Financial Accounting Report: Statements, Concepts, and Applications

This financial accounting report provides a detailed analysis of various aspects of financial accounting. It begins with an introduction defining financial accounting, key regulations, accounting rules, and principles, including consistency and materiality. The report then presents several client-based scenarios, demonstrating the preparation of journal entries, ledger accounts, and trial balances. It includes the creation of income statements and balance sheets. Further, the report delves into specific topics such as bank reconciliation statements, control accounts, suspense accounts, and rectification of accounting entries. It also covers the presentation of profitability statements, statement of financial position, and evaluation of depreciation methods. The report incorporates practical examples and calculations to illustrate these concepts, providing a comprehensive understanding of financial accounting principles and practices.

Financial Accounting
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TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
1. Defining financial accounting............................................................................................3
2. Presenting key regulations which are associated with financial accounting......................4
3. Stating concept of accounting rules and principles............................................................4
4. Explaining concept and convention of consistency and materiality..................................5
CLIENT 1...................................................................................................................................5
a. Journal entries.....................................................................................................................5
b. Ledgers account.................................................................................................................7
c. Trial balance.....................................................................................................................15
CLIENT 2.................................................................................................................................15
a. Income statement..............................................................................................................15
b. Balance sheet....................................................................................................................16
CLIENT 3.................................................................................................................................18
a. Profitability statement of Raintree Ltd.............................................................................18
b. Presenting statement of financial position for Raintree Ltd.............................................19
c. Stating prudence and consistency concept of accounting................................................19
d. Evaluating methods of depreciation.................................................................................20
CLIENT 4.................................................................................................................................21
A. Stating the purpose of bank reconciliation statement......................................................21
B. Presenting reasons due to which balance of cash and pass book varies..........................22
C. Bank reconciliation..........................................................................................................22
CLIENT 5.................................................................................................................................24
a. Preparing Henderson’s sales and purchase ledger...........................................................24
1............................................................................................................................................24
2............................................................................................................................................25
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b. Defining control account..................................................................................................25
CLIENT 6.................................................................................................................................26
a. Presenting suspense account and its features...................................................................26
b. Trial balance and usage of control accounts....................................................................27
c. Rectification of accounting entries...................................................................................28
d. Difference between suspense and clearing account.........................................................29
CONCLUSION........................................................................................................................29
REFERENCES.........................................................................................................................30
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INTRODUCTION
Financial accounting field lays high level of emphasis on summarizing, analyzing and
reporting of monetary transactions. Tools and techniques of financial accounting help in
tracking business performance over the period. Now, from sole traders to publicly listed
organizations prepare financial statement for assessing the extent to which their performance
improved over time frame. The present report is based on varied situation which will present
how journal and ledger helps in preparing trial balance and thereby final accounts. Besides
this, report will develop understanding regarding accounting concepts and principles. Further,
report also depicts how bank reconciliation assists business unit in getting information about
monetary aspects. Further, concept of suspense, clearing and control account will also be
described related to FA.
1. Defining financial accounting
In the current times, in UK, it is mandatory for business units listed on stock exchange
prepare and present financial statements at the end of accounting year. Besides this, sole
traders tend to focus on the preparation of income statement to ascertain income generate
over expenses. Hence, by recording all the business transactions business entities prepare
final account which in turn considered as financial accounting. Specifically, there are mainly
three types of statements which are prepared by business organization such as:
 Income statement: In this statement, manager records revenue and expenses related to
financial year. The main motive behind the preparation of such statement to identify
income generated over expenses. Income aspects of profitability statement include
sales revenue, dividend and interest received (Warren and Jones, 2018). On the other
side, expenditures side of income statement includes both direct and indirect.
Material, labour and overhead are recognized as direct expenses. In contrast to this,
selling and distribution, administration etc are depicted as indirect expenses. Hence,
by subtracting expenses from income generated one can determine net margin.
 Balance sheet: Statement of financial position furnishes information about the level
of assets, liability and shareholder’s equity. Hence, by making evaluation of balance
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sheet firm and its stakeholders can assess the extent to which liquidity and solvency
position of company is good.
 Cash flow statement: This statement entails position of cash inflows under three
different categories such as operating, investing and financing activities. By
undertaking such statement, firm can assess its cash position at the end of accounting
period.
Hence, by undertaking accounting concept, principles, rules and regulations al the above
depicted are prepared by business unit.
2. Presenting key regulations which are associated with financial accounting
In UK, majority of the companies prepare financial statements by complying with
rules of GAAP related to such country. In addition to this, there are several companies that
perform activities and functions internationally. Hence, now companies that have global
operations lay focus on undertaking IASB and FRS for recording as well as presenting
business transactions (Larson, Lewis and Spilker, 2017). Hence, by preparing final accounts
on the basis of such globalized rules firm can satisfy information need of stakeholders to a
great extent.
3. Stating concept of accounting rules and principles
 Accounting year concept: On the basis of such concept business unit should prepare
statements for the specific time frame such as quarterly, half yearly and annually.
 Going concern concept: It may be served as a fundamental principle of accounting
which believes that firm will continue its operations for longer time frame (Going
Concern Concept, 2017).
 Accrual concept: In financial accounting, accrual concept presents that expenses and
income needs to be recorded in the concerned period they occur irrespective of cash
aspect. Hence, such approach helps in presenting fair view of financial aspects by
reflecting all expenses associated with revenue with respect to specified time frame.
 Money measurement concept: Such accounting concept presents that only
information which can be presented in monetary form included under final accounts
(Narayanaswamy, 2017). Hence, non-financial information such as customer base,
employee’s capabilities are not considered as part of final accounts due to its
qualitative nature.
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 Dual aspect concept: According to such concept, each business transaction has dual
effect under financial statements in terms of debit and credit. For instance: Sales
worth of £2000 made in against to cash. In this, two accounts will be affected such as
sales (credit) and cash (debit) with related figures.
Assets: Liabilities + owner’s equity
4. Explaining concept and convention of consistency and materiality
 Consistency principle: As per such concept, firm should focus on following similar
rules in each accounting year that leads comparability. Further, such concept relies on
the aspect that firm needs to mention reason behind making changes in specific
method and its impact on financial outcomes (Maynard, 2017).
 Materiality concept: This concept or principle entails that business unit should reflect
all material information in its financial statements and notes that may have an impact
on the decision making aspect of stakeholders.
CLIENT 1
a. Journal entries
Journal of Alex Study’s for the period of 2017 is as follows:
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b. Ledgers account
Day books
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Sales ledger
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