Accounting Fundamentals: Financial Statements Analysis and Reporting

This accounting assignment provides a comprehensive analysis of fundamental accounting principles through the examination of three hypothetical companies: Maxim, Pendo, and Mafuta. The assignment begins with an introduction to accounting fundamentals, emphasizing the importance of maintaining accounts and ledgers for business operations. Task 1 focuses on Maxim, detailing journal entries, ledger accounts, trial balance, income statement, and financial statement preparation. Task 2 follows a similar structure for Pendo, including journal entries, ledger accounts, trial balance, and financial statements. Task 3 repeats the process for Mafuta. Task 4 involves recording transactions and creating ledger accounts. Task 5 differentiates between revenue and capital expenditures. The assignment aims to demonstrate the practical application of accounting principles in financial reporting and analysis, covering key aspects such as journalizing, ledger posting, and the preparation of financial statements to assess a company's financial position. The solution showcases the step-by-step process of accounting from basic transactions to the final financial reports, which are crucial for financial decision-making. The assignment is designed to improve understanding of accounting concepts and conventions, including GAAP and the International Accounting Standards.

Accounting
fundamentals

Table of Contents
INTRODUCTION...........................................................................................................................1
Task 1 ..............................................................................................................................................1
(a) Ledger accounts with the help of accounting transaction of Maxim ..............................1
(b) Trial balance of Maxim..........................................................................................................4
(c) Income statement and financial statement of Maxim ............................................................4
Task 2 ..............................................................................................................................................5
(a) Pendo's Ledger account with the helps of above mentioned transaction including date and
description ...................................................................................................................................5
(b)Trial balance of Pendo as prepared on 31st January ..............................................................8
(c)Income statement and financial statement of Pendo company................................................8
Financial statement that shows financial position ......................................................................9
Task 3.............................................................................................................................................10
a) Mafuta's Ledger accounts .....................................................................................................10
b) Trial balance prepared as on 31st January of Mafuta............................................................12
(c) Mafuta's Profit and loss statement and financial position statement as on 31st January ....12
Task 4.............................................................................................................................................13
(a) Recording of transaction and ledger accounts .....................................................................13
Task 5.............................................................................................................................................17
Difference between revenue and capital expenditure ..............................................................17
CONCLUSION..............................................................................................................................18
REFERENCE.................................................................................................................................19

INTRODUCTION
Accounting is the basic concept in any organisation that gives ideas to maintain various
accounts and ledger in order to run a business. Fundamental accounting refers basic concept that
helps to attain company's objectives by following accounting concept and convention (Barranco
and et.al., 2016). The main purpose of this report is to prepare ledger accounts, trial balance and
profit and loss accounts that will show enterprise's financial situation and will help to take
financial decision. It involves several guidelines such as generally accepted accounting principles
GAAP that helps to understand by accountant and users to be followed(Sacco, 2017). In this
report various topics and calculation will be covered that will define company's financial position
after preparing accounts. This report also will define difference between revenue and capital
expenditure by following international accounting standards. (Basrur, 2017).
Task 1
Journal entry: This is recording of financial data that is taken from journal voucher by
concerning business transaction in journal like debit equal credit (Reible, 2017). Moreover, it
helps to analyse effects of transaction on an enterprise's financial position. It helps to show
financial position of organisation by maintaining accounts (Grunwald, 2017).
Ledger posting: It is the second step after preparing journal entries that helps to transfer entries
in journal into accounts of ledger. It helps to classifying stage of accounting and its transaction.
Moreover, this is connected with initial information of business transaction (Kanodia and Sapra,
2016).
(a) Ledger accounts with the help of accounting transaction of Maxim
Date Particular Debit amount (£) Credit amount (£)
5th April Cash a/c 300
To capital 300
5th April Purchase a/c 200
To cash a/c 200
1

5th April Cash a/c 250
Received loan
from Tatiana 250
5th April Purchase a/c 150
To cash a/c 150
5th April Cash a/c 350
To sale a/c 350
5th April Rent a/c 50
To cash a/c 50
5th April Loan a/c 200
To cash a/c 200
5th April Drawing a/c 60
To cash a/c 60
Cash a/c
Date Particular Amount Date Particular Amount
5th April To capital a/c 300
5th
April By purchase a/c 200
5th April To loan 250 5th By motor van 150
2

received from
Tatiana April
5th April To sales 350
5th
April By rent 50
5th
April By loan paid 200
30th
April By drawing 60
30th
April By closing balance 240
900 900
Capital a/c
Date Particular Amount Date Particular Amount
30th
April To drawing 60
5th
April By cash 300
30th
April
To closing
balance 240
300 300
Purchase
a/c
Date Particular Amount Date Particular Amount
5th April To cash 200
30th
April By trading a/c 200
200 200
Loan a/c
3

Date Particular Amount Date Particular Amount
5th April To cash 200
5th
April By cash 250
To closing
balance 50
250 250
Motor van
Date Particular Amount Date Particular Amount
5th April To cash 150
30th
April By closing balance 150
150 150
Sale a/c
Date Particular
(£)
Amount Date Particular
(£)
Amount
5th April To trading a/c 350
5th
April By cash 350
350 350
Rent a/c
Date Particular (£)Amount Date Particular
(£)
Amount
5th April To cash 50
5th
April By P&L a/c 50
50 50
Drawing
A/c
4

Date Particular
(£)
Amount Date Particular
(£)
Amount
5th April To cash a/c 60
5th
April By capital a/c 60
60 60
(b) Trial balance of Maxim
Serial .
N. Particulars
Debit
(£)Amount
Credit
(£)Amount
1 Cash a/c 240
2 Capital 240
3 Purchase 200
4 Loan 50
5 Motor van 150
6 Sales 350
7 Rent 50
Total 640 640
(c) Income statement and financial statement of Maxim
Particular Amount
Sales 350
(-) Cost of good sold -100
(Purchase price -
closing stock)
Gross profit 250
Paid rent 50
5

NET PROFIT 200
Financial statement end of year that shows financial position
ASSETS
Non Current assets
Motor Van 150
Current assets
Cash 240
Closing stock 100
Total assets 490
LIABLITIES
Capital 240
(+)profit 200 440
Loan amount 50
Total liabilities 490
Task 2
(a) Pendo's Ledger account with the helps of above mentioned transaction including date and
description
Journal entries
Date Particulars (£)amount (£)amount
1st January Cash a/c 5000
To capital a/c 5000
(Invested capital)
6

2nd January Motor van 600
To cash a/c 600
(Being motor van purchased)
3rd January Purchase a/c 1300
To cash a/c 1300
(Being purchase made)
4th January Cash a/c 1000
To loan form Sergei a/c 1000
(Loan received from Sergie)
10th January Motor expenses 200
To cash a/c 200
(Being motor expenses paid)
13th January Cash a/c 300
To sales 300
(goods sold)
20th January Cash a/c 500
To sales 500
(goods sold )
24th January Storage Expenses a/c 150
To cash a/c 150
(being storage expenses paid)
27th January Loan a/c 350
To cash a/c 350
(payment of loan taken)
7

30th January Drawing a/c 175
Cash 175
(with drawl from business )
Ledger accounts
Cash A/c
Date Particular Amount (£) Date Particular
Amount
(£)
1st January To capital a/c 5000 2nd January By motor van 600
4th January
To loan form
sergri 1000 3rd January By Purchase 1300
13th January To sales 300 10th January
By motor
expenses 200
20th January To sales 500 24th January
By storage
expenses 150
27th January
By repayment
of loan 350
30th January By drawing 175
31st January
By closing
balance 4025
6800 6800
Motor A/c
Date Particular Amount (£) Date Particular Amount (£)
2nd January To Cash 600
31st
January
By closing
balance 600
600 600
8

Purchase a/c
Date Particular Amount (£) Date Particular Amount (£)
3rd January To Cash 1300 31st January
By trading
a/c 1300
1300 1300
Loan form Sergie A/c
Date Particular Amount (£) Date Particular Amount (£)
27th January To Cash 350 4th January By cash 1000
31st January To balance c/d 650
1000 1000
Sales A/c
Date Particular
Amount
(£) Date Particular
Amount
(£)
31st January To trading a/c 800 13th January By cash 300
20th January By cash 500
800 800
Storage expenses A/c
Date Particular Amount (£) Date Particular Amount (£)
24th January To Cash 150 31st January By P&L a/c 150
150 150
Drawing A/c
Date Particular Amount (£) Date Particular Amount (£)
30th January To Cash 175
31st
January By Capital a/c 175
175 175
9

Capital A/c
Date Particular Amount (£) Date Particular Amount (£)
31st January To Drawing 175 1st January By cash 5000
31st January To balance c/d 4825
5000 5000
Motor expenses
Date Particular Amount (£) Date Particular
Amount
(£)
10th January To Cash 200 31st January By P&L a/c 200
200 200
(b)Trial balance of Pendo as prepared on 31st January
Serial no. Particulars (£) Dr. amount (£) Cr. amount
1 Cash 4025 -
2 Motor Van 600 -
3 Purchase 1300 -
4 Loan a/c - 650
5 Sales a/c - 800
6 Storage expenses 150 -
7 Capital - 4825
8 Motor expenses 200 -
Total 6275 6275
(c)Income statement and financial statement of Pendo company
Statement of profit and loss
Particulars (£)Amount
10