Financial Accounting Analysis and Report of Soar Retail Business

This report provides a comprehensive financial accounting analysis of Soar, a retail business in the UK, focusing on events that occurred in June 2021. It includes explanations of various business activities such as sales, sales returns, purchases, purchase returns, cash receipts, and cash payments, along with their respective accounting treatments. The report details the updating of records and reports, including sales books, cash receipt books, purchase books, and purchase returns day books. Furthermore, it presents ledger accounts and explains the principle of prudence in accounting, emphasizing the importance of cautious revenue and expense recognition. The analysis covers examples of how the prudence principle is applied in inventory valuation, revenue recognition, and the treatment of bad debts. The report concludes that accounting is essential for businesses to determine their financial standing and facilitate product design assessment and forecasting.

Introduction to Financial
Accounting

INTRODUCTION
Accounting has changed over time in response to changing perceptions of the field's
requirements. Accounting has evolved in a lot of formats in various countries and situations. As
a result, the term accounting does not have a singular definition. Accounting, in broader, exists to
serve a variety of people who interact with businesses, including management, owners, creditors,
workers, vendors, consumers, authorities, and the public at large (Widiastuti, Sukmana and
Hady, 2021). This report based on the Soar which is retail business and established in UK. In this
report consist of explanations of events occurred in business during the financial year. Along
with record all the events in cash flow, ledger and income statement as per their nature. At the
end of the report define principle of prudence to owner in regard of the financial reports.
MAIN BODY
Short explanations of events that occurred in June 2021
An accounting event is an activity that is recorded in an accounting framework. Every
economic event that has an influence on a company’s cash must be recorded in its financial
statements. There are mentioned different events that occurred in Soar in the month of June 2021
these are:
Sales: A Sale Event is the sale of a substantial amount of funds shares or property of a Company
or an Affiliate of such Subsidiary, as decided by the Allocating Committee and approved to by a
plurality of the Board of Directors, such approval not to be unduly delayed, restricted, or
postponed (Blizkiy, Malinenko and Lebedinskaya, 2021). This event occurs in the business when
company selling different items to their customers as per their requirement these are:
 2nd June selling goods in 1400 to Mild
 5th June selling goods in 1200 to Tup
 11th June selling goods in 5700 to Warm
 24th June selling goods in 2060 to Wet
Sales return: Customers will return required item to the firm for a variety of reasons, including
receiving the incorrect product, receiving delayed payment, or receiving things that are defective
or faulty (Buszko and Ciechan-Kujawa, 2020). The account for sales depreciation and

amortization is the opposite of the account for sales revenues. In this event mention those
transactions which was rerunning by the customers after selling due to any defect these are:
 16 June received selling goods from Cold, 1200
 20 June received selling goods from Freeze, 1500
Purchase: In the events variable, the purchase event is a number. This number is important for
businesses who wish to track the money generated by their website. It is very reliant on the
purchased and item factors. This event is playing important role in retail business because it is
main pillar to operate business for effective manner (Nurdiansyah and et.al, 2021). There are
defined those transactions which are occurred in the month of June such as:
 5th June purchase by Dark in 2650
 6th June purchased goods by Night in 1400
 8th June purchased goods by Lin in 2000
 10th June purchased goods by Night in 870
Purchase return: Whenever the consumer of commodities, inventories, fixed assets, or other
objects returns the commodities to the seller, this is known as a transaction return. Purchase
refunds can occur for a variety of reasons, including: The consumer purchased an inordinate
amount and would like to recover the remaining (Safari Sarchah, Yazdifar and Pifeh, 2020). The
consumer made a mistake and bought the wrong item. Whenever a buyer of commodities,
inventories, capital assets, or other objects returns the items to the seller, this is known as a
purchase return.
 On 9th June returned goods to Dark by amount 2650
 On 18th June returned goods to Ray by amount 2200
Cash receipt: All the cash activities in the business of Sour occurred in the month of June from
the different clients underneath as:
 12 June take cash from Wind 4600 and allowed discount about 400
 14 June selling goods to customer in 920
 18 June cash received from Mild for selling in 1300 and provide discount 100
 20 June received loan from customers in 20000

 25 June selling goods to customer in 3400
 27 June selling goods to customer in 2500
Cash payment: People who do not have a bank account or who are looking to avoid declaring a
taxable income preferred cash payments (Mustafa, 2020). In an inflationary climate, cash
payments in a hard currency are preferable since all these resources maintain their worth
significantly better than just the domestic currency, which is vulnerable to hyperinflation.
 On 10th June payment rent in cash in 4100
 On 12th June payment to Dark by 2500 with 150 discount
 14th June payment to Shadow 820 with 60 discounts
Carriage inward: Carriage inwards relates to the service fees that the buyer must pay while
receiving items that were bought FOB shipment location. Freight-in or mass transit are other
terms for carriage inwards. The price of carriage inwards is included in the price of the products
ordered.
Return outward: Return items are products that are refunded to the vendor by a consumer. They
are items that were formerly acquired from third parties but were restored to them but they were
unsuitable; they are also known as Purchase returns. Outward returns lower a company's overall
accounting records (Sinaga and et.al, 2021).
Wages expenses: Wages expenditure refers to the cost of hourly pay earned by a business for its
hourly employees. This may be one of a company's biggest expenditures, especially in areas like
transportation and manufacturing where there are a lot of hourly workers. Based on the amount
of extra given, wage expenses might fluctuate significantly from month to period. Due to the
different volume of work hours in each monthly, it might also vary by time. Based on the needs
of weekends and the overall amount of days in the month, certain monthly may have as few as
18 days at work, whereas others have as many as 23.
Rent: The account Rent Expense will bear the value of spaces as during time frame specified in
the revenue document's header, whether or not rent was collected inside that time, underneath the
accrual system of accounting. (Rent received in excess is recorded in the current asset category
Prepaid Rent on the balance sheet.) Total Expenses may show on the income statement as either

of administration expenditures or selling expenses, dependent on the space's purpose. The rental
would be included in the price of an item generated unless the leased facility was utilised to
manufacture things (Madhuwanthi, 2020).
Updating of records and reports to the original records and reports
Soar sales book for June 2021
Date Customer Invoice No. Amount
2 June Mild 0035 1400
5 June Tup 0036 1200
11 June Warm 0037 2600
11 June Warm 0038 3100
24 June Wet 0039 2060
30 June Tup 0094 4000
Total
Soar Cash Receipt book for June 2021
Date Detail Discount
Allowed
Total Cash Receivable Other
12 June Wind 400 4600 4600
14 June Items sold 920 920
18 June Mild 100 1300 1300
20 June Loan 20000 20000
25 June Items sold 3400 3400
27 June Items sold 2500 2500
30 June Items sold 600 600
30 June Warm 3100 3100
Total 500
Soar Purchase book for June 2021

Date Customer Invoice No. Amount
5 June Dark 139B 2650
6 June Night XXX97 1400
8 June Lin 08814 2000
10 June Night 140B 870
21 June Shine 210955 3100
30 June Lin 08819 1800
Total
Cash payment Book June 2021
Date Detail Discount
Receive
d
Total Cash
Purchases
Payable Rent Electric Other
10
June
Rent paid 4100 4100
12
June
Dark 150 2500 2500
14
June
Shadow 60 820 820
16
June
Electric 1700 200 200
21
June
Equipment 200000 20000
25
June
Electric 200
27
June
Purchases 2100 2100
29
June
Drawings 3000 3000
29 Wages 4000 4000

June
30
June
Night 870
30
June
Equipment 9000
Soar Purchase Returns Day Book June 2021
Date Supplier Credit Note no. Amount
9 June Dark XX949 2650
18 June Ray 712 2200
30 June Night C48 1400
Total
Ledger account
Sales a/c
Date Particular Debit Date Particular Credit
30 June Sales return
day book
2700 1 June Balance b/d 301000
30 June Sales day
book
10360
30 June Balance c/d 315480 30 June Cash sales
(CB)
6820
Purchase a/c
Date Particular Debit Date Particular Credit
1 June Balance b/d 154840

30 June Purchase day
book
10020
30 June Cash
purchase
(CB)
2100 30 June Balance c/d 166960
166960 166960
30 June Balance b/d 166960
Explanation of principle of prudence within the material supplied by the accountant of Soar
Accounting's Prudence Principle (Conservatism Concept) argues that a company should be
cautious while recording revenue and consumption. It is recommended to record revenue unless
it is realized, but to register a cost as early as there is a fair chance of it being due. Do not
overstate the amount of revenues recognized or underestimate the number of costs under the
prudence principle. Also, when documenting the value of assets, one should be careful and not
overlook obligations. As a consequence, financial reports that are prudently reported should be
produced (Zhang, 2021). Prudence is being cautious when calculating data in an unclear scenario
to avoid overstating assets and revenues. In the same way, the idea dictates that in the event of
uncertainties, costs and obligations should not be underestimated. Liabilities should not be
underestimated, according to prudence. As a result, the value of obligations will always be more
than it should be. Workers, for instance, are set to retire. The relevant obligation should be
recognized whenever the cost for the same is reported.
Example 1: Rather than the projected selling price, inventories are documented at the lower of
cost or net realizable value (NRV). This guarantees that the benefit from the sale of goods is
realized only when it is really sold. Prudence, on the other hand, does not imply that
management intentionally overstates obligations and costs while understating assets and revenue.
Prudence should be used to remove bias from financial accounts, but it should not be used to
diminish the data's trustworthiness.
Example 2: Expenses are recognized promptly while they are likely, regardless of whether
money is received or not, per the prudence idea. Revenue recognition, on the other hand, is
deferred until the revenue is achieved or assured. They can see that the anticipated revenue for

Soar is 5,000,000. As a result, Soar will not be able to record the whole amount as revenue right
once. Only 25% of the total income can be recorded as income in the accounting records. For
financial reporting, this approach is known as the phase of calculating (Kollar, 2021). Revenue
recognition using this approach only to the degree that it has been finished. As a result, the
amount of revenue that might be recognized is just 1,250,000.
Example 3: A "provision for bad and doubtful debts" is stated in the collections part of liquid
liability and subtracted from the total bondholder’s amount. This provision does not display
borrowers who have become bad debts; rather, it indicates debtors who may become bad debts as
a consequence of their sold items only with firm or their unusual challenges, and the organization
may not be able to collect money from them. Underneath the prudence principle in accountancy,
these debtors were included in allowance (Sukandani, Istikhoroh and Widodo, 2021).
CONCLUSION
As per the above report it has been concluded that accounting is the process used by many
businesses and corporations to determine their finances. Accounting is used to product design
assessment and forecasting. Accounting is a popular study, and as the globe becomes more
civilized, the necessity for financial management to perform duties grows. Mastering accounting
terminology, on the other hand, is difficult since people are fully bombarded with assignments.
Accounting projects are usually difficult, necessitating the assistance of accounting assignment
assistance to professionals in order to solve the issues. Accounting is all about formulating ideas
and calculating results, which is necessary for future actions.

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