Principles of Financial Accounting - Doc

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Financial Accounting
Principles
Table of Contents
INTRODUCTION...........................................................................................................................1
Financial Accounting:......................................................................................................................1
Financial Accounting:..................................................................................................................1
Purpose:........................................................................................................................................1
Users Of Financial Accounting: ..................................................................................................3
CLIENT 1........................................................................................................................................4
Journal Entries and Ledger in the book of Alexandra Study.......................................................4
Ledgers.........................................................................................................................................4
Trial Balance as at 31st January 2019 in the books of Alexandra Study:....................................9
Trial Balance as at 31st January in the books of Alexandra study............................................10
CLIENT 2......................................................................................................................................11
Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018........11
Statement of Financial Position of Munteanu Ltd. As at 31st December 2018.........................11
Accounting Principles:...............................................................................................................12
Purpose and Methods of Depreciation:......................................................................................12
CLIENT 3......................................................................................................................................13
Bank Reconciliation Statement: ................................................................................................13
Imprest system in petty cash book: ...........................................................................................13
Bank Reconciliation Statement as at 30 September 2018.........................................................14
CLIENT 4......................................................................................................................................14
Control Accounts:......................................................................................................................14
Ledger Control Accounts in the books of Hilly:........................................................................15
CLIENT 5......................................................................................................................................15
Suspense Account: ....................................................................................................................15
Journal Entries:..........................................................................................................................16
Trial balance...............................................................................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................18
INTRODUCTION
The process of financial accounting is that collects and compiles financial data to
prepare and describe financial statements and reports such as balance sheet and income
statements for the management, lenders, investors, tax authorities, suppliers and other
stakeholders of the establishment(Abela and et.al, 2014). The overall motive to follow the
process of financial accounting is for generating the fund related statements or information that
can be utilised by external users as well as internal users to make their financial decisions.
For the better understanding of financial accounting and its principles, a junior
accountant of an accounting firm has prepared a report which covers the definition and
explanation of financial accounting, users and purpose of financial accounting, basic principles
of it by the help of some practical accounting statements of client companies.
Financial Accounting:
Financial Accounting:
Financial accounting is the field of accounting that mentions for collecting, recording,
summarizing and presentation of the financial data and information deriving from business
operations and transactions (Financial Accounting 2019). In broader terms, financial
accounting is a manner of reporting financial information and business actions to creditors,
investors and other persons outside the business. It find out the operational profit and the worth
of the business to the concerned individuals. It can be said that financial accounting is used for
presenting financial transactions to the stakeholders in a format that is acceptable and adaptable
by all businesses.
Purpose:
The objectives, functions or purpose of financial accounting can be described as under:
Planning: It is essential for the organizations to plan the structure to allocate and assign
their limited and valuable resources such as cash, materials, labour, equipment and machinery
towards competitive requirements in upcoming period. The utilisation of various types of
budgets may be an effective manner to fulfil the purpose. Financial statements enable
enterprises to develop plans by evaluating business resources and necessities.
Decision: Financial accounting assists the management in making developing policies
and business decisions to create more expeditious process of the establishment . Some
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illustrations related to managerial strategies which are supported by accounting data, involve
pricing policies for products and services, financing policies, investment strategies, product
development policies, credit terms for customers, etc.
Performance: Accounting related to finance provides help in deciding well effective
performance of the business by summarizing and analysing the financial content into standard
measurements and quantifiable (Carnegie and O’Connell, 2014). It is crucial for establishments
to manage a trustworthy informant of evaluating their main objectives so that they may
enhance their effectiveness by examining themselves against competitors and against their own
past performance as well.
Position: Financial statements, generated in this process, indicate the financial
perspective of an organization. Financial condition shows the fiscal status of an organization at
that period of time and also defines the condition of capital investment, utilisation of funds,
cumulative profit and loss, business liabilities and debts, liquidity position of the firm and other
material terms.
Control: One of the major prime objectives of a financial accounting method is to
maintain adequate controls in the organizational environment for the protection of limited and
valuable resources. Financial accounting checks that various hazards are reduced and under-
controlled to an satisfactory level across the business (Deegan, 2017). Organizational assets are
sensitive and may be lost because of theft, error, fraud, obsolescence, mismanagement and
damage. Accounting policies of an organization may require administration to make sure the
reliability and reduce the risk of fraud.
Accountability: Financial accounting renders a base for execution analysis of an
organizational entity over a time slot which encourages reliability across various levels of an
establishment. Directors can be hold by the other stakeholder to make responsible for the
efficiency of the entire organization.
Legal: Financial accounting is a lawful demand for the organizations. It is crucial for
the organizations to follow the required law, regulations and legislations to keep an overall
adequate financial record of their operations and to represent their overall outcomes to the
external as well as internal stakeholders of the establishment (Albu, Albu and Alexander,
2014).
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