FNSACC414: Financial Statement Preparation for Non-Reporting Entities

This assignment delves into the practical aspects of financial accounting, focusing on the preparation of financial statements for both profit-making partnerships and not-for-profit organizations. The student's work begins with an executive summary outlining the report's objectives, which include understanding the processes of data collection, recording financial transactions, and generating financial statements. The assignment covers the basics of accounting data collection and recording, emphasizing the importance of organized transaction recording and coding. It provides a detailed illustration of accounting for partnerships, including cash transactions, inventory management, and the preparation of income statements, balance sheets, and ratio analysis. Additionally, the assignment extends to not-for-profit organizations, detailing their unique revenue sources (grants, donations) and expenses, and demonstrating the preparation of income statements and statements of financial position tailored to their specific requirements. The paper concludes with a summary of the key learnings and the importance of adherence to accounting standards and guidelines for accurate financial reporting and decision-making. References and bibliography are included to support the findings.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL ACCOUNTING
Executive Summary:
This report aims at analysing and understanding the process of accounting, recording and
reporting financial transaction and financial statement for different types of organisations. In this
report a details practical work out has been done to understand the collection process of financial
transactions, recording them in the books of accounts and presenting them in the final financial
statement of the organisation for a profit making organisation as well as for a not for profit
organisation. Lastly the paper concludes with a brief to the financial statement analysis through
computation of various ratios from the financial statement as prepared.

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Table of Contents
Introduction:....................................................................................................................................3
Basics of accounting data collection and recording:.......................................................................3
Accounting for partnership:.............................................................................................................4
Accounting for not for profit organisation:...................................................................................10
Conclusion:....................................................................................................................................13
References and bibliography:........................................................................................................14

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Introduction:
Organisations are a social establishment, established to serve the people of the society.
Some of them make profit through their activities and some of them provides various services
and do various activities for increasing the social welfare of the society. Their financial record
collection and accounting process also differs based on their activities and objectivities. There
are various accounting standards and guidelines governing the accounting and reporting practices
of the respective organisation. In the following parts of this report, a detailed analysis and
illustration have been done to better understand the process of accounting and reporting for a
partnership profit making organisation and for a non profit making organisation (Pratt 2016).
Basics of accounting data collection and recording:
In every organisation irrespective of its types and nature, numerous transactions occur in
a day. It can be classified into various groups and recorded in separate books of accounts for
better recording and control over the accounting process. For instance, all the cash transaction
can be recorded in a separate book known as cash register or cash journal. Again cash payment
can be recorded separately in the cash payment journal and the cash receipts in the cash receipt
journal. Purchases and sales can be recorded in the purchase book or sales book. For tracking the
inventory and ascertaining the cost of goods sold of the inventory, a separate inventory record
can be kept. In recording all those transaction in the above mentioned books of accounts unique
code must be assigned to each transaction and recorded chronologically in the order of
occurrence of the transaction. If it can be maintained in this way, then the accounting process
which starts after the recording of transaction becomes easier, efficient and effective (Hoyle,
Schaefer and Doupnik 2015)..

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Accounting for partnership:
Partnerships are formed to carry out any business or non business transactions. Most of
the partnerships are established for doing business and making profit. In this type of business all
the partners contributes certain amount of capital and carries out the day to day business
organisation for sharing profit among them on the basis of a pre determined profit sharing rate.
In the following part a details illustration has been presented for the accounting of partnership
business.

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All the cash receipt transactions, which paid or received in cash and made through the
bank account have been recorded in the cash transaction table. For tracking the transaction all the
payments have been coded with an alphanumeric code starting with ‘CP’ and all the receipts
have been coded in the same process starting with the code ‘CR’. All the petty cash transactions
have been recorded in a separate register named as petty cash transactions and coded
chronologically with the date of occurrence. Transactions related to inventory have been

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recorded in a spate inventory ledger. In the inventory record all the purchases and sales are
recorded along with the date of occurrence of the transaction along with unit price quantity and
total costs. In the last column of the inventory record, the closing balances have been shown. In
preparing the inventory ledger, the weighted average method has been followed for valuation of
cost of sales (Hoyle, Schaefer and Doupnik 2015). After recoding all the transaction in this way,
the net result of all the key events can be found and the financial statement preparation can be
started.
All the transactions have been recorded in separate and respective books to have a better
control over the financial records and an efficient accounting system. Taking the results from all
those books of accounts the financial statement for the partnership can be prepared as below.

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As the partnership is a profit making organisation their financial performance and
financial position have been presented in the above format which best suitable for them. Now
based on the financial statement information a ratio analysis can be performed as follows.

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Accounting for not for profit organisation:
Not for profit organisations are some social establishment meant for serving the society
for the betterment and increase in the social welfare. Their intention is not to make profit but to
increase the social welfare. Their activities are mainly social activities in nature as well as have
some business type activities also. The main sources of their revenues are, grants, donations and
subscriptions, and their main expenses include charities, social program expenses and so on.
They are accountable to the society for showing the treatment and utilization of fund in the
intended purpose. The recording and financial accounting for such type of organisation should
focus on the transparency and accuracy of their financial reports (Hoyle, Schaefer and Doupnik
2015). Based on the given transaction in the case study a financial statement of a not for profit
organisation can be illustrated as follows.

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As can be seen from the above, the main source of revenue for the organisation are
membership income and government grants. In addition, they are having some business type
activities which generate revenues for them, such as sales of beverages, snacks and space
renting. Considering the cost of sales for all those business type activities the net income can be
computed as shown in the above income statement. The preparation of statement financial
position is completely different from others. Here, the assets section is more or less same but the
liabilities section is completely different (Beatty and Liao 2014). The liabilities section is
classified into to sub heads, one is liability and the other is Net assets. Net asset means the
amount of total assets over the liabilities. The net assets again are subdivided into three heads,
Unrestricted, Temporarily restricted and permanently restricted. Unrestricted assets mean which