Accounting Fundamentals: Ledger Accounts, Trial Balance, Statements

This assignment analyzes the accounting fundamentals of several companies (Maxim, Pendo, Mafuta, and Ricardo), covering ledger accounts, trial balances, income statements, and statements of financial position. The report details the recording of transactions in ledger accounts, the preparation of trial balances, and the creation of income statements to determine profit or loss. It also includes the preparation of balance sheets to assess the financial position. The assignment also considers the distinction between revenue and capital expenditures, in accordance with international accounting standards. The solution encompasses tasks involving the creation of ledger accounts, trial balances, and financial statements for each company, providing a comprehensive overview of accounting principles in practice.

ACCOUNTING
FUNDAMENTALS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(a) Ledger accounts of Maxim...............................................................................................1
(b) Trial balance of Maxim ....................................................................................................3
(c) Final Statements of maxim...............................................................................................4
TASK 2............................................................................................................................................5
(a) Ledgers accounts of Pendo...............................................................................................5
(b) Trial balance of Pendo......................................................................................................6
(c) Income statement of Pendo...............................................................................................7
TASK 3............................................................................................................................................8
(a) Ledger accounts of Mafuta...............................................................................................8
(b) Trial balance of Mafuta...................................................................................................10
TASK 4..........................................................................................................................................11
(a) Ledger accounts of Ricardo............................................................................................11
(b) Trial balance of Ricardo.................................................................................................14
TASK 5..........................................................................................................................................14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Accounting fundamentals are using as tool by every company for accounting activities.
(Joseph and Renardy, 2013). With the help of these tools solve complex terms that are occur in
business when recorded transactions. Advanced accounting totally depended on the fundamental
equation that described all business's success and failure. These fundamentals are helping to deal
with particular financial function of business. This report consist of analysis of ledger accounts,
income statement and financial position statement of each company. Evaluation distinction
between revenue expenditure and capital expenditure as per international accounting standard is
also performed in this report.
TASK 1
(a) Ledger accounts of Maxim
Accounting terms are firstly recorded in journal account as entries than these entries are
recorded in ledger accounts. These accounts are helping to maintain all component that are
connected to financial statements (Niroomandi, et. Al, 2012). Financial information are stored in
ledger account and presenting opening balance and closing balance of each account during
accounting period. Single transactions are identified with in a ledger account with a transaction
number. Ledger accounts are divided into two parts according to financial statements these are
income statement ledger account and balance sheet ledger account.
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Rent a/c
Date Particular Amount (£) Date Particular Amount (£)
April,28 To cash a/c 50 April,30
By profit & loss
a/c 50
Drawings a/c
Date Particular Amount (£) Date Particular Amount (£)
April, 30 To Cash a/c 60
Sales a/c
Date Particular Amount (£) Date Particular Amount (£)
April,30 By Trading a/c 350 April,20 To cash a/c 350
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(b) Trial balance of Maxim
List of accounts balances at April,30
Particulars Debit (£) Credit (£)
Cash A/c 240
Capital a/c 300
Purchase a/c 200
Loan a/c 50
Motor van a/c 150
Rent a/c 50
Sales a/c 350
Drawings a/c 60
Total 700 700
Interpretation – As per the above trial balance accounts are recorded from journal book.
After journal entries these transactions are recorded in trial balance as end balance of these
accounts such as cash a/c shows on debit side with amount £240, capital account £300 (credit),
purchase account £200 (debit), Loan account £50 (credit), Motor van account £150 (debit), Rent
account £50 (debit), Sales account £350, drawings account £60 (debit).
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(c) Final Statements of maxim
Working Note -
Cost of Sales = Opening balance + Purchase + direct expenses – Closing balance
= 0 + 200 + 0 – 100
= 100
Interpretation – As per the above table for getting net profit prepare statement of profit
and loss. There is gross profit 250£ and net profit 200£ and it is shows good position of the
company. Statement of financial position through know financial position of the company and
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TASK 2
(a) Ledgers accounts of Pendo
Loan from Sergei a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 27 To cash a/c 350 Jan, 4 By cash a/c 1000
Jan, 31 To Balance c/d 650
1000 1000
Feb, 1 By Balance b/d 650
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(b) Trial balance of Pendo
Trial Balance at 31 January
Particulars Debit (£) Credit (£)
Cash a/c 4025
Capital a/c 5000
Motor van a/c 600
Purchase a/c 1300
Loan from Sergei a/c 650
Motor van expenses a/c 200
Sales a/c 800
Storage expenses a/c 150
Drawings a/c 175
6450 6450
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Interpretation – As per the above table there are presents all closing balances of the
various accounts these are as follows – Cash account £4025 (debit), capital account £5000
(credit), motor van account £600 (debit), purchase account £1300 (debit), Loan account £650
(credit), motor van expenses account £200 (debit), sales account £800 (credit), storage expenses
account £150 (debit), and drawings account £175 (debit).
(c) Income statement of Pendo
The profit & loss statement is one of the important financial statement that help to know
profit and loss of the company for particular accounting period. The profit & loss is calculated by
tracking all incomes and expenses from operating and non operating activities. Income statement
applied by all corporate sector for finance and accounting. This statement present company's
costs, incomes, gross profit, selling and administrative expenses, tax paid, net profit in a logical
manner (Demski, 2013).
In comparison it represent what occur over a month, quarter or year. It is mainly
supported on a fundamental accounting equation ( income = Revenues – Expenses) and shows
the rate at which the owners equity is changing for better or worse. With the help of cash flow
statement and balance sheet it forms the basic set of financial information required to manage to
manage of business (Newville, 2014).
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TASK 3
(a) Ledger accounts of Mafuta
Cash a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 343 Jan, 5 By Wages a/c 12
Jan, 7 To Smith's a/c 18 Jan, 9 By Max's a/c 21
Jan, 11 To Sales a/c 64 Jan, 14 By Wages a/c 14
Jan, 21 To Sales a/c 110 Jan, 14 By Purchases a/c 75
Jan, 23 To Harvey's a/c 25 Jan, 15 By Rich's a/c 162
Jan, 28 To Sales a/c 84 Jan, 20 By Fixtures and 32
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fittings a/c
Jan, 31 To Sales a/c 31 Jan, 21 By Wages a/c 17
Jan, 23 By office expenses a/c 3
Jan, 28 By Wages a/c 15
Jan, 31 By Balance c/d 323
674 674
Feb, 1 To Balance b/d 323
Capital a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Payables 33 Jan, 1 By Cash in hand a/c 343
Jan, 31 To balance c/d 1049 By Inventory 458
By Furniture and
fittings 198
By Receivables 83
1082 1082
Fixtures and fittings a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 198 Jan, 31 By Balance c/d 230
Jan, 20 To cash a/c 32
230 230
Feb, 1 To Balance b/d 230
Sales a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 31 To Trading a/c 412 Jan, 2 By Harvey's a/c 124
Jan, 11 By Cash a/c 64
Jan, 21 By Cash a/c 110
Jan, 28 By Cash a/c 84
Jan, 31 By Cash a/c 30
412 412
Wages a/c
Date Particular Amount (£) Date Particular Amount (£)
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Jan, 5 To cash a/c 12 Jan, 31 Profit and loss a/c 58
Jan, 14 To cash a/c 14
Jan, 21 To cash a/c 17
Jan, 28 To cash a/c 15
58 58
Purchase a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 5 To Rich's a/c 150 Jan, 31 By Trading a/c 225
Jan, 14 To cash a/c 75
225 225
Office Expenses a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 23 To cash a/c 3 Jan, 31 Profit and loss a/c 3
Receivables from Smith's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan,1 To Balance b/d 18 Jan, 7 By Cash a/c 18
Receivables from Harvey's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 39 Jan, 23 By Cash a/c 25
Jan, 2 To Sales a/c 124 Jan, 31 By Balance c/d 138
163 163
Feb, 1 To Balance b/d 138
Receivables from Moon's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 1 To Balance b/d 26 Jan, 31 By Balance c/d 26
Feb, 1 To Balance b/d 26
Payable to Rich's a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 15 To cash a/c 162 Jan, 1 By Balance b/d 12
Jan, 5 By purchase a/c 150
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