Financial Accounting Project

This project provides a comprehensive guide to financial accounting, covering topics such as journal entries, ledger posting, bank reconciliation, control accounts, and suspense accounts. It includes solved examples and explanations to help students understand the concepts and apply them in real-world scenarios. The project also discusses the importance of financial accounting for businesses and stakeholders.

FINANCIAL
ACCOUTING

Contents
Contents...........................................................................................................................................2
a. BUSINESS REPORT..................................................................................................................3
CLIENT 1........................................................................................................................................7
Client 2...........................................................................................................................................11
c. Accounting concepts..............................................................................................................12
d. Types and purposes of depreciation in formulating financial statements..............................13
CLIENT 3......................................................................................................................................13
(B). Areas which cause the organizational records to vary from banker's record.....................14
(c) Imprest in petty cash book...................................................................................................14
CLIENT 4......................................................................................................................................15
CLIENT 5......................................................................................................................................16
REFERENCES..............................................................................................................................19

INTRODUCTION
Financial accounting is the field of bookkeeping worried about the deprived, examination
and announcing of monetary exchanges relating to a business (Arvidsson, 2011). All enterprises
need to plan fiscal reports for a particular timeframe and money related reports have present
before partners. It is useful for the association to take viable choices seeing speculation just as
extension. Fiscal reports demonstrates the money related position of the company. To more
readily comprehend this idea Airdri Limited has been chosen which bargains in electronic
segments and it has a place with United Kingdom. In this report, there are following subjects are
secured, for example, budgetary bookkeeping and its motivations, examination of inward and
outside partners, trail balance , asset report, last records for sole dealers, bookkeeping ideas
identified with consistency and prudency. Aside from this it also talk about reasons for getting
ready bank compromise articulations and deals and buy control record.
FINANCIAL ACCOUNTING
Financial accounting is a part of accounting which helps in tracking the financial
transactions of any organisation for operating and managing its operations in a systematic
manner. It helps in recording, summarizing and presenting all the transactions to prepare the
financial statements. The purpose of preparing such statement is to provide information related to
the operations, performance and cash flows to the managers for taking effective decisions
(Edwards and et. al., 2013). All the organisations are required to maintain their financial
transactions in effective manner so that information be able to usable for stakeholders and
owners. This report includes book keeping system, ledger posting system and the reconciliation
statements. Accounting rules, principles, consistency and importance of financial accounts are
also defined in this context.

a. BUSINESS REPORT
1. Financial Accounting: Financial accounting is a process recording financial transactions to
provide information related to financial performance and position of the organization. All the
financial statements are prepared by considering the local as well as international standards
prescribed. Such accounting helps in collecting and summarizing financial data for the
preparation of statements, such as, income statement, cash flow statement and financial position
statements. All such statements are described below:
 Income Statement: Income statements also known as profit & loss statements are
prepared to show the profits and losses of an organization over a period. Such
statements are used to display the organizational revenues, selling and administrative
expenses, incomes and expenses, costs, taxes paid, gross profit, net profit in a systematic
and logical manner. With the help of such statements owners, directors and stakeholders
are able to determine the profitability of the organisation.
 Cash flow statement: Cash flow statements are those statements includes transactions
related to the inflows and outflows of an organization during an accounting period. Such
statements provides important information related to the cash requirements and needs
for execution of the functions and operations of business in smooth manner. It reflects
the liquidity position of any organisation.
 Financial position statement: Financial position statements are the written records
which conveys the activities and financial performance of any organization. These
statements are inspected by the government agencies, accountants to ensure accuracy in
the operations. Such statements are also known as balance sheet which includes the
details related to assets and liabilities. These are majorly used to take financial and
investing decisions for current as well as future time period.
Regulations related to financial accounting: There are various rules and regulations which are
mandatory to follow in an organization while preparing financial statements in order to
effectively manage the financial transactions by the management for better execution of financial
operations (Francis and et. al., 2013). In order to present the financial information, various
regulations are formed and these are described as :
 Financial Reporting Council (FRC): FRC has provided various provisions in specific
and descriptive format. FRC Board is responsible for overall governance and setting

strategies along with standards and approval of all codes. Such council helps in
promoting integrity and transparency in the day to day transactions of any organization.
 Financial Accounting Standards Board ( FASB): FASB is a private, standard setting
authority which provides principles, legislations and rules related to preparation of
financial statements. It is the responsibility of FASB to establish and time to time update
reporting standards which are used by the financial professionals by the organizations.
The standards prescribed by such authority majorly helps managers and accountants to
present and disclose the financial information and accounting policies.
Financial accounting principles and rules: There are various financial accounting rules and
principles which all organizations must follow. Some of them are as follows:
Accounting rules: Some of the accounting rules are:
Ethical rules: Ethical rules are concerned with what is right and what is wrong. Some
guidelines are defined by various associations to feature the fundamental target and logical
reasons which are mandatory to follow by any organization (Horngren and et. al., 2012).
Financial ethics are related to general ethics which are essential for maintaining stability and
harmony in any organisation.
Measurement rules: Measurement rules are related to the money measurement in any
organization. Money measurement defines that an organisation should only record those
transactions which are expressed in terms of money. It helps in focusing only quantitative
information. Such rules are prescribed to measure the transactions and formulating policies for
future.
Boundary rules: Boundary rules are prepared to set future strengths of any organization.
Such rules defines what an organization should do and what not. These helps in establishing the
final documents on regular basis at the end of financial period. Such helps in recording the
transaction along with assumptions where the firm must go as well as various projects to be
accomplish at the end of the accounting year (Liao and et. al., 2014).
Accounting principles: Some of the accounting standards are as follows:
Going Concern: Going concern concept is a fundamental concept in financial
accounting. All organizations work on the principle that they will continue their operation in the
next accounting period and will not discontinue its operations due to any reason. Such concept is
applicable in all the organizations as whole.

Matching principle: Matching principle works according to the set guidelines in
accounting. The principle states that an organization should match its expenses with the related
revenues to determine the organizational profitability during a specific time period. The
guidelines shows that the expenses or revenues are based on the cause effect relationships.
Full disclosure: Full disclosure principle states that an organization should report all the
relevant information related to the organizational operations in the financial statements. The aim
of such principles are to share all the purpose full information with the outside world. Various
guidelines are provided to disclose the present transactions as well as future assumed
transactions in systematic manner.
Accounting Conventions: Accounting conventions are the guidelines which are considered at
the time of recording the transactions of the organization (May, 2013). Such are used under some
conditions when the definite guidelines are not prescribed to govern any situation.
Convention consistency: Convention consistency states that same management
accounting principle should be followed over various period of time while preparing the
financial statements. It helps in framing various conclusions in relation to the operations
performed during the period of times. Consistency of bookkeeping strategies and techniques
encourages bookkeepers to prepares the statement in efficient and systematic way.
Convention of materiality: Materiality is defined as the explanation of business
transactions. Such concept states that only those transactions are recorded which have important
facts and items at the same time useful for the organization. All the organizations should
discloses their important items and should neglects the unimportant items or transactions.
Purposes of financial accounting: Financial accounting serves various purposes in the
organization (Narayanaswamy, 2017). It helps in collecting and summarizing all the important
financial transactions for the preparation of statements, such as, income statement, cash flow
statement and financial position statements. Its main purpose is to provide the managers all the
important and relevant information to take effective decisions of the organization. Financial
accounting are prepared to provide relevant, reliable as well as comparable information about the
financial position, performance and cash flows about an organization which are useful to various
external stakeholders to take wide range of various decisions which benefits the society as
whole.
2. List of internal and external stakeholders of the organizational

Internal stakeholders: Internal stakeholders are those individual or group of individuals who
are involved in the operations processes within the organization (P Simnett and et. al., 2011).
Such people are directly and financially involved in the operational processes and have full
information related to the organization. Various internal stakeholders are as follows:
 Employees: Employees have interest in the financial information of the organization as
they are concerned about the continuity of operations as well as their jobs and the future
opportunities to grow in the organization.
 Owners: Owners have interest in the financial information of the organization as they are
the one who formulates the future strategies regarding where the organization will go and
maximising the profitability.
External stakeholders: External stakeholders are those who are not part of the business
processes but are interested in the performance as well as profitability of the organization
(Skogstad and et. al., 2011). These are those individuals whose actions defines the outcomes of
the business activity. Various external stakeholders are as follows:
 Customers: Customers have interest in the financial information of the organization as
they wants that the organization should provide high quality of goods and services at low
costs.
 Shareholders: Shareholders have interest in the financial information of the
organization, as they wants the organization to remain in profitable situations to get high
return on their investments in the organization.
 Suppliers: Suppliers have interest in the financial information of the organization as they
supply raw materials and wants the organization to buy them on continue basis to
maintain their profitability.
 Creditors: Creditors have interest in the financial information of the organization as they
wants repayment of the money, which they provided in credit in full and final settlement
as well as on time.
CLIENT 1
Journal Entries
Date Particular Debit Credit
01/05/16 Storage cost A/c............... Dr 450

To Bank A/c......................CR
(Being paid made through cheque)
450
02/05/16 Purchase A/c ….....................Dr
To S. Hood......................Cr
D. Main......................Cr
W. Tone......................Cr
R. foot.........................Cr
(Good purchase on credit)
6080
1450
2060
960
1610
03/05/16 T. Cole A/c...............................Dr
J. Allen A/c................................Dr
F. lane A/c.................................Dr
J. Wilson A/c.............................Dr
F. Syme A/c................................Dr
P. white A/c................................Dr
To Sales A/c.............................Cr
(Being goods sale to the creditors)
1650
1020
980
1200
2100
2520
9740
04/05/16 Motor A/c.......................................DR
To cash A/c........................Cr
(Being expenses made in cash)
470
470
07/05/16 Drawings A/c.........................................Dr
To cash A/c.............................................Cr
(Being cash use for personal purpose)
1500
1500
09/05/16 J. Fox A/c.....................................Dr
T. Cole A/c...................................Dr
To Sales A/c...................................Cr
(Good sold on credit)
1310
680
1990
11/05/16 Sales return A/c.........................Dr
To F. Syme A/c........................Cr
To J. Wilson A/c.......................Cr
680
410
270

(Being goods return to creditors)
16/05/16 Bank A/c.............................Dr
To F. Lane A/c.............................Cr
To P. Mullen A/c.........................Cr
To J. Wilson A/c..........................Cr
To F. Syme A/c.............................Cr
(Being payment received from debtors)
7020
3100
1400
850
1670
19/05/16 R. Foot A/c.............................Dr
To Purchase Return A/c............................Cr
(Goods return to R. foot)
50
50
22/05/16 Purchase A/c.................................Dr
To W. Wright.................................Cr
L. Mole......................................Cr
(Being good brought on credit)
3740
1910
1830
24/05/16 J. Brown A/c.....................................Dr
S. Hood A/c.......................................Dr
R. Foot A/c........................................Dr
To Bank A/c.....................................Cr
(Being payment made to creditors)
4600
3600
1400
9600
27/05/16 Salary A/c.....................Dr
To Bank A/c..................Cr
(Being Salary made through cheque)
4800
4800
30/05/16 Business Rate A/c..........................Dr
To bank A/c...................................Cr
(Rate paid through cheques)
1320
1320
Ledger posting
STORAGE COSTS ACCOUNT
DETAILS £ DATE DETAILS £

2018 2018
1 January Bank a/c 450 31 January Balance c/f 450
450 450
PURCHASES ACCOUNT
DETAILS £ DATE DETAILS £
2018 2018
02/01/18
S Hood
D Main
W Tone
R Foot
1,450
2,060
960
1,610
31/01/18 Balance c/f
9820
22/01/18 L Mole
W Wright
1,830
1,910
9820 9820
SALES ACCOUNT
DETAILS £ DATE DETAILS £
2018 2018
31/01/18 Balance c/f 11460 03/01/18
J Wilson
T Cole
F Syme
J Allen
P White
F Lane
1200
1650
2100
1020
2520
980

Client 2

c. Accounting concepts
Accounting concepts are the basic assumptions of the rules and regulations, which an
organization has to follow at the time of recording transactions and preparing the financial
statements.
Consistency: Consistency concept states that same management accounting principle
should be followed over various period while preparing the financial statements. The manager
ignores the consistency principle in an organization in order to make more revenues or profits.
Such concept is followed as it helps in making comparability between the results of different
times.
Prudence: Prudence concept states that an organization should not overvalue its
revenues, assets or profits also should not undervalue the liabilities, expenses or losses. It is a
fundamental concept, which helps in enhancing the trustworthiness in the financial statements of
the organizations. Figures and numbers must be considered at the time of preparation of financial
reports.

d. Types and purposes of depreciation in formulating financial statements.
Depreciation refers to the monetary reduction in the value of assets due to wear and tear,
obsolescence and long-time usage. The purpose of depreciation is to match the value of asset
with the revenues earned by the usage of assets. It provides an estimation to be ready to purchase
a new asset once the old asset is giving unproductive results. Techniques, which an organization
uses to calculate depreciation, are as follows:
 Straight-line method: the most common and simple method ofr calculating the
depreciation. Under this method, the amount remains same every year over the useful life
of the asset.
 Sum of the year’s digits depreciation method: Under this method, higher amount is
incurred in the early years while lower amount is incurred in the latter years of the asset.
Such method is calculated by the remaining life of an asset is divided by the sum of years
multiplied by depreciating base to calculate the amount.
e. Difference in the financial statements between sole trader and Limited companies.
Sole Trader Limited company
Sole trader prepares the financial statements
for its own purpose in order to ascertain
profitability.
Limited company prepares financial statements
for its stakeholders to provide them the
organisation performance, profitability as well
as position.
The financial statement of a sole trader
includes the amount of the assets held, its
liabilities and the amount of the owner's
capital.
The financial statement of the limited company
includes general description of business
practices, audited income statements, financial
position, and cash flow statement along with
the notes in the statements providing various
details.
CLIENT 3
(A). Purpose of preparing Bank reconciliation statements.
Bank reconciliation statement

These are the statements, which requires the bank passbook and money book. It is one of
the accounting framework, which is hold by association and broke down toward the finish of
consistently with the bank explanations and passbook adjusts. The purpose of Bank
reconciliation statement is to manage the difference and balance between the bank balance and
the cash balance. It is used to compare the records of the banks and cash transactions. Such
statements helps in verifying the data between banker’s records and organisational records.
(B). Areas which cause the organizational records to vary from banker's record
The major transactions, which creates difference, are as follows;
 Deposits that was sent to bank but not credited by bank and received by the bank at a
time.
 Cheques issues to pay for creditors also one of the difference creating factors which
increase the difference between the cashbook and bank passbook.
 Compromise proclamation are made to check the adjust of money book and bank
passbook. There are some exchange which influence the adjust of money book and bank
passbook. Stores in travel and issuing the checks even the assets are not accessible in
banks.
(c) Imprest in petty cash book.
Imprest means a general ledger account. It is related to the overuse of funds in the form
of petty cash. Imprest account is the way to have some control on the expenses.
Bank reconciliation statement
Particular Amount
Balance as per cash book 214
Add: Cheque issued but not presented 87
Cheque issued but not presented 122
Cheque issued but not presented 116
539
Less: Bank rates not recorded 105
Bank charges not recorded 36

Balance as per pass book. 398
Updated Cash book
Date Particular Receipts Payments
01/09/18 Balance 515
07/09/18 Cash sales 64
09/09/18 M Potter 251
12/09/18 M Pointer 26
14/09/18 C Hallern 89
17/09/18 Cash Sales 171
01/09/18 Bank Rates 105
24/09/18 Cash Sales 103
30/09/18 Bank Charges 36
CLIENT 4
(B) Importance of ledger control accounts:
Control accounts are used to clearly define the balances and the transactions of the
organization. Theses helps in identifying errors in the journal books of accounts. Such accounts
helps in preparation of further statements, such as, trial balance, income statement, cash flow
statement and balance sheet with an objective to show the financial position of the organization.
These accounts helps in providing detailed information related to the debtors, creditors, assets,
income and expenses (Wang, 2014). The main purpose of preparation of such accounts is to keep
permanent records of all financial transactions in systematic manner. Such accounts helps in
improving the cash flow at the initial stages to ensure profitability of the organization.

CLIENT 5
journal entries
Date Particular Amount Amount
Simon's a/c 2200

To Smith's a/c
(Being Simon debited and smith credited rectified)
2200
Jones a/c
To suspense a/c
(being Jones a/c debited)
4200
4200
Suspense a/c
To White's a/c
(being white's a/c credited)
7500
7500
Suspense a/c
Date Particular Amount Date Particular Amount
To White's a/c 7500 By balance c/d 3300
By Jones a/c 4200
7500 7500
Trail balance
Particular Debit Credit
Purchases 7000
Sales 11000
Rent Paid 2500
Cash In Bank 8400
Travel Expenses 1600
Receivables 7400
Payables 11000
Opening Inventory 2200
Capital 7100

Total 29100 29100
CONCLUSION
As from the above report, it has been concluded that it is essential to manage financial
accounts so that relevant information can be provided to the public. Financial statements such as:
income statement, cash book &balance sheet provides the financial position of company which is
helpful to take important decisions. There are various stakeholders, which are associated with the
organization. To know the actual value of assets depreciation can be helpful for the corporation
in order to ascertain the present value.