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 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 accountingbecauseitcanhelptomakecomparisontheirpastyearprofitsand 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 activitiesand 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
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 differentcompanieswheretheycangetmorebenefit.Sofinancialaccountingis 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
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