Accounting Fundamentals: Financial Statement Preparation and Analysis

This document presents a comprehensive solution to an accounting fundamentals homework assignment. It begins with an introduction to accounting fundamentals, emphasizing expenditure, income, assets, and liabilities. The assignment is structured into five tasks. Task 1 involves recording, balancing, and closing ledger accounts for Maxim, preparing a trial balance, and generating a profit and loss account along with a statement of financial position. Task 2 repeats this process for Pendo. Task 3 focuses on Mafuta, including ledger accounts, trial balance extraction, and the preparation of an income statement and balance sheet. Task 4 requires preparing ledger accounts and extracting a trial balance for Ricardo, dealing with transactions with customers and suppliers. Finally, Task 5 presents the differences between revenue and capital expenditure, concluding with a discussion of accounting standards. The solution includes detailed journal entries, ledger accounts, trial balances, profit and loss statements, and balance sheets, providing a complete overview of the accounting process.

Accounting fundamentals

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a) Recording, balancing and closing ledger accounts for Maxim...............................................1
b) Preparation of list of above accounts......................................................................................3
c) Preparation of P&L account and statement of financial position for Maxim..........................4
TASK 2............................................................................................................................................5
a) Recording, balancing and closing ledger accounts for Pendo.................................................5
b) Preparation of trail balance......................................................................................................7
c) Preparation of Profit and loss A/c and statement of financial position...................................8
TASK 3............................................................................................................................................9
a) Recording and closing ledger accounts for Mafuta.................................................................9
b) Extraction of trial balance at 31 January...............................................................................13
c) Preparation of Income statement and Balance sheet.............................................................13
TASK 4..........................................................................................................................................14
Preparation of ledger accounts and extracting trail balance for Ricardo having transactions
with individual customers and suppliers....................................................................................14
TASK 5..........................................................................................................................................17
Presenting difference between revenue and capital expenditure...............................................17
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21

INTRODUCTION
Accounting fundamentals is a term which used for basic concepts of accounting which
involves expenditure, incomes, assets, liabilities and many more (Albritton, 2019). This concept
is related with the purpose of developing various accounting statements which aids in assessing
the financial performance of a business organisation (Basu and et.al., 2015). The main aim of
this report is to build an understanding about the concepts and systems of accounting. This report
includes various tasks which involves development and presentation of various financial
statements.
The first four tasks of this report are related with development of various statements such as
ledger accounts, trial balance, income statements and balance sheets which are based on journal
entries. These statements are prepared using the information about various organisations and
individuals. The last task is related with assessing the difference between revenue expenditure
and capital expenditure. This difference is evaluated with the reference of accounting standards
which are universal accounting norms that are required to be followed by every lawful business
firm despite of the variation in its size or structure.
TASK 1
a) Recording, balancing and closing ledger accounts for Maxim
Journal entries for Maxim:
Date Journal entry Debit (£) Credit(£)
05/04/19 Cash Account Dr 300
To capital Account 300
07/04/19 Purchase Account Dr 200
To cash Account 200
08/04/19 Cash Account Dr 250
To loan Account 250
15/04/19 Motor van Account Dr 150
To cash Account 150
20/04/19 Cash Account Dr 350
To sales Account 350
28/04/19 Rent Account Dr 50
1

To Cash Account 50
29/04/19 Loan Account Dr 200
To cash Account 200
30/04/19 Drawing Account Dr 60
To cash Account 60
Total 1560 1560
Cash A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
05/04/19 To capital
Account
300 07/04/19 By purchase
Account
200
08/04/19 To loan Account 250 15/04/19 By Motor van
Account
150
20/04/19 To sales
Account
350 28/04/19 By rent Account 50
29/04/19 By loan Account 200
30/04/19 By Drawing
Account
60
30/04/19 By balance c/d 240
900 900
Loan A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
29/04/19 To cash Account 200 08/04/19 By cash Account 250
30/04/19 To balance c/d 50
2

250 250
Drawing A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
30/04/19 To cash Account 60 30/04/19 By balance c/d 60
60 60
Purchase A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
07/04/19 To cash Account 200 30/04/19 By balance c/d 200
200 200
Capital A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
30/04/19 To balance c/d 300 05/04/19 By cash account 300
300 300
Rent A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
28/04/18 To cash account 50 30/04/18 By balance c/d 50
3

50 50
Motor van A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
15/04/19 To cash Account 150 30/04/19 By balance c/d 150
150 150
Sales A/c
Dr. Cr.
Date Particular Amount (£) Date Particular Amount (£)
30/04/19 To balance c/d 350 20/04/19 By cash 350
350 350
b) Preparation of list of above accounts
Trial balance of Maxim as on 30 April 2019
Account Title Debit Credit
Cash Account 240
Purchase Account 200
Loan Account 50
Motor van Account 150
Capital Account 300
Sales Account 350
Drawing Account 60
rent Account 50
Total 700 700
4

c) Preparation of P&L account and statement of financial position for Maxim
Profit and Loss for the month ended 30 April
Particular Amount (£)
sales 350
Less: Cost of goods sold 100
Gross profit 250
Less: Rent paid 50
net profit 200
Working notes
Particulars Amount
opening stock 0
Add: Purchases 200
Less: closing stock 100
Cost of goods sold 100
Statement of financial position as on 30 April
Assets Amount Liabilities Amount
Non-current assets capital 300
Motor van 150 Less : Drawings 60
Current assets Add: net profit 200
inventory 100 440
cash 240 loan 250
Less : repaid 200
50
Total 490 Total 490
TASK 2
a) Recording, balancing and closing ledger accounts for Pendo
SALES ACCOUNT
Dr. Cr.
5

6

7

b) Preparation of trail balance
8

c) Preparation of Profit and loss A/c and statement of financial position
9

TASK 3
a) Recording and closing ledger accounts for Mafuta
Sales A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount
(£)
31/01/19 To balance c/d 412 02/01/19 By Harvey
Account
124
11/01/19 By cash Account 64
21/01/19 By cash Account 110
28/01/19 By cash Account 84
31/01/19 By cash Account 30
412 412
office expense A/c
Dr. Cr.
Date Particular Amount
(£)
Date Particular Amount (£)
10