HNBS 310 - Financial Accounting Assignment

HNBS 310 Financial
Accounting

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
SCENARIO 1..................................................................................................................................1
Question 1....................................................................................................................................1
Question2.....................................................................................................................................6
SCENARIO 2................................................................................................................................12
Question 1..................................................................................................................................12
Question 2..................................................................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
In business context, financial accounting is a key process of analysing, recording,
reporting the summaries financial and business transaction that are happened due to different
operation in a specific time frame (Financial accounting, 2019). Manager use to prepare various
financial statements according to GAAP guidelines so that exact strength and position can be
determined. The crucial financial statements are cash flow statement, trading profit and loss
account and balance sheet that are beneficial to report the company operating performance over a
specific accounting year. In this report, journal entries, ledger account and trail balance is
discussed. Report also cover, accounts for sole trader, partnership companies that are prepared
with the support of appropriate standards and principle. Additional in report, bank reconciliation
statements, control and suspense accounts and are being presented in according to guidelines.
SCENARIO 1
Question 1
Journal entries: The systematic way that is used to record the business transaction in
authentic records of a business transaction (Chen, 2015). The main concept behind making
accounting entries is to record each and every kind of business operation at least in two place
that is known as double entry. For instance, when there is sales on cash it will increase revenue
as well as cash accounts. There are different kind of journal entries such as adjustment entry,
compound and reversing entry.
1

2

Ledger accounts: In accounting term, the book of final entry are called ledger account
that use to classify and summarize the useful financial information. Many time few general
ledger accounts become summarize records that are further consider as control accounts. Few
examples are accounts receivable, investment, equipments that are assets accounts and accounts
payable, accrued expenses are liability accounts.
Capital a/c
30-06-16 To balance c/d 65000 01-06-16 By cash 65000
Purchase a/c
02-06-16 To Creditor 8000
16-06-16 To Creditor 10000 30-06-16 By Balance c/d 18000
Creditor's a/c
08-06-16 To bank 4000 02-06-16 By purchase 8000
20-06-16 To bank 4000
Drawing a/c
14-06-16 To bank 75
20-06-16 To bank 150 30-06-16 By balance c/d 225
Petty cash book
25-06-16 To bank 100 30-06-16 By stationary 30
30-06-16 By Balance c/d 70
Cash/bank
01-06-16 To capital 65000 14-06-16 By drawing 75
07-06-16 To sales 4000 18-06-16 By computer 3000
21-06-16 To sales 10000 20-06-16 By drawing 150
25-06-16 By petty cash book 100
20-06-18 By creditor 4000
` 30-06-18 By balance c/d 71675
79000 79000
Sales a/c
30-06-16 To balance c/d 26000 07-06-16 By cash 4000
12-06-16 By Debtor 12000
21-06-16 By cash 10000
26000 26000
3

Stationery a/c
Date Particular Amount Date Particular Amount
30/06/16 To Cash in hand a/c 30 30/06/16 By balance c/d 30
30 30
01/07/16 To balance b/d 30
Trail balance: In accounting the list of closing balances of all general ledger on a
specific time that support in preparing crucial financial statements (Collier, 2015). Responsible
accountant use to segregate ledger balance into debit and credit balances where expenses and
assets are part of debit column and liabilities, income and capital appear on credit side. If each
entries are carried in correct manner and ledger balances are accurately extracted than total of
debit side would be equal to credit. In case if balances are different than additional suspense
account is operated to bring stability.
4

Trial balance
Capital - 65000
Cash/bank 71675 -
Sales - 26000
Debtor 12000 -
Creditor - 14000
Purchase a/c 18000 -
Computer 3000 -
Drawing 225 -
Petty cash 70 -
Stationary 30 -
Total 105000 105000
Question2
Profit and loss account: In accounting term, the profit and loss account is also known as
income statements that summarizes the overall cost, expenses and revenues of an organisation
during an accounting period (Libby, 2017). The authenticity of P&L a/c use to provide clear
picture about company performance and ability to generate profit with the support of increase
revenue and decreasing cost. With the help of appropriate income statements manager are able to
compare total income and expenses of different financial year.
Profit & Loss a/c of Carol Andrew
For year 31 December 2017
Expenses Amount Income Amount
To opening stock 9500 By sales (125000-1000) 124000
To purchase (75000-1500) 73500 By closing stock 1000
To gross profit 42000
125000 125000
To wages and salaries 13200 By gross profit 42000
To provision for bed (1200+650-934) 916 By rent received (4850-490) 4360
To rent and rates (1500+340) 1840 By interest received 1000
To postage 900
To insurance (7500-411) 7089
To depreciation 5000
To net profit 18415
47360 47360
5

Balance sheet: One of the crucial financial statements for company that shows the actual
assets, equity, shareholders and liabilities on a particular time period. The detail balance sheet
use to gives the clear picture about what exactly company owes and owns and figure out the
amount that invested by shareholders (Maskell, Baggaley and Grasso, 2016). With the support of
this statements number of ratio can be derived that help investor to get the knowledge about total
strength of company finance.
Balance sheet of Carol Andrew’s retail business On 31st December 2007.
Equity
Capital 120800
(-) Drawing -5150
(+) net profit 18415 134065
Non current liabilities - -
Current Liabilities
Creditors 3900
Business rates 340
Accumulated depreciation 10400
Rent received in advanced 490 15130
Total assets 149195
Assets
Non current assets
Motor van 25000
Loan and advance 100000 125000
Current assets
Cash 340
Bank 10594
Debtors (12500-650) 11850
Stock 1000
Prepaid insurance 411 24195
Total Assets 149195
Sole trader company: These companies are mainly managed and operated by self
employed person. The main motive is to earn profit and sustain for long run in competitive world
by offering useful product at decent price so that customer might get attracted.
P&L account
6

Balance sheet of sole trader
7

8

9

Partnership company: It is consider to be more successful way of doing business, in
partnership firm two parties use to make formal arrangement so that they can operate, manage
business operation and share profit accordingly (Panchuk, 2015). In general partnership it is
stated that parties are agreed to share financial and legal liabilities in appropriate manner.
Income statement
Balance sheet
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SCENARIO 2
Question 1
A) Updated cash book
Revised cash Book (as per bank column)
Date Particulars
Dr.
balance Date Particulars
Cr.
Balance
Balance as per cash book 1760 Insurance paid 170
Cheque not yet presented 270 Monthly bill 56
Transfer from mr patel 1070 Cheque from arif 186
Drawings 105 bank charges 25
Dividend received 325 By balance as per pass 3093
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book
3530 3530
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b) Different term with example and actual differences:
Direct debit: In business scenario, direct debit is a type of pre authorised option for
making payment. An account holder use to give permission to bank to pay variable or fixed
amount to other bank, utility company etc. depending upon the actual bill to for the specific
period. Now a days direct debit is in demand as customer consider it as the simplest, fastest,
safest and most convenient way to make payment at regular interval. There are various benefit of
making payment through this option such as:
Convenient: It is automatic type of payment option so bills are never delayed, lost or
forgotten.
Cost: Many times companies are also offered different types of incentive by bank or other
businesses by making payment through direct debits.
Customer protection: It is consider to be the most safest payment option as customer do
not have to make any kind detail to be entered.
Companies use direct debit option for different purposes that are defined below:
 Regular bills for variable amount: With the support of direct debit companies are able
to pay all important bills on time at the end of moths. For example, ABC company use to
give direct debit option for paying telephone bills on regular interval in a month on
specific date. These amount keeps on changing and bank detected the right amount
according to bills provided by telephone company.
 Fixed subscription or membership: As discussed above it is the safest and easiest
method of making recurring payments such as newspaper bills, gym membership etc.
 Paying an account: In many companies, manager use to provide direct debit the best
option for spreading the total cost or paying an expenses equal of accounts.
Standing order: It is also a type direct debit in which an instruction are given to bank to
make payment to specific individual or organisation. In this option person use to fix the amount
and decide the date on which payment must be made to party. For example, fixed and regular
payment for rent, donations, charity and some time regular payments into saving options. At the
same time opting this option have different risk such as an outstanding bill of gas connection
paid twice than the payment can no be refunded and utility provider would adjust in next billed
amount.
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Bank charges: In fast and changing environment, bank use to provide number of
services to their customer in order to ease their work and save time (Barth, Li and McClure,
2018). By providing these services bank charge specific amount from customer for maintenance
or further updates. Different services such as ATM card, internet and mobile banking, message
banking, overdrafts etc. are provided by bank to customer on which they use to charge fixed or
variable charges for respective accounts. Fixed charges remain the same throughout the time
period customer have account in certain bank such as, internet and message banking. On the
other side variable changes such as card issuance fee, ATM withdrawal charges after free
transaction etc.
Dishonour of cheque: Many times there are situation in which bank use to reject the
cheque which are presented by customer to make specific payments. There is a systematic
guidelines that is provided by bank regarding cheque, in case if there is any mistake found then
bank use to neglect particular cheque. There are different are different reason for rejection or
dishonour of cheque like:
 Mismatch of signature.
 Insufficient balance in accounts.
 Wrong date or torn cheque.
Differences
Direct Debit Standing Orders Bank Charges Dishonour Cheque
It gives strength to
customer such as bank
give special rights to
them for making
payment. It is safest
and convenient option
by which different
bills can be paid on a
single time with secure
way.
This is basal facilities
that can be opted or
ignored by clients as
per their needs.
All those legal charges
that are charged by
bank from customer
by providing list of
services.
It is a situation
when customer are
able not able to
meet the guidelines
for banking and
there are some issue
with their cheque.
Thus bank
dishonour these
cheques.
14

Question 2
A) Journals entries
15

B). Suspense accounts
CONCLUSION
From the above report, it is discussed that financial accounting helps an organisation to
make authentic record of each financial information into final accounts so that decision are made
to improve future functioning. Accountant use to prepare essential annual statements like balance
sheet, income statements and cash flow to know the overall strength and position of company in
specific year.
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