Financial Accounting Principles Report: Financial Statements Analysis

This comprehensive report delves into the core principles of financial accounting, providing a detailed examination of its regulations, objectives, and significance for business entities. It covers essential topics such as defining financial accounting, drafting regulations, and elaborating on key accounting concepts like disclosure, materiality, and consistency. The report includes practical applications through client-based examples, analyzing journal entries, ledger accounts, trial balances, income statements, balance sheets, and bank reconciliations. It also explores specific accounting concepts like prudence and consistency, depreciation methods, and the role of suspense and control accounts. The analysis encompasses various financial statements, offering insights into their preparation and interpretation. This report is a valuable resource for understanding financial accounting practices and their application in real-world scenarios.

FINANCIAL ACCOUNTING
PRINCIPLES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Report related to financial accounting with its rules and regulations.........................................1
1. Defining financial accounting with its goal and objectives....................................................1
Drafting financial accounting regulations...................................................................................2
Accounting principles and rules for governing financial statements..........................................3
Elaborating various concepts of accounting which are disclosure, materiality and consistency4
CLIENT 1........................................................................................................................................4
1. Justifying its journal entries....................................................................................................4
2. Representing its ledger accounts with reference to double entry recording...........................6
B. Ledger accounts......................................................................................................................7
3. Identifying accuracy level of trial balance............................................................................22
CLIENT 2......................................................................................................................................23
(a) Representing Income statement of July 2018 for Sierra Laurenmt.....................................23
(b) Representing Income statement for July 2018 for Sierra Laurent.......................................25
CLIENT 3......................................................................................................................................26
(a) Representing Profit and loss statement of July 31 for LMS Limited..................................26
(b) Representing balance sheet for July 2018 of LMS limited.................................................27
(c) Justifying prudence and consistence with reference to accounting concept .......................27
(d) Representing motive of depreciation for accounting aspect with reference to its each
method.......................................................................................................................................28
CLIENT 4......................................................................................................................................28
A. Representing objective of preparing Bank Reconciliation Statement (BRS)......................28
B. Representing entries which helps in creating variances with context of bank statements...29
C. Representing Cash book of Kendal with its Bank reconciliation statement........................30
CLIENT 5......................................................................................................................................32
(a) Representing Purchase and Sales Ledger account ..............................................................32
(b) Defining control account ....................................................................................................33
CLIENT 6......................................................................................................................................33
a. Representing features of suspense account...........................................................................33
b.c. Representing trial balance .................................................................................................34
d. Representing difference between suspense and clearing account ........................................34
CONCLUSION..............................................................................................................................35
REFERENCES..............................................................................................................................37

INTRODUCTION
The principles of financial accounting are termed as very important for any business
entity as it helps in creating ease for perspective of understanding expenses of future. The main
objective is to control cost on basis of its operation which are held in premises. The present
report is giving brief discussion related to regulations and principles of accounting. In the same
series, it had represented its significance of accounting for attaining growth and profitability
which is followed by every industry along with business entity. There report is signifying
importance of depreciation with its both methods. It had also articulated different financial
statements like balance sheet, income statement, trial balance, bank reconciliation statements etc.
Further it had represented suspense account with its important features and it had been compared
with control account.
Report related to financial accounting with its rules and regulations
1. Defining financial accounting with its goal and objectives
It is considered as a particular accounting branch as it helps in tracking financial
statements of any organization in appropriate aspect. The main role of financial accounting has
been specified as measurement, reporting, gathering and recording of transactions related to
investors and shareholders. It is replicated as appropriate source for determining financial
performances of any organization along with its stability. The major concern is of representing it
in very consistent and fair aspect. The financial statement must be prepared by considering
financial standards which are Generally Accepted Accounting Principles and (IFRS)
International Financial reporting standards.
Its goals and objectives are defined with 4 classifications such as:
 Reliability
 Relevance
 Comparability
 Consistency
Reliability: The information which is given via statements of financial must be totally
reliable. In the same series, investors would be gaining difficulty for getting information which is
reliable and in its absence it also creates issues for decision making process. It had been justified
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that information which is reliable does not mislead others because it had been framed by
ignoring bias and its verifications had been framed with ease.
Relevance: The financial information which had been provided must be relevant and
useful for its final users. It also creates ease for understanding and process of decision making
with context of organization's financial performance. The present information is known as very
relevant for giving outcome on yearly and quarterly aspect (Beatty and Liao, 2014).
Comparability: It also helps in creating ease for comparing statement of business entity
to other organization or from previous year statements It also signifies system which had formed
for purpose of financial statements for reporting and recording it in systematic aspect. In same
series, it would be making easy with perspective of investors according to date as it could be
adjusted with decision making process related to investments.
Consistency: There are various changes in standards as it would be creating lack for
process of preparing financial statements with consistence. It is considered as specific reason for
purpose of standards so it would represent its data with proper consistency and in decision
making process it could be used for comparison aspect.
Drafting financial accounting regulations
The information regarding finance must be fair, unbiased, understandable and
comparable. On this basis various regulations with context of financial statements are prepared,
presented and developed. In United Kingdom, the organizations which are listed under FTSE had
to work on standards of GAAP (Generally Accepted Accounting problems) for preparing
financial statements according to its principles. The organization could be expanded on basis of
global market international accounting as it has to follow specific regulations like IFRS and
IASB. Theses accounting regulations could be elaborated as below:
International financial reporting standards (IFRS): In the year 2005 in United
Kingdom it had directly constituted through contribution of financial reporting. It is prepared on
basis of setting different global standards for disclosure and preparation of financial statements.
If there is adaption of single accounting standard for different countries to provide financial
information in consistent aspect. It also creates ease for investors for comparing procedure. In the
same series, it provides guidance rather than setting regulations for financial reporting
(Mullinova, 2016).
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International accounting standards board (IASB): The main goal of IASB is to
disclose each financial information to its professionals. It also helps in giving guidelines for
objective of preparing reports and database for preparing financial statements. The accounts
could be evaluated from this standard. There is presence of acceptance of legal structure through
stakeholders and for determining financial information which would directly influence investors
on basis of various countries.
Accounting principles and rules for governing financial statements
There is presence of various rules, principles and concepts for objective of financial
reports for application of accounting. There is presence of various rules and concepts which are
justified below:
 Business Entity: In this concept, financial statements would not be using any personal
transactions with reference to owner. Business is referred as separate entity with its
particular owner.
 Matching principle: All revenues and expenses must be similar in accounting duration
for extracting its earnings of actual concept.
 Consistency: The process of accounting must be used for business perspective as it
should be similar and consistent with huge necessity of its changes.
 Objectivity: There should be appropriate recording of its particular amount with context
of financial statements as it should also give proper evidence on impartial basis.
 Materiality: In this principle, accounting process would be justifying impact on decision
of user for attaining significance and need for reporting in proper aspect.
 Historical cost: The valuation of asset which is mentioned in financial statement with
reference to its original value but not recorded on its current value of market.
 Monetary unit: The amount must be recorded on monetarism aspect and if its presence
in vice versa format then it would be not considered in financial statements.
 Going concern:There is always an assumption with context of organization about its
continuity and it would be performed in specific indefinite duration (Pointer, Pointer Ivan
Andrew, 2011).
 Accounting period: It would be signifying process of accounting in given duration on
basis of half year, quarterly and fiscal year.
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 Conservatism: It would be signifying two particular amounts with reference to business
transaction as it would be directly considering its financial statements.
Elaborating various concepts of accounting which are disclosure, materiality and consistency
 Full Disclosure principle: It is indirectly related to concept of materiality as it has huge
necessity for disclosing its every detail about financial like policies of accounting related
to its financial statements. There is attainment of knowledge with reference to its
creditors and investors as well with reference to business entity's operation on specific
accounting basis. It also helps in justifying changes of decision with reference to its user
on external basis related to particular business entity with its disclosure. It would be
directly ensuring about deficiency in information as it would not mislead any of financial
statements.
 Materiality: The concept of accounting always signifies that it should always disclose
each thing as it creates very efficiency for its users. The business entity had gained
importance related to its items as it had gained importance to other business entity.
Different items had given significance to any other business entity which must be
avoided due to not providing any effect on its financials. This accounting concepts is
termed as very important as it helps accountants and auditors for decision making process
with reference to its classification about immaterial or material.
 Consistency: It is known as very significant measure for purpose of accounting process
as it must be very consistent for specific financial duration to any other. If these
techniques could be altered, then it would justify its changes in techniques for disclosing
true performance related to financial statements. It is termed as very important measure
for comparison aspect from statement of past year. The policies of accounting must be
changed with techniques as it would directly replicate in stability and performance of any
business entity (Sharma and Panigrahi, 2013).
CLIENT 1
1. Justifying its journal entries
There is representation of journal entries with context of given transactions. It would be
altering its entries which are termed as very significant for business related to sales and purchase
are stated below:
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2. Representing its ledger accounts with reference to double entry recording
The below ledger accounts are representing transactions of journal entries which are
stated below:
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B. Ledger accounts
Purchase ledger
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Sales Ledger
8

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