Understanding Suspense & Clearing Accounts

This assignment delves into the key principles of suspense and clearing accounts in financial accounting. It examines the characteristics of each account type, outlining their purpose and usage in resolving discrepancies and balancing ledgers. The assignment also compares and contrasts suspense and clearing accounts, highlighting their unique functionalities. Students analyze client scenarios to understand how these accounts are applied in real-world accounting practices.

Financial Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A. Report to line manager with information about accounting principles, regulations and rules
.....................................................................................................................................................1
Defining Financial accounting....................................................................................................1
Regulations facilitated by financial accounting..........................................................................1
Financial accounting principles...................................................................................................2
Material disclosure and Consistency concepts and principles....................................................2
CLIENT 3........................................................................................................................................2
C Prudence and consistency concept..........................................................................................2
D. Motive of estimating depreciation and the two techniques of measuring depreciation.........3
CLIENT 4........................................................................................................................................3
A. Analysing the reason for preparing BRS................................................................................3
B. Influences from various factors that affect BRS preparation.................................................3
CLIENT 5........................................................................................................................................3
B. Identifying the wants of presenting the Control accounts......................................................3
CLIENT 6........................................................................................................................................3
A. Evaluating the main features of suspense account as well as reasons behind presenting it...3
D. Comparing the Suspense account and Clearing account........................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
In order to have the profitable industrial operations the disclosure of the financial
statement will be helpful in terms of analysing the performance and efficiency of the firm. On
the other side, it can be said that, preparation of such data set must be in consideration of ethical
influences which are presented by various institutions such as IASB, IFRS and FRC.
A. Report to line manager with information about accounting principles, regulations and rules
To
Line Manager
Subject: Describing various principle and concepts of financial accounting which will be
beneficial for business activities.
Defining Financial accounting
The accounting refers to record of all the monetary and financial transactions which
were held during the period such as purchase, sales, payments and receipts. Therefore, the
records of such transactions, summarising them as well as analysing the end results to have the
adequate informations regarding the profitability, efficiency of the business. Thus, it will be
necessary that the industry must implement the financial accounting techniques in the daily
operations which will help in proper decisions, making planned strategies to make adequate
changes in the activities.
Regulations facilitated by financial accounting
There is favourable influence of all the institution which has facilitated the adequate
framework in the operational aspects of the business
IASB: This is the board of all the accounting standard which help in facilitating the
adequate informations relevant with keeping record of all the transactions as well as making the
fruitful disclosure of the accounts (Warren and Jones, 2018).
IFRS: this is the financial institution that helps in funnelling the accounting professional
in terms of making the appropriate disclosure of the financial statement of the business. Such as
income statement, cash flows statements, statement of change in equity and the balance sheet.
GAAP: This board has helped the corporate world in having the most adequate
principles and concepts which help in analysing the operational aspects of the business.
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However, these rules helps in presenting the financial data in appropriate manner.
Financial accounting principles
Money measurement concept: the presentation of financial statement must have record
of all thee transactions in monetary terms.
Going concern: Once the business has initiated its operations than it will be assumed
and estimated that, it will have thee operations on the continuous basis. It can be said that the
firm need to show reports of all the period and must have balance for the following period
(Ertimur and et.al., 2017).
Cost concept: It ensures that all the transactions which are relevant with the fixed assets
need to be recorded on the basis of its costs price. Thus, it will be easy and appropriate in terms
of analysing the profits made over sale of such assets.
Material disclosure and Consistency concepts and principles
Material disclosure: The principle and concept of such operations is that all the
transaction need to have adequate record which will be on the basis of authenticated
informations as well as contains the material facts behind it (Accounting Concepts, Principles
and Basic Terms, 2017).
Consistency: this principle belongs to the operations made while making the disclosure
of the accounts must be in a consistent form. The data set need to be presented on the regular
basis and the remaining balance need to be forwarded on the next stage.
CLIENT 3
C Prudence and consistency concept
Consistency: The disclosure of the financial statement be prepared on the periodical and
regular basis. Therefore, it will be fruitful for the business in terms of having the adequate
informations as well as have the proper revenue generation.
Prudence: this concept helps in the terms of, it does not overestimate the value and
amount of gains or profits as well as underestimate the expenditures. Therefore, the analysis over
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all the operational activities in the business is become easy and the professionals will make
efforts to attain the targets (The Prudence Concept, 2013).
D. Motive of estimating depreciation and the two techniques of measuring depreciation
The importance of analysing depreciation is that it present appropriate value of the fixed
assets which will be resale or replaced.
Straight-line Method: A fixed proportionate of amount will be reduced each year from
the total amount of assets till the estimated period (Dauth, Pronobis and Schmid, 2017).
Written down value: each year the proportion were analysed and reduced from the carry
forward amount. Thus, the cost of assets reduced and the depreciation value will be reduced
which is beneficial as it does not reflect the zero value of assets.
CLIENT 4
A. Analysing the reason for preparing BRS
To have the proper information regarding all the major transactions held during period as
well as the remaining reserves of the firm (Shanklin and Ehlen, 2017).
B. Influences from various factors that affect BRS preparation
The factors like, over drafting, borrowings, dishonour of checks, deposits etc. are the
reason which influences the transactional aspects of BRS (Warren and Jones, 2018).
CLIENT 5
B. Identifying the wants of presenting the Control accounts
To have the proper execution over each departs these accounts are prepared. It is mainly
presented by big entities which has huge transactions in each year (Ertimur and et.al., 2017).
Therefore, with the help of such accounts the business will have adequate control over various
departments such as purchase, sales, production as well ass in marketing.
CLIENT 6
A. Evaluating the main features of suspense account as well as reasons behind presenting it
The preparation of such accounts is to fix the error of balancing a particular account.
These accounts are need to be get solved before final disclosure of the accounts (Dauth, Pronobis
and Schmid, 2017). These will be helpful as it brings promptness in preparation of accounts and
it will be solved by the professionals before final submission.
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D. Comparing the Suspense account and Clearing account
Illustration 1: Comparing suspense accounts and clearing accounts
(Source: The Difference Between a Suspense Account & a Clearing Account, 2018)
CONCLUSION
In consideration with the above report it can be said that the influence of various financial
accounting principles and concepts has helped in making the adequate disclosure of the
statements. The report is also helpful in terms of presenting the accounts of various clients and
resolve their financial issues. There has been presentation which are relevant with the journal
entries, ledgers, trail balance, income statements, financial position BRS etc.
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REFERENCES
Books and Journals
Dauth, T., Pronobis, P. and Schmid, S., 2017. Exploring the link between internationalization of
top management and accounting quality: The CFO’s international experience matters.
International business review. 26(1). pp.71-88.
Ertimur, Y. and et.al., 2017. Financial Reporting for Pollution Reduction Programs.
Shanklin, S. B. and Ehlen, C. R., 2017. Extending The Use And Effectiveness Of The
Monopoly® Board Game As An In-Class Economic Simulation In The Introductory
Financial Accounting Course. American Journal of Business Education (AJBE). 10(2).
pp.75-80.
Warren, C. S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Online
Accounting Concepts, Principles and Basic Terms. 2017. [Online]. Available through
:<http://www.mbacrystalball.com/blog/accounting/>.
The Prudence Concept. 2013. [Online]. Available through
:<https://www.accountingtools.com/articles/what-is-the-prudence-concept-in-
accounting.html>.
The Difference Between a Suspense Account & a Clearing Account. 2018. [Online]. Available
through :<http://smallbusiness.chron.com/difference-between-suspense-account-clearing-
account-81560.html>.
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