Temporary Recording: Suspense Account vs. Clearing Account
Added on 2019-12-28
41 Pages5576 Words222 Views
|
|
|
FINANCIAL ACCOUNTING
INTRODUCTIONAccounting is the method used by the entities in order to keep the record of financial dataand information by which it able to analyse its performance for take the varies businessdecisions. Each and every company has the accounting department where a particular manage isto be appointed who check the financial transactions in the proper way. In the accounting aspectthere are generally two fields come into consideration which are like as management as well asthe financial for making the internal and external business decisions respectively (Bradshaw andet.al., 2013). The current report focus on the financial accounting where only the monetarytransactions are to be discussed as well as assessed by the company. Every firm in the entirebusiness process adopt the financial accounting which helps to the entrepreneur and managersfor measuring their profitability position within the market segment. The scenario providesexplanation for preparing the books of accounts from initial to the final account along withreducing the errors. It shows about the journal entries, ledger account as well as the trial balancewhich are used for determining the financial transactions in fruitful ways. Apart from this,description regarding to the bank reconciliation statement (BRS) and two accounting principlessuch as prudence and consistency also given in the present report. Moreover, it helps to thereader to known about the depreciation methods as well as suspense and clearing account whichare used by the accounting managers for keeping record of the various financial data occurswithin the company. The report giving description about preparing the accounts of financials stepby step in within the accounting process and assess the position in form of profit and revenue. A1) Definition of financial accountingFinancial accounting refers to recording, reporting and presenting organization's financialperformance for transacting goods and services produced by entity. In this regard, different toolsand elements are used to showing off incurred expenses and gained revenue on production andsupplement of products. It includes preparing and maintaining balance sheet, income statement,profit and loss account and different financial notes as journal, ledger and so on (Bakand, Hayesand Dechsakulthorn, 2012). Through these system tools, specific transaction involving purchase,sales, cash, capital are presented by which different ideas are created for operating furtherbusiness activities. Including this, revenue, expenses, assets including current and non-current
are obtained for identifying company's economic position that leads to make decisions for furtherimplementation. Moreover, systematic records are prepared and maintained as well reports are made toexpress monetary performance of organization. Different kinds of financial data and performanceof last years' transactions are presented by which several ratios are calculated and profit earningpotential of organization is obtained. On behalf of this interpretation of different financial tools,optimum allocation of fund can be gained that affects financial management of organization. Forfinancial accounting, different people are involved such as stakeholders, bank, employees,suppliers and business owners and so on (Cheng, Ioannou and Serafeim, 2014). There is anaccounting standard presented under which various rules and provisions are provided forfinancial accountancy. In this process, all kinds of transactions for business operations are to befollowed for effectiveness of entity. Moreover, it is analyzed that for preparing financialstatements, several obligations are applied for calculation and recording transaction as per whichfurther business activities. 2) Regulations regarding financial accountingThere are different kinds of regulations provided for financial accountancy for example;International Financial reporting council (IFRC) and Accounting standard Board (ASB).Through these accounting standards, several kinds of rules and obligations are provided toprepare and maintain financial records. In this regard, accurate economic information are gainedby which decisions are made to operate business activities effectively. Including this, systematicand ethical transaction of goods and services can be achieved that impacts on company's businessoperations and different decisions. It aims to improve standards of financial accounting as wellcorporate reporting. Along with this, it provides guidelines to record financial transactionssystematically. Including this, true and fair views are obtained to present actual economicposition of entity. However, accounting requirements are generated for financial accountancy forwhich issues can be solved out for adequate accountancy (Midrigan and Xu, 2014). In thisregard, some of the main regulations regarding financial accountancy for UK can be understoodas below:-International Financial Reporting Standards (IFRS):- It is founded and developed byindependent organization to provide structural framework to companies for preparing
financial statements. However, rules and regulations are mentioned through thisaccounting standards to present all details of financial transactions including balancesheet, income statement etc. In addition to this, various guidelines are provided for costimplementation that influences credit ratings (Battiston and et.al., 2016). Including this,several accounting regulations for controlling over excess of financial transactions. Thus,IFRS is effective regulatory to gain financial information for further implementations. Accounting Standard Board (ASB):- Through this accounting standard, role andenforcement of accounting are presented for financial information and provisions.However, usefulness of ASB can be understood as follows:-Helpful for formulating accounting standards.Provides different laws, costumes for recording and presenting financial information.Different terms and conditions are provided to develop own standard effectively.Thus, above mentioned accounting standards are useful to provide rules and regulationsregarding financial accountancy provisions. Therefore, various guidelines and instructions areprovided for financial accounting including journal, ledger, balance sheet, profit and lossaccounts' recording (Bartram, Brown and Waller, 2016). In this regard, rules and obligations ofaccounting standards presented for preparing and maintaining statements as well showings offmonetary performance of organization. On the basis of which, further strategies can beimplemented to improve accounting standards.3) Accounting rules and principlesFinancial Accounting Standard Board (FASB) provides provision for principles andguidelines related to recording information and further preparing planning for further businessoperations. For preparing financial statements, several principles are obtained for basicinformation and to understand generally accepted accounting principles effectively (egal,Shaliastovich and Yaron, 2015). Therefore, essential accounting rules and principles can bedescribed as follows:-Economic Entity Assumption:- In respect of legal purposes, it is considered thatproprietorship and its owner are just similar as one entity. While, in accountingperspectives, both entity and its owner are different for maintaining financial records.
Therefore, it is essential to prepare records for company and its owner's role separately.There must be financial statement prepared for both efficiently.Monetary unit assumption:- It is provided by accounting standard for presenting costs inunit. For this result, gains and losses are also related to recording amounts therefore trueand fair amount of financial transactions can be gained for further business operations(Pasquariello, 2014).Full disclosure principles:- Through this accounting principle, it is required foraccountant to present all details of financial transactions includes gained income andincurred losses thereby actual business performance can be expressed that is related withproviding all descriptions of information. In this regard, depreciated amount, scrap value,loss due to different changes are obtained for preparing accounting policies. Going concern principle:- It is considered that company is a going concern that neverdies whether its stakeholders, managers got fluctuated. In accordance to this, it is neededto prepare and maintain account in the name of company (Subrahmanyam and Titman,2013). Including this, gained profit, incurred losses are needed to be recorded toimplement plans in future time. Thus, going concern principle presents organization'sperformance and reputation to be maintained.Revenue recognition principle:- It is necessary for organization to record all kinds ofaccurate income in financial statements. For showing off good reputation of entity, do notpresent losses is unethical. However, in brief, we can explain this principle with the helpof example as if company incurred 10000 for selling goods and recording this amount as20000 is illegal as well not fair for business operations. Including this, different issues areobtained regarding business activities.4) Conventions and concepts related to consistency and material disclosureAccounting conventions is a method for providing guidelines for accountant to describingfinancial information. Through this method, different concepts are obtained regarding financialaccountancy for disclosing fair amount and value on transaction (Murphy, 2016). However,conventions in relation to consistency and material disclose can be expressed as below:-
Conventions related to consistency:- Under this convention, it should be obligated torecord all changes in business operations. However, reheat the true and fair business is quiterequired for accountancy. As per which, further implementation can be obtained as well financialtransactions can be operated in future time (Nixon, 2015). Therefore, consistency is needed to beexpressed for activities and recording financial transactions effectively. Conventions regarding material:- According to this convention, it is liability ofaccountant to record changes in materials for business operations therefore, proper transactionand effective can be obtained for recording financial transactions effectively. Sometimes,accountant records materials as to added it with other resources and records unfair transactionsfor business operations (Footman, 2014). In this regard, material used and allocated wrongrecording affects further business operations. CLIENT 1A) Prime entry bookThe record of the financial data and transaction which are done before comes intoconsideration in the system of double entry in order to secure data is identified as prime entrybook in the accounting aspect. There mainly cash book, day to day transaction book and journalentries made in this and the management go for prepare the further accounts (Bryer, 2013).
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents