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Report : Bookkeeping & Double Entry System

   

Added on  2020-02-03

31 Pages4644 Words61 Views
Financial Accounting Principles

Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3a. Journal Entries.........................................................................................................................3b. Preparation of ledgers account.................................................................................................5c. Drafting trial balance...............................................................................................................6TASK 2............................................................................................................................................7a. Drafting profitability statement................................................................................................7b. Presenting statement of financial position...............................................................................8TASK 3..........................................................................................................................................10a. Giving information about profit generated by Raintree Ltd..................................................10b. Presenting balance sheet of Raintree Ltd...............................................................................11c. Defining the accounting concept of consistency and Prudence.............................................12d. Evaluating the two methods that help in assessing the amount of depreciation....................12TASK 4..........................................................................................................................................14a. Purpose of preparing bank reconciliation statement..............................................................14b. Explaining the reasons why balance cash and pass book vary from each other....................14c. Preparing bank reconciliation statement and updated cash book..........................................15TASK 5..........................................................................................................................................15a. Framing sales and purchase ledger of Henderson Books......................................................15b. Explaining the meaning of control account...........................................................................16TASK 6..........................................................................................................................................17a. Suspense account and its features..........................................................................................17b. Presenting trial balance and use of control accounts.............................................................17c. Rectifying accounting entries................................................................................................18

d. Distinguishing suspense and clearing account......................................................................18CONCLUSION..............................................................................................................................19REFERENCES..............................................................................................................................20APPENDIX....................................................................................................................................21Appendix 1: Ledger account......................................................................................................21

INTRODUCTION Financial accounting is highly concerned with recording, summarizing and evaluatingmonetary information in a highly structured way. Now, each business organization such as soletrader as well as public and private business focuses on preparing final accounts at the end ofaccounting year. Hence, by preparing final accounts business entity can make evaluation ofprofitability, liquidity and solvency aspect. In this, financial accounts are highly significantwhich in turn aid in effectual decision making and assists in framing competent framework. Thepresent report is based on varied case scenarios which in turn provide deeper insight aboutbookkeeping and double entry system. Further, it will also develop understanding aboutsuspense, control and clearing account. Along with this, report will also depict the mannerthrough which profitability and monetary position can be identified through the means of finalaccount preparation. TASK 1a. Journal Entries Alex Study’s Journal for the month of May 2016 is enumerated below:ParticularsDebitCredit1.Storage expenses a/c Dr. To bank a/c 4004002.Purchase a/c Dr.To S. Hood a/c To D. Main a/c To W. Tone a/c To R. Foot a/c 60801450206096016103.J Wilson a/c Dr. T. Cole a/c Dr.F. Syme a/c Dr. J. Allen a/c Dr.P. White a/c Dr. F. Lane a/c Dr. To sales a/c 112016402080910242077089404.Motor car expenses a/c Dr. To cash a/c 470470

7.Drawing a/c Dr.To cash a/c 150015009.T. Cole a/c Dr.J. Fox a/c Dr.To sales a/c 680131011.Sales return a/c Dr. To J. Wilson To F. Syme a/c 68027041014Van a/c Dr. To Abel Motors Ltd 285002850016(a). Bank a/c Dr. Discount allowed a/c Dr. To P Mullen (b) Bank a/c Dr. Discount allowed a/c Dr. To F. Lane (c)Bank a/c Dr. Discount allowed a/c Dr. To J. Wilson (d)Bank a/c Dr. Discount allowed a/c Dr. To F. Syme1330702945155807.542.51586.583.514003100850167019R. Foot a/c Dr. To purchase return a/c 505022Purchase a/c Dr. To L. Mole a/c To W. Wright a/c 37401830191024a.S. wood a/c Dr. To Bank a/c To Discount receive a/c b.J. Brown a/c Dr. To Bank a/c To Discount receive a/c c.R. Foot a/c Dr. To Bank a/c To Discount receive a/c 36004600140032403604140460140126027Salaries a/c Dr. To bank a/c 4800480030Business rates a/c Dr To bank a/c 13201320

31 Abel motors Ltd. a/c Dr. To bank a/c 2050020500b. Preparation of ledgers account Mentioned in appendix 1.c. Drafting trial balance

TASK 2a. Drafting profitability statement Income statement serves information regarding the profitability generated by firm overexpenses. One of the main objectives of the firm is to attain high returns by reducing the level ofexpenditure. In this, by preparing profitability statement firm get information about profit marginwhich it has after making payment of all the expenses (Schroeder, Clark and Cathey, 2016).Hence, by using current profitability statement and comparing it with past years business entitycan frame highly strategic competent and policy framework.Peter Pipe’s Income statement for the year ended at 31st December 2016 is as follows: ParticularsAmount (in £)Sales1215000Closing stock101640

1316640Less:Opening stock82200Purchase778800Wages and salaries177500Add: Outstanding salaries andwages12201787201039720Gross profit276920Less: Indirect expensesMotor expenses87400Administration expenses17650Heating and lighting4950Advertising expenses13280Less: prepaid expenses84704810Depreciation on premises5400Depreciation on equipment17250Depreciation on motor vehicle2800Total indirect expenditure140260Net profit136660b. Presenting statement of financial position Balance sheet furnishes information about liquidity and solvency position as well asperformance of firm. Assets and liabilities are the main two elements of balance sheet which inturn helps in evaluating the business performance and positions. Further, assets side can bedistinguished into two sides such as fixed (land & machinery, land & building) and current (cash,bank, debtors etc). On the other side, sub elements of liabilities include shareholders equity, long

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