Cheque paid into the bank but not yet collected by the bank – The business organisation
directly debits the bank column of the cash book after depositing the cheques into bank.
22
Most of the banks has been taken about 2-3 years for clearing cheques in the case of
outstation cheques it takes 4-5 days.
3. Imprest
Generally speaking, it can be described as a type of fund utilised by organizations for
mini-cost purposes. As well as this sum of fund will be preserved at a given moment by
businesses. Broadly speaking, therefore, the businesses are applying it with the goal of making
billing transactions on a periodic basis (Höglund and Sundvik, 2016).
4. Bank Reconciliation Statement as at 30 September 2018
Dr Corrected Cash Book (Bank) Cr
£ £
31-Dec Balance b/d 19,973
Overstated
amount 1
Overstated
amount 9 Bank charges 47
Standing order 137
310923 (Direct D) 297
Balance c/f 19,500
19,982 19,982
Balance b/d 19,500
Particulars Amount
- Bank Balance as per pass book 398
Add: Items having effects of higher balance in cash
book
- Bank charges not recorded in cashbook... 36
- Adjustment for direct debit rates.............. 105
Less: Items having effects of lower balance in cash
book
Payments to:
- C David 122
23
outstation cheques it takes 4-5 days.
3. Imprest
Generally speaking, it can be described as a type of fund utilised by organizations for
mini-cost purposes. As well as this sum of fund will be preserved at a given moment by
businesses. Broadly speaking, therefore, the businesses are applying it with the goal of making
billing transactions on a periodic basis (Höglund and Sundvik, 2016).
4. Bank Reconciliation Statement as at 30 September 2018
Dr Corrected Cash Book (Bank) Cr
£ £
31-Dec Balance b/d 19,973
Overstated
amount 1
Overstated
amount 9 Bank charges 47
Standing order 137
310923 (Direct D) 297
Balance c/f 19,500
19,982 19,982
Balance b/d 19,500
Particulars Amount
- Bank Balance as per pass book 398
Add: Items having effects of higher balance in cash
book
- Bank charges not recorded in cashbook... 36
- Adjustment for direct debit rates.............. 105
Less: Items having effects of lower balance in cash
book
Payments to:
- C David 122
23
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
- S Leeming 116
- C Lyons 87
Bank balance as per cash book 214
CLIENT 4
a) (1) Sales Ledger Control Account
Sales Ledger Control Account is referred as Trade Debtors Control Account that is used
in the business to manage debtors and their payment periods in the most suitable manner. Sales
in the business are made in credit that gives rise to debtors and payments needs to be received
from debtors on time to manage cash flow. Sales Ledger Control Account helps in managing
debtors and helps in reminding debtors for payment due date. It is used to monitor the amount
owed by customers in the business.
Sales Ledger Control Account Of Hilly
24
- C Lyons 87
Bank balance as per cash book 214
CLIENT 4
a) (1) Sales Ledger Control Account
Sales Ledger Control Account is referred as Trade Debtors Control Account that is used
in the business to manage debtors and their payment periods in the most suitable manner. Sales
in the business are made in credit that gives rise to debtors and payments needs to be received
from debtors on time to manage cash flow. Sales Ledger Control Account helps in managing
debtors and helps in reminding debtors for payment due date. It is used to monitor the amount
owed by customers in the business.
Sales Ledger Control Account Of Hilly
24
a) (2) Purchase Ledger Control Account
Purchase Ledger Control Account or creditors ledger control account is a part of balance
sheet that helps in reflecting the amount how much business owe to suppliers. Purchase in
business are made in cash and credit and when credit purchases are made it gives rise to liability.
Business organisations needs to have a control over the amount of liability created as non
payment of liability for long run will effect financial viability of business. Purchase Ledger
Control Account also helps in checking arithmetical accuracy of purchase account and amount of
trade payables.
Purchase Ledger Control Account of Hilly
b) Control Account
Control account is defined as summarised form of all the ledger accounts with all the
details required. When amount of transactions in business is high and recording can be
manipulated in this situation control account help in identifying the reason behind any variance.
The control account helps in keeping general ledger nice and clean without any details yet clean
and correct. Financial accuracy of the business is kept at high as all the transactions that are
recorded are true and fair with correct information.
25
Purchase Ledger Control Account or creditors ledger control account is a part of balance
sheet that helps in reflecting the amount how much business owe to suppliers. Purchase in
business are made in cash and credit and when credit purchases are made it gives rise to liability.
Business organisations needs to have a control over the amount of liability created as non
payment of liability for long run will effect financial viability of business. Purchase Ledger
Control Account also helps in checking arithmetical accuracy of purchase account and amount of
trade payables.
Purchase Ledger Control Account of Hilly
b) Control Account
Control account is defined as summarised form of all the ledger accounts with all the
details required. When amount of transactions in business is high and recording can be
manipulated in this situation control account help in identifying the reason behind any variance.
The control account helps in keeping general ledger nice and clean without any details yet clean
and correct. Financial accuracy of the business is kept at high as all the transactions that are
recorded are true and fair with correct information.
25
CLIENT 5
a) Suspense account and features
In general term suspense account is defined as an account that is created to record
transactions and balance that can not be identified. Suspense account is mentioned in general
ledger and is prepared on temporary basis. A transaction when do not find exact place to record
on then the amount is recorded to suspense account until the correct place is identified for the
same. During preparation of accounts for business some accounts left unfinished that can not be
used for preparation of financial information. Suspense account helps in finalising all the
accounts and presenting correct financial position.
Some features of Suspense Account are as follows-
Suspense accounts helps in preparation of trial balance through debiting or crediating the
difference of any account.
Errors that are committed in past in the financial records can be identified through
suspense account.
Suspense account helps in rectifying the entries.
Through suspense account nature of error can be identified.
b) Trial Balance
Formulation of trial balance using control account
Particulars
Debit Amount (£)
Credit Amount (£)
Sales A/c 11000
Opening Inventory A/c 2200
Capital A/c 7100
Control A/c 3300
Purchase A/c 7000
Rent Paid A/c 2500
Cash in bank A/c 8400
Payables A/c 3500
Receivables A/c 3200
Travel expenses A/c 1600
26
a) Suspense account and features
In general term suspense account is defined as an account that is created to record
transactions and balance that can not be identified. Suspense account is mentioned in general
ledger and is prepared on temporary basis. A transaction when do not find exact place to record
on then the amount is recorded to suspense account until the correct place is identified for the
same. During preparation of accounts for business some accounts left unfinished that can not be
used for preparation of financial information. Suspense account helps in finalising all the
accounts and presenting correct financial position.
Some features of Suspense Account are as follows-
Suspense accounts helps in preparation of trial balance through debiting or crediating the
difference of any account.
Errors that are committed in past in the financial records can be identified through
suspense account.
Suspense account helps in rectifying the entries.
Through suspense account nature of error can be identified.
b) Trial Balance
Formulation of trial balance using control account
Particulars
Debit Amount (£)
Credit Amount (£)
Sales A/c 11000
Opening Inventory A/c 2200
Capital A/c 7100
Control A/c 3300
Purchase A/c 7000
Rent Paid A/c 2500
Cash in bank A/c 8400
Payables A/c 3500
Receivables A/c 3200
Travel expenses A/c 1600
26
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Total 24900 24900
c) Journal Entries
Journal Entries for Correction
Particulars Debit Amount (£)
Credit Amount
(£)
Simon A/c Dr. 2200
To Smith A/c 2200
(Being wrong account debited for sales)
John's A/c Dr. 4200
To Suspense A/c 4200
(Being sales amount is not recorded in John's
account)
Suspense A/c Dr. 7500
To White's A/c 7500
(Being an amount of purchases is not credited to
Whites account)
Suspense A/c
Dr. Cr.
Particulars Amount (£) Particulars Amount (£)
To White's A/c 7500 By Balance b/d 3300
By John's A/c 4200
Total 7500 Total 7500
CONCLUSION
As per the above discussion, it has been concluded that through financial accounting
every organisation knows about their actual situation and it will assist in reporting real growth of
a company. When any company conducts any transaction that will be recorded in the financial
report and connected with financial performance. The main purpose of financial accounting to
27
c) Journal Entries
Journal Entries for Correction
Particulars Debit Amount (£)
Credit Amount
(£)
Simon A/c Dr. 2200
To Smith A/c 2200
(Being wrong account debited for sales)
John's A/c Dr. 4200
To Suspense A/c 4200
(Being sales amount is not recorded in John's
account)
Suspense A/c Dr. 7500
To White's A/c 7500
(Being an amount of purchases is not credited to
Whites account)
Suspense A/c
Dr. Cr.
Particulars Amount (£) Particulars Amount (£)
To White's A/c 7500 By Balance b/d 3300
By John's A/c 4200
Total 7500 Total 7500
CONCLUSION
As per the above discussion, it has been concluded that through financial accounting
every organisation knows about their actual situation and it will assist in reporting real growth of
a company. When any company conducts any transaction that will be recorded in the financial
report and connected with financial performance. The main purpose of financial accounting to
27
create a framework in systematic way and assist accountants as well as management in the
procedure of decision making. Through different rules and regulations connected with
managerial personnel and determine an organisation's objectives and goals.
28
procedure of decision making. Through different rules and regulations connected with
managerial personnel and determine an organisation's objectives and goals.
28
1 out of 30
Related Documents
Your All-in-One AI-Powered Toolkit for Academic Success.
+13062052269
info@desklib.com
Available 24*7 on WhatsApp / Email
Unlock your academic potential
© 2024 | Zucol Services PVT LTD | All rights reserved.