Accounting Fundamentals: Financial Statements Analysis and Preparation

This accounting assignment provides a comprehensive overview of accounting fundamentals through four distinct tasks. Task 1 focuses on Maxim's financial data, including journal entries, ledger accounts, a trial balance, and the creation of profit & loss and financial position statements. Task 2 follows a similar structure for Pendo, demonstrating the recording of transactions, preparation of ledger accounts, and the generation of a trial balance and financial statements. Task 3 applies the same principles to Mafuta's data, reinforcing the process of financial statement creation. Task 4 builds on the previous tasks, requiring journal entries, ledger accounts, and a trial balance, integrating the concepts learned. Task 5 distinguishes between revenue and capital expenditures, a crucial aspect of accounting. The assignment covers a range of accounting principles and practices, from basic transaction recording to the analysis of financial performance and position. The solution provides detailed calculations and the application of accounting principles to real-world scenarios.

ACCOUNTING
FUNDAMENTALS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(a) Ledger accounts................................................................................................................1
(b) Trial Balance.....................................................................................................................3
(c) Statement of profit & loss and financial position of Maxim.............................................3
TASK 2............................................................................................................................................3
(a) Journal entries and Ledger accounts of Pendo .................................................................3
(b) Trial balance.....................................................................................................................6
(c) Statement of profit or loss and a statement of financial position......................................6
TASK 3............................................................................................................................................7
(a) Ledger accounts................................................................................................................7
(b) Trial balance...................................................................................................................10
(c) Statement of profit & loss and financial position of Mafuta...........................................10
TASK 4..........................................................................................................................................11
(a) Journal entries and Ledger accounts...............................................................................11
(b) Trial balance .................................................................................................................15
TASK 5..........................................................................................................................................16
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Accounting fundamentals are those factors who are helping to recording accounting
terms in business books. In accounting fundamentals are consist of accounting principles,
concepts, dual concepts, going concern, monetary terms etc. Accounting fundamentals are
supported to accounting terminology for solving complex terms (Mitra, 2016). In this report
consist of nature, behaviour and purpose of cost accounting, for solving practicals applying
techniques of cost accounting. Basic principles of accounting are solving by appropriate software
and prepare financial statement with the help of routine and non routine transactions. After
recorded these transactions analysis of financial statement.
In this report structure from task 1 to task 4 prepare primary accounts such as journal
entries for record transactions, ledger accounts, trial balance, statement of profit and loss and
statement of financial position. These accounts shows financial information of every company.
In task 5 explain revenue expenditure and capital expenditure and also defined difference
between both expenditures. All the above 4 task depend on task 5 because it helps to identify
expenditures.
TASK 1
Journal entries
Date Particulars Debit (£) Credit (£)
April, 5 Cash A/c 300.00
To Capital a/c 300.00
April, 7 Purchase a/c 200.00
To cash a/c 200.00
April, 8 Cash a/c 250.00
To Loan from Tatiana 250.00
April, 15 Motor van a/c 150.00
To cash a/c 150.00
April, 20 Cash A/c 350.00
To sales a/c 350.00
April, 28 Rent a/c 50.00
To cash a/c 50.00
1

April, 29 Loan a/c 200.00
To Cash A/c 200
April, 30 Drawings a/c 60.00
To cash a/c 60.00
(a) Ledger accounts
Cash a/c
Date Particular Amount Date Particular Amount
05/04/18 To capital a/c 300.00 07/04/18 By purchase 200.00
08/04/18
To loan form
Tatiana 250.00 15/04/18 By Motor van 150.00
20/04/18 To sales 350.00 28/04/18 By rent 50.00
29/04/18 By loan paid 200.00
30/04/18 by Drawing 60.00
30/04/18
By closing
balance 240.00
900.00 900.00
Capital a/c
Date Particular Amount Date Particular Amount
30/04/18 To drawing 60.00 05/04/18 By cash 300.00
30/04/18 To closing balance 240.00
300.00 300.00
Purchase a/c
Date Particular Amount Date Particular Amount
07/04/18 To cash 200.00 30/04/18 By trading a/c 200.00
200.00 200.00
Loan a/c
Date Particular Amount Date Particular Amount
29/04/18 To cash 200.00 08/04/18 By cash 250.00
30/04/18 To closing balance 50.00
250.00 250.00
Motor van
2

Date Particular Amount Date Particular Amount
15/04/16 To cash 150.00 30/04/16
By closing
balance 150.00
150.00 150.00
Sales a/c
Date Particular Amount Date Particular Amount
30/04/16 To Trading a/c 350.00 20/04/18 By cash 350.00
350.00 350.00
Rent a/c
Date Particular Amount Date Particular Amount
28/04/18 To cash 50.00 20/04/18 By P&l ac 50.00
50.00 50.00
Drawing a/c
Date Particular Amount Date Particular Amount
30/04/18 To cash a/c 60.00 30/04/18 By capital a/c 60.00
60.00 60.00
(b) Trial Balance
Particulars Debit (£) Credit (£)
Cash A/c 240.00
Capital a/c 300.00
Purchase a/c 200.00
Loan a/c 50.00
Motor van a/c 150.00
Rent a/c 50.00
Sales a/c 350.00
Drawings a/c 60.00
700.00 700.00
(c) Statement of profit & loss and financial position of Maxim
Statement of profit & loss a/c
Particulars Amount
Sales a/c 350.00
3

Less – Cost of goods sold 100.00
Gross Profit 250.00
Less – Expenses
Rent a/c 50.00
Net Profit 200.00
Statement of Financial position as at April, 30
Amount
Non Current assets
Motor van 150.00
Current Assets
Cash A/c 240.00
Inventory 100.00 340.00
Total Assets 490.00
Capital a/c 300.00
Add – Net Profit 200.00
Less – Drawings 60.00 440.00
Current Liabilities
Short term loan 50.00
Total Liabilities 490.00
TASK 2
(a) Journal entries and Ledger accounts of Pendo
Journal entries of Pendo
Date Particulars Debit (£) Credit (£)
January, 1 Cash a/c 5000.00
To capital a/c 5000.00
January, 2 Motor van a/c 600.00
4

To cash a/c 600.00
January, 3 Purchase a/c 1300.00
To cash a/c 1300
January, 4 Cash a/c 1000.00
To loan from Sergei 1000.00
January, 10 Motor van expenses a/c 200.00
To cash a/c 200.00
January, 13 Cash a/c 300.00
To sales a/c 300.00
January, 20 Cash a/c 500.00
To sales a/c 500.00
January, 24 Storage expenses a/c 150.00
To cash a/c 150.00
January, 27 Loan a/c 350.00
To Cash a/c 350.00
January, 30 Drawings a/c 175.00
To Cash a/c 175.00
Cash a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
01/01/18 To capital a/c 5000.00 02/01/18 By motor van 600.00
04/01/18
To loan form
sergri 1000.00 03/01/18 By Purchase 1300.00
13/01/18 To sales 300.00 10/01/18 By motor expenses 200.00
20/01/18 To sales 500.00 24/01/18
By storage
expenses 150.00
27/01/18
By repayment of
loan 350.00
30/01/18 By drawing 175.00
31/01/18 By closing balance 4025.00
6800.00 6800.00
5

Motor van a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
02/01/18 To Cash 600.00 31/01/18 By closing balance 600.00
600.00 600.00
Purchase a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
03/01/18 To Cash 1300.00 31/01/18 By trading a/c 1300.00
1300.00 1300.00
Loan form Sergie a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
27/01/18 To Cash 350.00 04/01/18 By cash 1000.00
31/01/18 To balance c/d 650.00
1000.00 1000.00
Sales a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
31/01/18 To trading a/c 800.00 13/01/18 By cash 300.00
20/01/18 By cash 500.00
800.00 800.00
Storage expenses
Date Particular
Amount
(£) Date Particular
Amount
(£)
24/01/18 To Cash 150.00 31/01/18 By P&L a/c 150.00
6

150.00 150.00
Drawing a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
30/01/18 To Cash 175.00 31/01/18 By Capital a/c 175.00
175.00 175.00
Capital a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
31/01/18 To Drawing 175.00 01/01/18 By cash 5000.00
31/01/18 To balance c/d 4825.00
5000.00 5000.00
Motor expenses
Date Particular
Amount
(£) Date Particular
Amount
(£)
10/01/18 To Cash 200.00 31/01/18 By P&L a/c 200.00
200.00 200.00
(b) Trial balance
Trial Balance at 31 January
Particulars Debit (£) Credit (£)
Cash a/c 4025.00
Capital a/c 5000.00
Motor van a/c 600.00
Purchase a/c 1300.00
Loan a/c 650.00
7

Motor van expenses a/c 200.00
Sales a/c 800.00
Storage expenses a/c 150.00
Drawings a/c 175.00
6450.00 6450.00
(c) Statement of profit or loss and a statement of financial position
Statement of Profit and Loss
for the month ended 31 January
Particulars Amount (£) Amount (£)
Sales a/c 800.00
Less – Cost of Goods sold 500.00
Gross Profit 300.00
Less- Expenses
Motor van expenses 200.00
Storage expenses 150.00 350.00
Net Loss 50.00
Statement of financial position at January, 31
Particulars Amount (£) Amount (£)
Non Current assets
Motor Van 600.00
Current assets
Cash 4025.00
Closing Stock 800.00 4825.00
Total assets 5425.00
Capital account 5000.00
Less- Net loss 50.00
Less – Drawings 175.00 4775.00
8

Current liabilities
Short term loan 650.00
Total Liabilities 5425.00
Working Notes – Cost Of goods sold = Purchase – Closing inventories
= 1300.00 – 800.00 = 500.00
TASK 3
(a) Ledger accounts
Cash a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 343.00 Jan, 5 By Wages a/c 12.00
Jan, 7 To Smith's a/c 18.00 Jan, 9 By Max's a/c 21.00
Jan, 11 To Sales a/c 64.00 Jan, 14 By Wages a/c 14.00
Jan, 21 To Sales a/c 110.00 Jan, 14 By Purchases a/c 75.00
Jan, 23 To Harvey's a/c 25.00 Jan, 15 By Rich's a/c 162.00
Jan, 28 To Sales a/c 84.00 Jan, 20
By Fixtures and
fittings a/c 32.00
Jan, 31 To Sales a/c 31.00 Jan, 21 By Wages a/c 17.00
Jan, 23 By office expenses a/c 3.00
Jan, 28 By Wages a/c 15.00
Jan, 31 By Balance c/d 323.00
674.00 674.00
Feb, 1 To Balance b/d 323.00
Capital a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Payables 33.00 Jan, 1 By Cash in hand a/c 343.00
Jan, 31 To balance c/d 1049.00 By Inventory 458.00
By Furniture and
fittings 198.00
9

By Receivables 83.00
1082.00 1082.00
Fixtures and fittings a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jan, 1 To Balance b/d 198.00 Jan, 31 By Balance c/d 230.00
Jan, 20 To cash a/c 32.00
230.00 230.00
Feb, 1 To Balance b/d 230.00
Sales a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jan, 31 To Trading a/c 412.00 Jan, 2 By Harvey's a/c 124.00
Jan, 11 By Cash a/c 64.00
Jan, 21 By Cash a/c 110.00
Jan, 28 By Cash a/c 84.00
Jan, 31 By Cash a/c 30.00
412 412.00
Wages a/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
Jan, 5 To cash a/c 12.00 Jan, 31 Profit and loss a/c 58.00
Jan, 14 To cash a/c 14.00
10