Financial Accounting: Transactions, Bookkeeping, Journal Entries, Financial Reports, Principles

FINANCIAL ACCOUNTING

Table of Contents
SCENARIO 1...................................................................................................................................2
Question 1....................................................................................................................................2
Question 2....................................................................................................................................3
Question 3....................................................................................................................................7
Question 4....................................................................................................................................9
Question 5..................................................................................................................................11
Question 7..................................................................................................................................12
SCENARIO 2.................................................................................................................................13
Question 2..................................................................................................................................13
Question 3..................................................................................................................................14
REFERENCES................................................................................................................................1

SCENARIO 1
Question 1
Business transactions:
It refers to the transactions that occur between the company and the third party and which
is recorded under organization's accounting system. These transactions are measurable in
monetary terms.
Types:
There are numerous types of accounting transactions. These are:
 Purchasing goods and materials in which goods and materials are purchased by company
with respect to its business.
 Sales transactions are common form under which transactions related with sales are
recorded.
 Payment of wages and salaries.
 Purchase of non current assets.
 Accounting transactions related with payment of taxes.
 Movement of cash and related transactions.
 Raising of finance related transactions.
Single and double entry book keeping:
Single entry book keeping:
It is a cash oriented accounting. Under this form of book keeping single transaction for
the business transaction are recorded. Under this mode the income and expenses related with the
business are recorded in cash register. Here single entry for all the transactions are passed.
Double entry book keeping:
This concept is based on a principle that every transaction has equal and opposite effect
in at-least two different types of accounts. This is the current mode of recording transaction
(Beretta and Cencini, 2020). As per this system of book keeping the recording of transactions
starts with passing of journal entry which is followed by ledgers preparation. This will further be
carried out with the preparation of trial balance and financial statements.
Three important rules with respect to double entry bookkeeping:
Debit what comes in and credit what goes out.
Debit the receiver and credit the giver.

Debit all expenses and credit all income.
Trail balance:
It is a book keeping worksheet under which balance of all the ledger accounts are
compiled into debit and credit account column that will be equal (Gurskaya, Kuter and
Bagdasaryan, 2019). In simple words it is a statement under which the ledger balance are shown
and its matching of debit and credit shows that the mathematical calculation regarding the
recording of financial data are accurate and correct.
Importance:
Being a starting point of the preparation of financial statements, it acts as a statement that
will lead to have an identification of errors at the starting (Gheorghe, 2017). It will also lead to
the preparation of final accounts which shows that the transactions that are recorded in books of
accounts are identical with regard to their debit and credit balances. Thus, in short it will ensure
arithmetical accuracy, assisting final account preparation, rectification of errors, assisting
adjustments along with comparative analysis are some advantage with trail balance preparation.
Question 2
Journal entries:
Date Particular Debit Credit
01/06/16 Bank a/c Dr
To Owner's equity
£65000 £65,000
02/06/16 Goods a/c Dr
To Creditors a/c
£8000 £8000
07/06/16 Cash a/c Dr
To Sales
£4000 £4000
08/06/16 Creditors a/c Dr
To Bank a/c
£4000 £4000
14/06/16 Insurance policy a/c
Dr
£75 £75

To Bank a/c
15/06/16 Creditors a/c
To Sales a/c
£12000 £12000
16/06/16 Goods a/c Dr
To Creditors a/c
£10000 £10000
18/06/16 Computer equipment
a/c Dr
To Cash a/c
£3000 £3000
20/06/16 Rent a/c Dr
To Bank a/c
£150 £150
21/06/16 Cash a/c Dr
To Sales a/c
£10000 £10000
25/06/16 Petty Cash tin a/c Dr
To Bank a/c
£100 £100
30/06/16 Stationary a/c Dr
To Petty Cash tin a/c
£30 £30
Ledger accounts:
Bank account
Date Particular Amount Date Particular Amount
01/06/16 Owner equity £65000 08/06/16 Creditors a/c £4000
21/06/16 Sales £10000 14/06/16 Insurance
policy a/c
£75
20/06/16 Rent a/c £150
25/06/16 Petty Cash tin
a/c
£100

30/06/16 To bal c/d £70675
£75000 Total £75000
Cash account
Date Particular Amount Date Particular Amount
07/06/16 Sales £4000 02/06/16 Computer
equipment a/c
£3000
30/06/16 To bal b/d £1000
£4000 Total £4000
Goods account
Date Particular Amount Date Particular Amount
02/06/16 Creditors £8000 30/06/16 To bal c/d £18000
16/06/16 Creditors £10000
£18000 Total £18000
Creditors account
Date Particular Amount Date Particular Amount
08/06/16 Bank a/c £4000 02/06/16 Goods a/c £8000
15/06/16 Sales a/c £12000 16/06/16 Goods a/c £10000
30/06/16 To bal c/d £2000
£18000 Total £18000
Capital account