UNIT 10 Financial Accounting : Assignment
Added on 2020-07-23
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UNIT 10 FINANCIALACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1A. Produce a report regarding accounting regulations for firm to the Line manager............14. Concepts of material disclosure and consistency...............................................................4CLIENT 1........................................................................................................................................51. Exhibiting journal account for organisation.......................................................................5................................................................................................................................................72. Producing ledger accounts from the journal entries...........................................................8..............................................................................................................................................10..............................................................................................................................................10..............................................................................................................................................11..............................................................................................................................................12..............................................................................................................................................13..............................................................................................................................................14..............................................................................................................................................15..............................................................................................................................................15..............................................................................................................................................173. Preparation of trial balance of organisation......................................................................17M1. Purchase and sale transactions to compile a trial balance.............................................18D1. Preparation of trial balance by considering accounting rules........................................18CLIENT 2......................................................................................................................................18A Income statement for the company...................................................................................18B. Balance sheet for Peter Piper company...........................................................................20........................................................................................................................................................22CLIENT 3......................................................................................................................................22A. Profit and Loss account for Raintree Ltd.........................................................................22B. Balance sheet for company..............................................................................................23C. Principles and concepts of accounting.............................................................................24D. Significance of measuring and presenting depreciation in the financials of business andmethods of deprecation.........................................................................................................25M2 Imparting analysis of P&L, balance sheet and cash flow statements............................25
D2 Application of accurate calculations in preparation of the final accounts of organisation25CLIENT 4......................................................................................................................................26A. Producing the bank statement..........................................................................................26B Discussing causes of recording bank statements..............................................................26C. Preparing cash books.......................................................................................................26M3 Preparing reconciliation process and discussing associated terms................................26D3 Preparing BRS in consideration of accounting concepts and tools................................27CLIENT 5......................................................................................................................................27A Preparing the sales and purchase ledger account for Henderson firm..............................27B. Discussing control account..............................................................................................28CLIENT 6......................................................................................................................................28A Explaining suspense account and outlining main features...............................................28B. Constructing trial balance................................................................................................29C. Preparing journal entries..................................................................................................29D. Differencing clearing and suspense account...................................................................30M4 Types of accounts and reconciliation.............................................................................30D4 Producing adequate accounting methods for company..................................................30CONCLUSION..............................................................................................................................30REFERENCES..............................................................................................................................31
INTRODUCTIONFinancial accounting is historical accounting which deals with preparation of financialstatements of the organisation. This is in turn helpful for accessing these statements to users ofaccounting information. The present report deals with various companies regarding preparationof financial statements. Accounting principles also help accountants to prepare accurate financialstatements. Financial accounting is the essence for management as well as users of financialaccounting as it helps them to take better and effective decisions with much ease. As a result, allsuch accounting policies, concepts and principles are taken in this report that will help linemanager in the best possible way. The accountants are required to follow such practices so thatefficiency can be obtained in organisation and proper tax liabilities may be accomplished withmuch ease. A. Produce a report regarding accounting regulations for firm to the Line managerTo: Line ManagerFrom: Junior accountantSubject: Various accounting terms and which are relevant with accounting regulations fororganisation.Respected Sir,Accounting principles and concepts play important role in preparing financial statementssuch as balance sheet, income statement and cash flow statement as well. The financialstatements are prepared by accountants and as such, accounting principles guides them forpreparation of financial statements with much ease. The accounting concepts, thus have muchimportance to accountants to prepare financial statements in the best possible way so that errorsare not made and true and fair financial position of business entity may be presented quiteeffectively (Warren and Jones, 2018). The accounting information which is derived after usingsuch principles, are reliable information for external as well as internal users for making certainbetter and effective decisions. In addition to this,budgeting and forecasting are also muchrelevant tools for organisation as well. By applying this, accurate financial statements areprepared which are meaningful to all the stakeholders' of the company. 1. Highlighting meaning of financial accounting1
Financial accounting is also known as historical accounting as it takes financialinformation from the past data and draws financial statements in the best productive way. Thisis a branch of accounting which records daily monetary transactions of business in a way whichis then interpreted by users of financial information (Campbell, Khan and Pierce, 2017).Management is also benefited by financial information which is provided by financialaccounting and as a result, management is able to better and effective decisions for thebetterment of the company. Several financial statements like balance sheet, Profit & Lossaccount and cash flow statement are formulated by accounting professionals in the best possibleway which is then utilised by external as well as internal stakeholders' of the company formaking better and timely decisions. Moreover, investors and creditors are delighted by suchinformation as they are able to make decisions whether to invest in the organisation or drop theplan of providing funds. This is effective method as it discloses liquidity, profitability andefficiency of firm quite effectively in the best possible way. Illustration 1: Various types of financialstatements Source : (Zeff, 2016)The above diagram shows various kinds of financial statements which are prepared byorganisation which provides clarity about the financial position of it in effective way(Narayanaswamy, 2017). The same information of financial statements is also helpful for taxpayment liability to the taxation authorities as they rely on financial statements as it is providesreliable information and at the same time, the statements exhibit true and fair information of thecompany quite effectively. 2. Financial accounting regulationsEach and every record is maintained by organisation so that correct financial statements2
may be prepared at a particular point of time. As such, financial accounting regulations arerequired to be follow by organisation so that it may present adequate financial statements andmoreover, no manipulation of accounting records are made as manipulation leads to falseinformation to users of accounting (Richardson, 2017). As such, in order to avoidmanipulations, certain financial accounting regulations are provided by professional bodies thathas to be followed so that true financial statements may be prepared in effective way. Inaddition to such, UK's corporate reporting and governance regulator has imparted FRCguidelines which are to be followed by companies of the country. This regulates reporting oforganisations, government departments and many other departments as well. As such, properand accurate financial statements are prepared which is helpful for the economy to trade easilywith other nations as well.The legal frameworks governed by bodies are listed below :FRC : This stands for Financial Reporting Council. This professional body is entitled to regulategovernment departments and corporations as well. Main aim of this body is to foster investmentin the country and to regulate corporate governance quite effectively. Moreover, FRC is legallyformed and is limited by guarantee. It regulates nicely to provide benefit to whole economy. IASB : This is also another professional body which regulates corporations to prepare financialstatements by guiding accountants. IASB stands for International Accounting Standards Boardwhich is formed for guiding accounting professionals so that financial statements are preparednicely and also with much easiness. As such, true and fair financial position of the entity mustbe highlighted. These guidelines are universally accepted by international investors' as well. IFRS : This stands for International Financial Reporting Standards which also guidesaccountants so that proper and accurate financial statements are prepared with much ease. Thishelps company to provide effective and true information for accounting users (Maynard, 2017).3. Several principles and rules for accountingGAAP (Generally Accepted Accounting Principles) has provided certain guidelineswhich are to be used by accountants so that proper and authenticated financial statements maybe prepared easily. The principles and rules for accounting are listed below :1. Monetary unit assumption : This is related to monetary currency value principle. Universally3
accepted currency is US dollar and as such, this principle provides that business transactionsmust be made in this currency as it is more stable one then other currencies of various nations. 2. Economic assumptions : This rule of accounting states that economic environment is analysedby company and in that relation assumptions are made for a certain period. Moreover,assumptions are made in order to predict how this will affect upcoming project of the entity.3. Cost principle : The cost principle assists that need and requirements of expenditures forseveral departments or units may be made so that budget may be prepared in the anticipation ofsuch needs and requirements (Brausch, 2017). Expenditures are to be budgeted to fulfil traderequirements. 4. Full disclosure principles : This principle states that every record must be maintained so thatproper financial statements may be prepared. To make information more reliable, financialstatements must be audited and compile in single statements to make it more attractive to usersof accounting information. As such, financial statements should be fully disclosed at the end ofevery financial period. 5. Going concern Principles : The business is carried for a long run and will continue. Thus,business is expected to run for a long time in future as well. As such, financial statements areprepared by organisation which is disclosed to users of accounting information. 6. Materiality : This concept conveys that only material items must be included in the records orbook of accounts. In simple words, company must disclose information which might affectdecisions of users of accounting. In contrary to this, the records must be ignored which does notaffect decisions of users of financial information. 4. Concepts of material disclosure and consistencyConsistency : This concept is concerned with following same accounting policies by theorganisation with a view to have reliable information (Brandau, Endenich, Luther and Trapp,2017). Consistent information is quite reliable piece of information. It is so because iforganisation follows different policies, reliability is lost and as such, information is notcomparable with past year data of organisation. For example, deprecation should be chargedwith same method so that correct valuation may be made. If firm follows inconsistent policies,reliability is not achieved. 4
Material disclosure : This states that material items must be included in books of accounts sothat financial statements may be prepared with full disclosure of accounting records. Accountingprofessionals are required to assess profitability and efficiency of company. All non materialitems are ignored which does not affect economic decisions of users of financial information. CLIENT 11. Exhibiting journal account for organisationBefore preparing journal entries, first of all, income statement and balance sheet ispresented by Alexandra organisation. The main motive of such journal entries is to providesummarized data set which exhibits fairness of financial statements as these are prepared fromjournal entries. These are recorded in a chronological order of payments as they occur in thebusiness. As such, journal entries are recorded in chronological order so that proper records ofevery transactions may be made by organisation.5
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