Financial Accounting Principles Report: Client Financial Analysis

This financial accounting report provides a comprehensive overview of financial accounting principles, including journal entries, trial balances, and financial statement analysis (profit and loss statement, statement of financial position). It examines the roles of internal and external stakeholders and their interests in financial information. The report includes detailed examples for multiple clients, covering topics such as owner's capital, double-entry recording, and the accounting concepts of consistency and prudence. Furthermore, it explains the purpose of depreciation and outlines two main methods for calculating it. The report references key accounting standards like GAAP and IFRS and provides a practical application of accounting principles to real-world scenarios. It aims to provide a clear understanding of financial accounting processes and their importance in business decision-making.

Financial Accounting Principals

Table of Contents
INTRODUCTION---------------------------------------------------------------- 3
MAIN BODY
a. Report -------------------------------------------------------------------- 4
CLIENT 1-------------------------------------------------------------------- 6
CLIENT 2-------------------------------------------------------------------- 15
CLIENT 3-------------------------------------------------------------------- 20
CLIENT 4-------------------------------------------------------------------- 23
CLIENT 5-------------------------------------------------------------------- 25
CONCLUSION------------------------------------------------------------------ 27
REFERENCES ------------------------------------------------------------------ 29

INTRODUCTION
Financial Accounting is a term which is concerned with analysing, evaluating, monitoring and
assessing the financial transactions of the business organisation. It also helps in preparing
financial statements of business for the year ending to ascertain the true and fair financial
position of the company, profit or income earned during the year and changes in equity, if any.
Financial Accounting principles are the uniform accounting practices followed by business entity
for recording, preparing and presenting financial statements of the year ending as per Generally
Acceptable Accounting Principles to present true and fair view of business affairs (Ofori-Atta, K.
and et.al., 2017). Report contains Journal entries, trial balance etc. Furthermore, explanation
about bank reconciliation statement, suspense account has been defined. The purpose of internal
as well as external shareholders of company, impact of financial accounting and financial
statements on their investments and its related decision making have been mentioned in report
(Ofori-Atta, K. and et.al., 2017).
MAIN BODY

a. Report
1. Explaining financial accounting and its purposes.
Financial accounting is the process of identifying, recording, classifying, analysing,
interpreting and communicating economic information to permit informed judgements and
decisions by users of the information. It is a service activity that provides quantitative
information, primarily financial in nature, about economic entities that is intended to be useful in
making economic decisions (Ofori-Atta, K. and et.al., 2017). It shows the overall profitability
and financial position of the firm so that decisions regarding the investments can be taken by the
users. This report acts as a multipurpose statement to meet the needs of all the users outside the
business. It is prepared by following the rules of GAAP (Generally accepted accounting
principle) and as per the (IFRS) international financial reporting standards.
Purpose of financial accounting-
Results of operation- The basic objective of financial accounting is to ascertain the results of
operation during a period so that the resources can be used optimally. By getting the information
in relation to the operations firm can measure the performance of the workers and can review
that the functions are performed as per the set standard (Ofori-Atta, K. and et.al., 2017). By
proper use of resources and timely reviewing results in effective and efficient achievement of
goal.
States the financial position- The major purpose of the financial accounting is to ascertain the
financial position of the firm by framing the financial statement that includes the records of the
income and expenses and the details regarding the firm's assets and liabilities. Through such
statement an organisation can maintain control over the assets and can reduce the expenses so
that it could earn higher profits.
Planning in respect of cash- For knowing the cash position of the business the financial
accounting provide useful information in the context of the inflows and outflows of cash by
framing the cash flow statement (Ofori-Atta, K. and et.al., 2017). This leads to proper planning
of the cash and a firm can keep control over its cash expenses so that the cash receipts are higher
which leads to sound liquidity position of the enterprise. By effective planning of cash the entity
can meet its short term obligation and can easily convert its short term assets into cash.

Ensure profitability- The foremost objective of every organisation is profit maximisation.
Financial accounting facilitates the data in respect of the profits and losses by framing the
income statement that involves the sales revenue and the expenses. The firm can use this
information for reducing the unnecessary expenditure and increasing the revenue so that the net
income gets increased after all the payments of taxes and the interest.
Facilitate information for decision making- The overall purpose of the financial accounting is
to avail the reliable set of data as a financial report so that outsiders can use the report for
analysis and decision making. The information regarding the financial position and the financial
performance is provided to the users like owners, suppliers, tax authorities and government etc.
to make the best decisions in relation to their shareholding, further investment and for
determining that the report is prepared with compliance of all the legal laws and regulations
(Ofori-Atta, K. and et.al., 2017).
Facilitate auditing- Financial accounting provides useful information in performing the auditing
effective. Any comment in relation to the report can be address by the firm by proper auditing.
The data must so reliable that the auditor cannot mark any such remark that affects the image of
the company (Ofori-Atta, K. and et.al., 2017).
2. Two internal and four external stakeholders and their interest in the financial information.
Financial information is known as the language of the business that communicates accounting
information to assists various internal and external users in making the better decisions (Brown,
A., 2018).
Two internal users-
The internal users of the accounting information are those individuals who are directly
involved in managing and operating an organisation. The internal role of the accounting is to
avail information to enable the insiders to improve the efficiency and effectiveness of the firm in
delivering the products and services. There are several internal users present in the entity such as
owners, managers and employees etc.

Owners- Owners are that person who possesses the legal right to use, hold and can enjoy the
benefit from the entity. The person to whom the property and business belongs. It assesses the
financial performance of its firm through the financial statements (Brown, A., 2018).
The statement provides useful information in relation to the overall profitability and the
several geographic segments. The accounting information also facilitates the owners in knowing
the stability of its business in the coming years and how the economic factors have affected the
entity. It also helps in taking decisions regarding the changes need to be made in the organisation
and further investment in any other business ventures so that higher profits can be achieved.
Managers- Managers are the persons who are responsible for planning and directing the work of
a group of individuals. They monitor the work of their subordinate and if there exist any gap then
take corrective action as per the necessity. They are appointed for managing the functions of
overall organisation (Brown, A., 2018).
They play an activating role in successful functioning of the management. For making an
effective plan they need the financial information so that strategies can be framed efficiently.
The accounting information enables the managers in allocating the funds, managing the human
resource and the capital resource of the enterprise. For preparation and monitoring the budget, a
reliable financial data is required in relation to the activities, products, processes, departments
and other segments of the firm (Brown, A., 2018).
The performance of the business can also be monitored by using the accounting
information so that managers can make comparison between the past year's performance and the
present performance. For achieving the competitive edge managers can assess the accounting
data to make comparison to against its competitor and accordingly the policies can be framed.
Four External Users-
External users are the users that are present outside the organisation like investors, creditors,
government and tax authorities etc. They use the accounting information in evaluating the risks
associated with the investments made and to know that the firm complies with all the rules and
regulations (Brown, A., 2018).

CLIENT 1
Draw Journal and Owner's Capital.
A Journal entry is defined as process of recording everyday business transaction in the
accounting records by following accounting principles as laid down for preparation of financial
statements of the company. Journal entry is recorded in the general ledger & sometime in
subsidiary ledger as well (Fay, R. and Negangard, E.M., 2017). The amount is summarized in
subsidiary ledger is then transferred to the general ledger for further calculations. Financial
statements of the company are then prepared with the help of general ledger. Journal entry for
every business transaction is always recorded at two places i.e. double entry accounting system
which means for every debit there is a credit and for every credit there is a debit (Fay, R. and
Negangard, E.M., 2017).
Owner's Capital is also known as Owners Equity. It is the amount of money which is invested by
the owner in the business. The owner capital is defines as the equity account which represents
the stake of owners money invested in the business. It shows that owner has owned how many
assets of the company instead of creditors (Gurskaya, M. and et.al., 2017).
Complete double entry recording within the relevant ledger.

Sales Ledger

Cash Book